• Establish a Cabinet-level committee to coordinate all economic decisions before issuing them. The committee should include representatives of FEI and the FECOC.
• Revive the “E’rada” Initiative, which is designed to vet all economic laws; and ensure that all its members have adequate seniority to be able to operate under the auspices of the Prime Minister.

• On July 14, 2019, the Prime Minister issued a decree to revive “E’rada” Initiative and establish its board of trustees, which includes the presidents of FEI and FECOC.

• The Ministry of Trade and Industry should track the idle production capacity in the different sectors and introduce a well-integrated program that aims at increasing employment and modernizing and developing the unused production capacities through international agreements for technology transfer.

• The lack of objectivity and transparency in the allocation and pricing of land, as well as the absence of comprehensive information on the availability of land, prices, and acquisition procedures.
• Land policies are developed in the absence of an updated integrated land information system.
• Lack of standardized procedures for land allocation across the various government entities, and lengthy and cumbersome allocation procedures.  

• The Prime Minister should promptly issue a decree to clarify jurisdictional issues related to industrial land; the decree should also clearly outline the role and function of the New Urban Communities Authority and IDA; the former should have jurisdiction over the land, infrastructure, and the provision of utilities, while the latter should have sole jurisdiction over land administration and allocation.
• Resolve the legal conflict regarding the jurisdiction of IDA over industrial land, as stipulated in the law regulating IDA. If needed, issue a new law that clearly delineates the jurisdictional authority of different government entitles over industrial land and the responsibility for providing utilities and allocation of land to the final beneficiary.
• Create a well-integrated and accessible information system for industrial lands; ensure that it remains updated.
•  
• Replace the numerous laws governing state land with a single unified and simplified law to administer it.  
• IDA should be designated as the sole entity for interacting with investors. 
• Create a land bank to serve as a database, listing all available industrial land, the price of each plot of land, and information regarding the current status of utilities and infrastructure.  

• A coordinating council, affiliated with the Cabinet, has been established to study the challenges facing investors in industrial zones. 
• The Cabinet contracted a consultancy firm (MegaCom) to examine the challenges and barriers facing investors in industrial zones and develop solutions. The firm was to consult with investors and seek their feedback and views on the barriers and solutions. The consultancy contract is funded by the Ministry of Finance.
• FEI and MegaCom discussed the recommendations included in the study. It was agreed that investors should be able to lease the land plot for ten years; the plot may be purchased if the investor demonstrates seriousness about the investment. 
• Investors can acquire industrial land by accessing the investment map posted on the website of GAFI and, according to the type of projects to be established in each region. That said, many users find it difficult to deal with this online map.

• To date, the decree establishing a new board of directors for IDA, pursuant to Law No. 95 of 2018, “The Industrial Development Authority Law”, has not yet been issued. More so, the executive regulations of the new law are yet to be issued.

• Promptly establish IDA’s new board of directors, in accordance with the new law.
• Expedite the issuance of the executive regulations of Law No. 95 of 2018, “The Industrial Development Authority Law”.
• Enact a new law to regulate the administration of industrial zones. The new law should clearly define the responsibilities and relationships between all the parties concerned (similar to the case of the free zones and zones that are run by independent operators, mostly from the private sector).
• Take into consideration including FEI on the board of IDA; the relevant provision in the law currently in force mandates the representation of those with expertise, alongside government, without specifying FEI.
• The Ministry of Local Development must be represented on the IDA’s board since it is among the entities that have the responsibility for issuing licenses for establishments operating within the boundaries of residential areas.  
• Ensure the full implementation and enforcement of the law; contrary to the applicable law, the New Urban Communities Authority continues to directly offer industrial land for sale.
• Review all existing decrees, which pertain to licensing and industrial registry to ensure that they comply with the relevant laws.
• Introduce a mechanism by which FEI and its member industrial chambers are able to assess the performance of IDA with regard to licensing, industrial registry, and land allocation, as well as identify all the implementation challenges, particularly those related to industrial land. 

The limited capacity of IDA is reflected in a number of areas, including:

• Inadequate staffing levels in IDA governorate-level offices render these offices ineffective.
• Staff in the governorate-level offices do not have real authority to make decisions without consulting with headquarters in Cairo.
• Some staff members are not well qualified; the majority do not have adequate understanding and knowledge of the procedures, and many lack the skills and abilities to engage effectively with the public.
• IDA issued 16,000 licenses, however, it does not have the manpower to monitor and review these licenses. 
• Poor communication and interaction between IDA and investors; the majority of investors are not aware of No. 15 of 2017.
• IDA’s website requires further improvements and upgrading to serve as the prime platform for interaction with investors.

So far, partial progress has been made in updating IDA’s website and populating it with much of the information needed by investors. However, online services are not yet operational, and no action has been taken to raise the capacity of IDA’s employees or increase its funding allocation. 

