A new package of incentives for industrial projects: President Abdel Fattah El Sisi yesterday instructed cabinet to implement a fresh package of incentives to support industrial activity and accelerate localization. In a statement, the presidency called for fresh tax breaks, discounts on land prices, and an expansion of the single-approval “golden” license in a bid to accelerate projects in priority sectors, which include chemicals, metals, building materials and textiles, and increase foreign direct investment.

#1- Exemptions from (almost) all taxes: El Sisi directed the cabinet to give all industrial projects in priority sectors a five-year exemption from all taxes, excluding VAT. The exemptions could be extended for a second five-year period, depending on whether the company meets investment targets.

The caveats: To qualify for the tax exemptions, companies must have their projects up and running within three years. Renewing the tax breaks will depend on the volume of foreign investment as well as other undisclosed stargets decided by the cabinet.

#2- An added incentive for finishing projects quickly: Businesses that get their projects up and running in half the agreed upon time frame will receive a 50% drawback on the price they paid for the land.

Remember: The Industrial Development Authority is currently inviting investors to bid for industrial land plots under the latest phase of its investment map.

#3- Expanding the golden license: El Sisi also directed the cabinet to expand the granting of golden licenses to all the projects working to deepen localization, the statement reads, without providing further information. Amendments to the Investment Act that received final approval from the House of Representatives last month aim to expand the eligibility for golden licenses.

Remember: Golden licenses fast-track new industrial and infrastructure projects. Also known as “single approval licenses,” they allow investors to require only one approval that covers everything from establishing the project, land allocation and building licensing, through to operation and management.

Background: This is the latest in a series of moves aimed at boosting industry and attracting new foreign investment into the sector. Egypt has been grappling with an FX crunch which has led the government to incentivize local manufacturing aimed at import substitution and industry localization.

NEW INDUSTRIAL PROJECTS ANNOUNCED-

We got word of several new industrial projects yesterday, including two which will receive hundreds of mns of USD of foreign investment from Russian and Chinese firms.

#1- Novostal M to invest USD 400-500 mn in local steelworks: Russia-based steel maker Novostal M plans to spend USD 400-500 mn to set up a steel factory in Egypt, Asharq Business quotes a government source as saying, without giving further details. The company currently produces 2.8 mn tons of reinforced steel every year from its factories in Russia. Representatives were reportedly in Egypt earlier this month to discuss investing in the local steel industry.

More steel licenses on the way: The government is planning to issue six more pellet steel production licenses to major foreign investors or local-foreign consortiums in 2024, an Industrial Development Authority (IDA) source told Enterprise. Prior to the war in Ukraine, steel licenses were granted to local firms, but the government is now prioritizing foreign companies to attract FX into the country, our source said.

#2- Chinese textiles giant to establish USD 60 mn factory: The local unit of Shanghai-listed Chinese textile manufacturer Zhejiang Cady Industry will invest USD 60 mn to establish a factory in China’s TEDA industrial zone in Ain Sokhna, Suez Canal Economic Zone (SCZone) said yesterday after the laying of the foundation stone. Egypt Cady Textile will construct the 145k square-meter factory across three phases, with the first set to start this year and wrap up before the end of 2024. The factory will produce 50k tons of environmentally-friendly fabrics and 8 mn pieces of seamless clothing every year, which will be exported to Europe and the United States.

#3- Al Amal to establish new factory: Al Amal for Food Industries is planning to invest USD 3 mn to establish a pectin factory in Sadat City, Al Borsa reports. The project would be in partnership with the German development agency GIZ and Chemonics Egypt Consultants.

Tags: