The General Authority for Investments and Free zones (GAFI) began implementing a new strategy with the aim of making the government a partner to investors. The strategy is based on separating between activities and cutting down on the time needed for procedures and restructuring the authority to work in favour of investors.
Al Borsa met with GAFI’s head, Mohamed Khodeir, who assumed his position in June. He explained his plans and vision for dealing with the urgent tasks assigned to him and GAFI, as well as what he called a “strategic shift” in the work of the authority.
What is GAFI’s vision of reform for the business environment and its related problems in the coming period?
Investment problems in Egypt are known and clear. Firstly, there is the time needed for procedures, multiplicity of state bodies related to licensing, and the officials’ understanding of the nature of investment and awareness of investors’ needs, in addition to the oversight role of these bodies.
GAFI has a vision to solve all problems facing investors. It operates under a slogan of creating partnerships with investors from the second they reach Egypt until they leave the market. We work to overcome the obstacles they face and ease the government procedures for them, as long as their demands are valid.
To meet their needs, we must have short-, medium-, and long-term plans. We are putting together a plan for a strategic shift to restructure the authority and position it for the benefit of investors.
The plan includes the quick abolition of any action and termination of committees that do not fit with the benefit of investors or deny their righteous demands legally. Nothing we offer, now, lacks a deadline.
How is that applied?
The concept is separating the regulatory part from the oversight role of GAFI. We have three main roles: regulation, oversight, and promotion. These three main factors are complementary to each other. In the first phase, the founding of any company or completing procedures falls within regulation. This has a deadline of one month. For example, investors seeking procedures related to approving a general assembly will complete their pursuit in time, as long as they provide the required legal documents. But if these assemblies were later proven to be violating the law, the oversight role of GAFI comes into effect through the governance and supervision departments.
This aims to accomplish all the investor procedures promptly, and at the same time develop control and governance practices. Wrongdoers will not be considered legitimate investors and legally-stipulated actions will then take their course.
Does Egypt need a new investment law or only amendments to improve the business environment?
We are currently working via Law 17 of 2015, which was passed before the economic summit in Sharm El-Sheikh. This law has always been controversial. Investors criticised it for its many problems, while others praised the goal achievable through it. This put GAFI between the horns of a dilemma: do we seek amendments or operate on the positive aspects of the law? We conducted a survey, with the cooperation of the Ministry of Investment, to find more from business organisations, their thoughts on the law, and suggestions for improvements.
We also had an idea for penning an entire new investment law. We contacted investors willing to assist and sought their ideas. Each was to specify 10 articles or terms that they thought are vital for the new law. We have a vision for legislative reform, but we also do not want to impose our own vision on investors. What we want is societal consensus on the law or the new amendments.
Did GAFI receive feedback from business organisations?
We set a two-week deadline for the survey. We will be holding meetings with business organisations, investment banks, accounting, and legal consulting firms to tackle the issue from all sides and discuss the proposed ideas with them.
There was a community dialogue before the passage of Law 17 of 2015. One and a half years later, we are discussing new amendments. Are there concerns about reaching the same conclusion?
I cannot impose an answer. There are calls for amending some articles. In GAFI, we divided the work into two plans. One is the urgent plan that includes an introduction to new amendments. But at the same time, we operate through the old law to continue work as usual. Time is not on our side now. The role of GAFI in the coming period is proposing the new amendments, conducting feasibility studies, and understanding the need of these new bills. But, after all, introducing the new law or even amending the old one must be carried out with the participation of the business community.
As I explained, we are currently operating on Law 17 of 2015. We are carrying out our role in offering and allocating lands. In the past two months alone, GAFI allocated 139 plots of lands. Our plan is to have allocated 400 plots by the end of October.
If the business community agrees on the need for amending the scheme for offering lands or seeking new mechanisms, we will ensure that in the new amendment. But until they come out, we have to operate based on the current legislative situation. GAFI is determined to propose all amendments agreed upon by the business community and investment officials in Egypt. Until then, we continue to operate with what we have in hand and make the best use of it.
What is GAFI’s vision for the amendments of the unified investment law?
