CAIRO (Reuters) - Egypt’s cabinet approved a long-awaited draft law on investment on Wednesday aimed at making deals less vulnerable to legal disputes or changes in government, and reducing stifling bureaucracy.
The government is seeking to address foreign business concerns before an investment conference in Sharm el-Sheikh set for mid-March, when Egypt hopes to secure domestic and foreign investment of up to $12 billion.
Announcing the new law, Prime Minister Ibrahim Mehleb said in a statement the government held discussions with investors, an industry association, law advisors and members of civil society when drawing up the legislation.
It will now be referred to President Abdel Fattah al-Sisi, who is expected to ratify it.
“If it hadn’t been for this law, there would be no Sharm el-Sheikh conference. It will be the main focus of the conference,” said Mohsen Adel, deputy head of the Egyptian Association for Financing and Investment.
One of the most important elements of the law is the imposition of punishments on the company and the guilty employee, as opposed to the previous practice of often making top executives responsible for violations committed by staffers.
“We had chaos before,” Adel said. “Now the employee who committed a mistake will be punished and the entity itself will incur punishments, like fines, or freezing activities.”
The law provides certain guarantees including for deals signed with governments, and allows for incentives to encourage the funding of labour-intensive projects.
Sisi, often criticised for a security crackdown against his political opponents, has embarked on a series of economic reforms since taking office last year that have won praise from investors traditionally wary of plunging cash into Egypt.
Investment Minister Ashraf Salman told Reuters in January that the new law was critical to winning the confidence of foreign investors who currently must secure permits from 78 government agencies to start a company in Egypt -- a process that can take up to five years.
The legislation creates a “one-stop shop” to make Egypt, the most populous Arab nation, more attractive for foreign money.
Angus Blair, chairman of business and economic forecasting think-tank Signet, told Reuters: “The whole investment system is antiquated and needs a complete overhaul.”
Egypt’s economic growth rate over the last three years was around 2 percent, too slow to reduce widespread unemployment.
The IMF has projected growth to reach 3.8 percent in 2014/2015 and to rise to 5 percent over the medium term.
Additional reporting by Ehab Farok; Writing by Stephen Kalin and Yara Bayoumy; Editing by Tom Heneghan