Legal treatment of foreign direct investment in Egypt : a study on investment climate in developing countries

In recent years, attitudes and policies of developing countries towards foreign direct investment have witnessed a clear change from suspicion to openness and competition. Nowadays, ideological differences between developed, developing countries are decreasing, and developing countries are moving from blocking the inflow of FDI into the mode, which welcome and promote FDI in their territory. It is recognised that the best way to achieve thus is through working on creating a sound investment climate.

For developing countries, such as Egypt, Foreign direct investment is a vital package of capital, technology, management skills, and expertise. Therefore, FDI is very important as it helps to strengthen the balance of payment of developing countries through the flow of foreign capital and through the generation of foreign exchange earnings in the long run. As a result, all states working for increasing the inflow of FDI tend to relax restrictions and to offer great inducements in order to create a favourable investment climate. The efforts have paid off in Egypt, but not enough.

An investment climate consists of three main factors: political, economic, and legal. The first two factors are clearly well covered by many article and books. The legal literature is still far behind. Much of the available legal literature is not comprehensive and focuses on some issues such as the BITs and others.

The purpose of this thesis is to examine the legislative framework governing foreign direct investment in Egypt. M ore specifically, it focuses on the regulatory control exerted over foreign entities in order to judge the success of the investment climate in attracting the required FDI During Egypt's transition era from a centrally planned of a market-oriented economy, national legislation designed to attract foreign capital needed to be reformed and developed. Simultaneously, it had also to allow the authorities to effectively screen the entry of foreign investment and supervise the operations of foreign enterprises. The various control mechanisms in Egypt remains far from those required. This does not create an impediment to a greater inflow of FDI, but also account for an insufficient investment environment. Amidst efforts to reconcile the tenets of a market economy with socialist ideology, the handling of foreign interest in Egypt remains highly conditioned by various ideological, political, historical, and cultural factors. The objective of this study is to illuminate the current legal standards on the investment climate in developing countries. This study will be valuable as a source of information on issues affecting the investment climate in host states.