Promoting the car industry should be a top priority
The package includes a five-year exemption from all taxes, excluding VAT, if new industrial projects begin operating within three years.
“These projects should involve strategic industries that target localisation,” said a cabinet statement, adding that details of industries eligible for incentives will be issued soon.
Some industrial projects may be exempted from taxes for an additional five-year period provided they meet targets on the volume of foreign investment set by the cabinet. Projects will also be able to reclaim up to 50 per cent of the value of the land on which they are constructed if they are completed within half of the initially agreed timeframe.
President Al-Sisi also directed the cabinet to expand the scope of golden licences to include all projects that deepen localisation of industry. The golden licence, introduced in September 2022, allows investors to acquire or lease land and operate enterprises with minimum red tape.
The directives came during a meeting with Prime Minister Mustafa Madbouli and Trade and Industry Minister Ahmed Samir on Sunday. During the meeting, President Al-Sisi was updated on the implementation of the National Strategy for the Development of the Industrial Sector which aims to boost the volume and quality of industrial exports, and on efforts to set up a series of integrated industrial complexes to support manufacturing and other areas in which Egypt enjoys a competitive edge.
President Al-Sisi also directed the government to continue efforts to empower the private sector by offering incentives and facilities supporting industrial investment and eliminating the obstacles the sector faces.
President Al-Sisi’s meeting on Sunday was the latest in a series of moves aimed at boosting industry and attracting new investments to the sector. Egypt has been grappling with a foreign exchange crunch which has led the government to incentivise local manufacturing aimed at substitution and industry localisation. Last week, Al-Sisi emphasised the need for “a very ambitious plan” for the industrial sector to reduce foreign currency expenditure on imported goods by producing domestic substitutes.
Industrialist Mohamed Al-Manzlawi, deputy chairman of the Senate’s Industrial Committee, said the promotion of strategic industries is essential for Egypt to achieve economic growth and become a major exporter in an internationally competitive environment.
“Industrial exports are a major source of foreign currency which Egypt desperately needs to emerge from its economic crisis,” Al-Manzlawi told Al-Ahram Weekly. He argues that promotion of the car industry should be a top priority: Egypt has a promising automotive industry and enjoys comparative advantages that could make it a major exporter of cars and electric vehicles to Arab and African markets.
“When Prime Minister Mustafa Madbouli was in South Africa this week to attend the BRICS summit, he was keen to sit down with car manufacturers and visit car factories,” noted Al-Manzlawi.
MP Mohamed Abdel-Hamid, deputy chairman of parliament’s Economic Affairs Committee, told the Weekly that heavy industries will be the first to receive incentives. “Egypt has a strategic iron and steel industry that should benefit from the new incentives to boost exports and cut import bills,” he said.
On the day of President Al-Sisi’s meeting, news broke of two manufacturing projects led by Russian and Chinese firms that could attract hundreds of millions of dollars into the local economy. The Russia-based steel-maker Novostal MP announced that it plans to spend $400-500 million to set up a steel factory in Egypt, and the local arm of Shanghai-based Chinese textile manufacturer Zhejiang Cady Industry said will invest $60 million to set up a factory in China’s industrial zone in Ain Sokhna. The 145,500 m2 eco-friendly clothing and textile factory will produce 50,000 tons of textiles and eight million pieces of clothing annually for export to Europe and the United States.
The government is also planning to issue six steel production licences to major foreign investors in 2024. Sources say the government is now prioritising foreign companies to attract foreign exchange.
* A version of this article appears in print in the 31 August, 2023 edition of Al-Ahram Weekly