New industrial zones: Russia invests in Egypt

Mona El-Fiqi , Friday 16 Mar 2018

The government last week gave the go-ahead for a new Russian industrial zone in East Port Said

Suez Canal
Suez Canal Economic Axis (Photo: AP)

During its weekly meeting last Wednesday, the cabinet approved an agreement to establish a new Russian Industrial Zone in Egypt, part of the government’ s ongoing efforts to attract foreign as well as domestic investors to the Suez Economic Zone where an international logistics hub, industrial areas for different sectors, and commercial and residential projects are being developed.

Following the cabinet’s approval, Minister of Industry and Foreign Trade Tarek Kabil said the agreement would be submitted to the State Council and parliament for review.

The new Russian Industrial Zone is planned to be established in East Port Said on the Suez Canal Economic Axis on an area of five million square metres in an investment worth more than $7 billion.

In accordance with the Industrial Zones Law, the land will be granted to the new zone for 50 years.

The law also stipulates that 90 per cent of the workforce in projects or industrial complexes inside the zone should be Egyptian.

The Russian zone is expected to generate 35,000 jobs in a wide array of industries, including sensors, air-conditioners, engines, construction and medical equipment, glass, ceramics, wood, paper and feeding industries for vehicles and tyres.

“This is a win-win agreement,” Farid Ahmed Abdel-Aal, an expert at the National Planning Institute in Cairo, said, explaining that Russia would benefit from Egypt’s location as a gateway for its products to reach African and European markets in addition to making use of the Egyptian labour force.

“On the other hand, establishing an industrial zone in cooperation with a developed country like Russia should help in the transfer of technology to the Egyptian industrial sector.

It should also attract international companies to invest in Egypt, particularly from the Russian-led Eurasian Customs Union [ECU] which includes Russia, Belarus and Kazakhstan,” Abdel-Aal added.

Economic cooperation between the two countries is expected to increase when negotiations to establish a free-trade area between Egypt and the ECU are finalised.

“The agreement will give Egyptian products access to a larger number of countries, with more members possibly joining the ECU in the future.

It will allow the customs-free export of Egyptian agricultural and industrial goods to the ECU, boosting Egypt’s trade,” Mustafa Khalil, a member of the Egyptian-Russian Business Council, said.

The volume of trade between Egypt and Russia came in at $5.5 billion in 2017.

According to Khalil, the establishment of the new industrial zone should add to economic cooperation and increase political ties between the two countries. It should also attract further investment to the Suez Canal Economic Axis.

For the past two years the government has been promoting the Suez Canal Zone in a bid to attract international investors and boost job creation and economic growth, according to Abdel-Aal.

The Suez Canal economic area stretches through the three governorates of Suez, Ismailia and Port Said. When it is complete, the zone will include six maritime ports. It is set to be completed by 2045.

“People should be able to reap the fruits of these efforts within the coming few years when the services and infrastructure have been improved and income increases,” Abdel-Aal said.

The construction work on the new zone will be carried out in three stages, which are expected to be finished by 2031 when Russian companies will start operations.

During the negotiations, which started in 2014, Egypt and Russia agreed to establish a company called the Moscow Economic Zone that would be responsible for the zone’s operations and construction work, while both governments would supervise the project as a whole.

The zone is funded by the Russian Direct Investment Fund (RDIF) and a number of Egyptian banks.

Khalil explained that bilateral cooperation between the two countries had been extended to include Russia’s assistance in building Egypt’s first nuclear power plant at a total cost of $35 billion in the city of Dabaa.

This project will renew Egypt’s cooperation with the former Soviet Union on building the former Anshas nuclear research reactor in Egypt.

Russian investment in the Egyptian market presently amounts to some $62.8 million in 417 projects in the areas of tourism, construction and communications, according to figures from the Ministry of Industry and Trade.

*This story was first published in Al-Ahram Weekly  

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