Doing Business in the Arab World

Arab Hellenic Chamber of Commerce & Development

(Athens, 22.3.2017)

Doing Business in Egypt

Challenges & Opportunities

Athanassios Makrandreou

Minister Plenipotentiary (Economic & Commercial Affairs)

Embassy of Greece in Cairo

EGYPT: Basic macroeconomic data

Source: Central Bank of Egypt (CBE) * 1st half 2016/2017 Others: February

Fiscal year: July/June 2013/14 2014/15 2015/16 Recent

GDP (in EGP trillion. – current prices) 2,102 2,444 2,708

GDP (in EGP trillion – fixed prices 2011/12) 1,729 1,838 1,917

Real GDP change (%) 2,2% 4,4 % 4,3%

Inflation (end of June, %) 8,20% 11,39% 13,97% 31,7%

Unemployment (%) 13,0% 12,8% 12,7%

Exports ($ billion) 26,02 22,24 18,70 10,4*

Imports ($ billion) 60,18 61,30 57,39 28,3*

Trade balance ($ billion) -34,16 -39,06 -38,68 -17,9*

Trade balance (% GDP) -11,2% -11,7% -11,5%

Current account balance ($ billion) -2,78 -12,14 -19,83 -9,4*

Current account balance (% GDP) -0,9% -3,6% -5,9%

Net international reserves ($ billion) 16,69 20,08 17,55 26,54

Fiscal deficit (% GDP) 12,2% 11,5% 12,3% 5,4%

Net foreign direct investment ($ billion) 4,18 6,38 6,93 7,4

Foreign debt ($ billion) 46,07 48,06 55,76

Foreign debt (% GDP) 15,4% 14,8% 18,1%

Domestic debt (EGP trillion) 1,817 2,116 2,620

Average exchange rate against $ 7,14 7,53 8,78 18,1

Main macroeconomic issues (1)

Serious decrease in the inflows of FDI, foreign

tourism and remittances from Egyptians abroad

during the post-2011 period

Dramatic decrease in foreign exchange inflows,

leading to serious shortages & creating problems in

trade and investor payments, which had a negative

impact on the overall business climate

Fiscal imbalances due to decreased revenues and

adherence to social support expenditure

Although situation is improving slowly, market

inadequacies & shortages of some goods in the

domestic market are still present, mainly due to the

insufficiencies in foreign exchange availability

Economic reform program implemented by the Government

and backed by the IMF – Support from World Bank

Introduction of VAT in September 2016, floating of the

exchange rate regime of the Egyptian pound in November

2016

The Egyptian Government is formulating strategies for

invigorating the domestic industry and exports, as well as

attracting foreign investment

Rationalization of the economy – cuts on subsidies – focused

social support – cut red tape

Improvement in basic economic indices generate optimism

Revenue expectations from the giant natural gas findings

encouraging to the economy – Start of production end of 2017

Megaprojects materialization – a real booster

Main macroeconomic issues (2)

Advantages of Egypt

as our business partner

Strategic position in the Mediterranean

Strategic position in the Middle East and Africa

The biggest market in the Arab world

The most stable country in the region

Greece’s gate to the broader region

Long term growth forecasts + Africa perspectives

Bilateral Trade Greece-Egypt 2012-2016

In million € 2012 2013 2014 2015 2016 2015/16

%

Exports 345,39 548,74 753,20 1.042,98 750,07 -28,1

Imports 444,39 578,44 843,63 657,37 577,02 -12,2

Trade Volume 789,78 1.127,18 1.596,83 1.700,35 1.327,09 -22,0

Trade Balance -99,00 -29,70 -90,43 385,61 173,05 -55,1

Source: HELLENIC STATISTICAL AUTHORITY (ELSTAT)

Bilateral Trade Greece-Egypt 2012-2016

-200.00

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

2012 2013 2014 2015 2016

345.39

548.74

753.20

1,042.98

750.07

444.39

578.44

843.63

657.37

577.02

-99.00

-29.70-90.43

385.61

173.05

Exports

Imports

Trade Balance

In million €

Source: HELLENIC STATISTICAL AUTHORITY (ELSTAT)

