This week, the House of Representatives began debating three bills that will provide incentives to industrial and building projects.
Topping the list is an amendment to the 2017 investment law which offers tax breaks to investors who use foreign currency to finance 50 per cent or more of their projects.
The amendments offer incentives to private businesses to reinforce industrial capacity and boost foreign exchange reserves, said House Speaker Hanafi Gebali.
The House’s Economic Affairs Committee began debating the law on Monday and will prepare a report to be discussed in plenary sessions.
Changes to Article 11 of the law offer a tax break of up to 55 per cent on income generated by foreign exchange-funded projects. They mandate the cabinet to determine which industries and areas benefit from the incentives which will be available for up to 10 years.
To be eligible for the incentives, projects must begin operations within six years of the bill being passed.
The 55 per cent tax deductions will be granted to investment projects located in under-developed Upper Egyptian governorates. Projects in more developed parts of the country will receive a tax deduction of up to 33 per cent.
Eligible projects should be labour-intensive and in the fields of renewable energy, export-led industries, vehicle manufacturing, textiles, or pharmaceuticals and be certified by the General Authority for Investment and Free Zones (GAFI).
Deputy Finance Minister Ahmed Kouchok explained that the new investment bill is in line with the State Ownership Policy Document which the government published in May and which is expected to be ratified by the end of this year. The document draws up a roadmap for a massive privatisation programme which aims to double the private sector’s contribution in the economy to 65 per cent over the next five years and attract $40 billion in investments by 2026.
The amendment to the 2017 investment law is part of a package of measures intended to generate greater foreign exchange revenues, said Kouchok, and “targets advanced technological industries which are the industries of the future”.
“They reflect a new policy of expanding financial incentives in line with standards prescribed by the IMF and the World Bank.”
Chair of the House’s Economic Affairs Committee Mohamed Suleiman said the legislative changes are needed to boost foreign exchange reserves and attract private investments to domestic industries that can reduce the demand for imports.
The House’s Industrial Committee has also started discussing amendments to the 2017 law regulating the performance of industrial establishments.
Chair of the Committee Moetaz Mahmoud said the changes will give temporary operation permits to unlicensed industrial establishments.
“The amendments will allow unlicensed industrial projects to resume production as long as they comply with environmental and civil protection measures,” said Mahmoud.
On Sunday, the House approved legal amendments that provide contractors who suffered losses as a result of the 2016 economic reforms to apply for financial compensation from the government. A Higher Committee for Compensations will be set up to examine claims filed by contractors.
Minister of Parliamentary Affairs Alaaeddin Fouad said “the amendments will improve the investment climate in Egypt and support the contracting sector which is a vital component of the national economy.”
The Higher Committee for Compensations — affiliated with the cabinet — will establish the ground rules for compensation and determine whether any losses incurred were a result of economic liberalisation policies.
“The changes are needed to maintain investments in the contracting sector, ensure a smooth implementation of the state’s national investment projects and safeguard the economy against shocks,” Mahmoud said.
Contractors requesting compensation will be required to provide documentation showing the extent of losses suffered due to economic liberalisation.
*A version of this article appears in print in the 24 November, 2022 edition of Al-Ahram Weekly.