Egypt sets strategies to lure investments into specific sectors: GAFI chairman

CAIRO – 7 August 2023: Chairman of the General Authority for Investment and Free Zones (GAFI) Hossam Heiba told press Monday that strategies are being set to bolster specific sectors that are green energy, automotive, home appliance, pharmaceuticals, ICT, logistics, education, and agriculture and fisheries.

Industrial Sector

Heiba elaborated that Egypt has companies that have been operating in the automotive sector for over 60 years. Hence, the country needs to leverage that experience, and also boost feeding industries in the sector.

A fruitful outcome of the efforts deployed is that Japan's Yazaki entered the Egyptian market for the first time, as it is establishing a factory in Fayoum to produce automotive components, mainly braids and wires. Egypt is also creating a fund to finance automotive enterprises, the GAFI chairman noted.

Speaking of home appliance, Heiba showcased that the local component in Samsung Egypt's products exceeded 70 percent. Further, China's Haier is setting up a factory in Egypt to mainly target foreign markets, so as it will bring in 3-4 feeding companies to supply inputs. Bosch and Beko got golden licenses to build plants, while Ariston purchased an Egyptian factory and is in process of issuing licenses.

The official stressed that Egypt had two main advantages in the home appliance sector, and those are the expertise and the large market.

Addressing Complaints

"We created the Committee of Principles to resolve frequent individual issues in the sector of manufacturing. It consists of the Tax Authority, Industrial Development Authority, and GAFI among others…We generalize the solutions devised to similar issues," Heiba explained.

The GAFI chairman stated that 75 percent of complaints have been settled, mostly in favor of investors. Between June 2022 and May 2023, 1421 out of 1949 complaints were processed. Some were lingering since the 1990s and 2000s. Examples included problems pertinent to proving ownership of reclaimed lands, licenses, and import of raw material.

"Complaints were from both Egyptians and non-Egyptians but Egyptians were the majority because the majority of investors in Egypt are Egyptians," Heiba highlighted. He added that "no foreign investor would enter the market without a local one."

On another level, "the Supreme Investment Council banned any agency from imposing new fees or raising existing ones without prior approval from the council and the Cabinet…The requests of some agencies were rejected," the GAFI chairman said.

Yet, some fees were planned to be put in place before the ban so "we consulted with investors and they agreed."

When considering the approval/rejection, "we need to make balance so that the agency would have enough resources to provide a quality service. We study if the raise is needed to maintain quality," Heiba pointed out.

Speaking of a radical solution to random estimates of taxes, the official stipulated that e-bills are key and that they are being introduced nationwide but the process would take time.

Commenting on claims that some investors had exited the Egyptian market, the GAFI chairman said, "No investor has completely shut down operations in Egypt. Some Egyptian investors just expanded into other countries."

Investment Promotion

The GAFI chairman underscored that the main framework of the authority's operation is Egypt’s 2030 Sustainable Development Vision. "Yet, we take into consideration variables on the international scene. Those [events] make it hard to smoothly implement plans," he added.

"We need to understand the real competitive edge of Egypt, evaluate the capabilities of the private sector, and study the obstacle it faces…Investment promotion currently requires integration of efforts. The private sector should play a role on that front. That mission cannot be done by state agencies alone," Heiba said.

Regarding the role played by the authority, "We divided ourselves into teams. Each is concerned with identifying different challenges. We talked with different state agencies to amend legislations and measures. Then, we drafted amendments and submitted them to the prime minister. That resulted in amending some measures," the GAFI chairman clarified.  

The official pointed out that one of the sectors that benefited from such work is real estate development.

As for attractiveness to investors, the GAFI chairman underscored that Egypt had "the advantages of location, and workers. We need to sharpen their skills. The cost of Egyptian labor has become cheaper than that of Southeast Asia, and even more productive than it is in some of the Southeastern countries…Those are the things that matter to investors and not tax exemption, for instance."

GAFI will launch an "After Care" platform, where complaints would be submitted online among other services offered. As for incentives, the investor receives residence for one year during the foundation phase, and it can be extended for another. When operation begins, they are granted a five-year residence.

The law of investment allows founding companies by foreign currencies, not necessarily the US dollar. For instance, many Chinese investors prefer to use their country's currency, Heiba said.

In another context, the Finance Ministry hired a global company to explain the taxation system to investors.

Regarding licenses, an investor's license request is submitted to the concerned body. If no reply is provided within five working days, that means the request is approved. Hence, rejection has to be made within that window of time. In case of inquiries from the agency, the investor is asked to provide answers.

Until present, 20 golden licenses were issued. If the investor aims for export, it is recommended to operate in the free zone system on the condition of supplying 20 percent of production locally.