The Ministry of Investment (MOI) has prepared a program for the upcoming year 2007. It is expected that the pace of the program will pick up to capitalize on the improvement in regional and local circumstances that could be conducive to foreign direct investment. The efforts vested by the MOI to realize this take off are multifaceted including diligent attempts for better outreach to local, Arab and foreign investors, continuously offering them more incentives, in addition, to the challenging task of restructuring and repacking the companies and assets to be offered for sale. Those efforts aim at bridging the gap between the seller, which is the Government in our case and the perception of the market to the state on assets.
Package of Incentives:
In light of the afore-mentioned, MOI produced a new set of incentives and procedures addressing various aspects of the transaction from the valuation to the commitment of all related parties to the contractual details . Those incentives were approved by the Cabinet and are now considered to be an integral part of the program thereafter.
We hereby, elaborate on few of those approved incentives:
1- Optimization of Investment:
• Excess land and idle assets are to be transferred to the relevant holding company prior to the offering to downsize the company under sale and make it more lucrative economically.
• Working capital items like inventory and receivable could be transferred as well to the Holding Company upon the investor’s request.
2- Valuation of Assets:
Details of incentives related to the valuation vary depending on the activity of the company from trading to transportation to industrial activities. However, the pervasive incentives related thereto and which are applicable to all companies are:
• Valuation of utilized land is made using the price per square meter in the nearest new industrial community. Terms of payment in those communities are granted to the investor conditional on his acceptance to preserve the full labor force of the sold company.
• Buildings are to be valued at net book value with a minimum of L.E. 150 per square meter.
• Machinery and equipment are to be valued at book value, as well as furniture.
• Inventory and receivables also are valued at net book value.
3- Financial Mix:
One of the major incentives offered to the potential investor is the readiness of the Government to transfer the outstanding debt to banks as well as other liabilities on the books of the company under sale to the Holding Company. This aims at rendering the company a healthy investment opportunity for the potential buyer.
4- Other Incentives:
• The potential investor can enjoy tax holidays and other incentives stipulated by Investment Incentives Law No.8/ 1997.
• The approved incentives clearly stipulate that all government entities are bound to abide by all the contractual commitments resulting from the transaction and that the potential investor or lessee should not dare the consequences of any legal disputes between any of those entities and the public enterprises.
The Ministry of Investment is applying several techniques to make those incentives reach investors like posting them on the new Portal of the MOI, along side the necessary information about the asset management program as well as Fact Sheets for each of the companies/assets slated for sale.