We have a vision for issuing a new investment law or introducing amendments on the existing one. But we want to reach a mutual understanding first and discuss opinions before jumping to real solutions. The survey, prepared by GAFI, aims to reach certain points that require amendments.
We will not ask investors to prepare a new law. We already have the vision and the drafts. What we really want to know is the feasibility of each amendment or the extent to which a new law would be beneficial. Experts will then write down the law to achieve the goals we have agreed on with all parties. We are aware there is nothing such as 100% consent, but we look for the best we could get.
What is the timetable for amendments or issuing a new law?
We do not want to rush into things with the legislative amendments. We are working to reach a state of stability. However, we have a deadline of six months to introduce the urgent necessary amendments, whether that was a whole new law or temporary amendments followed by permanent, more coherent ones.
You had put forward several urgent amendments, including the return of private free zones. Where do negotiations on that front stand with the Ministry of Finance?
There is constant communication between the Ministry of Investment and the Ministry of Finance to reach the best solution concerning the return of the private free zones, according to market needs. But this is still under negotiation.
Did GAFI receive new investment applications to bring back private free zones?
We have many requests for that. This was why we put the idea back on the table and began negotiations with the Ministry of Finance to reach a consensual solution, especially as new requests cannot be fulfilled without the current law.
What else is included in the list of urgent amendments?
We have a set of amendments that are necessary to facilitate procedures related to investors, such as the quick allocation of lands. There are some basic measures in the bylaws that can fulfill this part.
Will you bring back the allocation of land to other government bodies?
Right now, all investment lands do not enjoy the sovereignty of GAFI. But the law provides GAFI, in cooperation with the related state agency, with the ability to allocate these lands. Until there is a new legislative amendment, we will continue to abide by the current law.
What is GAFI’s plan to support promotion in the coming period?
The speed of completion procedures is the strongest promotion method. To properly promote investing in Egypt, we must first complete investors’ demands and procedures and counter the problems they may face.
The promotion sector at GAFI is one of the largest sectors. It has a large number of investment opportunities that have been inventoried from various state sectors.
Some areas in Egypt have potential investment opportunities. There are large areas of land allocated for industrial establishment across the country. But governments come and go without utilising them. Why is that?
Our promotion role abides us to follow up with all agencies of the government to learn about the available investment opportunities and how to prepare them to be presented to investors. Our plan includes the configuration of a database of all the opportunities available all over Egypt.
When investors face problems with using available opportunities, we make sure to solve them. Since I assumed the chairmanship of GAFI, I met with 500 investors and representatives to know about the issues they face and help them counter them.
Why would GAFI not organise conferences at the beginning of every fiscal year to showcase available investment opportunities in governorates?
GAFI has a department specialised in investing in governorates. It has been recently developed. This sector collects data on all available opportunities in governorates. We are now building a database with the information we have so far.
GAFI is working to geographically expand nationwide and build a service centre in each governorate. This aims to facilitate procedures for investors and reach them everywhere. We are set to open two branches in Upper Egypt and 6th of October City within the next six months, which would ease the burden on the main headquarters in Cairo. Moreover, we are working to automate those centres by 2017. This would enable the online foundations of companies, which would solve the problem of time. Furthermore, it would also push Egypt up on the Doing Business Report put out by the World Bank.
We are not only seeking to move Egypt north on the rankings, but to make Egypt an investment hub in the Middle East and Africa. Despite the procedural problems in Egypt, GAFI has a set of tools that could ensure solving them as soon as possible.
How many companies are approved by GAFI everyday?
The average is 50-70 companies per day. After automating the system, the number of new companies will increase, especially as GAFI will support the infrastructure of service centres with the latest technological systems.
Why does GAFI not address the banking system to assist and promote investment?
We are doing this already, but without a formal framework. We will expand in the coming period, though. We communicate with banks and offer them the chance to become partners in investment. This should see a more formal mechanism in the near future.
What were the highlights of demands you received from investors in the past period?
We met with many local and foreign investors in the last period. They had clear demands, including seeing the real investment opportunities available and solving the customs problems in free zones, such as finding a mechanism to dispose old equipments out of free zones.
We held 14 meetings for the technical committees in free zones over three months. We issued 250 decisions related to customs, renewal of licences, and fee payments to solve investors’ problems before they became conflicts.