Top 20 Greek products exported to Egypt

(2016)EXPORTS

CN4 PRODUCT DESCRIPTION VALUE (€) QUANTITY (KG) % VALUE % QUANTITY

2710'Petroleum oils and oils obtained from bituminous

minerals, other than crude 492.017.547 1.405.701.436 -34,7% -10,3%5201'Cotton, not carded or combed 55.425.132 39.282.464 6,5% 2,3%

2713'Petroleum coke, petroleum bitumen and other residues of

petroleum oils 51.863.560 392.684.959 -40,4% -18,6%2711'Petroleum gases and other gaseous hydrocarbons 34.831.901 120.821.659 484,1% 607,4%0808'Apples, pears and quinces, fresh 17.404.312 48.128.338 -22,2% -8,7%

2402'

Cigars, cheroots, cigarillos and cigarettes, of tobacco or of

tobacco substitutes 11.073.961 1.168.283 -8,4% -13,7%1101'Wheat or meslin flour 5.888.702 14.382.900 -12,0% -10,8%

4810'

Paper and paperboard, coated on one or both sides with

kaolin 5.716.438 14.551.212 -17,2% -4,5%

2008'

Fruit, nuts and other edible parts of plants, otherwise

prepared or preserved 3.875.657 4.743.256 7,7% 7,0%

2401'Unmanufactured tobacco; tobacco refuse 3.376.722 1.295.496 34,8% 23,4%

3204'

Synthetic organic colouring matter, whether or not

chemically defined 3.268.200 2.074.813 3,3% -3,1%

7210'

Flat-rolled products of iron or non-alloy steel, of a width of

600 mm or more 2.610.458 4.557.499 8,3% 25,4%

3923'

Articles for the conveyance or packing of goods, of

plastics; stoppers, lids, caps and other closures, of

plastics 2.452.657 477.415 15,6% 17,1%

8409'

Parts suitable for use solely or principally with internal

combustion engines 2.351.909 84.556 -25,1% -8,0%

2618'

Granulated slag (slag sand) from the manufacture of iron

or steel 2.246.484 59.932.000 2527,5% 6559,1%

1507'Soya-bean oil and its fractions, whether or not refined 2.179.000 2.824.170 Ø Ø

0809'Apricots, cherries, peaches (including nectarines), plums

and sloes, fresh 2.108.680 5.214.895 -43,5% -24,9%

3806'Rosin and resin acids, and derivatives thereof; rosin spirit

and rosin oils; run gums: 2.065.396 1.223.000 101,5% 118,7%

4901'

Printed books, brochures, leaflets and similar printed

matter 1.866.820 258.299 -17,2% -15,8%

3924'

Tableware, kitchenware, other household articles and

hygienic or toilet articles, of plastics 1.777.425 112.461 -81,2% -81,7%

2016 CHANGE 2015/16

Top 20 products imported from Egypt (2016)IMPORTS

CN4 PRODUCT DESCRIPTION VALUE (€) QUANTITY (KG) % VALUE % QUANTITY

2709'Petroleum oils and oils obtained from

bituminous minerals, crude 411.817.536 1.360.056.855 -18,8% -4,6%

3102' Mineral or chemical fertilisers, nitrogenous 39.579.519 176.199.941 25,0% 72,1%

2710'

Petroleum oils and oils obtained from

bituminous minerals, other than crude 30.926.499 68.800.606 154,5% 176,6%0701' Potatoes, fresh or chilled 14.502.087 46.403.800 -16,9% -17,0%

2905'

Acyclic alcohols and their halogenated,

sulphonated, nitrated or nitrosated derivatives 14.429.729 71.797.122 198,9% 336,8%

3901' Polymers of ethylene, in primary forms 4.885.041 4.331.140 -1,4% 6,5%2711' Petroleum gases and other gaseous 4.380.670 12.361.466 -55,2% -45,8%

2505'

Natural sands of all kinds, whether or not

coloured 3.183.610 110.718.461 5,0% 2,0%

0710'

Vegetables (uncooked or cooked by steaming

or boiling in water), frozen 3.095.286 1.338.086 -2,4% -1,3%

6302'

Bedlinen, table linen, toilet linen and kitchen

linen 3.083.896 514.325 24,6% 19,3%

2501'

Salt (including table salt and denatured salt)

and pure sodium chloride 3.057.354 113.696.510 -7,3% 4,4%

7210'

Flat-rolled products of iron or non-alloy steel,

of a width of 600 mm or more 2.498.869 5.112.125 29,9% 37,4%

3920'

