Page 1 of 11
Advances in Social Sciences Research Journal – Vol. 10, No. 3
Publication Date: March 25, 2023
DOI:10.14738/assrj.103.14262.
Heikal, S. (2023). Egypt’s Business Enabling Environment: An Analysis of the State’s Relevant Policies from 2018 to 2021. Advances
in Social Sciences Research Journal, 10(3). 190-200.
Services for Science and Education – United Kingdom
Egypt’s Business Enabling Environment: An Analysis of the State’s
Relevant Policies from 2018 to 2021
Sherif Heikal
Hankuk University of Foreign Studies
Abstract
This article aims to provide an analysis of the government of Egypt policies with
respect to business enabling environment, before the commencement of
illustrating the state relevant policies; the two adopted methodological approaches
which are the regulatory business environment, and the investment climate will be
underscored. Several elements of regulatory business environment in Egypt are
analyzed such as deregulation of business commencement, operation, and closing.
And in case of business climate political stability, education policy, adequate
infrastructure, and adequate health system are analyzed.
METHODOLOGICAL APPROACHES
Before the spotting the light on the adopted methodologies the business enabling environment
(BEE) should be clarified to articulate its ambit regarding both adopted approaches of the
regulatory business environment and investment climate in this article, thus BEE is
institutional, regulatory, infrastructure and cultural conditions that govern formal and informal
business activities. It includes the administration and enforcement of government policy, and
national and local institutional arrangements that affect the behavior of relevant actors:
regulatory authorities, entrepreneurs, business and trade union organizations, banks and non- bank financial institutions, and civil society organizations.
However, Regulatory business environment (as it is diagramed in figure no. 1) which is the first
adopted approach in this article highlights those regulations that immediately affect businesses
through the costs of compliance. So, it covers regulations that immediately affect businesses
through the costs of compliance. These are composed of direct costs, such as license fees, and
indirect costs resulting from unnecessary transactions. 1 The advocates of the regulatory
business environment contend that such reforms are not only suitable to enhance private
sector development and growth but that they directly advantage the poor more than
proportionally because “heavy regulation and fragile property rights disregard the poor from
doing business.2
1 Hernando De Soto et al., The Other Path: The Invisible Revolution in the Third World (New York Etc.: Harper and Row,
1989).
2 Michael U. Klein and Bita Hadjimichael, “The Private Sector in Development: Entrepreneurship, Regulation, and
Competitive Disciplines” (Washington, DC: World Bank Publications, 2003).
Page 2 of 11
191
Heikal, S. (2023). Egypt’s Business Enabling Environment: An Analysis of the State’s Relevant Policies from 2018 to 2021. Advances in Social Sciences
Research Journal, 10(3). 190-200.
URL: http://dx.doi.org/10.14738/assrj.103.14262
Figure 1: Regulatory Business Environment
Source: Author’s own
Regarding the investment climate (as it is diagrammed in figure no. 2) which encompasses
wider framework conditions such as infrastructure, health, and education. The term
“investment climate,” as used in the World Development Reports and Investment Climate
Surveys, which indicates to a group of enabling factors greater than the “regulatory business
environment.”. it provides property rights, reduce bureaucratic entry cost, and provide
incentives for legalization.
Consequently, the investment climate comprises all the elements of the regulatory business
environment, but in addition it includes the quality of infrastructure, the health system, the
overall level of education, rule of law, political stability, and security, functioning financial
markets, trade liberalization and international rules and standards as factors which shape the
opportunities and incentives for firms to invest productively.3
3 World Bank and International Finance Corporation, Doing Business in 2005: Removing Obstacles to
Growth (Washington (D.C.): World Bank, 2005).