• Law No. 15 of 2017 is not fully implemented; contrary to Law No. 15 of 2017 that gave IDA a clear and comprehensive mandate over industrial activities, overlapping jurisdiction between IDA and other government entities persist.
•  The multiplicity of oversight and inspection agencies, and the prevailing practice of imposing fines and shutting down enterprises by these agencies, including the Ministry Finance, the Ministry of Environment, the National Authority for Social Insurance, the Civil Defense Department, and local administration units.

• Ensure the effective implementation of Law No. 15 of 2017 and enable IDA to play its role effectively by preventing other entities from interposing into the industrial licensing process.
• Simplify the “Real Property Proof of Possession” handbook, and codify it; Clause 1 under Article 2 of the Executive Regulations of Law No. 15 of 2017  stipulates that “When issuing industrial licenses, it is essential that completing all procedures and abiding by the set timeframes must be observed, such that businesses do no endure additional burdens”; the situation on the ground is in sharp contrast to what the Executive Regulations call for.
• Before deciding to shut down any industrial enterprise, government entities must consult with IDA.
   

• Industrial licensing procedures are rendered complex and difficult to identify and decipher by the endless paperwork and cumbersome bureaucracy.

Activate the government portal, which was created to facilitate the procedures for economic activities; the portal aims at simplifying all procedures related to licensing by:

• Providing industrial investors with information regarding the required procedures.
• Providing a central platform through which the competent administrative body and the industrial investors can interact and discuss issues.
• Making available studies and analyses related to industrial development in Egypt.

• The license processing time continues to be long; banks refuse to finance industrial activities before the issuance of the operating license and the start of operations. 
• The limited availability or lack of accreditation offices that are designed to speed up the licensing process.

• Set a target to meet the industrial licensing waiting time frames stipulated in the law by 2020: 7 days for licenses issued under the notification license system, and 3 months for licenses issued under the pre-licensing system.
• Authorize governorate-level offices to grant licenses after completing the required procedures without having to secure the approval of the center.

• Even though 8 new accreditation offices were approved, however, licensing delays persist; more offices are needed to reduce the burden placed upon government entities. 

• The service fees imposed by IDA are excessive and eat up the capital of the investors.

• Reconsider the fees imposed by IDA to reduce the burden on investors

• IDA issued Decree No. 239 of 2019 reducing some of the prescribed service fees; most of the fees were lowered, particularly those related to SMEs. That said, it did not reduce the prescribed fines. 

• Problems in implementing the temporary admission and drawback systems; thus, they are less able to fulfill their purposes. 
• Additionally, two issues related to these systems stand out:  

1. Determining waste percentages. 
2. Determining the input-output coefficient, which, in turn, determines the amount of duty refund.

• Revamp the duty and fees refund process (refunds of safe custody fees, and other fees associated with withheld cargo and imports released under temporary admission). This should build trust and confidence in the customs and tax authorities among importers and exporters.

Businesses face many problems with the temporary admission system, including:

• The procedures for releasing the letters of guarantee are lengthy and complex.
• Customs duties are imposed on imported factors of production, especially equipment and machinery, that are used in the manufacturing of export products. 
• Exporting is complex and time consuming.  It usually takes a year to conclude an export operation—from the time the bank guarantee is issued to the release of the shipment for exporting; this issue is compounded by the fact that these procedures are lengthy, and usually go beyond the grace period granted to investors (the period of time immediately after the arrival of the imported raw materials, during which investors should export their products).

• Adopt the system of risk management for customs control. Under this system, businesses with an established solid reputation as importers, as well as reputable suppliers and customs brokers would be cleared through the green clearance track (no inspection). At the same time, take necessary and adequate protective measures, and in the case of offences, impose punitive measures, including having offenders go through the red clearance track (inspection).  
• The Customs Authority should consider entering into arrangements with companies that have solid track records of fulfilling the customs requirements on time—whitelisted companies; the arrangements should contain stringent penalty clauses that are to be applied in case the company fails to abide with the rules and regulations.
• Amend Article 98 of the Customs Law No. 66 of 1963, as amended by Law No. 172 of 2018, concerning the temporary admission system. The amendment should include the following:

1. Extend the life of the temporary admission permit to four years.
2. Eliminate the requirement that importers submit a letter of guarantee, submitting an insurance policy should suffice. 
3. Eliminate the penalties imposed on surplus raw materials that were not used in production, paying customs duties on the surplus should suffice.
4. In collaboration with the Industrial Control Authority, simplify and facilitate the setting of input and output coefficients the waste percentages, and fix the rates to ensure fair treatment among exporters.

• The provisions of the Customs Law dealing with container handling services are outdated, thus, the efficiency of container handling operations are severely undermined. This can be attributed to several long-standing operational efficiency shortcomings. Containers are transported from seaports to dry ports under the supervision of the Customs and the police, and the clients bear all fees and the burden of any delays. More so, there are no representatives of the supervisory authorities available in dry ports, so in the event that a customs dispute arises between an importer and the customs authorities in dry ports, the importer is forced to return to the original port to address the issue.

