Industry-Specific Reforms > COVID-19 Crisis

  • Delays in collecting payments on goods and services associated with national projects.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > COVID-19 Crisis

  • Expedite payments to businesses engaged in national projects.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > COVID-19 Crisis

  • Not all industries are equipped to turn to shift work; the feasibility of shift scheduling depends on the nature of the industry. 

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > COVID-19 Crisis

  • Avoid taking a broad-brush approach when looking at the different industries; take into consideration the nature of each industry.

Responsible Entities

Date 6/30/2020

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

  • 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.

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > General Reforms

  • Grant IDA full independence; it should be led by an independent chairperson and allowed to regulate itself. This practice should be adopted across the board to ensure the independence of other similar entities in Egypt. 

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • Support and strengthen the Industrial Development Bank to enable it to fulfill its role of funding industrial projects and expanding industrial activities in Egypt, including developing programs and procedures to incentivize expanding support for promising industrial endeavors.

Responsible Entities

Date 3/21/2019

Responsible Entities

Date 3/21/2019

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > General Reforms

  • Ensure that free zones and other investment zones are treated equally, particularly with regards to accessing incentives.  Free zones employ local workers and utilize local inputs, thus, enterprises operating in the free zones should be able to access the incentives offered through the Export Development Fund, along with other relevant incentives.

Industry-Specific Reforms > General Reforms

  • Reconsider Articles 115 through 119 of the Penal Code—The Chapter on Public Funds— to counter the prevailing modus operandi of the government, which is characterized by irresolution and hesitancy. In this regard, attention should be given to enacting a specific and clear law holding ministers and public officials politically accountable for their policies and action, rather than limiting their accountability to the legal realm—accountability for criminal conduct. Attention should also be given to providing support to public officials and building their confidence in making decisions that serve the public interest and respond to national development objectives, as long as these decisions are well-studied, and were subject to broad-based and meaningful community dialogue. 

Industry-Specific Reforms > General Reforms

  • It is imperative to create a national committee to effectively unify and coordinate all efforts that aim at attracting and marketing investment opportunities in Egypt, on both the domestic and international levels. More often than not, in most developing countries, agencies concerned with investment, while each performing robustly on its own, end up working in isolation without any meaningful and effective coordination with others. This practice results in meager results, as critical stakeholders, such as the stock exchange, investment banks, banking units, and non-bank financial institutions, are excluded and do not participate in the effort. 

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • Create a new position in Egyptian diplomatic missions and assign the incumbent the responsibility of promoting investment opportunities in Egypt. Additionally, establish new GAFI-affiliated investment offices, both inside Egypt and in selected key global markets with potential investors.

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • Speed up the dispute adjudication process, and establish a time frame for the proceedings. The outcome of the adjudication process should be presented to the ministerial committee at least twice a month irrespective of the number of disputes ready for presentation, or the preliminary recommendations resulting from the process.

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • Activate, via a presidential decree, the coordination council, which serves as a channel through which the government and the CBE work together to set monetary policy goals. This does not undermine the independence of CBE, especially that its law requires that CBE and the government collaborate, through this council, to reach an agreement on the goals of the monetary policy.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • The importance of rationalizing the state’s projects and extend its implementation timeframe as this is a salient factor for the stability of monetary policy so that the crisis does not occur again.

Responsible Entities

Date 9/26/2022

Responsible Entities

Date 9/26/2022

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Provision of Industrial Land

  • IDA lacks the financial resources needed for equipping industrial land with utilities. Together with the high cost of bringing utilities to undeveloped plots, small investors face a shortage of appropriate industrial land. IDA’s lack of financial resources is likely to hinder its ability to deliver on its plan of making available 60 million square meters of land by 2020.
  • Lack of industrial land plots (500 square meters) available to small enterprises in industrial zones, in line with the Industrial Licensing Law.
  • Excessive increases in land prices and the lack of pricing standards.

Industry-Specific Reforms > Provision of Industrial Land

  • Allocate additional land to IDA to increase the industrial land supply available for investors and develop objective and transparent mechanisms for land allocation.
  • Make available land plots and facilitate land acquisition procedures. 
  • Authorize the development of public markets, major commercial complexes, and hypermarket chains, which are critical for marketing locally manufactured products at competitive prices and increasing demand for these products.