Regulatory Business
Environment
Adequate
health
system
Political
Stability
Security
Functioning
financial
markets
Trade
liberalization
Rule of law
Overall
education
policies
Adequate
infrastructure
Page 3 of 11
192
Advances in Social Sciences Research Journal (ASSRJ) Vol. 10, Issue 3, March-2023
Services for Science and Education – United Kingdom
Figure 2: Investment Climate
Source: Author’s own
The World Bank’s “regulatory business environmen” and “investment climate” reports are
extremely sceptical about deliberate government action aimed at improving the performance
of enterprises and developing competitive advantages. The Doing Business Reports similarly
argue that creating a level playing field through deregulation and secured property rights is the
most important condition for enhancing economic growth and making it more equitable. The
Reports emphasize that broad government regulations hinder the formation, registration and
growth of private enterprises and create several chances for rent-seeking bureaucrats to grab
bribes, thereby growing corruption significantly4
Hence, in this research the Egypt BEE relevant policies will be analyzed in the light of the two
above selected approaches, i.e., regulatory business environment will be explored in Egypt
through scrutinizing regulations related the starting, operating & closing a business and the kye
question will be about the investors autonomy and protection provided to them.
REGULATORY BUSINESS ENVIRONMENT
Deregulate Starting, Operating & Closing a Business
Sole Authority for Accreditation and Operation:
General Authority For Investments (Hereinafter referred to as GAFI) is the only sole authority
for accreditation services related starting, operating & closing a business, feedback regard the
applications one business day.5 Hence, companies undertaking strategic or national- interest
projects, either as public-private partnerships or related to public utilities, infrastructure, new
and renewable energy, roads and ports, are eligible to receive a single approval to cover the
establishment, operation, and management of their project. This includes the building licenses
and allocation of real estate for the project. Moreover, Investors can obtain all licenses from
GAFI, thus, interact with any other authority is not needed. GAFI provide incorporation and
4 World Bank, “Doing Business 2007: How to Reform” (World Bank, 2006).
5
“Egypt Investment Law No. 72 of 2017”, Article 21, III § (n.d.).
Investment Climate
Large-scale
property
titling
Low uniform
taxes
Improve credit
registries.
Deregulate starting,
operating & closing
a business.
Labor market
deregulation
Ease contract
enforcement
Page 4 of 11
193
Heikal, S. (2023). Egypt’s Business Enabling Environment: An Analysis of the State’s Relevant Policies from 2018 to 2021. Advances in Social Sciences
Research Journal, 10(3). 190-200.
URL: http://dx.doi.org/10.14738/assrj.103.14262
post-incorporation services, collects all fees from applicants, and decides on completed
incorporation applications within one business day of their submission. GAFI establishes
electronic means by which incorporation activities may be conducted. Private sector Approval
Offices that are licensed and accredited by GAFI assist and represent investors before
government authorities.6
The Prime Minister may designate geographic areas for specific developments, including
logistics, agriculture, and industry. In areas designated for communications and information
technology, equipment for these enterprises will not be subject to taxes or customs duties. GAFI
shall prepare a map to identify special investment zones, needed investment projects and
government- owned land available to investors.7
Investors’ Autonomy and Protection
Foreign investors receive the same treatment under law as Egyptian nationals. Foreign
investors can be granted preferential treatment, with approval from the Council of Ministers.8
Investments will not be governed by arbitrary procedures or discriminatory decisions. 9
Investment projects will not be nationalized. 10 No administrative authority can revoke or
suspend investment project licenses without proper warning, due process, and time to correct
any issues. Foreign investors are guaranteed residence in Egypt during the term of a project.11
Investors have the right to transfer their profits abroad.12Investors’ projects may include up to
10% foreign employees, and up to 20% for investment companies. Foreign employees of
investment companies have the right to transfer their compensation abroad.13
Regarding the dispute settlement, there is an independent arbitration and mediation center
which have the authority to pursue the settlement of investment disputes that arise among
investors and state authorities.14 A ministerial committee was established to review complaints
and disputes between investors and state authorities. Committees within GAFI examine
complaints against resolutions issued in accordance with the investment law.15
Labor Market Deregulation
Egypt labor law No. 12 of the Year 2003 maintains the balance in duties and responsibilities
between workers and employers; due consideration to the social dimensions of the economy;
its provisions reflect global and local economic changes; reflection of fundamental principles
contained in international labor standards; safeguarding formerly acquired rights; and
recognition of workers' right to a periodic annual wage increase of at least 7 per cent.16
6
Ibid., Article 26 & 36, III § (n.d.).
7
Ibid., Article 28, III § (n.d.).
8
Ibid., Article 3, I § (n.d.).
9
Ibid., Article 3, I § (n.d.).
