General Agreement on Trade in Services (GATS) Commitments
Egypt has restrictions for most services sectors in which it has made General Agreement on Trade in Services (GATS) commitments. These restrictions place a 49 percent limit on foreign equity in construction and transport services. In the computer services sector, larger contributions of foreign equity may be permitted, such as when the Ministry of Communication and Information Technology determines that such services are an integral part of a larger business model and will benefit the country. Egypt restricts companies from employing non-nationals for more than 10 percent of their workforce. Limitations on foreign management also apply to computer-related services (60 percent of top-level management must be Egyptian after three years from the start-up date of the venture). A prohibition on the acquisition of land by foreigners for commercial purposes was amended in 2002 to allow such acquisition under certain circumstances.
Foreign firms may own up to 100 percent of Egyptian private insurance firms. Investors acquiring more than a 10 percent stake in an insurance company require approval from the Egyptian Insurance Supervisory Authority (EISA). A 2008 amendment to the insurance law made EISA more autonomous and strengthened its role from administrative regulator to a risk-based and market-sensitive regulator. The amendment also allows foreign property insurance brokers to do business in Egypt for the first time. In an attempt to create a self-regulatory body, the amendment creates a “Union of Insurance Companies” which all companies must join. The union will issue professional standards and have the power to discipline its members. Another key change was the abolition of the “Higher Council for Insurance” which was an unnecessary bureaucratic layer and overburdened the regulatory framework. Other changes include raising the required minimum issued capital for insurance companies to LE60 million ($5.57 million) instead of LE30 million ($5.57 million).
No foreign bank seeking to establish a new bank in Egypt has been able to obtain a license in the past 20 years, and in November 2009, the Central Bank Governor reaffirmed that no new banks would be given licenses.
Since banking reform began in 2004, the government has divested itself from many joint venture banks, and privatized the fully government-owned Bank of Alexandria in 2006. However, efforts to restructure the remaining three state-owned banks have been mixed, and the Central Bank rejected privatization for the three banks in 2009 on the grounds that market conditions were not right. The three remaining state-owned banks still control at least 40 percent of the banking sector's total assets. The banking reforms in the past five years have succeeded in significantly reducing the share of non-performing loans.
Despite the passage of a February 2003 law to allow for new telecommunications companies in accords with Egypt's WTO commitments, Telecom Egypt continues to hold a de facto monopoly since additional fixed-line licenses have not been issued by the National Telecommunications Regulatory Authority (NTRA). The NTRA postponed a plan to issue a second license in mid-2008, citing a lack of interest in the international markets for fixed-line service. However, in October 2009, the NTRA began accepting local and international bids for licenses to establish so-called "triple play" services of data, voice, and video in private residences, for which greater international market interest exists. The licenses for "triple-play" services are slated to be issued in 2010. Compared to fixed-line service, mobile phone service in Egypt is a more competitive sector, and three major private companies – Etisalat, Mobinil, and Vodafone – dominate the market.
The government is liberalizing maritime and air transportation services. The government's monopoly on maritime transport ended with the passage of Law 1 of 1998, and the private sector now conducts most maritime activities including loading, supplying, ship repair, and, increasingly, container handling. The Port of Alexandria now handles about 60 to 65 percent of Egypt’s trade. Renovations underway at the Port of Alexandria, thus far at a cost of about LE 750 million ($138 million) have increased handling capacity to 44 million tons per year, up from 32 million tons per year in 2004. The renovations included construction of deeper quays to receive larger vessels; redesign of storage areas, warehouses, and associated infrastructure; installation of new fiber optic cables for data transmission; installation of a more automated cargo management system; and renovation of the passenger cruise ship terminal. These renovations have resulted in a smoother flow of goods and services and have, combined with reforms in the Customs Authority, produced a sharp decrease in customs clearance times from three to four weeks in 2004 to about 3-5 days at present for the Port of Alexandria, and just 1 day at the Port of Ain Sukhna. However, when shipments are required to be approved by the General Organization for Import and Export Control (GOIEC), customs clearance may take between 2 to 20 days, depending on cargo type.
Egypt and the United States concluded an Air Transport Agreement in 1964, and the countries have modified the agreement only twice since then, adding a security article in 1991, and in 1997 adding an amended route schedule, a limited agreement on cooperative marketing arrangements, and a safety article. The agreement remains very restrictive and has no provisions on charter services. In the past, private and foreign air carriers have not been able to operate charter flights to and from Cairo without the approval of the national carrier, Egypt Air. The United States remains interested in replacing the restrictive 1964 agreement with an Open Skies air services agreement. In June 2008, Delta Air Lines resumed operation of non-stop service between Cairo International Airport and New York’s John F. Kennedy Airport. Egypt Air joined the Star Alliance in July of 2008 and has entered into a code share agreement with United Airlines.
