Policies Towards Foreign Direct Investment

Egypt’s completion of the three-year, $12-billion IMF Extended Fund Facility between 2016 and 2019, and its associated reform package, helped stabilize Egypt’s macroeconomy, introduced important subsidy and social spending reforms, and helped restore investor confidence in the Egyptian economy.  The flotation of the Egyptian Pound (EGP) in November 2016 and the restart of Egypt’s interbank foreign exchange (FX) market as part of this program was the first major step in restoring investor confidence that immediately led to increased portfolio investment and should lead to increased FDI over the long term.  Other important reforms have included a new investment law and an industrial licensing law in 2017, a new bankruptcy law in 2018, a new customs law in 2020, and other reforms aimed at reducing regulatory overhang and improving the ease of doing business. Egypt’s government has announced plans to improve its business climate further through investment promotion, facilitation, more efficient business services, and the implementation of investor-friendly policies.

With few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.

The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and relevant regulations govern Egypt’s capital markets.  Foreign investors are able to buy shares on the Egyptian Stock Exchange on the same basis as local investors.

The General Authority for Investment and Free Zones (GAFI, http://gafi.gov.eg) is the principal government body that regulates and facilitates foreign investment in Egypt, and reports directly to the Prime Minister.

The Investor Service Center (ISC) is an administrative unit within GAFI that provides “one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Middle East, and Africa. This is in addition to promoting Egypt’s investment opportunities in various sectors.

The ISC provides a start-to-end service to the investor, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increases of capital, changes of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities within 60 days from the date of request. Other services GAFI provides include:

Advice and support to help in the evaluation of Egypt as a potential investment location;

Identification of suitable locations and site selection options within Egypt;

Assistance in identifying suitable Egyptian partners; and

Aftercare and dispute settlement services. ​

The ISC plans to establish branches in each of Egypt’s Governorates by the end of 2021.  Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers/board members, except for Limited Liability Companies where the only restriction is that one of the managers must be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process.  Companies are able to operate while undergoing the often lengthy security screening process.  However, if the firm is rejected, it must cease operations and may undergo a lengthy appeals process.  Businesses have cited instances where Egyptian clients were hesitant to conclude long-term business contracts with foreign businesses that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the Government of Egypt has made progress streamlining the business registration process at GAFI, inconsistent treatment by banks and other government officials has in some cases led to registration delays.

Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. Nevertheless, the new Investment Law does allow wholly foreign companies investing in Egypt to import goods and materials. In January 2021 the Egyptian government removed the 20-percent foreign ownership cap for international and private schools in Egypt.

The ownership of land by foreigners is complicated, in that it is governed by three laws: Law 15 of 1963, Law 143 of 1981, and Law 230 of 1996.  Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). Law 15/1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law 143/1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is approximately equal to one acre) that may be owned by individuals, families, cooperatives, partnerships, and corporations regardless of nationality. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.

Under Law 230/1986, non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:

• Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors) in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
• The area of each real estate property does not exceed 4,000 m².
• The real estate is not considered a historical site.

Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the Prime Minister consents to an exemption.

Other Investment Policy Reviews

In December 2020, the World Bank published a Country Private Sector Diagnostic report for Egypt, which analyzed key structural economic reforms that the Egyptian government should adopt in order to encourage private-sector-led economic growth. The report also included recommendations for the agribusiness, manufacturing, information technology, education, and healthcare sectors. https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/cpsd-egypt

https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/cpsd-egypt

The Organization for Economic Cooperation and Development (OECD) signed a declaration with Egypt on International Investment and Multinational Enterprises on July 11, 2007, at which time Egypt became the first Arab and African country to sign the OECD Declaration, marking a new stage in Egypt’s drive to attract more foreign direct investment (FDI).  On July 8, 2020, the OECD released an Investment Policy Review for Egypt that highlighted the government’s progress implementing a proactive reform agenda to improve the business climate, attract more foreign and domestic investment, and reap the benefits of openness to FDI and participation in global value chains. https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm  

https://www.oecd.org/countries/egypt/egypt-continues-to-strengthen-its-institutional-and-legal-framework-for-investment.htm  

In January 2018 the World Trade Organization (WTO) published a comprehensive review of the Egyptian Government’s trade policies, including details of the Investment Law’s (Law 72 of 2017) main provisions. https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

https://www.wto.org/english/tratop_e/tpr_e/s367_e.pdf 

The United Nations Conference on Trade Development (UNCTAD) published an Information and Communications Technology (ICT) Policy Review for Egypt in 2017, in which it highlighted the potential for investments in the ICT sector to help drive economic growth and recommended specific reforms aimed at strengthening Egypt’s performance in key ICT policy areas.   https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf 

https://unctad.org/en/PublicationsLibrary/dtlstict2017d3_en.pdf   

Business Facilitation

GAFI’s ISC ( https://gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx ) was launched in February 2018 and provides start-to-end service to the investor, as described above.  The Investment Law (Law 72 of 2017) also introduces “Ratification Offices” to facilitate obtaining necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.

Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI.  The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online.  GAFI has also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.

Outward Investment

Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to January 2021, outward investment featured the following:

• Egyptian companies implemented 278 Egyptian FDI projects. The estimated total value of the projects, which employed about 49,000 workers, was $24.26 billion.
• The following countries respectively received the largest amount of Egyptian outward investment in terms of total project value: The United Arab Emirates (UAE), Saudi Arabia, Algeria, Kenya, Jordan, Ethiopia, Germany, Libya, Morocco, and Nigeria.
• The UAE, Saudi Arabia, and Algeria accounted for about 28 percent of the total amount.
• Elsewedy Electric was the largest Egyptian company investing abroad, implementing 21 projects with a total investment estimated to be $2.1 billion.

Egypt does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

The Egyptian government has made efforts to improve the transparency of government policy and to support a fair, competitive marketplace.  Nevertheless, improving government transparency and consistency has proven difficult, and reformers have faced strong resistance from entrenched bureaucratic and private interests.  Significant obstacles continue to hinder private investment, including the reportedly arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  Nevertheless, the impetus for positive change driven by the government reform agenda augurs well for improvement in policy implementation and transparency.

Enactment of laws is the purview of the Parliament, while executive regulations are the domain of line ministries.  Under the Constitution, the president, the cabinet, and any member of parliament can present draft legislation.  After submission, parliamentary committees review and approve, including any amendments.  Upon parliamentary approval, a judicial body reviews the constitutionality of any legislation before referring it to the president for his approval.

Although notice and full drafts of legislation are typically printed in the Official Gazette (similar to the Federal Register in the United States), there is no centralized online location where the government publishes comprehensive details about regulatory decisions or their summaries, and in practice consultation with the public is limited.  In recent years, the Ministry of Trade and other government bodies have circulated draft legislation among concerned parties, including business associations and labor unions. This has been a welcome change from previous practice, but is not yet institutionalized across the government.

While Egyptian parliaments have historically held “social dialogue” sessions with concerned parties and private or civic organizations to discuss proposed legislation, it is unclear to what degree the current Parliament will adopt a more inclusive approach to social dialogue.  Many aspects of the 2016 IMF program and related economic reforms stimulated parliament to engage more broadly with the public, marking some progress in this respect.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  The Financial Regulatory Authority (FRA) supervises and regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization, and microfinance.  It issues rules that facilitate market efficiency and transparency. FRA has issued legislation and regulatory decisions on non-banking financial laws which govern FRA’s work and the entities under its supervision. ( http://www.fra.gov.eg/jtags/efsa_en/index_en.jsp  )

The criteria for awarding government contracts and licenses are made available when bid rounds are announced.  The process actually used to award contracts is broadly consistent with the procedural requirements set forth by law.  Further, set-aside requirements for small and medium-sized enterprise (SME) participation in GoE procurement are increasingly highlighted. The FRA publishes key laws and regulations to the following website: http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

The Parliament and the independent “Administrative Control Authority” both ensure the government’s commitment to follow administrative processes at all levels of government.

The cabinet develops and submits proposed regulations to the president following discussion and consultation with the relevant ministry and informal consultation with other interest groups. Based on the recommendations provided in the proposal, including recommendations by the presidential advisors, the president issues “Presidential Decrees” that function as implementing regulations.  Presidential decrees are published in the Official Gazette for enforcement.

The degree to which ministries and government agencies responsible for drafting, implementing, or enforcing a given regulation coordinate with other stakeholders varies widely.  Although some government entities may attempt to analyze and debate proposed legislation or rules, there are no laws requiring scientific studies or quantitative regulatory impact analyses prior to finalizing or implementing new laws or regulations. Not all issued regulations are announced online, and not all public comments received by regulators are made public.

The government made its budget documents widely and easily accessible to the general public, including online.  Budget documents did not include allocations to military state-owned enterprises, nor allocations to and earnings from state-owned enterprises.  Information on government debt obligations was publicly available online, but up-to-date and clear information on state-owned enterprise debt guaranteed by the government was not available.  According to information the Central Bank has provided to the World Bank, the lack of information available about publicly guaranteed private-sector debt meant that this debt was generally recorded as private-sector non-guaranteed debt, thus potentially obscuring some contingent debt liabilities.

International Regulatory Considerations

In general, international standards are the main reference for Egyptian standards.  According to the Egyptian Organization for Standardization and Quality Control, approximately 7,000 national standards are aligned with international standards in various sectors.  In the absence of international standards, Egypt uses other references referred to in Ministerial Decrees No. 180/1996 and No. 291/2003, which stipulate that in the absence of Egyptian standards, the producers and importers may use European standards (EN), U.S. standards (ANSI), or Japanese standards (JIS).

Egypt is a member of the WTO, participates actively in various committees, and notifies technical regulations to the WTO Committee on Technical Barriers to Trade.  Egypt ratified the Trade Facilitation Agreement (TFA) in June 2017 (Presidential decree No. 149/2017), and deposited its formal notification to the WTO on June 24, 2019.  Egypt notified indicative and definitive dates for implementing Category B and C commitments on June 20, 2019, but to date has not notified dates for implementing Category A commitments.  In August 2020 the Egyptian Parliament passed a new Customs Law, Law 207 of 2020, that includes provisions for key TFA reforms, including advance rulings, separation of release, a single-window system, expedited customs procedures for authorized economic operators, post-clearance audits, and e-payments.