10 Ibid., Article 4, I § (n.d.).
11 Ibid., Article 3, I § (n.d.).
12 Ibid., Article 6, I § (n.d.).
13 Ibid., Article 8, I § (n.d.).
14 Ibid., Article 88, V § (n.d.).
15 Ibid., Article 85, V § (n.d.).
16 “Egypt Labor Law No. 12 of the Year 2003”, Articles 3 and 4 (n.d.).
Page 5 of 11
194
Advances in Social Sciences Research Journal (ASSRJ) Vol. 10, Issue 3, March-2023
Services for Science and Education – United Kingdom
While writing this article new bill of labor law is being discussed in the house of representatives
of Egypt, the bill will include the creation of new labor courts to speed-up litigation processes.
It provides the opportunity for better training and education, while ensuring the rights of
working women and people with special needs. It will retain the balance between the business
owner and the workers.
This new law targets also to build balanced work relationships between the two sides of the
production process, ensuring steadiness of work and a secure work environment, the relevant
committee of the house of the representatives of Egyptian said, it will lead to increased
production and encourage youth to work in the private sector.
17
Ease Contract Enforcement
Based on Law No. 72 of 2017, An independent arbitration and mediation center enjoys the
authority to pursue the settlement of investment disputes that arise among investors and state
authorities. The Egyptian courts usually endorse international arbitration clauses in
commercial contracts. 18 E.g., Egypt Court of Cassation has, on several cases, approved the
validity of arbitration clauses included in contracts between Egyptian and foreign investors.
Table 1: Contract Enforcement in Each Governorate in Egypt
Location Enforcing Contracts rank Time (days) Cost (% of claim value)
Alexandria 11 923 26.2
Assuit 14 965 26.2
Aswan 7 745 26.1
Cairo 15 1010 26.2
Damietta 1 810 18.2
Fayoum 3 830 18.2
Giza 4 810 25.7
Ismailia 2 706 20.7
Kharga 10 946 23.2
Mansoura 11 1050 25.7
Port Said 7 964 19.5
Sohag 6 915 22.5
Suez 9 845 25.7
Tanta 5 830 24.6
Zagazig 13 1105 25.7
Source: World Bank
The Egyptian Investment Law No. 72 of 2017 mechanism for settling investment disputes
targets to avoid the court system altogether. In particular, the Ministerial Committee on
Investment Contract Disputes is responsible for settling disputes arising from investment
contracts to which a public or private body associated it, is a party. Egypt’s dispute resolution
17 “Egypt’s Senate Approves New Amendments to Labor Law,” EgyptToday, January 2,
2022, https://www.egypttoday.com/Article/1/111476/Egypt-s-Senate-approves-new-amendments-to-labor-law.
18
“Egypt | International Investment Agreements Navigator | UNCTAD Investment Policy Hub,”
investmentpolicy.unctad.org, accessed December 24, 2021, https://investmentpolicy.unctad.org/international- investment-agreements/countries/62/egypt?type=bits.
Page 7 of 11
196
Advances in Social Sciences Research Journal (ASSRJ) Vol. 10, Issue 3, March-2023
Services for Science and Education – United Kingdom
Overall Education Policies
The quality of education remains a major challenge in developing countries generally and
specifically in Egypt. Most of developing countries including Egypt, teaching styles can
sometimes be rigid; student contribution is not encouraged sufficiently, and physical
punishment is sometimes used. Hence, the El-Sisi administration from 2018 has given greater
priority to improving the education system.21
The plan for developing the education system, which is based on developing the already
existing system, alongside a radical transition of a new educational system, under the title
"Building the Egyptian Human.” World Bank provides loan of $500 million to develop the
education sector.22
The public education system in Egypt consists of three levels, the basic education stage for 4 to
14 years old, kindergarten for two years followed by primary school for six years and
preparatory school for three years. Then, the secondary school stage is for three years, for ages
15 to 17, followed by the tertiary level. Education is made compulsory for 9 academic years
between the ages of 4 and 14. Moreover, all levels of education are free within any public
schools.
The performance of the pre-university education sector in Egypt has improved over the past 10
years according to accessibility indicators, as net and gross enrolment rates at all educational
levels have increased. These successes have been concentrated in the primary education
stage.23
Data on enrolment rates for both boys and girls show a decline in the gender gap during the
period between the academic years of 2011 and 2020, with the net enrolment rates for girls
exceeding those of boys at all levels of pre-university education.24
Adequate Infrastructure
Regarding the logistics performance,25 from 2010 to 2018 Egypt has moved up 25 places to
rank 67 in the World Bank’s report of Logistics Performance Index as indicated in figure No. 4.