Other plates, sheets, film, foil and strip, of

plastics 2.341.643 1.320.515 -30,9% -16,9%

2005'

Other vegetables prepared or preserved

otherwise than by vinegar or acetic acid 2.310.160 1.955.954 214,2% 256,4%

4107'

Leather further prepared after tanning or

crusting 2.150.606 136.650 81,7% 97,2%

3104' Mineral or chemical fertilisers, potassic 1.965.143 3.851.800 101,1% 136,5%

4803'Toilet or facial tissue stock, towel or napkin

stock and similar paper 1.921.669 2.028.778 18,2% 21,2%

3103' Mineral or chemical fertilisers, phosphatic 1.392.442 7.563.625 17611,0% 14512,9%

4402'

Wood charcoal (including shell or nut

charcoal) 1.358.705 3.811.201 1,2% 6,1%

3904'

Polymers of vinyl chloride or of other

halogenated olefins, in primary forms 1.351.159 1.998.000 -46,4% -40,2%

2016 CHANGE 2015/16

Top growth Greek products exported to

Egypt (2016)

Cotton

Natural gas

Prepared & preserved fruits

Unmanufactured tobacco

Synthetic organic coloring materials

Flat-rolled products of iron & steel

Plastic packaging materials

Granulated slag

Soya-bean oil (new entry, 2016)

Rosin & resin acids

Traditional top product categories

of Greek exports to Egypt

• Mineral fuels & oils (Chapter 27)

• Cotton (Chapter 52)

• Edible fruits & nuts (Chapter 08)

• Tobacco & manufactured substitutes (Chapter 24)

• Plastics & articles thereof (Chapter 39)

• Machinery & equipment (Chapter 84)

• Salt, sulphur, earth & stones (Chapter 25)

• Paper, paperboard, articles of paper pulp (Chapter 48)

• Products of the milling industries (Chapter 11)

• Fertilizers (Chapter 31)

• Preparations of vegetables, fruits & nuts (Chapter 20)

• Chemical products (Chapter 38)

• Tanning & dyeing extracts, dyes, pigments (Chapter 32)

• Iron & steel (Chapter 72)

• Vehicles, parts & accessories (Chapter 87)

• Electrical machinery, equipment & parts (Chapter 85)

• Products of the printing industry (Chapter 49)

BATIMAT EGYPT(construction, building materials, construction machinery &

equipment) - recent 1st edition: 9-11.3.2017

www.batimat-egypt.com

FOOD AFRICA (food & beverage) - next edition: 22-24.4.2017

www.foodafrica-expo.com

EGYMEDICA (pharmaceuticals, medical equipment) - next edition: 4-6.5.2017

www.egymedica.com

SAHARA (agriculture, agricultural equipment) - next edition: 27-29.9.2017

www.saharaexpo.com

HACE (hotel & restaurant equipment, catering) - next edition: 30.10-2.11.2016

www.hace.com.eg

Full Egyptian trade fair program available on the web page

of Egypt Expo & Convention Authority (EECA), at: http://www.eeca.gov.eg/calendar-E-017.html

Important trade fairs in Egypt

Main trade impediments (1)

Egypt’s trade relations with Europe are governed by the Association

Agreement, in force since 2004, which provides for the establishment of a

free trade area. There is a gradual reduction of tariff levels for agricultural

and industrial products, over periods ranging from 3 to 15 years. Still,

certain delays and setbacks are noted.(Information on the EU-Egypt trade relations is available on the site of the EU Delegation to Egypt,

at https://eeas.europa.eu/delegations/egypt_en;

information on Egyptian tariffs & import procedures available on the EU Market Access Database,

at http://madb.europa.eu/madb/indexPubli.htm)

The range of tariff rates for EU-originated products lays between 0%

and 32% (with the exception of heavily charged alcoholic beverages)

Since the beginning of 2016, the Egyptian Government has introduced

new import legislation (Decrees 991/2015 & 43/2016) requiring foreign

exporters to pre-certify & register their manufacturing facilities and products

in special foreign exporters’ register. The procedure is very lengthy and has

in fact inhibited the imports of numerous European consumer products into

the Egyptian market

Main trade impediments (2)