Legal System and Judicial Independence

Egypt’s legal system is a civil codified law system based on the French model.  If contractual disputes arise, claimants can sue for remedies through the court system or seek resolution through arbitration.  Egypt has written commercial and contractual laws. The country has a system of economic courts, specializing in private-sector disputes, which have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  The judiciary is set up as an independent branch of the government.

Regulations and enforcement actions can be appealed through Egypt’s courts, though appellants often complain about the lengthy judicial process, which can often take years.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur (a legal document issued by governments allowing judgements to be enforced).  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied. Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts, and verifying the competence of the court rendering the judgment.

Judges in Egypt enjoy a high degree of public trust, according to Egyptian lawyers and opinion polls, and are the designated monitors for general elections.  The Judiciary is proud of its independence and can point to a number of cases where a judge has made surprising decisions that run counter to the desires of the regime.  The judge’s ability to interpret the law can sometimes lead to an uneven application of justice.

Laws and Regulations on Foreign Direct Investment

No specialized court exists for foreign investments.

The 2017 Investment Law (Law 72 of 2017) as well as other FDI-related laws and regulations, are published on GAFI’s website,  https://gafi.gov.eg/English/StartaBusiness/Laws-and-Regulations/Pages/default.aspx .

In 2017 the Parliament also passed the Industrial Permits Act, which reduced the time it takes to license a new factory by mandating that the Industrial Development Authority (IDA) respond to a request for a license within 30 days of the request being filed.  As of February 2020, new regulations allow IDA regional branch directors or their designees to grant conditional licenses to industrial investors until other registration requirements are complete.

In 2016, the Import-Export Law was revised to allow companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians; formerly the law required 100 percent Egyptian ownership and management.  In November 2016, the inter-ministerial Supreme Investment Council also announced seventeen presidential decrees designed to spur investment or resolve longstanding issues. These include:

• Forming a “National Payments Council” that will work to restrict the handling of FX outside the banking sector;
• Producers of agricultural crops that Egypt imports or exports will get tax exemptions;
• Five-year tax exemptions for manufacturers of “strategic” goods that Egypt imports or exports;
• Five-year tax exemptions for agriculture and industrial investments in Upper Egypt; and
• Begin tendering land with utilities for industry in Upper Egypt for free as outlined by the Industrial Development Authority.

Competition and Anti-Trust Laws

The Egyptian Competition Law (ECL), Law 3 of 2005, provides the framework for the government’s competition rules and anti-trust policies. The ECL prohibits the abuse of dominant market positions, which it defines as a situation in which a company’s market share exceeds 25 percent and in which the company is able to influence market prices or volumes regardless of competitors’ actions. The ECL prohibits vertical agreements or contracts between purchasers and suppliers that are intended to restrict competition, and also forbids agreements among competitors such as price collusion, production-restriction agreements, market sharing, and anti-competitive arrangements in the tendering process. The ECL applies to all types of persons or enterprises carrying out economic activities, but includes exemptions for some government-controlled public utilities. In early 2019, the Egyptian Parliament endorsed a number of amendments to the ECL, including controls on price hikes and prices of essential products and higher penalties for violations.

In addition to the ECL, other laws cover various aspects of competition policy. The Companies Law (Law 159/1981) contains provisions on mergers and acquisitions; the Law of Supplies and Commerce (Law 17 of 1999) forbids competition-reducing activities such as collusion and hoarding; and the Telecommunications Law (Law 10 of 2003), the Intellectual Property Law (Law 82 of 2002), and the Insurance Supervision and Control Law (Law 10 of 1981) also include provisions on competition.

The Egyptian Competition Authority (ECA) is responsible for protecting competition and prohibiting the monopolistic practices defined within the ECL. The ECA has the authority to receive and investigate complaints, initiate its own investigations, and take decisions and necessary steps to stop anti-competitive practices. The ECA’s enforcement powers include conducting raids; using search warrants; requesting data and documentation; and imposing “cease and desist orders” on violators of the ECL. The ECA’s enforcement activities against government entities are limited to requesting data and documentation, as well as advocacy.

Expropriation and Compensation

Egypt’s Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain.  The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration.  It offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation.  Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

Dispute Settlement

ICSID Convention and New York Convention

Egypt acceded to the International Convention for the Settlement of Investment Disputes (ICSID) in 1971 and is a member of the International Center for the Settlement of Investment Disputes, which provides a framework for the arbitration of investment disputes between the government and foreign investors from another member state, provided the parties agree to such arbitration. Without prejudice to Egyptian courts, the Investment Incentives Law recognizes the right of investors to settle disputes within the framework of bilateral agreements, the ICSID, or through arbitration before the Regional Center for International Commercial Arbitration in Cairo, which applies the rules of the United Nations Commissions on International Trade Law.

Egypt adheres to the 1958 New York Convention on the Enforcement of Arbitral Awards; the 1965 Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States; and the 1974 Convention on the Settlement of Investment Disputes between the Arab States and Nationals of Other States.  An award issued pursuant to arbitration that took place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is party or it satisfies the conditions set out in Egypt’s Dispute Settlement Law 27 of 1994, which provides for the arbitration of domestic and international commercial disputes and limited challenges of arbitration awards in the Egyptian judicial system.  The Dispute Settlement Law was amended in 1997 to include disputes between public enterprises and the private sector.

To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur.  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt and several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts and verifying the competence of the court rendering the judgment.

Egypt has a system of economic courts specializing in private-sector disputes that have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes. Despite these provisions, business and investors in Egypt’s renewable energy projects have reported significant problems resolving disputes with the Government of Egypt.

Investor-State Dispute Settlement

The U.S.-Egypt Bilateral Investment Treaty allows an investor to take a dispute directly to binding third-party arbitration.  The Egyptian courts generally endorse international arbitration clauses in commercial contracts.  For example, the Court of Cassation has, on a number of occasions, confirmed the validity of arbitration clauses included in contracts between Egyptian and foreign parties.

A new mechanism for simplified settlement of investment disputes aimed at avoiding the court system altogether has been established.  In particular, the law established a Ministerial Committee on Investment Contract Disputes, responsible for the settlement of disputes arising from investment contracts to which the State, or a public or private body affiliated therewith, is a party. This is in addition to establishing a Complaint Committee to consider challenges connected to the implementation of Egypt’s Investment Law.  Finally, the decree established a Committee for Resolution of Investment Disputes, which will review complaints or disputes between investors and the government related to the implementation of the Investment Law.  In practice, Egypt’s dispute resolution mechanisms are time-consuming but broadly effective.  Businesses have, however, reported difficulty collecting payment from the government when awarded a monetary settlement.

Over the past 10 years, there have been several investment disputes involving both U.S. persons and foreign investors.  Most of the cases have been settled, though no definitive number is available. Local courts in Egypt recognize and enforce foreign arbitral awards issued against the government.  There are no known extrajudicial actions against foreign investors in Egypt during the period of this report.

International Commercial Arbitration and Foreign Courts

Egypt allows mediation as a mechanism for alternative dispute resolution (ADR), a structured negotiation process in which an independent person known as a mediator assists the parties to identify and assess options, and negotiate an agreement to resolve their dispute.  GAFI has an Investment Disputes Settlement Center, which uses mediation as an ADR.

The Economic Court recognizes and enforces arbitral awards. Judgments of foreign courts may be recognized and enforceable under local courts under limited conditions.

In most cases, domestic courts have found in favor of state-owned enterprises (SOEs) involved in investment disputes.  In such disputes, non-government parties have often complained about the delays and discrimination in court processes.

Many foreign investors employ clauses that specify that U.S. companies employ contractual clauses that specify binding international (not local) arbitration of disputes in their commercial agreements.

Bankruptcy Regulations

Egypt passed a Bankruptcy Law (Law 11 of 2018) in January 2018, which was designed to speed up the restructuring of troubled companies and settlement of their accounts.  It also replaced the threat of imprisonment with fines in cases of bankruptcy.  As of July 2020, the Egyptian government was considering but had not yet implemented amendments to the 2018 law that would allow debtors to file for bankruptcy protection, and would give creditors the ability to determine whether debtors could continue operating, be placed under administrative control, or be forced to liquidate their assets.

In practice, the paperwork involved in liquidating a business remains convoluted and protracted; starting a business is much easier than shutting one down. Bankruptcy is frowned upon in Egyptian culture, and many businesspeople still believe they may be found criminally liable if they declare bankruptcy.

Investment Incentives

The Investment Law 72/2017 gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentive programs to apply to expansions of existing investment projects in addition to new investments.

General Incentives:

• All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
• Investors are exempted from the stamp tax, notary fees, registration of the Memorandum of Incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
• If the establishment is under the provisions of the new investment law, it will benefit from a two-percent unified custom tax over all imported machinery, equipment, and devices required for the set-up of such a company.

Special Incentive Programs:

• Investment projects established within three years of the date of the issuance of the Investment Law (Law 72 of 2017) will enjoy a perpetual deduction from their net profit subject to the income tax;
• 50 percent deduction of depreciated investment costs from taxes, infrastructure fees, and cost of lands for projects in regions the government has identified as most in need of development, as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena, and El Quseer; or
• 30 percent deduction of depreciated investment costs from taxes, infrastructure fees, and land costs for projects elsewhere in Egypt; and
• Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

• The establishment of special customs ports for exports and imports of the investment projects.
• The state may incur part of the costs of the technical training for workers.
• Free allocation of land for a few strategic activities may apply.
• The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
• The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72/2017:

• Exemption from all taxes and customs duties.
• Exemption from all import/export regulations.
• The option to sell a certain percentage of production domestically if customs duties are paid.
• Limited exemptions from labor provisions.
• All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
• All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
• Manufacturing or assembly projects pay an annual charge of one percent of the total value of their products excluding all raw materials. Storage facilities are to pay one percent of the value of goods entering the free zones, while service projects pay one percent of total annual revenue.
• Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone): 100 percent foreign ownership of companies allowed.

