Mohamad B Talaat, Partner, Helmy, Hamza & Partners, on laying the legal groundwork for continued economic expansion

Egypt has recently undergone a series of dramatic political developments, leaving the country with a number of economic challenges to face. Just as the revolution brought about fundamental political change and lifted the country from its state of stagnation, it was also a direct cause of interrupted commercial activity, which led to a prolonged stock market closure and a drop in tourism receipts, despite the election of President Mohamed Morsi on June 30, 2012. In the years prior to the revolution, the legal trend regarding the investment climate involved fewer restraints and more incentives for investors. Passed during the Sadat administration and now vigorously implemented, the Companies Law literally flung open the door to investors, both domestic and foreign, by amending the stifling effect of its predecessor. In effect, it re-sparked the free enterprise system domestically and entrepreneurs began flourishing. One of the most important features of the Companies Law is that it allowed for 100% foreign ownership of legal entities in Egypt. In addition, a recent amendment to the Companies Law in 2009 abolished the minimum capital requirement for the establishment of limited liability companies.

Since the early 1990s, the Egyptian financial system, with its three main sectors – capital markets, banking and insurance – has been undergoing legislative reforms to enhance performance and encourage competition. The government is focusing on reactivating the bond market, creating new financial institutions and building links with international financial institutions, as evidenced by the issuance of Law No. 10 of 2013 for financial instruments. Efforts are also being made to divest state ownership of joint ventures, public banks and insurance firms, and to increase private sector involvement in the financial sector. Full private ownership, including foreign ownership, has been allowed in the banking and insurance sector. So, several financial intermediaries, representing large international financial institutions in the area of commercial and investment banking, mutual funds, insurance and securities trading, are now operating in Egypt. Speaking of the trend towards privatisation, the Public Enterprise Law 203 of 1991 was the first step towards the privatisation of public sector organisations in Egypt. The Public Enterprise Law paved the way for transforming public sector organisations and the companies they controlled into holding firms and subsidiaries (or affiliate companies). Shares of public subsidiary companies may be traded on the stock exchange – a measure that is viewed by many as facilitating Egypt's privatisation programme. Reforms to Egypt’s privatisation laws have increased local and foreign private investment in the public sector. Unfortunately, in recent judgments issued by the Council of State, privatisation is experiencing a setback resulting from the de-privatisation of some firms. In line with the strategy to promote and increase the private sector’s involvement in the economy, the government has taken the initiative to introduce public-private partnerships through the promulgation of the Public Private Partnership Law 67 of 2010 and its implementing regulations, which came into force on January 24, 2011. In essence, this form of partnership is a way of public service provision whereby the government contracts with a reliable private sector company to finance, build and operate an infrastructure project for its own use, whereby, at the end of the contract, title to such project passes on to the government, thus increasing the stock of public assets. In line with the above, trade has played a significant role in Egypt's economic development. Egypt has considerably liberalised its economy and opened it to foreign trade. In this context, Egypt has made significant progress in reducing administrative and other non-tariff barriers to trade. In parallel, Egypt has been engaged in introducing legislative reforms to bring domestic legislation into compliance with its expanded network of international, regional and bilateral agreements. In light of this, we can confidently say the years prior to the revolution were a period of growth, and the government maintains a legal framework conducive to reform.