Port congestion and/or slow pace customs clearance

Lengthy inspection procedures at the ports of entry; most of them

conducted by the General Organization for Export & Import Control

(GOEIC)

Specific local inspection and pre-inspection procedures for specific

product categories, e.g. meat & poultry products

Specific packaging, labeling and shelf-life requirements for food

products

Actual foreign currency inadequacies and restrictions

Remittance regulations engaging restrictive Bank involvement

Registration &, particularly, pre-shipment inspection cost

Egyptian nationals & companies of Egyptian ownership only, are

entitled to import goods (the law is under revision)

BUSINESS SECTORS WITH POSITIVE

PERSPECTIVES FOR COOPERATION

▪ Energy & Renewable Energy Sources

▪ Tourism and Real Estate

▪ Food & Beverages

▪ ICT

▪ Shipping and related activities

▪ Logistics

▪ Waste Management

▪ Pharmaceuticals

▪ Franchise

The Egyptian legal framework for investment

The basic Egyptian investment legal framework originates in 1997 (Law 8/1997), that

regulates investment in 16 sectors and provides investors with special treatment & incentives in

specific industries, such as manufacturing and infrastructure development. The Law of 1997

guarantees the repatriation of profits, the ownership of lands and buildings, accounts on foreign

currency, as well as equal treatment between domestic & foreign investors

The Investment Law of 1997 has been amended several times; the most important, so far

amendment, was in 2015, through the Presidential Decree 17/2015. The Investment Law of 2015

provided additional incentives and guarantees to foreign investors, reduced the obstacles to

investment, as well as the import duties for machinery and equipment deemed necessary for

investments, from 5% to 2%. Furthermore, the Law improved the level of protection from

bureaucracy and corruption and accelerated the procedures for approval and licensing of

investment projects. It also established favorable conditions for concessions of public lands for

investment utilization and improved the system of investment dispute settlement

Free zones: Their regime is governed by Law 8/1997. Imports the majority of raw materials and

goods are exempt from duties, restrictions and customs procedures. The 10 public free zones,

which fall under the jurisdiction of GAFI, are concentrated in the regions of Alexandria, Suez, Port

Said, Damietta, Ismailia and Cairo, while 2 zones, in Qeft and Shibin El Kom, are respectively

located in Upper Egypt and the Nile Delta

The Egyptian Government is promoting, since the end of 2016, a new investment law , mainly

targeting the attraction of foreign investment. According to Government sources, the new

legislation provides for additional, targeted tax incentives, according to the geographical area, the

nature and the jobs created by investment projects. The incentives mainly consist of tax

exemptions and deductions, within specified limits, concerning the overall industrial & commercial

activities, as well as the capital gains of investment companies.

Set of measures for attracting investment, as decided

by the Egyptian Supreme Investment Council

(1.11.2016)

Free allocation of industrial lands with infrastructure in Upper Egypt

5-year tax exemption for new agricultural and industrial investment projects in Upper Egypt

5-year tax exemption of new companies manufacturing strategic products that either substitute

imports, or are destined to export

Extension of the exemption of shares listed in the Egyptian Stock Exchange from taxes on

dividends & capital gains till 2020

Granting of incentives to SMEs for complying to tax regulations, tax settlement of older cases

Acceleration of business licensing procedures, through the granting of temporary licenses

Granting of one-year temporary industrial licenses by the Industrial Development Authority (IDA) to

non-compliant factories

Allocation of public lands in the New Administrative Capital & the new cities (East Port Said, El

Alamein, El-Galala και New Ismailia) with a 25% discount; allocation of lands in new cities in Upper

Egypt at a price of EGP500 per m2

Increase by 20-24% of the number of state enterprises to be privatized, over the coming 3 years

Establishment of a National Payment Council, aiming at enhancing the role of the banking system

Enhancement of the role of the private sector in public works, setup of a legal framework for the

encouragement of PPPs

Establishment of a Permanent Committee at the Ministry of Investment, destined to examine

investors’ complaints and to report to Supreme Investment Council. Settlement of investment

disputes within 15 days

Reform action

microfinance law

competition law (passed)

mining law (passed)

third party contract appeal law (passed)

commercial register law

insolvency and debit restructuring law

customs law

new investment law

Drawbacks in attracting investment

➢ Bureaucracy

➢ Entanglements in the operation of the country’s

administration

➢ Administrative opacity and relevant practices

(mainly medium & lower level staff)