What did GAFI do with investment arbitration?
Minister of Investment Dalia Khorshid has restructured the cabinet’s technical committee for arbitration. It has already looked into 150 disputes.
What is the nature of amendments made to the committee?
The amendments include forming teams within the committee to research certain problems. For instance, there is a team that looks into solving disputes with governorates, another for tenders, and a third one for lands. The reports of these subcommittees are then presented to the cabinet’s main committee and it quickly decides on solutions. We have a group of experts working in those committees to find legal solutions before deciding upon them by the main committee.
There are two committees for resolving investment disputes. The first handles contracts with GAFI and the second is the cabinet’s, which is headed by the minister of justice. We have recently accelerated work on the matter by deciding to meet twice per month.
There is a difference between a problem and a dispute. We try to contain problems before they spur into disputes through our complaints department and the specialised committees.
How many disputes do you plan on settling this year?
We have a target to settle 80% of the old disputes and 90% of the new ones within a year.
What is the ministry’s plan to increase the number of investment services complexes?
We aim to establish five new complexes in 6th of October City, Gamasa, New Valley, Aswan, and Marsa Matrouh.
How will the expansion of public investment and free zones take place?
We have a plan to add two free general free zones in Nuweiba and Minya, and the development of a number of existing free zones, as well as the establishment of five investment zones.
Investment zones are models for the one-stop shop, where it represents a smaller model, which GAFI aims to build.
Will the one-stop shop really be activated?
The one-stop shop is already implemented. It includes three main elements: founding, allocation, and licensing. Establishing companies takes time, between 24 to 72 hours depending on the nature of the company. We are going through an automating strategy to speed up the process.
As for allocation, we are committed to the investment law that granted GAFI the allocation task. We have activated the scheme in a better way and hope for further improvement and cooperation with other agencies. Lastly, licensing is the most time-consuming procedure. We signed a protocol with all licence-granting agencies to unify all licensing agencies and automate them.
What about the free allocation of land?
We support all free land allocation procedures made available by Law 17 of 2015.
Does GAFI rule on all requests made?
Yes, the technical specifications are laid down by the body that is in charge of the piece of land at hand. Prices, meanwhile, are set by one of the four committees stipulated by the law. GAFI handles requests and decides on offers.
Is there coordination between GAFI and the Suez Canal Economic Zone to promote the latest projects?
We are in constant contact with head of the Suez Canal Economic Zone, Ahmed Darwish. We look at the investment opportunities and improve them. We will hold cooperation meetings in the coming period to support joint promotion.
How do you deal with the State Information Service, commercial representation offices, and embassies to promote investment in Egypt?
We hold meetings with ambassadors and trade representatives before traveling abroad to give them the necessary information to promote. We open channels of communication to permanently market for projects.
What conferences will GAFI hold in the coming period to promote investment?
We are considering a number of suggestions to showcase investment opportunities within a set geographical area or those linked by sector. However, there should be a large enough number of opportunities to hold a conference. We are coordinating with the state’s relevant agencies to collect all potential opportunities and choose the governorates to hold the conference, or even hold one main big conference.
Will there be a second economic summit?
If the need arises, we will organise one.
Are there any plans for a conference to promote investment in Upper Egypt?
We are working with several agencies to choose the best time for it and put together a list of investment opportunities. Until this happens, we continue to work with all governorates. Currently, we are coordinating with the governor of New Valley to showcase the opportunities there. The New Valley is the strategic economic treasure of Egypt, and we strive to achieve a quantum leap there.
Did GAFI receive investment requests from Arab investors in the last period?
We have been in talks with a number of Arab investors to expand their projects in Egypt. We are also in touch with a group of Kuwaiti investors interested in entering the market. We will announce huge Arab investments in Egypt in the near future.
What is the outcome of GAFI’s mission to Kenya and Rwanda?
The African market is huge with over 1.6bn consumers. We can attract new investors interested in investing in Africa if we promote ourselves as an investment hub in the region. We are training the investment authorities in Africa and are observing the available investment opportunities, especially as Egyptian companies are capable of making a profit for Egypt when they invest in Africa.