Mohamed Khodeir’s diverse experience spans multiple areas of law including corporate, banking & finance, dispute settlement, government projects, legislation, investment and tax, as well as family business. Having served for one year as the CEO of the General Authority for Investment and Free Zones (GAFI) in Egypt, he has now returned to work as a Corporate Commercial Partner at Al Tamimi & Company. He talks to Law Today about navigating the investment climate at this critical time for Egypt and the region.
LT: You have recently moved to Dubai with Al Tamimi and are embarking on a new challenge, quite different from your role within GAFI. Can you tell us about your plans and how this transitional period has been for you so far?
MK: I must be one of few very fortunate people to have had the opportunity to practise law within four jurisdictions. The diversity and regional scope of this experience is something I can now apply to a strategic role, to help grow our international practices outside of the UAE from the corporate commercial perspective.
Al Tamimi is the largest law firm coming from the Middle East. Founded in 1989 by Essam Al Tamimi, its model is that of a fully-fledged firm in all jurisdictions in the region, where we have local partners who help us to provide the full spectrum of legal services that clients will expect. Our strategy is to continue to grow our international practices and to make sure that we synchronise different experiences from our offices, to develop the business and to explore new practice areas and business opportunities around the corporate commercial sector. You can see that governments and businesses are putting a huge premium on sustainability at the moment. All the work that is being done to contribute to the 2030 vision entails a lot of legal input, particularly related to regulatory and legislative reform. These are areas where Al Tamimi has a record of excellence provided to clients, so we want to capitalise on that and take it to the next level.
One of the reasons I have worked with Al Tamimi for twelve years cumulatively is its commitment to developing the region. Its model is unique and unparalleled, showing the same level of commitment to CSR work and client work. This stems from the firm’s clear vision that we are part of the communities we operate in. I’m a person who likes to add value, not just do a job, and with Al Tamimi I can do this. We are always challenging ourselves to grow as a firm, working with different partners, seeking to build a collaborative legal community, to build a culture of understanding and spreading legal knowledge.
LT: How would you characterise Dubai’s investment climate currently? Are there points of comparison and opportunities for learning and collaboration between Egypt and Dubai, even though they are so different?
MK: First of all, let me start by confirming the obvious. Egypt and the UAE have a timeless relationship that goes beyond any challenges that may occur in the region. Sheikh Zayed always talked about Egypt as the heart of the Arab World and part of his vision for the UAE included a close collaboration with Egypt. Likewise, Egypt considers the UAE to be of intrinsic value as a neighbour and partner. These strong relations present endless opportunities for collaboration and cross investment. When you look at the amount of FDI coming from the UAE into Egypt and the number of Egyptians living in the UAE as if it’s their own country, you see how this translates into practical cooperation. For me personally, the only place I could live in other than Egypt was the UAE. It has a very open culture and one that is constantly growing and developing.
When it comes to the challenges that each country has to confront so as to improve the investment climate and legislative structures, it’s a different situation. There are many areas in which we can learn from each other. The civil code system adopted by Egypt and by many places in the Arab World, including the UAE, has over time evolved within the UAE into several new laws and into a wide and diversified legal system. The UAE is also, of course, very advanced from a technological perspective.
But if you look at the demographics and challenges in Egypt – especially after the past five years – you understand that of course we have a different set of challenges and reform measures that need to be undertaken. The Egyptian government has finally started to tackle the core of the problems, which has brought with it extensive media coverage and a degree of scrutiny, but the fact remains that necessary measures have been taken. These were brave decisions. Who would have imagined, even just a couple of years ago, that we would have taken the decision to float the Egyptian pound? Who would have imagined that we would finally be dealing with the subsidy problems that have been an issue for so many years?
The UAE is dealing with a different set of challenges. There are different economic factors, demographic factors and population factors at play. The UAE has done an amazing job with its economy, society and infrastructure. Everyone, not just in the Middle East but throughout the whole world, looks up to it.
But Egypt – and I remind people of this at every event I go to – has emerged from a hugely turbulent period. When people talk critically about Egypt’s ranking in competitiveness, about interest rates and whether they are going to be reduced or what’s going to happen in terms of the debt scenario, we should be mindful that these are the type of challenges we are talking about now. In May 2013 we were talking about whether we would still be able to live in our country, asking ourselves whether everything would deteriorate into civil war.