• 100 percent foreign ownership of companies allowed.
• 100 percent foreign control of import/​export activities allowed.
• Imports are exempted from customs duties and sales tax.
• Customs duties on exports to Egypt imposed on imported components only, not the final product.
• Fast-track visa services.
• A full service one-stop shop for registration and licensing.
• Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Tenders Law (Law 89/1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree No. 719/2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt). The decree provides an incentive of 15,000 EGP (approx. $940) for each job opportunity created by the project, on the condition that the investment costs of the project exceed 15 million EGP (approx. $940,000). The decree can be implemented on both new and ongoing projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Public and private free-trade zones are authorized under GAFI’s Investment Incentive Law No. 72 of 2017. Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges. Companies producing largely for export (normally 80 percent or more of total production) may be established in free-trade zones and operate using foreign currency. Free-trade zones are open to investment by foreign or domestic investors. Companies operating in free-trade zones are exempted from sales taxes or taxes and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a one-percent duty paid on the value of commodities upon entry for storage projects and a one-percent duty upon exit for manufacturing and assembly projects.

There are currently nine public free trade zones in operation in the following locations: Alexandria; Damietta; Ismailia; Qeft; Media Production City; Nasr City; Port Said; Shebin el Kom; and Suez. Private free-trade zones may also be established with a decree by GAFI but are usually limited to a single project. Export-oriented industrial projects are given priority.  There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law 83/2002 allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations. The first SEZ was established in the northwest Gulf of Suez.

Investment Law 72 of 2017 authorized creation of investment zones with Prime Ministerial approval. The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector. The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones. Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities. There are currently five investment zones located in Cairo, Giza, and Ismailia, and in 2019 GAFI approved the development of an additional 12 investment zones in the Alexandria, Dakhalia, Damietta, Fayoum, Giza, Qalyubia, and Sharkia governorates.

The Suez Canal Economic Zone ( http://www.sczone.com.eg/English/Pages/default.aspx) , a major industrial and logistics services hub announced in 2014, includes upgrades and renovations to ports located along the Suez Canal corridor, including West and East Port Said, Ismailia, Suez, Adabiya, and Ain Sokhna. The Egyptian government has invited foreign investors to take part in the projects, which are expected to be built in several stages, the first of which was scheduled to be completed by mid-2020. Reported areas for investment include maritime services like ship repair services, bunkering, vessel scrapping and recycling; industrial projects, including pharmaceuticals, food processing, automotive production, consumer electronics, textiles, and petrochemicals; IT services such as research and development and software development; renewable energy; and mixed use, residential, logistics, and commercial developments.

Performance and Data Localization Requirements

Egypt has rules on national percentages of employment and difficult visa and work permit procedures. The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector. There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

No performance requirements are specified in the Investment Incentives Law, and the ability to fulfill local content requirements is not a prerequisite for approval to set up assembly projects. In many cases, however, assembly industries still must meet a minimum local content requirement in order to benefit from customs tariff reductions on imported industrial inputs.

Decree 184/2013 allows for the reduction of customs tariffs on intermediate goods if the final product has a certain percentage of input from local manufacturers, beginning at 30 percent local content. As the percentage of local content rises, so does the tariff reduction, reaching up to 90 percent if the amount of local input is 60 percent or above. Exporters receive additional subsidies if they use a greater portion of local raw materials. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance.

Prime Minister issued Decision No. 3053 of 2019 regarding the formation of joint committees in the inspection yards at each customs port. These committees include representatives of the customs authority and the concerned authorities and bodies according to type of goods. The committees are responsible for completing inspection and control procedures for imported or exported goods within a period not exceeding three working days from the date of the customs declaration was registered.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and satisfy the local content requirements contained therein. Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, have performance standards specified in each individual agreement, which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.

Egypt does not impose localization barriers on ICT firms. Egypt’s Personal Data Protection Act (Law 151/2020), signed into law in July 2020, will require licenses for cross-border data transfers once the law’s executive regulations are finalized, but it will not impose any data localization requirements. Similarly, Egypt does not make local production a requirement for market access, does not have local content requirements, and does not impose forced technology or intellectual property transfers as a condition of market access. But there are exceptions where the government has attempted to impose controls by requesting access to a company’s servers located offshore, or requested servers to be located in Egypt and thus under the government’s control.

Egypt has a set of laws to combat corruption by public officials, including an Anti-Bribery Law (articles 103 through 111 of Egypt’s Penal Code), an Illicit Gains Law (Law 62/1975 and subsequent amendments in Law 97/2015), and a Governmental Accounting Law (Law 27/1981), among others.  Countering corruption remains a long-term focus. However, corruption laws have not been consistently enforced.  Transparency International’s Corruption Perceptions Index ranked Egypt 106 out of 198 in its 2019 survey.  Transparency International also found that approximately 50 percent of Egyptians reported paying a bribe in order to obtain a public service.

Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. There is no government requirement for private companies to establish internal codes of conduct to prohibit bribery.

Egypt ratified the United Nations Convention against Corruption in 2005.  It has not acceded to the OECD Convention on Combating Bribery or any other regional anti-corruption conventions.

While NGOs are active in encouraging anti-corruption activities, dialogue between the government and civil society on this issue is almost non-existent, the OECD found in 2009 in a trend that continues to this day.  While government officials publicly asserted they shared civil society organizations’ goals, they rarely cooperated with NGOs, and applied relevant laws in a highly restrictive manner against NGOs critical of government practices.  Media was also limited in its ability to report on corruption, with Article 188 of the Penal Code mandating heavy fines and penalties for unsubstantiated corruption allegations.

U.S. firms have identified corruption as an obstacle to FDI in Egypt. Companies might encounter corruption in the public sector in the form of requests for bribes, using bribes to facilitate required government approvals or licenses, embezzlement, and tampering with official documents.  Corruption and bribery are reported in dealing with public services, customs (import license and import duties), public utilities (water and electrical connection), construction permits, and procurement, as well as in the private sector.  Businesses have described a dual system of payment for services, with one formal payment and a secondary, unofficial payment required for services to be rendered.

Resources to Report Corruption

Several agencies within the Egyptian government share responsibility for addressing corruption.  Egypt’s primary anticorruption body is the Administrative Control Authority (ACA), which has jurisdiction over state administrative bodies, state-owned enterprises, public associations and institutions, private companies undertaking public work, and organizations to which the state contributes in any form.  2017 amendments to the ACA law grant the organization full technical, financial, and administrative authority to investigate corruption within the public sector (with the exception of military personnel/entities).  The ACA appears well funded and well trained when compared with other Egyptian law enforcement organizations.  Strong funding and the current ACA leadership’s close relationship with President Sisi reflect the importance of this organization and its mission.  However, it is small (roughly 300 agents) and is often tasked with work that would not normally be conducted by a law enforcement agency.

The ACA periodically engages with civil society.  For example, it has met with the American Chamber of Commerce in Egypt and other organizations to encourage them to seek it out when corruption issues arise.

In addition to the ACA, the Central Auditing Authority (CAA) acts as an anti-corruption body, stationing monitors at state-owned companies to report corrupt practices. The Ministry of Justice’s Illicit Gains Authority is charged with referring cases in which public officials have used their office for private gain.  The Public Prosecution Office’s Public Funds Prosecution Department and the Ministry of Interior’s Public Funds Investigations Office likewise share responsibility for addressing corruption in public expenditures.

Resources to Report Corruption

Minister of Interior

General Directorate of Investigation of Public Funds

Telephone: 02-2792-1395 / 02-2792 1396

Fax: 02-2792-2389

Stability and economic development remain Egypt’s priorities. The Egyptian government has taken measures to eliminate politically motivated violence while also limiting peaceful protests and political expression. Egypt’s presidential elections in March 2018 and senatorial elections in August 2020 proceeded without incident. Militant groups also committed attacks in the Western Desert and Sinai. The government has been conducting a comprehensive counterterrorism offensive in the Sinai since early 2018 in response to terrorist attacks against military installations and personnel by ISIS-affiliated militant groups. In February 2020, ISIS-affiliated militants claimed responsibility for an attack against a domestic gas pipeline in the northern Sinai. Although the group claimed that the attack targeted the recently opened natural gas pipeline connecting Egypt and Israel, the pipeline itself was undamaged, and the flow of natural gas was not interrupted.

Official statistics put Egypt’s labor force at approximately 29 million, with an official unemployment rate of 7.3 percent at the end of 2020. Women accounted for 25 percent of those unemployed as of May 2020, according to statistics from Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS). Accurate figures are difficult to determine and verify given Egypt’s large informal economy, in which some 62 percent of the non-agricultural workforce is engaged, according to International Labor Organization (ILO) estimates.

The government bureaucracy and public sector enterprises are substantially over-staffed compared to the private sector and international norms. According to the World Bank, Egypt has the highest number of government workers per capita in the world. Businesses highlight a mismatch between labor skills and market demand, despite high numbers of university graduates in a variety of fields. Foreign companies frequently pay internationally competitive salaries to attract workers with valuable skills.

The Unified Labor Law 12/2003 provides comprehensive guidelines on labor relations, including hiring, working hours, termination of employees, training, health, and safety. The law grants a qualified right for employees to strike and stipulates rules and guidelines governing mediation, arbitration, and collective bargaining between employees and employers. Non-discrimination clauses are included, and the law complies with labor-related ILO conventions regulating the employment and training of women and eligible children. Egypt ratified ILO Convention 182 on combating the Worst Forms of Child Labor in 2002. In 2018, Egypt launched the first National Action Plan on combating the Worst Forms of Child Labor. The law also created a national committee to formulate general labor policies and the National Council of Wages, whose mandate is to discuss wage-related issues and national minimum-wage policy, but it has rarely convened, and a minimum wage has rarely been enforced in the private sector.

