Industry-Specific Reforms > General Reforms

  • 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.

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > General Reforms

  • 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.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Provision of Industrial Land

  • 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.  

Industry-Specific Reforms > Industrial Licensing Law

  • 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.

Industry-Specific Reforms > Industrial Licensing Law

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.

Industry-Specific Reforms > Industrial Licensing Law

  • 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.

Industry-Specific Reforms > Industrial Licensing Law

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

Industry-Specific Reforms > Industrial Licensing Law

  • 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.

Industry-Specific Reforms > Industrial Licensing Law

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

Industry-Specific Reforms > Customs Procedures

  • 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.

Industry-Specific Reforms > Customs Procedures

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).

Industry-Specific Reforms > Customs Procedures

  • 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.

Industry-Specific Reforms > Customs Procedures

  • 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.

Industry-Specific Reforms > Customs Procedures

  • 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.

Industry-Specific Reforms > Customs Procedures

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).  

Industry-Specific Reforms > Import Control

  • 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.

Industry-Specific Reforms > Import Control

  • 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.

Industry-Specific Reforms > Preference for Domestic Products

  • 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.  

Industry-Specific Reforms > Export Subsidy Program

  • 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. 
     

Industry-Specific Reforms > Export Subsidy Program

  • 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?

Industry-Specific Reforms > Export Subsidy Program

  • 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.

Industry-Specific Reforms > Food Industry and Agriculture Products

  • 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.

Industry-Specific Reforms > Food Industry and Agriculture Products

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

Industry-Specific Reforms > Food Industry and Agriculture Products

  • 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.

Industry-Specific Reforms > Food Industry and Agriculture 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. 

Industry-Specific Reforms > Automotive Industry

  • 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.

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Automotive Industry

  • 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.

Responsible Entities

Date 2/2/2020

Industry-Specific Reforms > Automotive Industry

  • 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.

Responsible Entities

Date 2/2/2020

Industry-Specific Reforms > 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.

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Leather Industry

  • 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. 

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Leather Industry

  • 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.  

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > 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.  

Responsible Entities

Date 2/2/2020

Industry-Specific Reforms > Leather Tanning Industry

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

Responsible Entities

Date 6/30/2020

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. 

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.

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. 

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.

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. 

Industry-Specific Reforms > Ready-Made Garment Industry

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

Industry-Specific Reforms > Woodworking Industry

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

Industry-Specific Reforms > Woodworking Industry

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

Industry-Specific Reforms > Textile Industries

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

Industry-Specific Reforms > Textile Industries

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

Industry-Specific Reforms > Textile Industries

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

Industry-Specific Reforms > Textile Industries

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

Industry-Specific Reforms > Textile Industries

  • 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.