So we have to be realistic. Yes, we are facing huge inflation because this government had to take economic decisions that had not been taken for forty years. But are we safer? Are we on track to growing our economy? If we had dealt with the subsidy issue gradually, we would not have had to take the massive step that was taken. The same thing applies to the value of the pound. As an Egyptian I am grateful to see my country where it is today, given all the challenges it has faced.
LT: What impact do you think the floating of the pound will continue to have in the next 6 months to one year?
MK: Put simply, I think the most difficult period has passed. I believe that the period from the 3rd November 2016, for the six months that followed it, was always going to be the most difficult to navigate. The massive impact of the inflation, the soaring prices and the distraction that happened in the market I think is over. The reserves have been announced now and they are record breaking. The foreign currency that came into the country during 2017 was a record. Our FDI is not yet at the record level we want to reach, but in 2012 we had a figure of $2.2 or $2.3 billion and today we’re talking about a figure in the range of $8 billion. Yes, the inflation is high but it’s going down. The exchange rate for the Egyptian pound has been very high, but it didn’t go up to 25 LE to the dollar as people had expected; it settled at 17.5 or around that figure. The tough period of having two prices for our currency is over.
So credit goes to the leadership of Egypt and to the Central Bank for managing monetary policy so as to lead to this scenario.
LT: Your tenure as the CEO of GAFI was marked by a lot of discussion about the new Investment law and its impact. How was the process of navigating this period of activity and debate, for you?
MK: The short answer is, very enlightening and challenging!
What happened is that I was asked to become the CEO of GAFI in June 2016, with a term of one year. When I arrived, there was a plan in place to reform the investment climate. An intrinsic part of that plan was for GAFI to really serve as the executive arm of the Ministry of Investment, implementing investment policies and overseeing the regulatory function that exists for companies, doing promotional work and implementing administrative reform for 2500 staff. Investors deal with different bureaucratic levels in Egypt but their kick-off point is always GAFI.
Upon my arrival, I reformatted the plan with my colleagues, within the different sectors of GAFI, comprising twelve sectors and four sub-sectors: so a total of sixteen departments. We met with our colleagues, listened to their comments about their challenges and set the vision. We used all the feedback that came to us to create a one year action plan, as part of GAFI’s ten year strategy for development.
The key files related to several main categories:
1) Administrative reform
2) Legislative reform
3) Procedural reform
A simple concept governed our approach and strategy. We agreed that when it came to any decision that hindered investment, that we had the authority by law to take without affecting the rights of constituencies or minorities, we would take it right away – in order to make life easier. For example, we took a decision that ultimately resulted in reducing the time span for general meetings, which is a relatively minor issue for an investor, but nevertheless an impactful one. To ratify a general meeting used to take a long time but now, according to the decision we took, it has to be done within the same day.
We did this not by reinventing the wheel but by reading the wider interpretation of the law, which holds that GAFI’s role is to verify that the document presented to it constitutes an original copy of the minutes of the general meeting that was held. GAFI’s role is not to review the legalities of the contents, which might relate to the civil law, because we are not a court of law. So revisiting this interpretation, allowing us to define GAFI’s precise role, helped us save a lot of time. This is one example of how procedural reform can simplify the lives of the people we are serving. Anything procedural that didn’t fall within GAFI’s authority was raised with the appropriate bodies.
So we had a one year plan to design these processes, because of course they are ongoing. We were crafting processes to allow for our overall review and improvement processes, which don’t have an end point. What you improve today needs to be better tomorrow, so in our case we recognised the need to always be thinking about how to get the investment climate to function as best it can.
Legislative reform and a legislative agenda came alongside this procedural reform, and then on top of that came the Investment law, which had in fact already been amended in 2015, but the adjustments were felt to be insufficient. This was a very long process, because of course there are so many other legal considerations that affect this law. Some reforms will take one year, some two; but the reform plan is there.
The administrative reform we undertook related to how we function at GAFI, including looking for better ways of reporting, automating online services (we had, for example, the launch of the first 30 companies able to register online as companies back in May). The concept was to facilitate less direct dealings between staff and investors.
Working on all of these areas was a huge job and it was a challenging period, but also very rewarding. I think we succeeded in delivering a law that is creating impact and we delivered a draft ten year reform strategy for GAFI that incorporates important measures. We were adamant that what was important was not the legacy of any particular individual, but rather of GAFI, as a crucial organisation dealing with investment in Egypt, having a sustainable reform plan. We delivered a few critical items that could be delivered in a year, and what remains is a comprehensive plan for reform that our colleagues at GAFI will take further.
It was a very rewarding thing to do and something that you cannot help but recognise as being an honour, because very few people get the opportunity to serve their country during such a challenging time.
