{"id":603754,"date":"2023-08-20T00:00:00","date_gmt":"2023-08-20T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/ida-offers-up-land-plots-a-new-phase-of-its-investment-map-to-spur-local-manufacturing\/"},"modified":"2023-08-20T00:00:00","modified_gmt":"2023-08-20T00:00:00","slug":"ida-offers-up-land-plots-a-new-phase-of-its-investment-map-to-spur-local-manufacturing","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/ida-offers-up-land-plots-a-new-phase-of-its-investment-map-to-spur-local-manufacturing\/","title":{"rendered":"IDA offers up land plots + a new phase of its investment map to spur local manufacturing"},"content":{"rendered":"

The IDA is pushing to fill a USD 30 bn gap in imports with local industry: <\/strong> The Trade and Industry Ministry\u2019s Industrial Development Authority (IDA) began offering industrial land and new investments<\/a> under a new phase of the authority\u2019s investment map last week. The new offerings come as the ministry is scrambling to put together a plan to slash our import bill by creating a strategy to boost local alternatives to imported products. The strategy, which the ministry has distributed among the Federation of Egyptian Industries\u2019 various divisions, is designed to save state coffers some USD 30 bn in import expenses. <\/p>\n

The current state of affairs: <\/strong> Industrial players have limited ability to secure customs clearance for various imported products, including production inputs and raw materials, as the country suffers from a prolonged FX shortage. The government has been working to give customs clearance to imports \u2014 with Prime Minister Moustafa Madbouly saying in January<\/a> that the backlog at ports was cleared in January \u2014 but many voices in industry have been complaining<\/a> about a shortage of hard currency to allow importers to keep their goods moving through ports. <\/p>\n

What the strategy entails: <\/strong> 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. This offering of investments comes as the IDA is also offering up 790 new industrial land plots \u2014 which are connected to utilities \u2014 spanning some 1.7 mn sqm across 14 governorates, IDA head Mohamed Abdel Karim said. Propping up local industry by taking stock of the imported products and materials that manufacturers rely on is a top priority for the government, Abdel Karim told us, saying that this will help localize industry and narrow the trade deficit. <\/p>\n

These investments aren\u2019t limited to Egyptian investors: <\/strong> The ministry has announced these investment options at its foreign commercial representative offices abroad, head of the Trade Ministry\u2019s Commercial Representation Authority Yehia El Wathek Bellah told Enterprise. So far, around 27 foreign investors have submitted offers for various investments that are expected to be implemented during the current fiscal year, El Wathek Bellah said. The ministry expects to reel in some USD 5.5 bn of investments from India, Turkey, and Europe in FY 2023-24 through this investment promotion, he indicated. <\/p>\n

A contrarian view: <\/strong> Import substitution is not necessarily the ideal way for Egypt to move towards its goal of cutting down on imports, since that would entail producing everything locally, which is inefficient and costly, Concrete CEO Mohamed Talaat Khalifa said at the Enterprise Exports and FDI Forum earlier this year. Instead, Egyptian companies should focus on creating higher value products that can then substitute an imported product, and support leveling up of the entire supply chain, Khalifa said. ( ICYMI- <\/strong> Listen to our chat with Khalifa, as well as Mars\u2019 Shams Eweis and Fertiglobe\u2019s Tarek Hosny about the lessons learned from the industries that have raised our export profile on the Enterprise Podcast<\/a>.)<\/p>\n

Never let a good crisis go to waste: <\/strong> The ongoing FX shortage has helped push attention to local industry, with the government working on rolling out policies and incentives that could make manufacturing a leading contributor to the economy, Bassim Youssef, a member of the engineering industries division at the Federation of Egyptian Industries (FEI) told Enterprise. <\/p>\n

Let\u2019s encourage clustering: <\/strong> \u201cWhat we\u2019re looking to do now is setting up industrial clusters of 3-4 companies per cluster, because bringing several companies in a cluster is a good solution for manufacturers with limited liquidity to make the most out of their investments,\u201d Youssef said. ( ICYMI- <\/strong> Industrial clusters were the focal point of one of our panels at the Enterprise Exports and FDI Forum \u2014 catch up here<\/a> or listen to the podcast version here<\/a>.)<\/p>\n

Broadly speaking, industrial players are happy with the IDA\u2019s push to offer new <\/strong> investments and industrial lands<\/strong>, but also remain concerned about what the future might hold if the strategy isn\u2019t implemented, our sources tell us. The strategy would be a good step in the right direction, although there are a few major hurdles that stand in the way, El Arabbeya for Integrated Industries Chairman and head of the FEI\u2019s electrical appliances division Bahaa El Adly told Enterprise. Localizing industries still requires some level of imports \u2014 particularly machinery to begin manufacturing certain products and certain raw materials, El Adly told us. Additionally, many of the products whose manufacturing we\u2019re looking to localize fall under intellectual property rights, which means we would need partnerships with foreign players to be able to manufacture them locally.<\/p>\n

AND- The informal economy needs to be brought into the light: <\/strong> Manufacturers operating outside the formal economy are a major sore point for industry, as they aren\u2019t held to certain quality standards and can therefore cut corners (and costs) and perform better than manufacturers who are playing by the book, Youssef said. <\/p>\n

The solution? <\/strong> Manufacturers need to get a boost of FX to get the ball rolling once the correct policies are put in place to really encourage local industry, El Adly suggested. The government\u2019s goals for local industry aren\u2019t far-fetched, and can be reached gradually, but will need a focused push and a way to get over the initial hurdles, El Adly said.<\/p>\n

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