• The Customs Authority and all other relevant agencies should refrain from issuing directives related to import/export activities until they consult with the Agreements and Foreign Trade Sector of the Ministry of Trade and Industry. More so, the new bills of landings should be accepted. 
• The new customs law should take into account all international best practices and adhere to the Revised Kyoto Convention regarding customs control.
• Egypt should accede to the International Convention for Safe Containers (CSC); the new bills of lading should be accepted.  

• The Customs Authority issued Circular No. 5 of 2020, which details the requirements that must be adhered to when importing production inputs; the requirements include submitting the following two documents: 

1. Proof of business activity document (or operating license) from the issuing authority.
2. Gas and electricity bills as evidence of business activity.

• In general, the issuance of abrupt directives by the Customs Authority represents a major hurdle for manufacturers and importers; the subject directives is unjustified, especially that industrial enterprises that import production inputs are already subject to the supervision of other government entities, such as the Industrial Control Authority and IDA. Additionally, the directive undermines earlier efforts by the government, including the introduction of the whitelist.

• A complex and problematic customs valuation system that obstructs importation; having in place an efficient importation system is essential for ensuring the availability of production inputs and equipment and thus enhancing investment.

• Adhere to the Customs Valuation Agreement (“improving” invoice prices), as the valuation of goods for customs purposes is one of the biggest obstacles facing importers, especially those included on the whitelist. 
• Adopt a customs risk management system and an import risk analysis scheme, under which source countries are classified based on specific risks identified.
• Establish clear operational mechanisms for the inter-entity committee (includes the five relevant entities) to ensure that release of shipments is not disrupted in the event that a member of the committee is absent. 
• Consolidate customs transactions and ensure the electronic connectivity in all customs outlets in Egypt, and that all transactions are conducted electronically.
• Establish a timeframe for carrying out the reviews that take place after the release of goods (conceivably 2 weeks from the date of release), as the importing company may have sold the goods and collected their money during that period.
• Misr Technology Services should develop electronic connectivity between customs outlets to reduce the time required for the release of cargo.
• Use an AI program to create a whitelist of companies, using a number of variables, including credibility, reputation, the history of its business dealing, the country of origin, the type of imported goods, the category of good, whether fully-manufactured goods or production inputs, and the importing entity.

• A whitelist including 75 companies was created; while a positive step, it should be expanded to include all companies, so that blacklisting companies is the exception rather than the rule. It is also important that the criteria used for creating both lists be revisited, as many of them are hard to meet.

The drawback system poses a series of challenges, including: 

• A large number of required documentation and the multiplicity of entities involved in the process.
• The difference in opinions between the manufacturing exporters and customs officials regarding the mechanisms for determining the rates at which drawback could be granted.
• The delayed payment of drawback claims (sometimes it can take up to two years).  

• Introduce an online notification system, whereby importers, companies, and factories, receive timely expiration alert notices once they log onto the website using the client identification number. The system should allow clients sufficient time to renew and resubmit their documents as required in Customs Handbook No. 46. 
• Ensure that companies and factories are duly notified via registered mail of any additional fees or duties, which were determined by the audit department upon reviewing previously cleared cargo. 
• Provide the relevant customs broker with a photocopy of the claim notification. More so, allow the customs broker to review and discuss the claim with the audit department, and have them sign a statement indicating that they will notify the concerned business of the claim to avoid the unnecessary escalation of the situation; this will help businesses avoid the risk of an administrative order of attachment in the event they fail to address the claim as they may not be aware of any pending claim.

• IDA’s instructions regarding the registration of production inputs violate Article 15 of Ministerial Decree No. 835 of 2017, which amended some provisions of the Executive Regulations of the Import and Export Law, which were issued by Ministerial Decree No. 770 of  2005.

• Repeal IDA’s instructions; there is no different customs duty rates for the industry than for trade; only production inputs used in assembly industries are subject to different duty rates, in accordance with the rules regulating them.

• While Ministerial Decree No. 43 of 2016, which amended the rules governing the registration qualified foreign manufacturers prior to exporting their products to Egypt, is aligned with international agreements and the World Trade Organization rules, yet, there are a number of issues with the implementation mechanisms of the decree. For example, Section 1 of Article 2 of the Decree mandates that factories interested in registering must provide, among other documentations, “….. A certificate confirming that the manufacturer has a quality control system, issued by a body recognized by the International Laboratory Accreditation Cooperation (ILAC) or the International Accreditation Forum (IAF), or by an Egyptian or foreign governmental entity approved by the minister responsible for foreign trade.”
• Yet, to date, several companies that have been met the requirements set out in the decree remain unregistered, including a number of companies that adhere to high quality standards in their internal operations, and which enjoy a stellar international reputation.

