Doing Business In Egypt

1- Activities Benefit from The Investment Law
2- Free Zones Regulations And Incentives
3- SEZ (Special Economic Zones)
4- QIZs (Qualifying Industrial Zones)
5- Public- Private Partnership
6- Business Legislation

1- Activities which Benefit from The Investment Law



Investment law applies only to a specific number of activities:-
• Reclamation and cultivation of barren and desert lands.
• Animal, poultry and fish production.
• Manufacturing and mining.
• Preparation and development of selected industrial zones.
• Hotels, motels, hotel apartments, tourist villages and tourist transportation.
• Refrigerated transportation of goods, refrigerators for the purposes of storing crops, manufactured products and foodstuffs, container stations and grain silos.
• Air transport and directly related services.
• Overseas maritime transport.
• Petroleum services in support of drilling, exploration as well as gas transport and delivery.
• Housing complexes for the purposes of full, unfurnished lease for noncommercial users.
• Infrastructure operation including potable water, sewage, electricity, roads and communications.
• Hospital, medical, and therapeutic centers that offer 10 per cent of their capacities free of charge.
• Financial leasing.
• Underwriting of subscription to securities.
• Venture capital.
• Production of computer programs or systems.
• Projects funded by the Social Fund for Development.
• Development of new urban zones
• Software designing and production.
• Establishment and management of technological zones.
• Credit classification.
• Deductions.
• Establishment, management and operation or maintenance of river transportation for groups within and between new cities and urban communities.
• Performance management of industrial projects.
• Collecting garbage, waste disposal (whether of production or service activities), and waste treatment.
Investors engaged in sectors not covered by law 8 are subject to corporate law no 159 of 1981. In both cases, The General Authority for Investment (GAFI) acts as the official regulator for all incorporations and licenses.
Among the incentives and guarantees, are protection against expropriation and compulsory pricing, full right of profit and dividend repatriation, no export requirements, access to dispute resolution committees administered by GAFI, unfettered access to land in Upper Egypt. Other incentives include a standard income tax rate of 20% (oil & gas sector companies at 40.55%), a 10 – year tax exemption for land cultivation and production activities related to live stock, poultry and fish, export duty ranging from 5 – 25% of the value of whole sales transactions, and import duties ranging from 2-32%.
2-Free Zones Regulations And Incentives

Free Zones are located within national territory but are considered offshore areas. Free Zones are usually located adjacent to sea ports and airports. Investors operating inside the Free Zones must export more than 50% of their total production.
There are two different kinds of Free Zones; public and private. Private Free Zones: In addition to public Free Zones, private zones may also be established, each limited to a single project. The same privileges and incentives granted to public free zones apply to private zones as well.
Among the Free Zone incentives and guarantees are a lifetime exemption from all taxes and customs; exemption from all import/export regulations; the option to sell a certain percentage of production domestically if custom duties are paid; and limited exemptions from labor provisions. In addition, all equipment, machinery and essential means of transport (excluding sedan cars) necessary for maintaining the licensed activities of a project are exempted from all customs,
Egypt's Free Zones Offer Competitive Utility Prices: A new pricing mechanism for electricity used by energy-intensive industrial sectors (above 50 million kilowatts) is currently being applied to all sectors with the exception of food processing and textiles. Electricity costs are approximately 4 cents/kilowatt (KW). Potable water costs are approximately 20-30 cents per-cubic-meter. Fees and Charges Applicable to Free-Zone Companies: Manufacturing or assembly projects pay an annual charge of 1% of the total value of their products excluding all raw materials. Storage facilities are to pay 1% of the value of goods entering the Free Zones while service projects pay 1% of total annual revenue. Goods in transit to specific destinations are exempt from any charges. Land Rental Prices are as Follows: US$ 3.50 per square meter per year for industrial projects; US$ 7.00 per square meter per year for all other projects (storage and services). A reduction of 50% of the above rate is available in three of the nine public free zones: Ismailia (for industrial and service projects only), Damietta and Shebein El Kom.
3- SEZ (Special Economic Zones)

SEZ provides significant incentives and competitive advantages for investors. Each of the zones is autonomous and has its own Board of Directors who handles incorporation, licensing procedures as well as other investor services. The North West Suez Special Economic Zone was the first zone created, and will serve as a model for the future development of other SEZs in Egypt. The North West Suez SEZ stretches over 20 square kilometers strategically located directly adjacent to the Sokhna Port about 45kilometers southeast of Suez City near the southern entrance of the Suez Canal.
A Master Development Company (MDC) was established by the SEZ Authority in 2006 to create a master plan for the promotion and management SEZs.
SEZ incentives and guarantees include a 5% flat rate on personal income tax; integrated custom administration, tax administration, dispute settlements, licensing as well as general investors services for projects incorporated within the zones; a 10% tax rate on all activities within the SEZ; and Egyptian certificates of origin for SEZ – based exporters, allowing them to make use of Egypt's international trade agreements.
4- QIZs (Qualifying Industrial Zones)

