A few weeks prior to the long-awaited Egypt Economic Development Conference, the Egyptian Center for Economic and Social Rights (ECESR) released a report stating that investments do not automatically translate into improved living conditions for large sectors of the population.
The report entitled "Above the State" said that despite foreign investments peaking during Mubarak's era, the percentage of the population under the poverty line has gone from 16.5 in 2002 to 26.3 in 2014.
"Egypt has effectively allowed… foreign investment to be an end in itself, rather than a goal for its economic and social development," the report read.
Instead of building an anti-corruption legislative framework, Egypt's post-revolutionary governments have amended existing legislation in a way that facilitates corruption and even oversteps the rulings of the Egyptian judiciary.
The report argued that Egypt’s current investment framework continues to favor the interests of multinational corporations over the interests of the public.
Moreover, the report pointed out that the country went one step further and revised its local investment codes with the intention of granting immunity to multinational corporations by making sure citizens cannot file lawsuits in national courts on corruption allegations. In addition, the government has ensured that “economic crimes” such as theft, corruption and bribery are handled by the General Authority for Investment and Free Zones (GAFI) and not the court system.
Bilateral investments treaties
The report also sheds light on Egypt's unbalanced bilateral investments treaties (BITs). Despite Egypt ranking first among Arab countries and fifth globally in the BITs signed, currently amounting to 100, it remains one of the most vulnerable countries in the world. This is due to the fact that the BITs signed with foreign investors categorically favor those investors, at the great expense of Egypt's state sovereignty and public interest.
Bilateral treaties are considered a tool for economic growth and investments, however the report states that several countries have indicated the treaties are not only a great threat to the democratic process, but also to the nation’s economic and social policies.
"For the foreign investors, the treaty acts as a legal blanket for unconditional protection, without linking the terms of protection to any responsibility on the investor’s side," the report read.
Meanwhile, the investment framework has been amended to provide further immunity to foreign investors, denying Egyptians the right to litigate for public interest and the right to defend public funds and assets.
The report used an example to strengthen its findings by addressing one of the amendments to the “Law of Reconciliation with Investors”. Issued through Act 8 in 1997 and amended by Act 4 in 2012, the ammendment gives responsibility to the GAFI and not the judiciary to handle reconciliation with investors.
With regards to land ownership, the report goes on to place emphasis on the fact that there are no restrictions on companies’ ownership of property or lands in Egypt, regardless of their nationality. The only exception in this case is in Sinai and some other border areas, where land ownership –even to nationals – continues to be a matter of national security.
The government has also failed to impose legal restrictions on transferring company profits outside of Egypt, nor are there any stipulations that investors have to reinvest a part of their profits in Egypt. Foreign investors are therefore allowed to transfer all profits incurred in Egypt outside, often untaxed.
All of these practices have, according to the report, only served to enforce impunity for systematic and widespread corruption in Egypt, continuing to cost Egypt billions of dollars annually.
A brighter future?
In the weeks leading up to the economic conference, which will be held in Sharm el-Sheikh from 13 to 15 March, Prime Minister Ibrahim Mehleb has approved a law preventing third parties from challenging contracts signed between investors and the government. This was done to compensate investors who suffered losses in the wake of the 25 January revolution when court verdicts cancelled previously-held contracts.
Though this step forward may seem unsubstantial in light of the many sour notes the government struck with the ECESR, it may nonetheless show slow progress toward improving bilateral treaties with Egypt's many investors.