• Reconsider the implementation mechanisms of Ministerial Decree No. 43 of 2016, which was intended to serve as an interim measure prior to the decision to float the Egyptian pound).
• Ensure the correct application of the quality system-related provisions of the concerned Ministerial decree; providing a certificate from an approved accreditation body should suffice, there is no need to require the submission of the certification of quality. 
• Allow companies, which fulfill the prescribed conditions and procedures of registration, to be directly registered by the General Authority of Export and Import Control, without the need for a ministerial decree to effect the registration.  
• Publish the list of companies that meet the quality system requirements in the Egyptian Gazette. 
• Consider developing a whitelist of international companies, across all sectors, which enjoy a strong reputation; allow these companies to be automatically registered.

• In January 2019, Decree No. 44 of 2019 was issued expanding the list of goods included in Ministerial Decree No. 43 of 2016. The expanded list included bags/suitcases; items for packaging and transporting goods (e.g., containers, boxes, bags, and similar products); shaving and hair care appliances, and telephones.  

• Law No. 5 of 2015, which prescribes preferential treatment for domestic products in government contracting, is not fully enforced by many government agencies, as well as economic bodies and public sector companies. Thus, its effects remain unfelt.  

• Issue directives to all ministries and agencies obligating them to enforce the law, and at the same time, develop compliance monitoring mechanisms to ensure its enforcement. Efforts should be made to link the future needs of national projects with local industries to replace imports.
• Refer violations for prosecution; more so, the Minister of Trade and Industry should delegate authority to the Technical Secretariat of the Local Product Preference Committee, which is constituted via a ministerial decree, in accordance with the provisions of the law, and is located at FEI.
• Revisit the domestic preference percentage (currently 15%) prescribed in Law No. 5 of 2015. The law should be binding on all ministries, government agencies, national projects, and all government contractors from the private sector.

• In October 2018, the President ratified Law No. 182 of 2018 that regulates the contracts and agreements that are concluded by the public authorities in Egypt.  

The following are highlights of the new law:

• It includes a number of provisions of Law No.5 of 2015.
• It obligates all governmental entities and public sector companies to post all their public procurement opportunities, in detail, on the Public Contracts Portal; upon completion of the procurement process, the final decision, with specified details, should also be posted on the portal. 
• It obligates all parties to use the standard tender document, which is currently being developed and will be posted on the Public Contracts Portal. In the event that an entity decides not to use the standard document, it must provide an explanation as to why it chose not to comply with the requirement. This requirement will significantly reduce noncompliance with the preferential treatment for domestic products requirement. The requirement was being circumvented by including in the tender documents language that discriminated against domestic products and eventually resulted in their exclusion from the procurement process. 

• To date, neither the Prime Minister nor the Board of Directors of the Export Development Fund (EDF) has officially issued any decision regarding the mechanisms for implementing the proposed new system for supporting Egyptian exports.
• One of the challenges that hinder exporters from fulfilling the documents required for receiving export subsidies in a timely manner is the requirement that they must provide an export certificate issued by the Customs Authority, which takes up to a year. FEI has already called for revisiting this requirement. 
   

• Amend the rules so that the percentage of export subsidy is not less than 40%, in line with the definition of Egyptian (domestic) products contained in Law No. 5 of 2015—products satisfying the proportion of domestic industrial components.  
• Review and amend all sectoral programs that benefit from the export subsidy program (each sectoral program specifies the percentage of export subsidy it is entitled to); a number of these programs include many sectors with no requirement for a specific percentage of  domestic value added in exports to enjoy the export rebates, these include: leather, leather products, and footwear program; artifacts and handicrafts; spinning and weaving; home furnishings; ready-made garments; and garment accessories.
• Revisit the sectors that are already benefiting from export support; target those sectors that can actually contribute to achieving a quantum leap in industrial exports; thus, support should be directed to specific goods that are exported to specific countries, rather than adopting an undifferentiated, one-size-fits-all approach.
• Review and amend the percentages of domestic value addition included in other programs that provide export rebates for industries with domestic value added of less than 25%. These include programs covering the following industries: furniture, engineering industries, medical industries, pharmaceuticals and cosmetics, chemical industries, marble and granite, and insulating materials.
• Carryout out a thorough performance evaluation of the Egyptian Exports Subsidy Program (EESP), with a focus on assessing its impact on the rate of growth of industrial exports since its launch in 2001. The evaluation should also provide an analysis of each of the industrial sectors, identify the winners and losers, as well as to measure the impact of the support provided on the profitability and competitiveness of exported products. The results of the evaluation should serve as the basis for designing a forward-looking comprehensive strategy to develop Egyptian exports.  
• Carryout sectoral studies of the upstream industries relevant to each of the industrial sectors, including:

1. Identifying production gaps and prioritizing the imports which the upstream industries require. 
2. Examining the feasibility of substituting these inputs with locally produced inputs, taking into consideration local demand and competitiveness in global markets. 

