What the government has in store for the manufacturing industry in 2024-25: Last week, Finance Minister Mohamed Maait delivered his budget statement to the House of Representatives, kicking off the annual state budget process. The new budget — which expects to see economic growth picking up pace to 4.2% in the coming fiscal year, up from an estimated 2.9% in FY 2023-2024 — sees manufacturing contributing around 15% of Egypt’s GDP next fiscal year.

BUDGET REFRESHER- Total spending for the upcoming fiscal year is projected to increase to EGP 3.9 tn, with the majority of spending allocations going towards interest payments, social support, and investments. That includes some EGP 495.8 bn earmarked for public investments. The government expects total GDP to hit EGP 17.3 tn, rising from EGP 13.9 tn this fiscal year, with expectations that the growth will be underpinned by industrial and service sectors.

Lots of fresh incentives + investments coming for industry: The new budget has earmarked some EGP 40.5 bn to finance several programs geared towards stimulating the economy, with a particular focus on supporting industry and exports. The government has also penciled in:

  • EGP 23 bn for export subsidies,
  • EGP 8 bn for low-interest loans for manufacturing,
  • EGP 6 bn in spending to maintain subsidized electricity prices for industry,
  • EGP 1.5 bn to maintain real estate tax exemptions for factories,
  • EGP 1.5 bn in cash incentives for SMEs,
  • EGP 500 mn to support the automotive strategy.

REMEMBER- The Madbouly government has been signaling for the past couple of years that it wants to make industry and local manufacturing a core part of Egypt’s economic growth, with several incentive packages rolled out to help support local industry. In 2022, the government identified nine priority sectors to get a hand from its EGP 200 bn import substitution program. Cabinet has also rolled out new regulations at the end of 2022 to boost investments, including facilitating the process for companies to obtain a golden license, as well as making automotive-linked engineering industries eligible for several incentives provided under the Investment Act.

Industrial development rests on three pillars: To hit its growth targets, the government has identified three core components that will help support local industry, according to the government’s economic plan. The three pillars are import substitution, industries with export potential, and green industries.

#1- Import substitution: The first component of the strategy focuses on deepening local manufacturing of industrial components as a means to reduce reliance on imported goods and production inputs. The government is looking to stimulate the local manufacturing of products to substitute imports through 152 different projects with a combined production capacity worth USD 3 bn. These projects include producing paper products, medicines, serums, pipes, automotive components, and the iron and steel industries. Their output would together cover around 11% of our current trade deficit.

This has already been on our radar for some time: Cutting down on imports in favor of relying more on locally produced goods has been a goal for the government for several years. Back in 2018, the cabinet — which was then headed by Sherif Ismail — had ordered a study of the total import of goods and services over the previous three years to help the government set policy priorities for which goods can be manufactured by the private sector domestically. In the years since, import substitution has cropped up multiple times as a focal point for the government as part of its economic strategies. In 2022, the Madbouly government said it would focus on nine industries with which to spearhead its import substitution push: Wood and furniture, engineering, food and agriculture, chemicals, textiles, pharma and medical, printing and packaging, building materials, and metallurgical industries.

#2- Industries with export potential: The government’s economic development plan is also zeroing in on developing certain industries with “distinct” export potential, with hopes of raising industrial exports by 20%. In particular focus: Food, textiles, and engineering and chemical industries exports. These sectors are already among our top performing industries in terms of export revenues in 2023, with chemical products and fertilizers reeling in USD 6.54 bn, food netting USD 5.46 bn, and textiles accounting for USD 1.12 bn of our export revenues last year. The government plans to give these industries a boost by disbursing additional export subsidies and hosting more exhibitions abroad.

REMEMBER- The Madbouly government previously said it is looking to increase its exports to USD 100 bn a year by 2027 as part of its plan to increase the private sector’s role in the economy.

#3- Green industries: Last but not least, the government is looking to ramp up the activity in environmentally friendly industries, including the production of electric cars, green hydrogen, solar panels, and water- and electricity-saving devices, according to the strategy.

Your top industrial development stories for the week:

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