Is it a good idea to invest in Egypt?If yes,Why?

News Letter | April 2012

In This Issue: Pg. 1 Is it a good idea to invest in Egypt now?

Pg. 1 Is the Egyptian Economy Already Rebounding?

Pg. 2 Goldman Sachs's Jim O'Neill on the Egyptian Economy Pg. 3 Substantial Business Related Reform Pg. 4 The Project for the Development of the Suez Canal and the Ground Area Around It Pg. 4 NILEX Updated its Listing Rules Pg. 5 About Us

Is it a good idea to invest in Egypt now?

If yes, Why? Ever since Mubarak’s regime fell in February 2011, Egypt has been going through a transitory period with the objective of adopting a democratic system. Now that we are in April 2012, it is safe to say that a good deal of progress has been achieved on that regard. Fair elections of the members of the Parliament with its two chambers, the People’s

Assembly and the Shura Council, have taken place. Security has been restored to a large extent and there has been considerable progress on curbing corruption.

Most importantly, the military has promised to relinquish full power in June following the presidential elections, thus, ending the transitory period.

Is the Egyptian Economy Already Rebounding?

The ITIDA’s CEO, Eng. Yasser El Kady, said “there have been a number of fantastic ICT success stories as Egypt continue to mark its appeal to global companies with 17 new investments by multinational companies in the past 2 years and a number of substantial deals taking place in the last 12 months”

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There are several indications that the economy is indeed getting back on track.

In February the Egyptian stock exchange index reached its highest point since July 2011 A.T. Kearney’s Global Services Location index placed Egypt in 4th place in the world for offshoring and outsourcing for the year 2011. Some of the world leading information and communication technology (ICT), companies, such as Vodafone, Microsoft, and IBM are expanding their operations in Egypt.

Moreover, Egypt’s Information Technology Industry development Agency (ITIDA) announced back in December that it has reached its 2011 goal of USD1.1 billion in IT export revenue. Egypt’s General Authority for Investment and Free Zones (GAFI) indicated in its last report on agribusiness that investors are interested in the massive mega farm project to be built in either North Sinai or the Toshka region in Upper Egypt. The report states that “the farm is designed to attract investments of almost USD$5 billion and will create 45,000 jobs".

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Abou El-Fadl, El-Kassed, and Partners Law Office "A&K"

News Letter | April 2012

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The next eleven have the potential to be, along with the BRICs, the world's largest economies in the 21 century

Goldman Sachs's Jim O'Neill on the Egyptian Economy Economist Jim O’Neill, who coined the term ‘BRIC’ and accurately predicted the fastest growing economies of the past decade (Brazil, Russia, India, and China) recently released a new book called “The Growth Map” in which he predicts that Egypt could soon outperform the BRICs and that it offers exciting opportunities for investors over the next decade. In fact, O’Neill believes that Egypt “could be one of the top 10 contributors to global GDP this decade, adding well over USD 2 trillion''. What are some of his reasons?

Egypt, with its population of 85 million, is rapidly growing; the majority of Egyptians are educated and many of those are multilingual; Egypt lies in a strategic location between Europe, Africa, and Middle East; with more

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than 6 million tourists visiting Egypt every year, there is a great potential for growth in the tourism sector; great potential in the construction business; Egypt is rich with oil and gas reserves; huge industrial and agricultural resources”.

Egypt "could be one of the top 10 contributers to global GDP this decade, adding well over $2 trillion", Jim O'Neill

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Abou El-Fadl, El-Kassed, and Partners Law Office "A&K"

News Letter | April 2012

Substantial Business Related Reforms During the last year, many government, international entities, and investors were hesitant to invest in Egypt because of the political situation. In order to ameliorate the investment atmosphere in Egypt, the Egyptian government took several steps to boost investment and allay any unease.

In August 2011 a committee was formed, headed by the Prime Minister and included several high profile officials, with the sole purpose of finding amicable solutions for contract or agreement disputes arising between investors and public authorities.1 In early January 2012 Field Marshal Hussein Tantawi issued a new law amending the Investment Law by adding two Articles. One Article refers to the above-mentioned committee.

The second states that the government has the right to reconcile with investors concerning specified crimes stated in the Penal Code, which include embezzlement and forgery, if those crimes were committed in any act relating to the Investment Law and on condition that the final judgment was not issued by the Egyptian courts.2 In addition to the legal reforms, it has become easier to establish companies and branches. The

Mr. Khairat Al Shater, Deputy Chairman of the Brotherhood 1 2

Head of Egypt's current government, Dr. Kamal Ganzouri (left) with Field Marshal Hussein Tantawi (right).

General Authority for Investment and Free Zones (GAFI) has improved its procedures and reduced bureaucracy. This has resulted in a substantial decrease in the time frame for establishing new commercial entities from a few weeks to 3 to 7 working days.

After substantially winning in the parliamentary elections, the Muslim Brotherhood, in order to alleviate any unease, made several statements to reassure investors.

They indicated that they are committed to an open and transparent economy and have recently met with delegations of foreign investors including J.P. Morgan Chase and Morgan Stanley. In a statement released in February 2012, Mr. Khairat Al Shater, Deputy Chairman of the Brotherhood, said that the Brotherhood is "open to the whole world, ready for any economic agreements that would achieve common interest, does not sacrifice people's rights and are based on mutual respect, pride and dignity and achieve the requirement of the phase in Egypt".

Prime Minister Decree 1009/2011. It was later amended by Prime Minister Decree 1491/2011 Law 4/2012

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Abou El-Fadl, El-Kassed, and Partners Law Office

News Letter | April 2012

The Project for the Development of the Suez Canal and the Ground Area Around It The Egyptian National Competitiveness Council (ENCC), a non-profit, non-governmental organization, with strong ties to the Egyptian government, has asked national and international investment companies/bureaus to prepare a feasibility study on the project for the development of the Suez Canal and the ground area around it. The said decision by the ENCC to take the project forward was taken after it had already studied the project internally and concluded that the development of the Suez Canal and the ground area around it could produce great investment opportunities in various fields, such as the transit business, industrial projects especially exporting ones, and tourism.

This is a grand scale project but how big is it? The chairman of the board of ENCC, Mr. Seif Fahmy, stated that the project can attract up to USD 250 billion of investment money in a 10 year period, which is what he believes is the project duration.

Accordingly, it is safe to say that if the feasibility study done by independent investment companies/bureaus fall in line with the Chairman’s statement, then we would be looking on, without a doubt, one of the most ambitious and massive non-energy related investment projects in the Middle East in modern history.

ENCC believes that the project can directly create up to one million new jobs and indirectly contribute to the creation of up to two million new jobs.

NILEX Updated its Listing Rules In order to make the listing in the Nile Stock Exchange (NILEX) more appealing and make it more secure to investors, the Egyptian Financial Supervisory Authority (EFSA) issued a Decision in October 2011 amending the listing rules. The new listing rules were applied by the NILEX in November 2011.3 NILEX is an Egyptian Stock Exchange created in 2007 and is dedicated to small and medium sized companies. When it first launched, companies had to have a capital of at least LE500,000 and a maximum of LE25 million. Now companies 3

who wish to be part of the new NILEX trading system for SMEs will not need a minimum capital requirement, with the maximum ceiling set at LE50 million. By establishing a new trading system, NILEX hopes to attract more investors and companies from the small and medium businesses. The government boasted, at the time of its launch, that NILEX is the first mid and small cap market in the MENA region.

EFSA Decision 81/2011

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Abou El-Fadl, El-Kassed, and Partners Law Office

News Letter | April 2012

AbouElfadl, ElKassed& Partners Law Office, "A&K" A&K is an international corporate law firm committed to serving the business community with its cutting edge expertise and professionalism. A&K has experience and expertise in diverse legal fields across a wide array of business. The accumulated experience and reputation of the Partners is the result of more than 25 years within long-standing international law firms. A&K partners have firsthand knowledge of several major mergers and acquisitions, due diligences, and a variety of business transactions.

This issue was supervised and edited By: AK&P Law Office Edit by: Miss: Tami Clay Address: 13 El Themar St., Moustafa Mahmoud Square, Mohandessin, Giza, Egypt P.O. Box: 12311 Tel: (+202)374 93 924 Fax: (+202)374 93 932 E-Mail: info@ak-p-law.com

Copyright 2012 AbouElfadl, ElKassed, & Partners Law Office Reproduction is permitted provided that the source is acknowledged For inquiries: Ms. Yara Ahmed info@ak-p-law.com

Images References:

Pg.1 img.1 | totallycoolpix.com Pg.2 img.2 | telegraph.co.uk Pg.4 img.1 | encc.org.eg

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Pg.1 img.2 | af.reuters.com Pg.3 img.1 | english.ahram.org.eg

Pg.2 img.1 | wikipedia.org Pg.3 img.2 | news.egypt.com

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