➢ Inefficiencies in the judicial system

➢ New arbitration procedure a setback

➢ Inadequacies in foreign currency for payback

➢ Unsatisfactory labor productivity

➢ Labor regulations on foreign employees (9:1 ratio)

Greek investment in Egypt

Egypt is a top destination for Greek investment

The stock of Greek investment in Egypt is estimated at

approximately €800 million, according to official data

(ENTERPRISE GREECE 2012)

However, the real Greek-interest capital invested in Egypt is

estimated as being quite higher; numerous incoming Greek

investments originate in other countries (e.g. Cyprus)

The main fields of Greek investment in Egypt include paper

manufacturing, cement manufacturing, oil & gas exploration

and extraction, construction, food industry, manufacturing of

building materials & paints, aluminium, irrigation systems,

banking, sea & air transportation, training services

Sectors of primary economic interest for

Greece, in the scope of bilateral cooperation

with Egypt (1)

Sectors of traditional economic interest for bilateral cooperation

Agricultural cooperation, cooperation in agricultural research (phytosanitary

harmonization, exchange of information)

Energy, renewable sources of energy (cooperation of public sector and

companies, research, investment from both sides)

Transportation (road, air, cooperation between Greek & Egyptian ports)

Environment (exchange of information, research, promotion of joint projects)

Services (banking, tourism, ICT)

Industrial cooperation (development of industrial zones, cooperation in the

fields of certification, standardization)

Construction & technical services (joint projects, Greek participation in

Egyptian “Mega Projects”, financing, exchange of know-how)

Cooperation in the fields of Culture, Education & Health

Cooperation in the field of water resource management

Sectors of primary economic interest for

Greece, in the scope of bilateral cooperation

with Egypt (2)

Specific sectors of economic interest & opportunities in the context of

the Tripartite Cooperation Greece-Egypt-Cyprus:

Maritime cooperation, cooperation between ports, aiming at restoring

and further developing a maritime network connecting the 3 countries

Tourism cooperation, aiming at strengthening tourism flows between

the 3 countries & promoting joint tourism packages to third countries

Energy, particularly extraction & transportation of natural gas resources,

located in the Mediterranean Sea, between Egypt & Cyprus

Agricultural cooperation (specifically transfer of know-how in the field of

olive tree cultivation)

Infrastructure development

Cooperation in water resource management, desalination, flood

protection & land reclamation projects

Cooperation in the field of environmental protection (mainly sea

environment)

BIG INVESTMENT OPPORTUNITY

AREAS

MEGA projects

- Suez Canal – Investing in Special Economic Zones

- New Administrative Capital

- Golden Triangle

1,5 million Feddans development project

Energy projects

Regional, housing and other infrastructure development

projects

Privatization of state owned enterprises

Hints to business (1)

Excellent bilateral relations between the two countries at

every level

Very friendly disposition shown by the Egyptian people

to Greece and Greeks

Cultural proximity as a comparative advantage

Political stability and hard working Government a very

serious asset

Steadily improving business climate

Attractive capitalization options on continuously

emerging business opportunities

Comparatively low tax and labor cost

24ΓΡΑΦΕΙΟ Ο.Ε.Υ. ΚΑΪΡΟΥ

Hints to business (2)

Prudent selection of partner

Proper legal advisor hiring

Registration with GAFI and pertinent industry entities (associations,

federations etc)

Serious consideration of local social and cultural conditions and

particularities

Avoidance of unethical practices – Clear cut professional approach

Persistence and perseverance in pursuing targeted access

Personal contact indispensable

Arab speaking staff a big plus

Advance contact with Greek Embassy in Cairo – EcoCom Office

recommended

Visa issues to be only addressed to Greek Consulates in Egypt

(Cairo & Alexandria)25ΓΡΑΦΕΙΟ Ο.Ε.Υ. ΚΑΪΡΟΥ

For further inquiries please contact:

EMBASSY OF GREECE IN CAIRO

OFFICE FOR ECONOMIC & COMMERCIAL

AFFAIRS

18, Aisha El Taymoureya, Garden City

Tel.: +202-27948482, 27952036

Fax: +202-27940684

E-mail: ecocom-cairo@mfa.gr

Web site: www.agora.mfa.gr

THANK YOU