From the horse’s mouth: What do industrial developers want? Enterprise joined industrial developers who were gathered during an industry event last week as they voiced their concerns with the industrial sector and the issue of land allocation. Insiders we spoke with touched on several key concerns and requests, including expanding land availability to help shore up exports.

Land availability plays a key role: The availability of industrial land is the first step to kickstarting the industrial investment process, according to Chairman of the Federation of Egyptian Industries’ Chemical Industries division Sherif El Gabaly (bio). He pointed to the necessity of allocating land to investors at a marked down price to help them contribute to Egypt’s long-term economic growth plan. Land availability will also play a major role in boosting the country’s exports, he added.

The numbers speak for themselves: Industrial developers have developed some 14 mn sqm of industrial land between 2008-2016, compared to a mere 6 mn sqm developed by the state over the same period, CPC Industrial Development CEO AlMoataz Baha El Din (LinkedIn) said. The industrial developer is “more than just a broker” and the state needs to work to create a climate for industrial development, which is more attractive to industrial investors cost-wise. Each 1 mn sqm of industrial land taken on by a private player brings in some EGP 15-20 bn of FDI and provides some 12k jobs, he added.

Boosting industry is crucial for boosting exports: For the Madbouly government to achieve its target of increasing exports to USD 100 bn a year by the middle of the decade, it needs the industrial sector to bring in some USD 250 bn in gross income, Moatasem Rashed, the head of the Private Freezones Investors Association said.

Industrial developers still have to jump through hoops: The Trade and Industry Ministry’s Industrial Development Authority (IDA) is currently not allocating any new land plots to industrial developers before they finish developing already purchased plots, Ahmed Radwan, the advisor to the head of the Industrial Development Authority, said. The IDA has so far allocated some 22.9 mn sqm of land to industrial developers.

Industrial development in Egypt: There are currently some 147 state-developed approved industrial zones in Egypt, in seven regions, with a total area of 1.7 mn feddans. As for private-sector development, there are some 17 industrial zones with a total area of 22.7 mn sqm.

How industrial development differs from real estate development: Industrial development has to adhere to around 4k industrial codes, this comes on top of the different requirements for each industrial facility. That’s why industrial developers carry out operations with a manufacturer in mind, so that the developed plot is in line with whatever facility they want to set up.

After-sale services: Private-sector industrial developers are responsible for the management of the developed industrial zone even after the sale, a service unavailable with state-developed plots, Bahaa El Din said. Developers are also able to carry out development in a way that keeps cost low for the operator.

Boosting industrial development in Egypt comes with a long list of obstacles:

#1- The industrial land parallel market: Brokers take over most of the industrial land plots offered by the government for cheap and then resell it at a much higher price, Polaris Parks General Manager Bassel Shoirah (LinkedIn) said. The IDA sells land at EGP 1.6k per meter, while brokers resell the same plots of land at EGP 6-8k per meter.

Regulations can help resolve the issue: Chairman of the Sixth of October Investors Association Mohamed Khamis Shaaban recommended setting up controls allowing qualified investors to bid on IDA-offered land to prevent brokers from sweeping it up. The state needs to implement stricter controls, to ensure that the sold land is being used for its intended purpose, he said, adding that investors need to have a 6-12 month timeframe to start working on their purchased land.

#2- Inflated prices have significantly impacted industrial land prices: Industrial land prices have recently seen a 100-150% jump on the back of the hiked cost of utility work — mainly building materials. Shoirah said, calling for longer tenors (up to five years) for payment facilities.

#3- Land ownership registration remains an issue: The IDA requires investors to pay the full price of the land, complete 40% of the project’s construction, and obtain an operating license, before they can obtain the necessary certificate to register land ownership, Rashed said. When this process is completed, investors then have to go through the real estate registration process.

#4- Difficulties securing funding: It is difficult for developers to secure the necessary funding to carry out the necessary utility work ahead of selling off the land, consultant Mohamed Abdel Ghani said, adding that it would be helpful for the state to offer tax and custom breaks on fees imposed on machinery and equipment.

More private-sector industrial development ahead? The New Urban Communities Authority (NUCA) has received offers from seven industrial developers to take over some 13 mn square meters of land, Housing Minister Assem El Gazzar said. The land will be allocated over two phases in no longer than 5 years. Developers will need to finish up 35% of the “basic work” before they can acquire land during the second phase.

The location is a key factor to any industrial complex: The location of an industrial complex is crucial, seeing as it needs to be within close proximity to complementary industries and residential areas to reduce cost for small and medium-sized investors, Shoirah said. Therefore the IDA and developers need to work closely to ensure that the offered land plots can house industrial complexes.

The IDA is looking to fill a USD 30 bn gap in imports: Last month the IDA began offering industrial land and new investments as part of the Trade and Industry Ministry’s plan to slash our import bill by creating a strategy to boost local alternatives to imported products in efforts to save state coffers some USD 30 bn in import expenses The IDA is offering 152 potential investments as part of the latest phase of its investment map, with these investments covering production inputs for five critical industries: Engineering, chemicals, pharma, construction and building, and food industries. The IDA is also offering up 790 new industrial land plots — which are connected to utilities — spanning some 1.7 mn sqm across 14 governorates.

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