Egypt's new Investment law misses the mark

In the next few days, Egypt will have both a new president and the same old problems. Among them, a sub-optimal level of investment and associated governance deficiencies that have bred and been nurtured by the country’s poor economic performance.

Both problems were highlighted by the Egyptian government’s recent approval of a law barring third parties from challenging investor-state contracts in Egyptian courts.

Issued amidst an economic crisis, an investment slump, a slew of post-January 25 investor claims against Egypt, and notable court-ordered reversals of Mubarak era investor-state contracts, the new law aims to bolster investor confidence, particularly among Arabian Gulf-based investors whose home governments have since July 2013 pumped billions of dollars into Egypt.

Hardly a cure for Egypt’s investment woes, the measure is symptomatic of official Egypt’s chronic inability to conceive and implement economic and investment policies proactively, rather than from a position of weakness and often as a condition of receiving outside financial or other aid.

The ban on third party legal challenges (Law 32 of 2014), which reportedly applies prospectively and retroactively to previously initiated third party actions, has drawn praise and criticism. Its proponents contend that it will provide investment security needed to lure investors. The law’s detractors argue that it will breed corruption and infringe on the judiciary’s oversight power (its constitutionality is now being tested).