This is some guardedly good news for foreign investors operating in Egypt who are interested in establishing vehicles to import commodities for direct trading on the domestic market in Egypt (i.e., importation for trading).
A company can now be majority or wholly-owned by foreign nationals or foreign entities and apply for the importation license for commercial resale. However, the importation license will only be granted for 10 years with a possible renewal for another 10 years.
On 29 October 2023, the Government of Egypt issued Law No. 173 of 2023 (“Amendment“) amending the Importers Registry Law No. 121 of 1982 (“Importers Registry Law“), lifting the 51% minimum Egyptian ownership requirement, and allowing importation vehicles to be wholly owned by foreign shareholders.
Under the Amendment, Egyptian companies with foreign shareholders, holding the majority of its shares and up to 100%, are eligible to apply for an importation license, subject to meeting other qualifying conditions for the license such as minimum capital and turnover. However, the term of the license for these entities will be limited to 10 years, with a possibility to extend the term for another 10 years by virtue of a cabinet decision. Existing companies partially owned by foreign shareholders (up to 49%) are given a license with a validity of five years, which can be renewed for unlimited terms.
The Amendment came into force on 30 October 2023, but its enforcement remains to be seen as the executive regulations are yet to be issued.
Historically, Egypt imposed relatively hefty conditions on obtaining importation licenses to alleviate pressure and demand on foreign currency, and encouraged local manufacturing as opposed to importing finished goods.
Until 2017, companies licensed to carry out importation activities were required to be 100% owned by Egyptian nationals to be eligible for an importation license.
Later, in 2017, Egypt partially shifted its position by allowing Egyptian companies owned 49% by foreign shareholders to obtain the license. This was a significant reduction of the nationality requirement under the Importers Registry Law, from 100% to 51%.
Despite this partial easing of the nationality requirements, foreign investors operating on the local market, mainly big market players, faced a number of challenges in structuring their importation operations, and voiced such challenges to the government.
In May 2023, in a very positive step, the Supreme Investment Council, presided by the president of the republic, held a number of meetings with foreign investors to consult on possible reforms to enhance the investment climate.
On 16 May 2023, the Supreme Investment Council adopted 22 investor friendly decisions. One of which was to “amend the Importers Registry Law in order to allow foreign investors to obtain License for 10 years.” Accordingly, the Egyptian government and Parliament drafted a short one-pager Amendment.
Under the Amendment, joint stock companies and limited liability companies incorporated in Egypt that may be majority owned or wholly owned by foreign shareholders are eligible to apply for the license, if they comply with the qualifying conditions.
Under the Amendment, importation licenses issued to companies wholly owned by foreign shareholders (or majority owned by foreign shareholders) may not exceed 10 years in total, with a possibility to extend the license’s term for another 10 years by virtue of a decree issued by the Egyptian Cabinet of Ministers. This means that the best-case scenario is that a company succeeds in renewing the license and the life span of the company is 20 years. This extension is not guaranteed as it is granted on a case-by-case basis. The requirements and conditions to obtain this additional 10-year extension remains to be seen.
The Egyptian Minister of Trade may possibly issue executive regulations to shed more light on the relevant details, including the process of renewal of the license in this respect.
The new Amendment was passed in response to the requests of the foreign manufacturing investors that import their own finished products manufactured abroad in their own facilities. However, the restrictions on the renewal may be considered an obstacle by investors planning for long-term and stable structures.
Impact on current operators
The application of the Amendment by the relevant sector regulator remains to be seen. The possible issuance of an executive regulations with further details may also give more certainty on the application. The Amendment should not technically negatively impact the current importation structures, owned up to 49% by foreigners.