Egypt is working with the U.S. on transportation security issues at seaports and airports, and a bilateral memorandum of understanding on the Container Security Initiative is expected soon.
Courier and Express Delivery Services
Private courier and express delivery service suppliers seeking to operate in Egypt must receive special authorization from the Egyptian National Postal Organization (ENPO). In addition, although express delivery services constitute a separate for-profit, premium delivery market, private express operators are required to pay ENPO a "postal agency fee" of 10 percent of annual revenue from shipments under 20 kilos. In 2009, the government of Egypt proposed a new contract for private courier and express delivery companies, which would grant ENPO even more extensive regulatory oversight over the private express delivery sector by increasing considerably the fees paid to ENPO and requiring private express delivery companies to receive prior ENPO authorization for their prices and other polices. Given that ENPO is not an independent regulator, there are strong concerns that this new proposed contract will negatively impact competition in the express delivery sector.
Other Services Barriers
Egypt maintains several other barriers to the provision of certain services by U.S. and other foreign firms. Foreign motion pictures are subject to a screen quota, and distributors may import only five prints of any foreign film. According to the Egyptian labor law, foreigners cannot be employed as export and import customs clearance officers, or as tourist guides.
Under the 1986 United States-Egypt Bilateral Investment Treaty (BIT), Egypt is committed to maintaining an open investment regime. The BIT requires Egypt to accord national and Most-Favored Nation (MFN) treatment (with certain exceptions) to U.S. investors, to allow investors to make financial transfers freely and promptly, and to adhere to international standards for expropriation and compensation. The BIT also provides for binding international arbitration of certain disputes.
Based on a review of Egypt’s investment policies, the OECD has invited Egypt to adhere to the OECD Declaration on International Investment and Multinational Enterprises. Egypt signed the Declaration in 2007, becoming the first Arab and first African country to join. During this process, Egypt agreed to review the restrictions on investors identified in the OECD’s 2007 Investment Policy Review of Egypt, such as certain limits in the tourism sector as well as the discriminatory treatment of foreign investors in courier services.
Under Egyptian competition law, a company holding 25 percent or more market share of a given sector may be subject to investigation if suspected of certain illegal or unfair market practices. The law is implemented by the Egyptian Competition Authority, which reports to the Minister of Trade and Industry. However, the law does not apply to utilities and infrastructure projects, which are regulated by other governmental entities. In June 2008, Law 3/2005 on Protection of Competition and Prohibition of Monopolistic Practices was amended and passed by the People’s Assembly under Law 190/2008. The amendment sets the minimum fine for monopolistic business practices at LE 100,000 (US$18,380) and the maximum at LE 300 million (US$55.15 million). It also provides for doubling the penalty in cases where violations are repeated. The first trial under both new laws involved a cement cartel, which was convicted in 2008 and given a fine of LE200 million ($36.76 million), which was upheld on appeal.
Egypt's Electronic Signature Law 15 of 2004 established the Information Technology Industry Development Agency (ITIDA) to act as the e-signature regulatory authority and to further develop the information technology sector in Egypt. The Ministry of State for Administrative Development (MSAD) is implementing an e-government initiative to increase government efficiency, reduce services provision time, establish new service delivery models, reduce government expenses, and encourage e-procurement. For example, the e-tender portal, established in August 2007, allows all government tenders to be published online. In September 2009, the government implemented the esignature service, allowing public and private companies to offer e-signature authentication. New legislative proposals on information security, cyber crimes, and the right to information have been in the drafting process for over a year, and it is unclear if they will be implemented.
Pharmaceutical Price Controls
The Egyptian government controls prices in the pharmaceutical sector to ensure that drugs are affordable to the public. The government does not have a transparent mechanism for pharmaceutical pricing. The Pharmaceutical Committee in the Ministry of Health and Population reviews prices of various pharmaceutical products and negotiates with companies to adjust prices based on a cost-plus formula. This method, however, does not allow price increases to compensate for inflation and the pricing policy has failed to keep pace with the rising cost of raw materials.
About 85 percent of active pharmaceutical ingredients in Egypt are imported. In 2004, the government reduced customs duties on most imports of pharmaceutical inputs and products from 10 percent to 2 percent. In that same year, the MOHP lifted restrictions on exporting pharmaceuticals to encourage pharmaceutical investment and exports.