• Consider the following fundamental underpinnings when designing the export support program: 

1. Improving the international competitiveness of Egyptian exports should be the priority; providing cash subsidies to exporters against the delivery of export invoices should be secondary. Price is not the only consideration that determines competitiveness, non-price factors, including product quality and the efficiency of the production process (the technical, human, and administrative components) are equally important.
2. Replacing imports with domestic production is no less important than exporting, especially that it contributes to the same strategic objective of reducing the trade deficit and providing hard currency.
3. Priority, in terms of land allocation and licensing, should be given to industries with high export potential or which are the least import-intensive. 
4. Export support and import substitution programs should be linked to a range of non-monetary incentives, such as facilitated access to land allocation, extending utilities to land plots, the provision of utilities, labor training, customs, and tax incentives, and the promotion of modern production techniques. 
5. Export support programs should give adequate attention to promoting industrial deepening and the effective targeting of support to reach the most deserving industries. 
6. The export support program should not be overextended, it should be treated as a phased program designed to activate the system of export development and address the imbalances that the earlier programs suffered from. It will not necessarily lead to increasing exports as desired. Increasing exports require undertaking an integrated approach to addressing the shortcomings in the investment environment in a holistic manner, closing all the gaps in the industrial sectors by focusing on industrial deepening, reducing imports, identifying specific high value added products and targeting them to increase exports to targeted countries. In other words, increasing exports requires undertaking a methodological effort that reaches all corners of the relevant state bodies. FEI is concerned that continuing with the export support program in its current configuration will not yield the intended results—significantly increasing exports, and ultimately, the responsibility for the failure will fall squarely on the shoulders of the program.

• The support provided to exports should be dynamically linked to the changes in the exchange rate. This is particularly important as the recent strengthening of the Egyptian pound against the US dollar, as well as the high inflation rates negatively affected the competitiveness of the domestic products.  
• Streamline procedures, and ensure that funds are released to exporters in a timely manner; failure to do this will render the program unsuccessful. 

• In July 2019, the Board of Directors of EDF announced the approval of a new LE 6 billion export rebate program for the fiscal year 2019-2020. This program entails allocating, 40% of the total budget, LE 2.4 billion, for cash payments to exporters, while another 30% of the program, LE 1.8 billion, will be deducted from liabilities that exporters owed to the Ministry of Finance. The remaining LE 1.8 billion, 30% of the program, will be used to boost the infrastructure and capacities of export operations.
• The implementation mechanisms of the program center on determining the value of rebates at the sectoral level and allocating a budget for each sector separately. The allocation of each sector will be revisited every 6 months, and reallocation of funds will be decided upon as needed. In this regard, the eligible sectors include the food industries; spinning and weaving, ready-made garments, home furnishings, and engineering industries; chemical and fertilizers; building materials, refractories and metallurgical industries; building and construction materials; agricultural crop; printing and packaging; medical industries; as well as leather, furniture; and artifacts and handicrafts.
• Exports not benefitting from the export rebate program will continue to benefit from the Shipping Africa Program, which will receive an allocation of LE 40 million. Additionally, under the continued the Air Cargo Program, LE 100 million will be allocated to EgyptAir to support the shipping of Egyptian exports. LE 100 million will also be allocated to the EDA in order to continue holding pooled fairs through a transitional phase until the end of 2019.
• The new program focuses on industrial deepening, aiming at increasing local manufacturing by a minimum of 40%, as well as encouraging exports of small and medium-sized enterprises by providing additional export rebates, over and above the already established rates: an additional 1% export rebate for medium-sized enterprise exports and an additional 2% export rebate for small enterprise exports respectively. 
• The program also provides additional incentives—export rebates—to companies to encourage export expansion. It grants large and medium-sized enterprises an additional 10-15% rebate for exports that show 20-30%+ growth, and small enterprises will receive an additional 20-30% rebate for exports that show 20-30%+ growth. Exporters located in free zones will receive 50% less export support than non-free zone exporters.
   

• The Export Councils, which are advisory bodies that are neither elected nor part of the executive branch, are still operating on the basis of the ministerial decree that was issued to regulate them; the decree is valid through the end of 2019. 

The Following are some key issues that need addressing:

• There is a fee for one of the required export rebate application forms; this is a flaw in the regulations.
• The settlement of overdue export rebate arrears owed to a number of companies for the period ending July 1, 2019, remains ambiguous. It was announced that the Ministry of Finance will offset these arrears with outstanding tax liabilities. It is not clear, however, how this issue will be resolved for companies with no outstanding tax liabilities for the prior years. 
• Does the export support program allocate a specific fixed amount of funds for each sector? In the case that the volume of exports in one particular sector necessitates the disbursement of funds that exceed the sector’s allocation, how will this situation be resolved?  
• Should Export Councils, which are advisory bodies that are neither elected nor part of the executive branch have the prerogative to decide who is entitled to receive export support? 
• The status of free-zone companies is ambiguous.
• How will export rebates be treated by the Tax Authority, and what mechanisms will be used to disburse the rebates?

• Application processing fees should only be imposed by law.
• Respond to the memo submitted by FEI and FECOC concerning the issue of export rebate allocations, and the extent to which they are commensurate with the actual volume of exports.  

