New and Flawed System for Calculati

On 6 November 2018, Prime Ministerial Decree No. 2731 of 2019 (the “Decree”)[1] was published in the Official Gazette, adding two new articles to the Executive Regulation of the Investment Law No. 72 of 2017, which oblige public and private entities regulated by the Law to notify the Ministry of Investment of the data of foreign investment they receive according for procedures determined by the new provisions. Although the new amendment deals only with the addition of the provisions relating to the notification of foreign investment data, its significance lies in that it reflects a disagreement within government economic departments on the issue of calculating the volume of foreign investment in Egypt. By way of background, the Central Bank of Egypt (“CBE”) issued its latest balance of payments figures for the third quarter of this calendar year, indicating a sharp decline in the volume of foreign investment in Egypt by 24% compared to the same period of the previous year, a large percentage in itself, especially considering the modest volume of foreign investment in Egypt in recent years in general. It is customary that the central bank in any country is the competent authority to issue official data on the balance of payments which are invoked and relied upon by international bodies and financial institutions. Central Banks apply the same methodology in calculating the figures and components of the balance of payments, in various countries throughout the world, which allows for scientifically accurate comparisons between them. Therefore, it came as a surprise that the Ministry of Investment, in response to the FDI data issued by CBE, issued statements questioning the accuracy, integrity and credibility of these data and confirming that the volume of foreign investment exceeds what CBE had reported. This unprecedented public statement expresses a disagreement between governmental economic entities and has a negative impact on the credibility of the Egyptian economic decision-making. Pursuant to the foregoing, the aforementioned Decree was issued which obliged all public and private entities to electronically notify, on forms specified by the Prime Minister, the General Authority of Investment of the data for foreign investment assets to which their activities are related. The Decree included in the definition of public bodies all ministries, authorities, governorates and entities that issue licenses to establish and conduct economic activities or that have control over economic activities, including the Ministry of Petroleum, the Ministry of Electricity, CBE, the Egyptian Stock Exchange (“EGX”) and Misr for Central Clearing, Depository and Registry (MCDR). Private entities are all companies and projects that have a foreign investment participation. It is also worth noting that the Decree was not limited to foreign direct investment, but also extended to indirect foreign investment, that is, investment in securities through EGX. In this sense, especially the inclusion of investment in securities, the Decree confused the need to calculate foreign direct investment in accordance with international standards and the calculation of investment in general, which takes into account the purchase of securities. This weakens the credibility of official data on economic activity and investment in Egypt and makes it unreliable internationally, which is regrettable and worth reviewing.   [1] Prime Ministerial Decree No. 2731/2019 amending the Executive Regulation of the Investment Law issued by virtue of Prime Ministerial Decree No. 2310/2017, Official Gazette, Issue No. 44 (bis) (w), 6 November 2019.