And the government increases FY annually 50% of financial allocations to Infrastructure
Projects.
21 Farah Ramzy, “Egypt’s Education 2.0: A Promising Project Facing Political Challenges - Legal Agenda,” Legal Agenda,
November 17, 2021, https://english.legal-agenda.com/egypts-education-2-0-a-promising-project-facing-political- challenges/.
22 “World Bank Project: Supporting Egypt Education Reform Project - P157809,” World Bank,
n.d., https://projects.worldbank.org/en/projects-operations/project-detail/P157809.
23 Fayza Megahed, “Future Vision for Developing Education in Egypt,” International Journal of Research in Educational
Sciences 02, no. 04 (September 15, 2019): 119–40, https://doi.org/10.29009/ijres.2.4.3.
24 UNICEF, “Gender and Education - UNICEF DATA,” UNICEF DATA, 2020, https://data.unicef.org/topic/gender/gender- disparities-in-education/.
25 The Domestic LPI looks in detail at the logistics environments in 100 countries. For this measure, surveyed logistics
professionals assess the logistics environments in their own countries. This domestic evaluation contains more detailed
information on countries’ logistics environments, core logistics processes and institutions, and time and distance data.
This approach looks at the logistics constraints within countries, not just at the gateways, such as ports or borders. It
uses four major determinants of overall logistics performance to measure performance: Infrastructure, Services, Border
procedures and time, and Supply chain reliability.
Page 8 of 11
197
Heikal, S. (2023). Egypt’s Business Enabling Environment: An Analysis of the State’s Relevant Policies from 2018 to 2021. Advances in Social Sciences
Research Journal, 10(3). 190-200.
URL: http://dx.doi.org/10.14738/assrj.103.14262
Figure 4: Egypt Logistics Performance
Source: World Bank
As shown in table No. 2 the value for Logistics performance index: Overall (1=low to 5=high) in
Egypt was 2.82 as of 2018. As the table below shows, from 2010 to 2018, this indicator reached
a maximum value of 3.18 in 2016 and a minimum value of 2.61 in 2010.
Table 2: Egypt's Logistics Performance by sector
overall
LPI
score
overall
LPI
rank
Customs Infrastructure International
shipments
Logistics
quality and
competence
Tracking
and tracing
Timeliness
score rank score rank score rank score rank score rank score rank score rank
2010 2.61 92 2.11 122 2.22 106 2.56 110 2.87 54 2.56 101 3.31 81
2012 2.98 57 2.60 69 3.07 45 3.00 51 2.95 50 2.86 66 3.39 64
2014 3.26 42 3.17 39 3.17 41 3.12 53 3.19 44 3.30 40 3.59 44
2016 3.18 49 2.75 65 3.07 50 3.27 45 3.20 43 3.15 54 3.63 48
2018 2.82 67 2.60 77 2.82 58 2.79 73 2.82 63 2.72 89 3.19 74
Source: World Bank
As an example of the improvement of the infrastructure in Egypt generally and specifically in
logistics, Egypt’s road quality ranking has jumped 90 spots over five years, putting us at 28th
worldwide. The number of road accidents per year dropped 41.1% between 2014 and 2018,
while the death and injury rates from these accidents have been halved over the same period
of time.26
As shown in figure No. 5 the overall investments in infrastructure in Egypt has increased
steadily from 2016 up to 2021, and the energy sector occupied the highest level, which is
indicating to the real improvement in Energy supply for production that transformed Egypt
form country suffering for the electricity deficient country to electricity exporting country.
26 “Egypt’s Road Quality Now 2nd Place in Africa: Prime Minister,” Egypt Independent, August 16,
2020, https://egyptindependent.com/egypts-road-quality-now-2nd-place-globally-prime-minister/.
0
1
2
3
4
overall LPI
score
overall LPI
rank
Customs Infrastructure International
shipments
Logistics
quality and
competence
Tracking and
tracing
Timeliness
2010 2012 2014 2016 2018