The government’s response to the concerns raised by the Export Councils highlighted the following:

• Efforts will be made to create a legal framework for Export Councils by early 2020.
• Export support is not to be limited to member companies in the Export Councils. However, a number of Export Councils require membership to receive support, particularly with respect to health and safety approvals, and fulfillment of other relevant requirements.  
• The fee imposed on one of the required export rebate application forms is not prescribed by law; rather, it is imposed via an administrative decision made by the Export Councils. This issue will be addressed in the legal framework that will be developed.  
• Settling export rebate arrears will be subject to the new mechanism, which will be applied beginning July 1, 2019. Arrears for time periods before July 1, 2019, will be subject to the old mechanism. This will increase the burden on the EDF, especially that the rebate mechanism for these arrears has not been decided upon yet. EDF board discussed the settlement of arrears owed to companies for the period ending December 31, 2017. 
• Large businesses may receive full support with regard to shipping (this does not address cases where the amount due to the business exceeds the 30% prescribed for technical support).
• Five export councils are contributing LE 6 million towards automating EDF operations. 
• To settle overdue export rebates, the government will randomly select a number of companies with outstanding tax liabilities and offset it with the overdue export rebates; the government will explore mechanisms for settling overdue export rebates for companies with no outstanding tax liabilities. (FEI and FECOC responded to this proposal by highlighting that this will ultimately boil down to rewarding companies that are delinquent in meeting their tax obligations, and penalizing compliant companies that fulfill their obligations on time.)
• Specific amounts of funds are being separately allocated to each sector for export rebate purposes. These allocations will be reviewed periodically to determine their adequacy. (FEI and FECOC notes that this adds more ambiguity to the export support program implementation mechanisms.)

• The continued support and incentives offered to industries result in financial obligations that exceed the current budget of the ESF; this practice affects its capacity to satisfy its obligations towards factories and business owners.

• Set up a mechanism, whereby ESF’s debt owed to a business can be transformed into credit in favor of the business; the credit can then be used by the business to pay any dues or meet other delinquent obligations owed to the government.

• Non-compliance with good agricultural practices (GAP), including the requirements for a monitoring system and general quality standards.
• Irrigation water shortages, and its contamination with sewage in a number of areas.
• Problems of reclaimed land allocation and pricing.
• The lack of satellite images to assist in monitoring and regulating agricultural activities and the illegal construction on agricultural land.

• Carry out a comprehensive restructuring of the Ministry of Agriculture and its various agencies.
• Modify the agricultural policies and link them to the industrial and export policies and the findings and recommendations produced by agriculture research centers.
• Expedite the issuance of the new law to regulate the protection of biological resources.
• Review customs duties on raw materials, and facilitate import procedures by speeding the health inspection and customs clearance process for industrial inputs. 

• Failure to implement a food safety system and non-adherence to international standards and specifications.
• Extensive use of inorganic pesticides.

• Impose dissuasive penalties on companies committing violations; penalties can include banning offenders from exporting for a certain period of time, in addition to imposing large financial penalties, and denying offenders access to export support.
• Introduce a farm coding system, and accredit farms to export and sell products in the local market. 
• Expand the establishment of pesticide residue laboratories.
• Review and revamp the Ministry of Agriculture Seed Committee to improve its operational efficiency and responsiveness to the requirements related to seed exports.

• The estimated loss in agriculture production is 30%; weaknesses throughout the supply chain and logistics, as well as ineffective farming methods are the primary causes of this loss.

• Establish logistics hubs across Egypt to improve the supply chain of agricultural products.

• With regards to the customs release of meat and poultry shipments, Egypt has revoked the permits of 8 halal food companies operating in America. At the same time, it has approved only one company, which is permitted to operate in specific geographic areas. Furthermore, the company has neither the experience with halal food products nor any established contact with Islamic institutions that supervise and certify the halal slaughtering process. This same action was taken with regard to meat and poultry imports from South America, particularly Brazil. Such practices hinder trade flows and contrast with the situation in Saudi Arabia and Indonesia, which have in place clear regulations and standards governing the importation of halal meat. 

• In consultation with the private sector and the Chamber of Food Industries, develop a mechanism with clear criteria for approving and revoking permits.

• Ministerial Decree No. 907 of 2005 led to the demise of the industry as it allowed car manufacturers to circumvent the local component requirements, by exporting either local components or finished cars. Manufacturers have abandoned the development of the local industry and concentrated their efforts on low value-added upstream industries.  As a result, car companies unjustly benefit from tariff incentives, and the State treasury loses billions of Egyptian pounds annually in revenues.

• Cancel Ministerial Decree No. 907 of 2005, and develop a realistic and comprehensive strategy to incentivize the automobile industry in Egypt, as well as other related upstream industries.