Parliament adopted a new Trade Unions Law (Law 213/2017) in late 2017, replacing a 1976 law, which experts said was out of compliance with Egypt’s commitments to ILO conventions. After a 2016 Ministry of Manpower and Migration (MOMM) directive not to recognize documentation from any trade union without a stamp from the government-affiliated Egyptian Trade Union Federation, the new law established procedures for registering independent trade unions, but some of the unions noted that the directorates of the MOMM did not implement the law and placed restrictions on freedoms of association and organizing for trade union elections. Executive regulations for trade union elections stipulate a very tight deadline of three months for trade union organizations to legalize their status, and one month to hold elections, which, critics said, restricted the ability of unions to legalize their status or to campaign. In 2018, the government registered its first independent trade union in more than two years.

In July 2019 the Egyptian Parliament passed a series of amendments (Law 142/2019) to the 2017 Trade Unions Law that reduced the minimum membership required to form a trade union and abolished prison sentences for violations of the law. The amendments reduced the minimum number of workers required to form a trade union committee from 150 to 50, the number of trade union committees to form a general union from 15 to 10 committees, and the number of workers in a general union from 20,000 to 15,000. The amendments also decreased the number of unions necessary to establish a trade union federation from 10 to 7 and the number of workers in a trade union from 200,000 to 150,000. Under the new law, a trade union or workers’ committee may be formed if 150 employees in an entity express a desire to organize.

Based on the new amendments to the Trade Unions Law and a request from the Egyptian government for assistance implementing them and meeting international labor standards, the International Labor Organization’s and International Finance Corporation’s joint Better Work Program launched in Egypt in March 2020.

The Trade Unions law explicitly bans compulsory membership or the collection of union dues without written consent of the worker and allows members to quit unions. Each union, general union, or federation is registered as an independent legal entity, thereby enabling any such entity to exit any higher-level entity.

The 2014 Constitution stipulated in Article 76 that “establishing unions and federations is a right that is guaranteed by the law.” Only courts are allowed to dissolve unions. The 2014 Constitution maintained past practice in stipulating that “one syndicate is allowed per profession.” The Egyptian constitutional legislation differentiates between white-collar syndicates (e.g. doctors, lawyers, journalists) and blue-collar workers (e.g. transportation, food, mining workers). Workers in Egypt have the right to strike peacefully, but strikers are legally obliged to notify the employer and concerned administrative officials of the reasons and time frame of the strike 10 days in advance. In addition, strike actions are not permitted to take place outside the property of businesses. The law prohibits strikes in strategic or vital establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens. In practice, however, workers strike in all sectors, without following these procedures, but at risk of prosecution by the government.

Collective negotiation is allowed between trade union organizations and private sector employers or their organizations. Agreements reached through negotiations are recorded in collective agreements regulated by the Unified Labor law and usually registered at MOMM. Collective bargaining is technically not permitted in the public sector, though it exists in practice. The government often intervenes to limit or manage collective bargaining negotiations in all sectors.

MOMM sets worker health and safety standards, which also apply in public and private free zones and the Special Economic Zones (see below). Enforcement and inspection, however, are uneven. The Unified Labor Law prohibits employers from maintaining hazardous working conditions, and workers have the right to remove themselves from hazardous conditions without risking loss of employment.

Egyptian labor laws allow employers to close or downsize operations for economic reasons. The government, however, has taken steps to halt downsizing in specific cases. The Unemployment Insurance Law, also known as the Emergency Subsidy Fund Law 156/2002, sets a fund to compensate employees whose wages are suspended due to partial or complete closure of their firm or due to its downsizing. The Fund allocates financial resources that will come from a one percent deduction from the base salaries of public and private sector employees. According to foreign investors, certain aspects of Egypt’s labor laws and policies are significant business impediments, particularly the difficulty of dismissing employees. To overcome these difficulties, companies often hire workers on temporary contracts; some employees remain on a series of one-year contracts for more than 10 years. Employers sometimes also require applicants to sign a “Form 6,” an undated voluntary resignation form which the employer can use at any time, as a condition of their employment. Negotiations on drafting a new Labor Law, which has been under consideration in the Parliament for two years, have included discussion of requiring employers to offer permanent employee status after a certain number of years with the company and declaring Form 6 or any letter of resignation null and void if signed prior to the date of termination.

Egypt has a dispute resolution mechanism for workers. If a dispute concerning work conditions, terms, or employment provisions arises, both the employer and the worker have the right to ask the competent administrative authorities to initiate informal negotiations to settle the dispute. This right can be exercised only within seven days of the beginning of the dispute. If a solution is not found within 10 days from the time administrative authorities were requested, both the employer and the worker can resort to a judicial committee within 45 days of the dispute. This committee comprises two judges, a representative of MOMM, and representatives from the trade union and one of the employers’ associations. The decision of this committee is provided within 60 days. If the decision of the judicial committee concerns discharging a permanent employee, the sentence is delivered within 15 days. When the committee decides against an employer’s decision to fire, the employer must reintegrate the latter in his/her job and pay all due salaries. If the employer does not respect the sentence, the employee is entitled to receive compensation for unlawful dismissal.

Labor Law 12/2003 sought to make it easier to terminate an employment contract in the event of “difficult economic conditions.” The Law allows an employer to close his establishment totally or partially or to reduce its size of activity for economic reasons, following approval from a committee designated by the Prime Minister. In addition, the employer must pay former employees a sum equal to one month of the employee’s total salary for each of his first five years of service and one and a half months of salary for each year of service over and above the first five years. Workers who have been dismissed have the right to appeal. Workers in the public sector enjoy lifelong job security as contracts cannot be terminated in this fashion; however, government salaries have eroded as inflation has outpaced increases.

Egypt has regulations restricting access for foreigners to Egyptian worker visas, though application of these provisions has been inconsistent. The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. Application of these regulations is inconsistent.

* Sources for Host Country Data: Central Bank of Egypt; CAPMAS; GAFI

Table 3: Sources and Destination of FDI
Data not available.

Policies Towards Foreign Direct Investment

Over the past decade, the GOR has undertaken a series of policy reforms intended to improve the investment climate, wean Rwanda’s economy off foreign assistance, and increase FDI levels. Rwanda enjoyed strong economic growth until the start of the COVID-19 pandemic in March 2020, averaging over seven percent annual GPD growth over the prior decade. Rwanda also enjoys high rankings in the World Bank’s Doing Business report (38 out of 190 economies in 2020 worldwide, and second best in Africa) and a reputation for low corruption. In 2020, Rwanda experienced a 3.4 percent GDP contraction, marking its first recession since the 1994 genocide.

The RDB ( https://rdb.rw ) was established in 2006 to fast-track investment projects by integrating all government agencies responsible for the entire investor experience under one roof. This includes key agencies responsible for business registration, investment promotion, environmental compliance clearances, export promotion, and other necessary approvals. New investors can register online at the RDB’s website (https://rdb.rw/e-services) and receive a certificate in as few as six hours, and the agency’s “one-stop shop” helps investors secure required approvals, certificates, and work permits. RDB states its investment priorities are: 1) export; 2) manufacturing including -textiles and apparel, electronics, information communication and technology equipment, large scale agricultural operations excluding coffee and tea, pharmaceuticals, processing in wood, glass and ceramics, processing and value addition in mining, agricultural equipment and other related industries that fall in these categories; 3) energy generation, transmission and distribution; 4) information and communication technologies, business process outsourcing and financial services; 5) mining activities relating to mineral exploration; 6) transport, logistics and electric mobility; 7) construction or operations of specialized innovation parks or specialized industrial parks; 8) affordable housing; 9) tourism, which includes hotels, adventure tourism and agro-tourism; 10) horticulture and cultivation of other high-value plants; 11) creative arts in the subsector of the film industry; 12) skills development in areas where the country has limited skills and capacity.

In February 2021, Rwanda made significant changes to the Investment Code to address previous investor complaints and included new incentives to attract investments in strategic growth sectors. The GOR created the Rwanda Financial Intelligence Centre (FIC), passed a law on Anti-Money Laundering and Counter-Terrorism Financing, and passed a law on Mutual Legal Assistance in Criminal Matters to fully criminalize money laundering and terrorism financing and align the country with OECD rules. The GOR amended the Company Act and passed a law on partnerships to allow professional service providers to register as partners rather than limited liability companies.

In 2020, The World Bank Ease of Doing Business report indicated that Rwanda made doing business easier by exempting newly formed small and medium businesses from paying for a trading license during their first two years of operation. In addition, the GOR reduced the time needed to obtain water and sewage connections to facilitate construction permits. It also began requiring construction professionals to obtain liability insurance. The country also upgraded its power grid infrastructure and improved its regulations on weekly rest, working hours, severance pay, and reemployment priority rules.

Several investors have said a top concern affecting their operations in Rwanda is that tax incentives included in deals negotiated or signed by the RDB are not fully honored by the Rwanda Revenue Authority (RRA). Investors further cite the inconsistent application of tax incentives and import duties as a significant challenge to doing business in Rwanda. For example, a few investors have said that customs officials have attempted to charge them duties based on their perception of the value of an import regardless of the actual purchase price.

Under Rwandan law, foreign firms should receive equal treatment regarding taxes and equal access to licenses, approvals, and procurement. Foreign firms should receive value added tax (VAT) rebates within 15 days of receipt by the RRA, but firms complain that the process for reimbursement can take months and occasionally years. Refunds can be further held up pending the results of RRA audits. A few investors cited punitive retroactive fines following audits that were concluded after many years. RRA aggressively enforces tax requirements and imposes penalties for errors – deliberate or not – in tax payments. Investors cited lack of coordination among ministries, agencies, and local government (districts) leading to inconsistencies in implementation of promised incentives. Others pointed to a lack of clarity on who the regulator is on certain matters. The U.S. Treasury Department’s Office of Technical Assistance (OTA) provided tax consultants to RRA to review auditing practices in Rwanda. The OTA program concluded in 2020 and produced a standardized tax audit handbook for RRA’s auditors to use. RRA has also instituted improvements to its systems that will automate certain processes and make many more processes digitized. Per RRA, it is now able to handle VAT claims in real time due to these changes.