LT: Now that some time has passed since the new Investment law was first drafted, what do you think its impact will be in terms of how people do business?
MK: The law was issued at the end of May 2017 and its Executive Regulations in October, so it is now ready for implementation. In June we had designed an implementation plan because each chapter and article of the law has specific designated efforts that need to be undertaken in order for it to be implemented in the right way, and to allow proper follow through with different authorities. There are a lot of procedures, time frames that are specific and all of this needs to be followed to make the law really operational. That’s the challenge of the next phase.
Any activity undertaken by human beings will have people who like and approve of it and people who criticise it. What I can say categorically is that my colleagues and I had no interest in that law other than the interest of investment in Egypt. We looked at best practice across the region, globally and at what different competitors are doing, to make sure that Egypt’s law was up to date and that it addressed the real issues at stake. We wanted to make sure it had a basis in international best practice, but with an Egyptian vision.
Critics of the law have argued that you need an investment law that deals with the incentives and guarantees of investment, and only those things. This would be an ideal scenario if you were establishing an investment law for the first time in a fresh jurisdiction, but with Egypt’s historical record and our massive amount of existing legislation, you need everything to be properly regulated. This is why the law couldn’t be a succinct 20 or 30 articles. You need to address aspects of setting up your venture, land acquisition, guarantees, dispute settlements – and many other issues besides. With so many details, if you tried just to summarise them then, rather than curing the problem, you would have just created a vacuum unresolved by the new law. We really wanted to make sure that Egypt has a proper investment “constitution”, so to speak.
Investors want assurance; they want to be able to transfer their money and to know that no one is going to impose a new regulatory burden on them overnight. So we have sought at every opportunity to establish guarantees that have been clearly and publicly highlighted. We even took it a step further, and sought to define the main principles of investment – something for which I personally fought very hard. We felt that this was an important step because this law is a reflection of the country’s vision for sustainable reform and inclusive growth.
The most difficult aspect of all this was encountering people who criticised without fully understanding the nuances of the topic. We tried to be very patient, working as we did to convince many different people, with different viewpoints, speaking with constituency groups and investors’ representatives within and outside Egypt. We spent a total of 7000 hours working on this law.
Another critique levelled at us came from someone who said how sad it was to know that the drafting and approval of a law took 7000 hours, rather than those involved simply taking global best practice, applying it and just issuing the law. This is a dangerous approach because if you take, say, Singapore, and decide just to copy its framework, this doesn’t take into account Egypt’s context or cultural needs, or the historical developments of legislation here.
Fundamentally, I believe this law has achieved most of what I had hoped it would. I do feel it is something to be proud of, and of course the important thing is that we hope Egypt will benefit from it in the coming period.
LT: Now that the new Investment law has been passed, what do you think GAFI’s current priorities are within that broader framework you mentioned earlier?
MK: It seems clear to me that the priorities will be to take the pillars of GAFI’s sustainable plan and vision and put them into action, by continuing legislative reform now that the pressure of finalising the Investment law is over. It is a great opportunity to open online debate and matrices for people to comment and to give the groups dealing with different areas of legislation more time to finalise their work. The investment climate was really at a stage where the law was not enough, it didn’t offer incentives; it was hindering investment in the country. Now following step one of the reform program, you have company practices, an investment law that GAFI has the authority to implement, technological improvements to processes, an open provision that gives GAFI the authority to facilitate all procedures. You have temporary provisions in place for investment to grow, while the other laws that need reform can do so, through a process of discussion and debate.
Legislative and Administrative Reform measures can be followed. Moreover, GAFI can continue the key role of investment promotion. During my year as CEO I travelled to Rwanda, Tokyo, Kenya, the UAE, Greece, other places besides – to attend strategic conferences and meet investors, telling them of Egypt’s reform plan, addressing the core matters important to them and working out how to turn these things into action, as well as sharing our experience with colleagues in Africa.
So the key is to continue the sustainable plan and I’m sure my colleagues at GAFI will take it to the next level and make the work they are doing even better. I was inspired to see the level of commitment during my time at GAFI, including people who would stay working all night in order to do things that needed to be done, as we were working to prepare the law. Not all government officials fulfil the negative stereotypes attributed to them – many believe that their roles are important to serve their country and are willing to work very hard, with a team spirit that is deeply inspiring.
For me, having the opportunity to do this job was great and I will always be happy to see GAFI go further and further in its development as one of the region’s most important autonomous organisations.