• The formula used for determining the domestic content in vehicles is outdated. Currently, the percentage of each vehicle’s component— the standard percentage—is calculated, in an approximate manner, as an average of the commonly used percentage for each component. The standard percentages adopted are as follows: air conditioning system 9.54%, radiator 0.693%, radio cassette deck 2.53%, seats 5.397%, electric braids 3.205%, glass 1.48%, suspension system 4.4%, mufflers 1.08%, battery 0.468%, rims 0.9% steel - 2% aluminum, fuel tank 0.845%, carpets (floor lining) 0.813%, door binding 1.5%, tires 2.38%).  Thus, the total standard percentage for the most common components shared across many vehicles is 35.43%.  More so, the applicable percentage
• for calculating the contribution of the assembly line in the domestic content rate of a vehicle is 13%, and the applicable percentage for calculating the contribution of the local paint materials is 4% at most. Technological advancements in modern vehicles have pushed downwards the share of these components in the content of the vehicle. For example, the air conditioning system, which represented 9.540% of the content of old vehicles has decreased to 6% in modern vehicles.

• Decree No. 571 of 2019 issued by the Minister of Trade and Industry repealed Decree No. 371 of 2018, which established the domestic content percentage in the automotive industry and its method of calculation (Decree No.371 which was issued to complement the automotive strategy, disregarded the above-mentioned percentages, and relied on the percentages provided by the parent companies). The new decree also reinstated Decree No. 136 of 1994, regarding the assembly line’s required contribution in the domestic content rate, as well as Decree No. 907 of 2005 concerning the required domestic content rates in the automotive assembly industry. It should be noted here that while these two decrees have been in force for a long period of time, yet they did not result in industrial deepening in the automotive sector. More so, Decree No. 371 of 2018 was canceled without providing any viable alternative that can significantly and positively impact the automotive industry.

• While the free trade agreements with Europe and other countries grant full customs duty exemptions for finished cars and their parts, yet, other duties and fees continue to be imposed, including VAT, development fees, and domestic licensing fees for auto parts and spare parts. More so, there are flaws in the existing taxation and customs systems.

Abolish the development fee, the local license fee, and VAT on components and spare parts, which are imported for the purpose of use in the automotive manufacturing process; address the flaws in the customs and taxation systems.  

• The industry lacks key support infrastructure, namely technological innovation and leather fashion design services. Currently, there is only one center, affiliated with the Ministry of Trade and Industry, that provides such services to the entire sector.  The industry can benefit from the establishment of many such centers to assist with developing production technologies and raising product quality. 
• Lack of skilled labor. 

• Allocate funds for setting up training and technology development centers to help improve the competitiveness of the industry.
• Increase the availability of leather-based industries professional programs in industrial secondary schools and vocational training centers; offer incentives to enrolled students, and work with large leather-based industries to offer students apprenticeship opportunities.

• The unjustified dramatic increases in imports of low-quality footwear and leather products that do not conform to the standard specifications are negatively affecting the industry. This spike in low quality imports is due to manipulative practices by some importers, who present to customs fraudulent import invoices that do not reflect the real production cost in the country of origin.  It should be noted here that while reference price lists are used for verifying the declared value of the imports of footwear and other leather products, yet, some importers are still able to circumvent this system, by entering their imports under a customs sub-category that is not subject to the application of reference price lists.  

• Revise the current reference price list used for clearing imports of footwear and leather products; adopt the reference price list developed by Leather Industry Chamber. The latter was developed based on the actual costs of manufacturing footwear and leather products and can be used to assess the customs duties on imported products, particularly in light of the fake and fraudulent invoices submitted by importers. 
• Keep a strict watch on the market to combat the dangers of the phenomenon of low-quality products, which can lead to the collapse of the leather industry.

• The problem of distressed and stalled factories; the Ministry of Trade and Industry should explore different options to support these factories so that they resume operations. 
• The problem of smuggling raw leather outside the country by circumventing the ministerial decrees regulating leather exports.  

• Strengthen control measuresat customs points, free zones, and transit areas.
• Criminalize smuggling and categorize it as a crime against honor.
• Confiscate seized goods, and enforce Article 15 of Law No. 118 of 1975 (Import and Export Law). 
• Halt exports of unfinished leather.
• Support promotion tours to boost the leather-based industries in international markets.

• To date, factories have not been issued permanent licenses, which are key documents for concluding any bank transactions.

• Expedite the issuance of permanent licenses to factories located in El Roubiki Leather City; it has been two years since these factories relocated from Magra El Eyoun.

• Direct reduced iron (DRI) production plants (sponge iron) are not economically feasible due to the high price of natural gas ($7). In fact, DRI production plants should be treated like fertilizer and petrochemical plants, since natural gas is used as an input in the iron reduction process, and not as fuel. This gas pricing scheme has undeniable negative effects on the productive efficiency of the DRI production plants and impairs the equivalent of 6 million tons of sponge iron production capacity that can benefit the Egyptian economy. 

• Similar to the case of the fertilizer industry, natural gas should be treated as a raw material, rather than a fuel, for (DRI) production plant—they should be charged $4.5/million British thermal unit. This measure will enhance their competitiveness and increase their production capacity from the current 7 million tons/year to 13 million tons/ year.
• Impose a protectionist tariff on billet and steel rebar (customs items No. 7207, 7213, and 7214) imports from non-agreement countries.
• Impose a protectionist tariff on imports of finished steel products taking into account that these tariffs do not adversely affect the domestic by raising the cost of inputs (e.g., billets).