Limits on Foreign Control and Right to Private Ownership and Establishment

Rwanda has neither statutory limits on foreign ownership or control nor any official economic or industrial strategy that discriminates against foreign investors. Local and foreign investors have the right to own and establish business enterprises in all forms of remunerative activity.

Foreign nationals may hold shares in locally incorporated companies. The GOR has continued to privatize state holdings with the government, ruling party, and military continuing to play a dominant role in Rwanda’s private sector. Foreign investors can acquire real estate but with a general limit on land ownership according to the 2013 land law. While local investors can acquire land through leasehold agreements that extend to a maximum of 99 years, foreign investors can be restricted to leases of 49 to 99 years with the possibility of renewal. Freehold is granted only to Rwandan citizens for properties of at least five hectares but may also be granted to foreigners for properties in designated Special Economic Zones, on a reciprocal basis, or for land co-owned with Rwandan citizens (if Rwandan citizens own at least 51 percent). However, according to an October 2020 draft law, freehold tenure would continue for Rwandan citizens on lands of at least two hectares and freehold tenure for foreigners could be approved by a Presidential Order for exceptional circumstances of strategic national interests. Long-term leases (emphyteutic leases) in residential and commercial areas for both citizens and foreigners acquiring land through private means would be increased to 99 years compared to the current 20 and 30 years, respectively. As of April 2021, this draft law had not yet been finalized. The Investment Code includes equal treatment for foreigners and nationals regarding certain operations, free transfer of funds, and compensation against expropriation. In April 2018, Rwanda introduced new laws to curb capital flight. Management, loyalty, and technical fees a local subsidiary can remit to its related non-residential companies (parent company) are capped at two percent of turnover. Companies resolving to go beyond the cap are subject to a 30 percent corporate tax on turnover in addition to a 15 percent withholding tax and an 18 percent reserve charge.

Other Investment Policy Reviews

In February 2019, The World Trade Organization (WTO) published a Trade Policy Review for the East African Community (EAC) covering Burundi, Kenya, Rwanda, Tanzania and Uganda. The report is available at: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/s/*)%20and%20((%20@Title=%20rwanda%20)%20or%20(@CountryConcerned=%20rwanda))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

The Rwanda annex to the report is available at: https://docs.wto.org/dol2fe/Pages/FE_Search/ExportFile.aspx?Id=251521&filename=q/WT/TPR/S384-04.pdf

https://docs.wto.org/dol2fe/Pages/FE_Search/ExportFile.aspx?Id=251521&filename=q/WT/TPR/S384-04.pdf

Business Facilitation

RDB offers one of the fastest business registration processes in Africa. New investors can register online at RDB’s website ( http://org.rdb.rw/busregonline ) or register in person at RDB offices in Kigali. Once RDB generates a certificate of registration, company tax identification and employer social security contribution numbers are automatically created. The RDB “One Stop Center” assists firms in acquiring visas and work permits, connections to electricity and water, and support in conducting required environmental impact assessments.

RDB is prioritizing additional reforms to improve the investment climate. In October 2020, RDB launched electronic auctioning to reduce fraud by increasing transparency. The new system reduces the time needed to enforce judgments, reducing court fees and allowing payments electronically. RDB hopes to amend the land policy to merge issuance of freehold titles and occupancy permits; introduce online notarization of property transfers; implement small claims procedure to allow self-representation in court and reduce attorney costs; and establish a commercial division at the Court of Appeal to fast-track commercial dispute resolution.

Rwanda promotes gender equality and has pioneered several projects to promote women entrepreneurs, including the creation of the Chamber of Women Entrepreneurs within the Rwanda Private Sector Federation (PSF). Both men and women have equal access to investment facilitation and protections.

Outward Investment

The Investment Code provides incentives for internationalization. A small and medium registered investor or emerging investor with an investment project involved in export is entitled to a 150 percent tax deduction of all qualifying expenditures relating to internationalization including: 1) overseas marketing and public relations activities including launch of in-store promotions, road shows, overseas business or trade conferences; 2) participation in overseas trade fairs not supported by another existing initiative; 3) overseas business development costs; 4) market entry and research costs such as costs of establishing a legal entity in a foreign market, salary costs of employees stationed in foreign market, and cost of analysis of market opportunities, supply chain and entry requirements. The Commissioner General of RRA approves qualifying expenditures in consultation with the CEO of RDB. Eligible registered investors receive pre-approval of qualifying expenditures through a joint review process administered by the RRA, RDB and the Ministry of Trade and Industry (MINICOM). An eligible registered investor may claim the tax deduction on a maximum of USD 100,000 of qualifying expenditures in each year. There are no restrictions in place limiting domestic firms seeking to invest abroad.

Rwanda is a member of the WTO, the East African Community (EAC), Economic Community of the Great Lakes, the Economic Community of Central African States, and the Common Market for Eastern and Southern Africa (COMESA). Rwanda ratified the African Continental Free Trade Area agreement in March 2018, and the agreement entered into force in 2019, but its implications for the region remain unclear.

The United States and Rwanda signed a Trade and Investment Framework Agreement (TIFA) in 2006 and a bilateral investment treaty (BIT) in 2008. Rwanda has active BITs with Germany (1969), the Belgium-Luxemburg Economic Union (1985), and the Republic of Korea (2013). Rwanda signed BITs with Mauritius (2001), South Africa (2000), Turkey (2016), Morocco (2016), the United Arab Emirates (2016), and Qatar (2018), but these treaties have yet to enter into force. Rwanda signed the Economic Partnership Agreement between the EAC and the European Union; this agreement has not yet entered into force.

Rwanda does not have a bilateral taxation treaty with the United States. Rwanda has double taxation agreements with Barbados, Mauritius, the Belgium-Luxembourg Economic Union, the Bailiwick of Jersey, Singapore, South Africa, Morocco, Turkey, United Arab Emirates, and Qatar.

After Rwanda implemented higher tariffs on imports of secondhand clothing and footwear in 2016, the U.S. government partially suspended African Growth and Opportunities Act (AGOA) benefits for apparel products from Rwanda, effective May 2018. Many other Rwandan exports to the United States are still eligible for trade preferences under the Generalized System of Preferences and AGOA. In 2020, Rwanda enjoyed a trade surplus of $24 million with the United States due in large part to AGOA-qualified exports of coffee, tea, and tree nuts.

Transparency of the Regulatory System

The GOR generally employs transparent policies and effective laws largely consistent with international norms. Rwanda is a member of the UN Conference on Trade and Development’s international network of transparent investment procedures. The Rwanda eRegulations system is an online database designed to bring transparency to investment procedures in Rwanda. Investors can find further information on administrative procedures at: https://businessprocedures.rdb.rw/.

The GOR publishes Rwandan laws and regulations in the Official Gazette and online at https://www.minijust.gov.rw/index.php?id=133 . Government institutions generally have clear rules and procedures, but implementation can sometimes be uneven. Investors have cited breaches of contracts and incentive promises and the short time given to comply with changes in government policies as hurdles to complying with regulations. For example, in 2019 the Parliament passed a law banning single use plastic containers. Investors in the beverage and agro-processing sectors expressed concern that the law would have a serious impact on their operations, that alternative packaging was not available in some cases, and that the GOR did not consult effectively with stakeholders before submitting it. The law built on a ban on the manufacture and use of polyethylene bags introduced in 2008. Enforcement has not taken full effect as of April 2021.

There is no formal mechanism to publish draft laws for public comment, although civil society sometimes has the opportunity to review them. There is no informal regulatory process managed by nongovernmental organizations. Regulations are usually developed rapidly to achieve policy goals and sometimes lack a basis in scientific or data-driven assessments. Scientific studies and quantitative analysis (if any) conducted on the impact of regulations are not generally made publicly available for comment. Regulators do not publicize comments they receive. Public finances and debt obligations are generally made available to the public before budget enactment. Finances for State Owned Enterprises (SOEs) are not publicly available. Civil society organizations may request them with a legitimate reason, but these requests are not routinely granted.

There is no government effort to restrict foreign participation in industry standards-setting consortia or organizations. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms but are not always enforced. The Rwanda Utility Regulation Agency (RURA), the Office of the Auditor General (OAG), the Anticorruption Division of the RRA, the Rwanda Standards Board (RSB), the National Tender Board, and the Rwanda Environment Management Authority also enforce regulations. Consumer protection associations exist but are largely ineffective. The business community has been able to lobby the government and provide feedback on some draft government policies through the PSF, a business association with strong ties to the government. In some cases, the PSF has welcomed foreign investors’ efforts to positively influence government policies. However, some investors have criticized the PSF for advocating for the government’s positions more so than conveying business concerns to the government.

The American Chamber of Commerce launched in November 2019, and a European Business Chamber of Commerce launched in March 2020. Both are coordinating policy advocacy efforts to improve the business environment for American, European, and other foreign firms in Rwanda. The Chinese also have a Chamber of Commerce registered in China that is active in Rwanda.

International Regulatory Considerations

Rwanda is a member of the EAC Standards Technical Management Committee. Approved EAC measures are generally incorporated into the Rwandan regulatory system within six months and are published in the Official Gazette like other domestic laws and regulations. Rwanda is also a member of the Standards Technical Committee for the International Standardization Organization, the African Organization for Standardization, and the International Electrotechnical Commission. Rwanda is a member of the International Organization for Legal Metrology and the International Metrology Confederation. The Rwanda Standards Board represents Rwanda at the African Electrotechnical Commission. Rwanda has been a member of the WTO since May 22, 1996 and notifies the WTO Committee on Technical Barriers to Trade on draft technical regulations.