The QIZ protocol was signed in December 2004, and today they are 705 companies eligible to export under QIZ. Qizs are expected to help further develop Egypt's robust textile and garment industry as well as supporting sectors. Qiz incentives and guarantees include duty – free access to the US market for products that comply with the rules of origin requirements; flexible application of the requirements; no quotas on exported products; and open – ended validity, in that the QIZ protocol does not have an expiration date. The QIZ protocol between Egypt and the United States grants certain products manufactured in Egypt preferential access to the United States as long as they satisfy the rules of origin related to local content. They are currently 19 QIZs located within 4 geographical areas: Greater Cairo, Middle Delta, Alexandria and the Suez Canal Zone, Both Egyptian and Israeli companies must contribute and maintain at least 10.5 % of the minimum 35% local content required under the legislation in order to qualify duty-free access to the US. Manufacturers on both sides must also contribute and maintain at least 20% of the total cost of production of goods eligible for duty/-free access, excluding profits, even if the cost cannot be considered as a part of the 35% minimum content requirement. For this purpose, costs may include originating materials, wages and salaries, design, research and development, depreciation of capital investment and overheads.
5- Public- Private Partnership

The State created a legislative and institutional framework that facilitate the execution of major Public- Private Partnership (PPP) infrastructure projects and encourage more local and foreign investors to partner with the government in priority sectors including water, transportation, health and education. Egypt, through a public-private partnership (PPP) strategy allowed the private sector to deepen its participation in the economic reform process. PPP aims to enhance the quality of services available in the country while simultaneously decreasing the financial burden on the government.
On the institutional and capacity building fronts, a joint PPP Unit has been established by the Ministries of Investment and Finance. Sector specific regulatory agencies have also been established to deal directly with various projects that are already in the works. Between 1990 and 2005, the private sector was involved with PPPs in four infrastructure domains, including telecommunication, transportation, water and sewage, carrying out 20 projects with a total investment of US$ 7.5 billion. The telecom sector accounted for the lion's share of investment at US$ 5.27 billion. This was, however just the beginning of a successful experiment that the government intends to replicate and vastly expand in the future. More recently, the government has tendered for the construction and operation of schools as part of program aiming to build 2,210 new schools; fresh and sewage water treatment projects in Cairo and Borg El Arab; and billions of dollars in new highway projects that will speed traffic between the nation's north and south, between industrial zones and ports. Tenders for more projects are in the pipeline.
Foreign companies have already placed sizable investments into Egyptian ports. Danish shipping and oil group AP Moller – Maersk signed an agreement with the Egyptian government to double the capacity of it s East Port Said terminal by 2011. In October 2007, Dubai port operator DP World acquired a 90% stake in the Egyptian Container Handling Co., located near the mouth of the Suez Canal for US$ 670 million. In the field of education, the Egyptian Education Initiative (EEI) is a PPP between the government of Egypt, the World Economic Forum's IT member community and multinationals including Cisco, HP, Intel, Oracle, IBM, Microsoft, Siemens and Computer Associates. The initiative supports Egypt overall education reform efforts and maximizes the potential for a collaborative partnership. The main objectives of the initiatives are to improve the development of and delivery of education, to raise the quality of teacher training, to develop skills needed for a knowledge society and to provide education to a wider sector of the population.
6-Business Legislation

Investment in Egypt has seen significant overhauls in the past several years. The government has taken bold steps to make Egypt one of the easiest country in which to do business. Some examples of reforms and protections based on the concepts of property rights protections, equality and ease of doing business include 100% foreign ownership of companies, profit and dividend repatriation, comprehensive corporate governance principles, anti-money laundering, anti-trust and consumer protection laws, new commercial court system now rolling out nationwide to settle business disputes, minimum capital requirements for LLC reduced to EGP 200 etc…. The new tax code cut corporate tax rates from 42% to 20% and personal tax rates from 32% to 20%. Other new administrative changes include the new random audit system and having the Tax Authority personally oversee the largest corporate taxpayers. Customs Reform: In order to improve Egypt's standing as a global manufacturing hub, the government reduced the weighted average tariff rate from 14% to 6.9%, streamlined tariff bands, reduced the number of tariff categories from 27 to 6 and also reduced the number of articles covered under the Customs Act by more than half.

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