Promoting Industrial Growth and Encouraging Foreign Direct Investment in Egypt
Ministry of Electricity and Renewable Energy
Industry-Specific Reforms > Utilities and Public Services
- The procedures for extending utilities to industrial establishments are cumbersome, lengthy, and costly.
- Industrial areas lack in services such as transport, health facilities, shops, and restaurants.
- Pricing of different energy products for industrial establishments does not follow any uniform standard; pricing schemes vary according to the nature of the industrial sector.
- The high price of natural gas has a negative impact on industrial competitiveness (particularly for steel factories); the domestic gas price reached $7/million British thermal unit compared to $3/million British thermal unit in the global market.
Responsible Entities
Date 2/2/2020
Industry-Specific Reforms > Utilities and Public Services
- Consider offering payment plans, including an installment scheme, to allow industrial enterprises to pay for utilities over time; the payment plan should be commensurate with the size of the enterprise.
- Provide reliable and economical transportation to serve workers in industrial zones.
- Make available commercial properties in industrial zones that can be used by food and beverage providers, as well as rest and recreation areas.
- Provide emergency medical facilities in industrial areas.
- Adopt a standardized mechanism for pricing energy products used in factories in order to achieve greater transparency and fairness. Similar to the situation in most industrial nations, the mechanism should be based on a well-defined formula that takes into consideration global prices, including their upward and downward fluctuations.
- Exercise flexibility when pricing natural gas, especially for factories with high natural gas consumption. Domestic prices should correspond to global prices, and at the same time safeguard the competitiveness of the local product.
Responsible Entities
Date 2/2/2020
Industry-Specific Reforms > Utilities and Public Services
- On March 17, 2020, the Prime Minister issued a number of decrees that support the industrial sector. The decrees entailed reducing the price of natural gas for industries to $4.5 /million British thermal unit, as well as lowering electricity prices for ultra-high, high-and medium-voltage industrial activities by LE 0.10, and placing a freeze on electricity prices for the next 3-5 years for other industrial uses.
Responsible Entities
Date 2/2/2020
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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).
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- Abolish the system of auctioning off heavy industry licenses.
Responsible Entities
Date 3/21/2019
Responsible Entities
Date 3/21/2019
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 2/2/2020
Industry-Specific Reforms > Mineral Industry
- 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.
Responsible Entities
Date 2/2/2020
Responsible Entities
Date 2/2/2020
Industry-Specific Reforms > Mineral Industry
- Factories are required to make a deposit payment (equivalent to the estimated charge for service for two months, reaching a few tens of millions of Egyptian pounds); they are billed according to the contractually agreed-upon volume of gas supply stipulated rather than actual consumption; if actual consumption exceeds the contracted volume, the price is doubled.
Industry-Specific Reforms > Mineral Industry
- Factories should be billed according to their actual consumption of gas.
Industry-Specific Reforms > Film Industry
- The complete shutdown of movie theaters during the COVID-19 crisis, as well as the numerous financial burdens placed on the industry (rent, salaries, maintenance costs, and taxes).
Responsible Entities
Date 6/30/2020
Responsible Entities
Date 6/30/2020
Responsible Entities
Date 6/30/2020
Industry-Specific Reforms > Ceramics Industry
- Factories suffer from high utility debt (electricity and natural gas) because they are erroneously classified as energy-intensive industries.
Responsible Entities
Date 6/30/2020
Industry-Specific Reforms > Ceramics Industry
- Since IDA concluded that the ceramics industry is a labor-intensive, rather than and energy-intensive industry, all utility debt, including interest, should be canceled; the utility debt represents 30% of the industry’s total debt.
Responsible Entities
Date 6/30/2020
Responsible Entities
Date 6/30/2020
Ministry of Electricity and Renewable Energy
Challenge(s)
- The procedures for extending utilities to industrial establishments are cumbersome, lengthy, and costly.
- Industrial areas lack in services such as transport, health facilities, shops, and restaurants.
- Pricing of different energy products for industrial establishments does not follow any uniform standard; pricing schemes vary according to the nature of the industrial sector.
- The high price of natural gas has a negative impact on industrial competitiveness (particularly for steel factories); the domestic gas price reached $7/million British thermal unit compared to $3/million British thermal unit in the global market.
Recommendation(s)
- Consider offering payment plans, including an installment scheme, to allow industrial enterprises to pay for utilities over time; the payment plan should be commensurate with the size of the enterprise.
- Provide reliable and economical transportation to serve workers in industrial zones.
- Make available commercial properties in industrial zones that can be used by food and beverage providers, as well as rest and recreation areas.
- Provide emergency medical facilities in industrial areas.
- Adopt a standardized mechanism for pricing energy products used in factories in order to achieve greater transparency and fairness. Similar to the situation in most industrial nations, the mechanism should be based on a well-defined formula that takes into consideration global prices, including their upward and downward fluctuations.
- Exercise flexibility when pricing natural gas, especially for factories with high natural gas consumption. Domestic prices should correspond to global prices, and at the same time safeguard the competitiveness of the local product.
Status/Notes
- On March 17, 2020, the Prime Minister issued a number of decrees that support the industrial sector. The decrees entailed reducing the price of natural gas for industries to $4.5 /million British thermal unit, as well as lowering electricity prices for ultra-high, high-and medium-voltage industrial activities by LE 0.10, and placing a freeze on electricity prices for the next 3-5 years for other industrial uses.
Challenge(s)
- 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.
Recommendation(s)
- 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).
Status/Notes
- 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.
Challenge(s)
- 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.
Recommendation(s)
- 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.
Status/Notes
Challenge(s)
- 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.
Recommendation(s)
Status/Notes
- 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.
Challenge(s)
- 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.
Recommendation(s)
- Abolish the system of auctioning off heavy industry licenses.
Status/Notes
Challenge(s)
- 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.
Recommendation(s)
- 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.
Status/Notes
Challenge(s)
- Factories are required to make a deposit payment (equivalent to the estimated charge for service for two months, reaching a few tens of millions of Egyptian pounds); they are billed according to the contractually agreed-upon volume of gas supply stipulated rather than actual consumption; if actual consumption exceeds the contracted volume, the price is doubled.
Recommendation(s)
- Factories should be billed according to their actual consumption of gas.
Status/Notes
Challenge(s)
- The complete shutdown of movie theaters during the COVID-19 crisis, as well as the numerous financial burdens placed on the industry (rent, salaries, maintenance costs, and taxes).
Recommendation(s)
Status/Notes
Challenge(s)
- Factories suffer from high utility debt (electricity and natural gas) because they are erroneously classified as energy-intensive industries.
Recommendation(s)
- Since IDA concluded that the ceramics industry is a labor-intensive, rather than and energy-intensive industry, all utility debt, including interest, should be canceled; the utility debt represents 30% of the industry’s total debt.
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Challenge(s)
Recommendation(s)
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