Legal System and Judicial Independence

The Rwandan legal system was originally based on the Belgian civil law system. However, since the renovation of the legal framework in 2002, the introduction of a new constitution in 2003, and the country’s entrance to the Commonwealth in 2009, there is now a mixture of civil law and common law. Rwanda’s courts address commercial disputes and facilitate enforcement of property and contract rights. Rwanda’s judicial system suffers from a lack of resources and capacity but continues to improve. Investors occasionally state that the government takes a casual approach to contract sanctity and sometimes fails to enforce court judgments in a timely fashion. The government generally respects judicial independence, though domestic and international observers have noted that outcomes in high-profile politically sensitive cases appeared predetermined.

In August 2018, the GOR created a Court of Appeals to reduce backlogs and expedite the appeal process without going to the Supreme Court. The new Court of Appeals arbitrates cases handled by the High Court, Commercial High Court, and Military High Court. The Supreme Court continues to decide on cases of injustice filed from the Office of the Ombudsman and on constitutional interpretation. Based on Article 15 of Law nº 76/2013 of 11/09/2013, the Office of the Ombudsman has the authority to request that the Supreme Court reconsider and review judgments rendered at the last instance by ordinary, commercial, and military courts. More information on the review process can be found at https://ombudsman.gov.rw/en/?Court-Judgement-Review-Unit-1375 . A tax court is yet to be established in Rwanda. In 2019, the RDB announced the government’s intent to create a commercial division at the Court of Appeal to fast-track resolution of commercial disputes.

Laws and Regulations on Foreign Direct Investment

National laws governing commercial establishments, investments, privatization and public investments, land, and environmental protection are the primary directives governing investments in Rwanda. Since 2011, the government has reformed tax payment processes and enacted additional laws on insolvency and arbitration. The Investment Code establishes policies on FDI, including dispute settlement (Article 13). The RDB publishes investment-related regulations and procedures at: http://businessprocedures.rdb.rw .

According to a WTO policy review report dated January 2019, Rwanda is not a party to any countertrade and offsetting arrangements or agreements limiting exports to Rwanda.

A new property tax law was passed in August 2018. The new law removes the provision that taxpayers must have freehold land titles to pay property taxes. Small and medium enterprises (SMEs) will receive a two-year tax trading license exemption upon establishment.

In April 2018, the GOR passed a new law to streamline income tax administration and to clarify the law. The new law can be accessed here: http://www.primature.gov.rw/media-publication/publication/latest-offical-gazettes.html?no_cache=1&tx_drblob_pi1%5BdownloadUid%5D=464 .

The most recent laws (passed between 2020-21) on FDI are below:

• Amended law on Investment Promotion and Facilitation:

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_bis_of_08.02.2021_Ubufatanye_Mpanabyaha___Korohereza_Ishoramari.pdf

• Amended Company Act:

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_ter_of_08-02-2021_Companies_ACT_2021.pdf

• Law on Mutual Assistance in Criminal Matters:

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_bis_of_08.02.2021_Ubufatanye_Mpanabyaha___Korohereza_Ishoramari.pdf

• Law on Anti-Money Laundering and Terrorism Finance:

https://gazettes.africa/archive/rw/2020/rw-government-gazette-dated-2020-02-24-no-7.pdf

• Law on Partnerships:

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___Special_of_17.02.2021_Partnershiip_Ubufatanye___RSSB.pdf

• Law on Transfer Pricing:

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/_2020_Official_Gazettes/December/Official_Gazette__N___40_of_14.12.2020_Transfer_Pricing___Ubworozi_bwo_mu_mazi_Aquacultre_Uburobyi___Erratum___BNR___Amazina___Cooperative___Imiryango.pdf

Competition and Antitrust Laws

The GOR created the Competition and Consumer Protection Unit at the Ministry of Trade and Industry (MINICOM) in 2010 to address competition and consumer protection issues. The government is setting up the Rwanda Inspectorate, Competition and Consumer Protection Authority (RICA), a new independent body with the mandate to promote fair competition among producers. The body will reportedly aim to ensure consumer protection and enforcement of standards. To read more on competition laws in Rwanda, please visit: https://www.minicom.gov.rw/fileadmin/user_upload/Minicom/Publications/Laws/Official_Gazette_no_46_of_12-11-2012_competition_law.pdf https://www.minicom.gov.rw/fileadmin/user_upload/Minicom/Publications/Policies/CompetitionPolicy_September_2010-3.pdf 

Market forces determine most prices in Rwanda, but in some cases, the GOR intervenes to fix prices for items considered sensitive. RURA, in consultation with relevant ministries, sets prices for petroleum products, water, electricity, and public transport. MINICOM and the Ministry of Agriculture have fixed farm gate prices (or the market value of a cultivated product minus the selling costs) for agricultural products like coffee, maize, and Irish potatoes from time to time. On international tenders, a 10 percent price preference is available for local bidders, including those from regional economic integration bodies in which Rwanda is a member.

Some U.S. companies have expressed frustration that while authorities require them to operate as a formal enterprise that meets all Rwandan regulatory requirements, some local competitors are allowed to operate informally without complying fully with all regulatory requirements. Other investors have claimed SOEs, ruling party-aligned, and politically connected business competitors receive preferential treatment in securing public incentives and contracts.

More information on specific types of agreements, decisions and practices considered to be anti-competitive in Rwanda can be found here: https://rura.rw/fileadmin/Documents/docs/ml08.pdf

Expropriation and Compensation

The Investment Code forbids the expropriation of investors’ property in the public interest unless the investor is fairly compensated. An expropriation law came into force in 2015, which included more explicit protections for property owners.

A 2017 study by Rwanda Civil Society Platform argues that the government conducts expropriations on short notice and does not provide sufficient time or support to help landowners fairly negotiate compensation. The report includes a survey that found only 27 percent of respondents received information about planned expropriation well in advance of action. While mechanisms exist to challenge the government’s offer, the report notes that landowners are required to pay all expenses for the second valuation, a prohibitive cost for rural farmers or the urban poor. Media have reported that wealthier landowners have the ability to challenge valuations and have received higher amounts. Political exiles and other embattled opposition figures have been involved in taxation lawsuits that resulted in their “abandoned properties” being sold at auction, allegedly at below market values.

Dispute Settlement

ICSID Convention and New York Convention

The Investment Code states that “a dispute that arises between an investor and a State organ in connection with a registered investment should be amicably settled. If an amicable settlement cannot be reached, parties must refer the dispute to an agreed arbitration institution or to any other dispute settlement procedure provided for under an agreement between both parties. If no dispute settlement procedure is provided under a written agreement, both parties must refer the dispute to the competent court.”

Rwanda is signatory to the International Center for Settlement of Investment Disputes (ICSID) and the African Trade Insurance Agency (ATI). ICSID seeks to remove impediments to private investment posed by non-commercial risks, while ATI covers risk against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances.

Rwanda ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2008.

Investor-State Dispute Settlement

Rwanda is a member of the East African Court of Justice for the settlement of disputes arising from or pertaining to the EAC. Rwanda has also acceded to the 1958 New York Arbitration Convention and the Multilateral Investment Guarantee Agency convention. Under the U.S.-Rwanda BIT, U.S. investors have the right to bring investment disputes before neutral, international arbitration panels. Disputes between U.S. investors and the GOR in recent years have been resolved through international arbitration, court judgments, or out of court settlements. Judgments by foreign courts and contract clauses that abide by foreign law are accepted and enforced by local courts, though these lack capacity and experience to adjudicate cases governed by non-Rwandan law. There have been a number of private investment disputes in Rwanda, though the government has yet to stand as complainant, respondent, or third party in a WTO dispute settlement. Rwanda has been a party to two cases at ICSID since Rwanda became a member in 1963; one of these cases is an ongoing case brought by an American investor against Rwanda. SOEs are also subject to domestic and international disputes. SOEs and ruling party-owned companies party to suits have both won and lost judgments in the past.

International Commercial Arbitration and Foreign Courts

In 2012, the GOR launched the Kigali International Arbitration Center (KIAC). KIAC case handling rules are modeled on the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules. According to the KIAC’s 2020 activity report, KIAC had reviewed 160 cases by June 2020. Close to 40 percent of those cases were international with parties from more than 20 nationalities (Burundi, China, Ethiopia, Egypt, France, India, Italy, Kenya, Korea, Pakistan, South Africa, South Korea, Singapore, Rwanda, Spain, Switzerland, Turkey, Uganda, the United States, and Zambia). Arbitrators appointed were from Rwanda, Kenya, Malaysia, Nigeria, Canada, the United States, and Singapore. Of the 89 KIAC-approved international arbitrators, only four are of Rwandan nationality, suggesting that KIAC draws from a large pool of professionals in alternative dispute resolutions from all over the world. All 38 domestic arbitrators are Rwandan nationals.

Some businesses report being pressured to use the Rwanda-based KIAC for the seat of arbitration in contracts signed with the GOR. Some of these companies have indicated that they would prefer arbitration take place in a third country, noting that KIAC has a short track record and is domiciled in Rwanda. Moreover, some companies have reported difficulty in securing international financing due to the KIAC provision in their contracts.

Bankruptcy Regulations

Rwanda ranks 38 out of 190 economies for resolving insolvency in the World Bank’s 2020 Doing Business Report and is number two in Africa. It takes an average of two and a half years to conclude bankruptcy proceedings in Rwanda. Per the World Bank 2020 Doing Business Report, the recovery rate for creditors on insolvent firms was reported at 19.3 cents on the dollar, with judgments typically made in local currency.

In April 2018, the GOR instituted a new Insolvency and Bankruptcy Law. One major change is the introduction of an article on “pooling of assets” allowing creditors to pursue parent companies and other members of the group, in case a subsidiary is in liquidation. The new law can be accessed here: https://org.rdb.rw/wp-content/uploads/2020/06/Insolvency-Law-OGNoSpecialbisdu29April2018.pdf

On February 8, 2021, Rwanda passed a new Company Act, with several bankruptcy and insolvency provisions. The new law can be found here: https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_ter_of_08-02-2021_Companies_ACT_2021.pdf

On February 17, 2021, Rwanda published a new law on partnerships with several provisions on partnerships’ insolvency. The new law can be accessed here: https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___Special_of_17.02.2021_Partnershiip_Ubufatanye___RSSB.pdf

Investment Incentives

The Investment Code offers a package of benefits and incentives for registered investors in priority and strategic growth sectors. Under certain conditions, these can include:

Preferential corporate income tax rate of zero percent for 1) an international company that has its headquarters or regional office in Rwanda; or 2) an entity registered in Rwanda by a philanthropic investor.