• In April 2019, the Ministry of Trade and Industry imposed a 25% and a 15% anti-dumping duty on imports of steel rebar and iron billets respectively.  
• The advisory committee of the Ministry of Trade and Industry, which is responsible for developing the final report on the protectionist tariff imposed on imported billets, recommended revising the 15% anti-dumping duty on billets, and imposing instead a 7% duty during the first year, to gradually decrease to 5% during the second and 3% during the third.  

• The fixed electricity charges (electric load charges) were supposed to represent less than 25% of the actual consumption. However, in the case of the metal casting industry (where the smelting is done within a day and the finishing within a week), as well as the factories which have to cease production for any reason, this fixed charge far exceeds the actual consumption cost.

• Place a cap on the fixed electricity charges so that they do not exceed 25% of the actual consumption. This will benefit the metal casting industries, as well as factories which cease production for any reason and maintain a competitive environment.

• New factories that have requested additional electrical power above 500 kilowatts are required to pay generation fees equivalent to LE 550/kilowatt for low voltage electricity, and up to LE 3000/ kilowatt for high voltage electricity. This is inconsistent with the manner older factories are treated, thus competition is tilted in favor of older factories. 

• The issue was presented to the Ministry of Electricity and the Cabinet, however, it is still under review. Until the issue is resolved, the existing competitiveness imbalances between established factories and new ones will continue.

• The practice of auctioning off heavy industry licenses works against the goal of expanding exports, which requires increasing production beyond the needs of the local market, and making good use of the industry’s comparative advantage (cost of fuel and gas is lower than in the countries that have to import). Needless to say, such a practice represents an additional burden on new factories, and unlevels the playing field for the competition between new factories and the already established ones.

• Abolish the system of auctioning off heavy industry licenses.

• The erroneous classification of some plants as energy-intensive industries, such as nail factories, cast iron foundries, and aluminum casting factories, hurts industries as they are charged the same energy prices as that charged to energy- intensive industries, such as steel and aluminum smelters. 

• Seriously consider adopting the IDA’s recommendation regarding the erroneous classification of some plants as energy-intensive industries, in other words, de-link the definition of heavy industry from the type of the product produced.  

• Exporters do not have adequate liquidity to maintain operations and continue with production.

• Expedite the disbursement of the FY 2017/2018 export rebates owed to exporters. 

• Domestic manufacturers face unfair competition from imported finished wood products. 

• Ban the importing of fully-finished wood furniture—final products.  

• The burden of increased costs associated with the high penalty fees that manufacturers pay due to lengthy customs clearance processes. 

• Offer a 3-month installment plan for paying the customs duties on raw materials.
• Adopt an exceptional measure, whereby port demurrage charges associated with delayed customs clearance are waived.

• Outdated machinery and equipment that are used in the different stages of the textile manufacturing process.

• To improve quality and increase production, extend assistance and incentives to factories that import new machinery and equipment for use in the different processes (spinning, weaving, dyeing, printing, and finishing). Grant textile factories a 50% tax exemption for 5 years, and ready-made garment factories a 25% tax exemption for 3 years. 
• Exempt existing factories that expand operations and new textiles factories from taxes for 10 years.

• Weak linkages among the key manufacturing processes—spinning, weaving, dyeing, printing, finishing, and other upstream industries.

• Attract domestic and foreign investors in the textile industries, whether in single projects or textile cities. 
• Encourage the development of textile cities, focusing on governorates in the Delta and Upper Egypt to boost their development.

• Cotton-relevant Agriculture Policy 

• Expand the cultivation of short- and medium-staple cotton instead of importing them.
• Continue with cultivating long-staple cotton, taking into account the quantity that can be exported and the needs of the local industry.
• Encourage investment in ready-made garment industries that use long-staple cotton.
• Allow cotton imports from all countries and repeal the decision that limits importing to specific countries.

• The Industrial Control Authority has weak capacities to carry out its functions, including the calculation of the waste percentages for manufacturers.

• Develop and modernize the Industrial Control Authority and provide it with updated electronic systems that can assist with calculating the waste and damage percentages to ensure fairness and equity in treating exporters. 

• The processing time for export rebates and VAT refunds is lengthy. 

• Expedite the processing of refunds and set a timeframe, not to exceed 90 days from the time all documents are submitted, for disbursing the funds; export assistance should be linked to the percentage of domestic value added in the given export, in accordance with the rules of Egyptian origin. 

• The high production costs; the natural gas prices are particularly high despite the fact that textile industries are labor-intensive industries; the gas producing companies deal with this issue in a high-handed manner. 

• Review natural gas prices; charge the textile industries the same natural gas price charged to brick factories.
• Reduce the price of water supplied to the textile industries; water is an essential component in all the  different manufacturing processes—spinning, weaving, dyeing, printing, and finishing