Mohamad Talaat, Co-Managing 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 address. While the two uprisings brought about fundamental political change and lifted the country from its state of stagnation, they also were a direct cause of interrupted commercial activity, leading to a prolonged closure of the stock market as well as a marked drop in tourism receipts.

In previous years, the legal aspect of the investment climate trended towards fewer restraints and more incentives for investors. The Companies Law No. 159 of 1981, passed during the Sadat administration and now firmly in place, effectively flung open the door to domestic and foreign investors alike, removing the stifling effect of prior statutes. The law revived domestic free enterprise and entrepreneurs began to flourish. One of the most important features of the law was its allowance for 100% foreign ownership of legal entities in Egypt. In addition, an amendment to the law in 2009 abolished minimum capital requirements for the establishment of limited liability companies.

Since the early 1990s the Egyptian financial system and its three main sectors (capital markets, banking and insurance) have been undergoing legislative reform to enhance performance and encourage competition. In particular, the government is focused on reactivating the country’s bond market, creating new financial institutions and building crucial links with international financial institutions, as evidenced by the issuance of Law No. 10 of 2013 on financial instruments.

Earlier efforts were made at divesting state ownership of joint ventures, public banks and insurance firms, as well as increasing private sector involvement in the financial sector. Furthermore, full private ownership – including by foreigners – has been allowed in the banking and insurance sectors. As a result, several financial intermediaries, representing large international financial institutions operating in the areas of commercial banking, mutual funds, insurance, investment banking and securities trading, are now operating in Egypt.

In terms of the privatisation trend, the Public Enterprise Law No. 203 of 1991 was the first step in the direction of privatisation of public sector organisations in Egypt. The law paved the way for transforming public sector organisations and the companies they controlled into holding firms and subsidiaries (or affiliate companies). Most importantly, the shares of public subsidiary companies can be traded on the Egyptian stock exchange – a measure that many view as central to facilitating the country’s privatisation programme.

Reforms to Egypt's privatisation laws have successfully increased local and foreign private investment in the public sector. Unfortunately, privatisation is experiencing a setback from the de-privatisation of some firms in response to recent judgments by the Council of State. 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 No. 67 of 2010 and its associated regulations, which came into force on January 24, 2011. This form of partnership is, in essence, a method of public service provision whereby the government contracts a reliable private sector company to finance, build and operate an infrastructure project for its own use and whereby, at the conclusion of the contract, the ownership title passes to the government, thereby increasing the stock of public assets.

Trade has played a significant role in Egypt's economic development. The country has progressively liberalised its economy, opening it to foreign markets. In this context, significant progress has been made to reduce administrative and other non-tariff trade barriers. In parallel, Egypt has been engaged in 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 that the years leading up to the popular uprisings were a period of growth, and that the current government maintains a legal framework conducive to reform.