Preferential corporate income tax rate of three percent for 1) an investor licensed to operate as a pure holding company; 2) a special purpose vehicle registered for investment purposes; 3) a Collective Investment Scheme; 4) a global trading or paper trading company (on foreign sourced trading income); or 5) an intellectual property company (on foreign sourced royalties).

Preferential tax incentives for a philanthropic investors: An entity established by a philanthropic investor is granted the following incentives: 1) grants and funds transferred to the entity for the purposes of financing its social impact activities are not deemed revenues and are therefore exempted from value added tax and corporate income tax charges; 2) goods and services procured locally by the entity are value added tax zero- rated; 3) an exemption of employment income tax is applied to foreign nationals recruited by the entity who ordinarily reside in Rwanda, provided that foreign employees do not exceed thirty percent of the professional staff of the entity. Foreign employees of the entity are entitled to a refund of social security contributions paid, upon their permanent departure from Rwanda.

Preferential corporate income tax rate of fifteen percent for registered investors undertaking one of the following operations: 1) energy generation, transmission and distribution from peat, solar, geothermal, hydro, biomass, methane and wind (excluding investors having engineering procurement contracts executed on behalf of the Government of Rwanda); 2) mass transportation of passengers and goods; 3) manufacturing; 4) information and communication technology; 5) innovation research and development facilities; 6) fund management entities, collective investment schemes, wealth management services, financial advisory entities, family office services, fund administrators, financial technology entities, captive insurance schemes, private banks, mortgage finance institution, finance lease entities, asset backed securities, reinsurance companies, trust and corporate service providers; 7) construction of affordable houses; 8) electric mobility; 9) adventure tourism and agriculture tourism.

Preferential corporate income tax rate for export investments: 1) twenty-five percent corporate income tax is applied to a registered investor with at least thirty percent of total turnover of goods and services coming from exports; 2) fifteen percent corporate income tax is applied to a registered investor with at least fifty percent of total turnover coming from export of goods and services.

1. Exemption from custom taxes and duties for products used in export processing zones: In addition to incentives for export investments, registered investors in products used in export processing zones are exempted from customs taxes and duties.
2. Incentives for internationalization: Small, medium or emerging involved in exports are entitled to a one hundred and fifty percent tax deduction of all qualifying expenditures relating to internationalization.

Corporate income tax holiday of up to seven years: Investors (except those in private equity and venture capital) investing an equivalent of at least fifty million U.S. dollars and contributing at least thirty percent of the invested amount in form of equity in specific priority sectors are granted a maximum of a seven-year corporate income tax holiday.

Corporate income tax holiday of up to five years for 1) specialized innovation and industrial park developers from the first year that the project makes a positive net income; and 2) licensed microfinance institutions from the date of their licensing.

1. Preferential withholding tax of zero percent is applicable to dividends, interest and royalties paid by investors benefiting from preferential corporate income tax of fifteen percent and three percent.
2. Preferential withholding tax of five percent is applicable to dividends and interest income paid to investors in companies listed on the Rwanda Stock Exchange.
3. Preferential withholding tax of ten percent is applicable to specialized innovation and industrial park developers on interest on foreign loans, dividends, royalties and service fees.

More information on additional incentives and benefits for the mining sector, the film industry, industrial and innovation parks, angel investors, start-ups, immigration, accelerated depreciation and capital gain tax exemption, can be found in the annex of the Investment Code here: https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_bis_of_08.02.2021_Ubufatanye_Mpanabyaha___Korohereza_Ishoramari.pdf

https://www.minijust.gov.rw/fileadmin/user_upload/Minijust/Publications/Official_Gazette/2021_Official_Gazettes/_February/Official_Gazette_N___04_bis_of_08.02.2021_Ubufatanye_Mpanabyaha___Korohereza_Ishoramari.pdf

In addition, the Ministry of Finance and Economic Planning (MINECOFIN), upon recommendation by RDB’s Private Investment Committee, can issue a Ministerial Order offering more incentives for investments deemed of strategic importance.

In the past, poorly coordinated efforts between the RDB, RRA, MINICOM, and the Directorate of Immigration and Emigration led to inconsistent application of incentives, according to investors. Investors reported that tax incentives included in deals signed by the RDB were not honored by the RRA in a timely manner or sometimes were not honored at all. Additionally, investors continue to face challenges receiving payment for services rendered for GOR projects, VAT refund delays, and/or expatriation of profits. In 2016, the GOR instituted a law governing public-private partnership (PPPs) as a step toward courting investments in key development projects. The law provides a legal framework concerning establishment, implementation, and management of PPPs. Detailed guidelines for the law can be accessed here: http://rdb.rw/wp-content/uploads/2018/08/PPP-Guidelines.pdf

Foreign Trade Zones/Free Ports/Trade Facilitation

Rwanda has established the Kigali Special Economic Zone (KSEZ), which was set up through the merger of the former Kigali Free Trade Zone and the Kigali Industrial Park projects. SEZs in Rwanda are regulated by the SEZ Authority of Rwanda (SEZAR), based at the RDB. Land in KSEZ is acquired through the Prime Economic Zone Secretariat, a private developer, under the regulations of SEZAR. The price per square meter is $62, and the minimum size that can be acquired is one hectare (2.5 acres). Bonded warehouse facilities are now available both in and outside of Kigali for use by businesses importing duty-free materials. The GOR has established a number of benefits for investors operating in the SEZs, including tax and land ownership advantages. A company basing itself in the SEZ can also opt to be a part of the Economic Processing Zone. A number of criteria must be satisfied in order to qualify. These include requirements to maintain extensive records on equipment, materials and goods, suitable offices, and security provisions.

Holding an Export Processing Zone (EPZ) license allows a company to operate in the KSEZ and will exempt a company from VAT, import duties, and corporate tax. The company is then obliged to export a minimum of 80 percent of production. Even after considering savings due to these government incentives, a few investors reported that land in the SEZs was significantly more expensive than land outside the zones. The GOR has stated that there are no fiscal, immigration, or customs incentives beyond those provided in the Investment Code, though media has occasionally speculated that certain investors received additional incentives. The negative list of goods prohibited under the EAC Customs Management Act applies in SEZs. In November 2018, the GOR approved the Bugesera Special Economic Zone (BSEZ), located 45 minutes from Kigali. A new airport is under construction near the BSEZ as well. Procedural information and cost involved in operating in SEZs can be accessed here: https://businessprocedures.rdb.rw/procedure/238/189?l=en . The SEZ policy was revised in 2018. Under the new policy, foreigners and locals may only lease land (formerly, foreign investors were able to purchase land outright in SEZs). To read more on the new policy, please see: https://www.minicom.gov.rw/fileadmin/user_upload/Minicom/Publications/Policies/SEZ_Policy_-_January_2018_v2.pdf

For a quick survey of companies currently operating in Rwandan special economic zones, please visit: Economic Zone catalogue at https://rdb.rw/wp-content/uploads/2020/09/SEZAR-Catalogue.pdf .

Rwanda created the Export Growth Facility (EGF) in 2015 with an initial capital of RWF 500 million ($500,000) administered by the Development Bank of Rwanda (BRD). German KfW Development Bank injected $10 million in support of the fund. The pilot program targets SMEs with export sales below $1 million. Priority sectors include horticulture, agro-processing, and manufacturing. The facility has three windows: an investment catalyst fund, a matching grant fund for market entry costs, and an export guarantee facility. Investment catalyst funds support private sector investments in export-orientated production through a 6.5 percent subsidy on market interest rates (normally between 16-20 percent). The matching grant fund provides grants (50 percent of the need) for expenditure on specific market entry costs (export strategy elaboration, export promotion, compliance with standards, etc.). The export guarantee fund provides short-term guarantees to commercial banks financing exporters’ pre- and post-shipment operations. The export guarantee component is not yet operational. The facility supports both locally- and foreign-owned companies in Rwanda; at least one American company has already received a loan. Rwanda created the Business Development Fund (BDF) in 2011 to provide support to SMEs in credit guarantees, matching grants, asset leasing, and advisory services. BDF works with banks to provide guarantees between 50-75 percent of required collaterals. The maximum guarantee is RWF 500 million ($500,000) for agriculture projects and RWF 300 million ($300,000) for other sectors, for a maturity period of up to 10 years.

The GOR also manages the Rwanda Green Fund (FONERWA) to spur investment in green innovation. UK Aid and other donors have invested in the fund. FONERWA claims projects it supports have created more than 137,000 green jobs.

The GOR’s cabinet resolution of April 30, 2020, established the Economic Recovery Fund (ERF) to support businesses severely affected by COVID-19, and the National Bank of Rwanda (BNR) was designated to manage the initial $100 million in funds. This $100 million was structured in four financing windows: 1) the hotel financing window, 2) the working capital window for large corporations, 3) working capital window for small and medium enterprises (SMEs) and 4) working capital for micro-businesses. Lending under the first three windows is through banks, while the fourth one is through Microfinance Institutions (MFIs). According to the January 2021 International Monetary Fund (IMF) report, “the ERF comprises a debt restructuring window for hotels ($50 million), working capital financing windows for large corporates, SMEs, and microbusinesses ($47 million), and a guarantee scheme for up to 75 percent of ERF loans to SMEs ($3 million). ERF funds are lent to banks, MFIs, and Savings and Credit Cooperative Organizations (SACCOs), at zero or low interest, who in turn use it to provide loan restructuring for hotels or working-capital financing, at reduced rates, to firms deemed viable.” On March 31, 2021 the GOR announced the ERF would receive an additional $350 million to support the same activities as the original $100 million. The monies were not made immediately available, and sources of the funding have not been disclosed.

Performance and Data Localization Requirements

There is no legal obligation for nationals to own shares in foreign investments and no requirement that shares of foreign equity be reduced over time. However, the government strongly encourages local participation in foreign investments. There is no requirement for private companies to store their proprietary data in Rwanda. There is also no requirement for foreign IT providers to turn over source code and/or provide access to encryption technology. IT companies dealing with government data cannot store it outside Rwanda or transfer it without GOR approval. Rwandans’ private data must be stored in Rwanda. There is no formal requirement that a certain number of senior officials or board members be citizens of Rwanda unless as a pre-condition to benefits from increased investment incentives. For example, the Investment Code specifies that for an international company that moves its headquarters or regional office to Rwanda to be able to recruit any number of required managerial, professional, and technical foreign employees, at least 30 percent of professional staff must be Rwandan. A preferential corporate income tax rate of three percent is granted to collective investment schemes, special purpose vehicles and pure holding companies if at least 30 percent of their professional staff are Rwandans and at least two professional or qualified Rwandan residents are members of their board of directors.

While the government does not impose conditions on the transfer of technology, it does encourage foreign investors, without legal obligation, to transfer technology and expertise to local staff to help develop Rwanda’s human capital. There is no legal requirement that investors must purchase from local sources or export a certain percentage of their output, though the government offers tax incentives for the latter. Unless stipulated in a contract or memorandum of understanding characterizing the purchase of privatized enterprises, performance requirements are not imposed as a condition for establishing, maintaining, or expanding other investments. Such requirements are imposed chiefly as a condition to tax and investment incentives. The GOR is not involved in assessing the type and source of raw materials for performance, but the RSB determines quality standards for some product categories.

Rwanda is ranked among the least corrupt countries in Africa, with Transparency International’s 2020 Corruption Perception Index putting the country among Africa’s four least corrupt nations and 49th in the world. The GOR maintains a high-profile anti-corruption effort, and senior leaders articulate a consistent message emphasizing that combating corruption is a key national goal. The government investigates corruption allegations and generally punishes those found guilty. High-ranking officials accused of corruption often resign during the investigation period, and the GOR has prosecuted many of them. Rwanda has ratified the UN Anticorruption Convention, is a signatory to the OECD Convention on Combating Bribery and is a signatory to the African Union Anticorruption Convention. U.S. firms have identified the perceived lack of government corruption in Rwanda as a key incentive for investing in the country. There are no local industry or non-profit groups offering services for vetting potential local investment partners, but the Ministry of Justice keeps judgments online, maintaining a source of information on companies and individuals in Rwanda at www.judiciary.gov.rw/home/ . The Rwanda National Public Prosecution Authority issues criminal records on demand to applicants at www.nppa.gov.rw .

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Ms. Madeleine Nirere, Chief Ombudsman , Ombudsman (Umuvunyi)
P.O Box 6269, Kigali, Rwanda
Telephone: +250 252587308
omb1@ombudsman.gov.rw  / sec.permanent@ombudsman.gov.rw 

Mr. Felicien Mwumvaneza, Commissioner for Quality Assurance Department (Anti-Corruption Unit) Rwanda Revenue Authority
Avenue du Lac Muhazi, P.O. Box 3987, Kigali, Rwanda
Telephone: +250 252595504 or +250 788309563
mwumvaneza@rra.gov.rw / commissioner.quality@rra.gov.rw

Mr. Obadiah Biraro, Auditor General, Office of the Auditor General
Avenue du Lac Muhazi, P.O. Box 1020, Kigali, Rwanda
Telephone: +250 78818980 , oag@oag.gov.rw

Contact at “watchdog” organization

Mr. Apollinaire Mupiganyi , Executive Director , Transparency International Rwanda
P.O: Box 6252 Kigali, Rwanda
Telephone: +250 788309563, amupiganyi@transparencyrwanda.org / mupiganyi@yahoo.fr

Rwanda is a stable country with relatively little violence. According to a 2017 report by the World Economic Forum, Rwanda is the ninth safest country in the world. Gallup’s Global Law and Order Index report of 2018 ranked Rwanda as the second safest place in Africa. Investors have cited the stable political and security environment as an important driver of investments. A strong police and military provide a security umbrella that minimizes potential criminal activity.

The U.S. Department of State recommends that U.S. citizens exercise caution when traveling near the Rwanda-Democratic Republic of Congo border, given the possibility of fighting and cross-border attacks involving armed rebel and militia groups. Relations between Burundi and Rwanda are tense, and there is a risk of cross-border incursions and armed clashes. Since 2018, there have been a few incidents of sporadic fighting in districts bordering Burundi and in Nyungwe National Park.

Grenade attacks aimed at the local populace occurred repeatedly between 2008 and 2014 in Rwanda. There have been several reported cross-border attacks in Western Rwanda on Rwandan police and military posts since 2016. Despite occasional violence along Rwanda’s borders with the DRC and Burundi, there have been no incidents involving politically motivated damage to investment projects or installations since the late 1990s. Relations with Uganda are also tense, but leaders continue to emphasize they are seeking a political solution. Rwanda has not allowed commercial traffic originating from Uganda to cross the Rwandan-Ugandan border since February 2019. Transit from/to Kenya through Uganda is allowed. Because of political tensions between Rwanda and Uganda, most of the commercial traffic to Rwanda goes through the Tanzanian border. In May 2020, the Rwanda-Tanzania border crossings were negatively impacted due to an influx of Tanzanian truck drivers infected with COVID-19.

Please see the following link for State Department Country Specific Information: https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Rwanda.html

https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Rwanda.html

General labor is available, but Rwanda suffers from a shortage of skilled labor, including accountants, lawyers, engineers, tradespeople, and technicians. Higher institutes of technology, private universities, and vocational institutes are improving and producing more highly trained graduates each year. The Rwanda Workforce Development Authority sponsors programs to support both short and long-term professional trainings targeting key industries in Rwanda. Carnegie Mellon University opened a campus in Kigali in 2012–its first in sub-Saharan Africa–and currently offers a Master of Science in Electrical and Computer Engineering and Master of Science in Information Technology. In 2013, Kepler established a nonprofit university program for students to work toward a U.S.-accredited degree through online learning and in-person seminars through a relationship with Southern New Hampshire University. Oklahoma Christian University offers an online Master of Business Administration program with on-site support in Kigali. The African Institute of Mathematics, University of Global Health Equity, and African Leadership University campuses in Rwanda offer college level and advanced degrees in many fields. Investors are strongly encouraged to hire Rwandan nationals whenever possible. According to the Investment Code, a registered investor who invests an equivalent of at least $250,000 may recruit three foreign employees. However, a number of foreign investors reported difficulties importing qualified staff in accordance with the Investment Code due to Rwandan immigration rules and practices. In some cases, these problems occurred even though investors had signed agreements with the government regarding the number of foreign employees.

Investors are strongly encouraged to hire Rwandan nationals whenever possible. According to the Investment Code, a registered investor who invests an equivalent of at least $250,000 may recruit three foreign employees. However, a number of foreign investors reported difficulties importing qualified staff in accordance with the Investment Code due to Rwandan immigration rules and practices. In some cases, these problems occurred even though investors had signed agreements with the government regarding the number of foreign employees.

Rwanda has ratified all the International Labor Organization’s eight core conventions. Policies to protect workers in special labor conditions exist, but enforcement remains inconsistent. The government encourages, but does not require, on-the-job training and technology transfer to local employees. The law restricts voluntary collective bargaining by requiring prior authorization or approval by authorities and requiring binding arbitration in cases of non-conciliation. The law provides some workers the right to conduct strikes, but due to numerous restrictions, workers rarely engage in strikes. In 2020, the government published additional specifications for labor representatives, regulations against strikes, and guidelines providing labor inspectors greater authority to access to workplaces and assess fines. The GOR has been known to take swift action against foreign companies with poor labor practices upon initial complaints from workers. The legal framework for employment rights for disabled persons is not as strong as in the United States, but the government and some employers are making efforts to offer reasonable accommodations. In 2000, the government revised the national labor code to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons. Private firms are responsible for their local employees’ income tax payments and Rwanda Social Security Board pension contributions. For full-time workers, these payments amount to more than 30 percent of take-home pay, which can be a disadvantage if competing firms are in the informal economy and not compliant with these requirements. Labor laws are not waived to attract or retain investment. There are no labor law provisions specific to SEZs or industrial parks. Collective bargaining is a relatively new concept in Rwanda and is not common. Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque. The official minimum wage has not changed since 1974 and is 100 Rwandan francs ($0.10) per day.

The legal framework for employment rights for disabled persons is not as strong as in the United States, but the government and some employers are making efforts to offer reasonable accommodations. In 2000, the government revised the national labor code to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons. Private firms are responsible for their local employees’ income tax payments and Rwanda Social Security Board pension contributions. For full-time workers, these payments amount to more than 30 percent of take-home pay, which can be a disadvantage if competing firms are in the informal economy and not compliant with these requirements. Labor laws are not waived to attract or retain investment. There are no labor law provisions specific to SEZs or industrial parks. Collective bargaining is a relatively new concept in Rwanda and is not common. Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque. The official minimum wage has not changed since 1974 and is 100 Rwandan francs ($0.10) per day.

Inward Direct Investment according to IMF’s Coordinated Direct Investment Survey (http://data.imf.org/CDIS). Data on Rwandan outward FDI is not available.

Data on Rwanda equity security holdings by nationality is not available.  According to a 2019 BNR report, portfolio investment remains the lowest component of foreign investment in Rwanda mainly due to the low level of financial market development.  Portfolio investment stock amounted to $109.3 million in 2018, a 5 percent increase from 2017 levels.  In 2018, Rwanda recorded foreign portfolio inflows of $5.9 million compared to $0.3 million in 2017.