Industry-Specific Reforms > Provision of Industrial Land

  • In June 2019, the Cabinet approved a proposal, submitted by the coordinating council for Industrial Zones that allows selling industrial land plots on installments at an annual interest rate of 7%, rather than the interest rate set by CBE.  This decision, which will remain in effect for three years only, aims to attract more investments to the industrial sector, in order to expand the establishment of new industrial zones to increase youth employment opportunities. 
  • In July 2019, the Internal Trade Development Authority) signed eight partnership agreements with a group of investors and commercial developers. Under these agreements, commercial and logistic zones will be established in a number of governorates including Sharqiya, Menoufia, Gharbia, Beheira, Luxor, Qena, Fayoum, and the New Obour City. It is expected that the agreements will attract investments worth LE 23 billion, and provide approximately 200,000 direct and indirect job opportunities, as well as make available commercial centers that meet all the needs of citizens at reduced prices.

Industry-Specific Reforms > Provision of Industrial Land

Even though the Prime Minister’s decision number 3308 for year 2022 with regard to the immediate allotment of the industrial lands of the investors in applying the principle of usufruct, the decision included some important points that require modification:

  • The decision of the H.E Prime Minister no. 3308 for year 2022 with regard to the industrial land in most of the decreed rulings, especially concerning the rules and established prices, have been already issued from the Industrial Development Authority and the responsible commission with the decision no. 2100 for year 2021.
  • There was no discussion held with the Federation of Egyptian Industries (FEI) about the prices of the lands included in the decree which are overpriced and not attracting any investment/investors.
  • The decision did not include the required documents, even though the FEI had its reservations and objected several times about the documents required from the industrial investors after formulating committee 2100 for year 2021 such as providing detailed feasibility studies that include a technical,  economic, and fiscal studies. Also, infrastructure studies, capital investment, proposed fund, schedule of outdated products, production cost list, and a 5-year prospective income list starting from the project’s initiation date. Furthermore, referencing the procedures and pricing for the established committee according to the PM’s decision no. 2100 for year 2021, in contrast to what the decree no.95 for 2018 included.
  • The decision did not include the timeframe/period installments shall be paid through.
  • The decision included that the proposed prices are for guidance.
  • The decision did not elaborate on what the investors should do in case the piece of land was not delivered and this is a common situation that happened with most investors.
  • In the first clause, chapter no.5 ‘’In case the investor does not pay for two consecutive installments, the ownership entity has the right to terminate the contract’’.
  • In the first clause, chapter no.6 ‘’The land is given to, including what is established/built on it, to its protectorate after the usufruct period is over’’
  • In all cases, that who is assigned shall comply with all the assignments’ requirements, which include implementing the project and starting the initiation process in three-years’ time maximum starting from the date of receiving the land, in addition to complying with the specified scheduled period of time, otherwise, the piece of land is withdrawn/taken with usufruct during the time of having the piece of land. These are the rules that are applied presently which have many disadvantages such as:
    • The contracts that are formulated with the investor are compliance contracts meaning that s/he do not have the right to object to any clause and it also includes what was mentioned in the abovementioned chapter no.6 according to the PM’s decision.
    • The existence of natural obstacles, in the lands being delivered, is not taken into consideration. Such as the existence of a hill or other obstacles which shall take a period of time from the investor to remove, in addition to the increasing burden of the construction costs. Also, the delay fines are doubled on a monthly basis and also standard costs
    •  The attached lands are not delivered with the specified given piece of land whether at the starting date of land receival or during the implementation/execution of the process. The owning entity does not comply with the aforementioned and delay fines are applied on the investor in case a delay takes place for the scheduled period.
    • The Industrial Development Authority sets the execution program for a time limit of three years, without taking into account any obstacles or impediments that impede the process.
  •  What was mentioned in the last paragraph of Article 3 of the PM’s decision which states ‘’Paying the price of the land after reevaluating its commercial price while deducting what has been paid as usufruct’’
     

Industry-Specific Reforms > Provision of Industrial Land

  • The period of installment should be a 15-year period.
  • The prevailing notion about the lands issue is that industrial development and supporting manufacturers to reduce construction costs for factories to expand industrial production instead of land trading.
  • Simplify the documents that are required from the industrial investors after establishing the committee 2100 for year 2021 such as providing a detailed feasibility study.
  • The importance of clarifying other options for the investors in case the attached lands are not delivered.
  • The existence of grace periods in case of occurrence of out-of-control circumstances that affects the investor such as what took place in the case of COVID19 pandemic or the Russian-Ukrainian war or any critical occurrences that may affect the investor’s income and their ability to pay their debts steadily. Hence, a grace period must be included, and a first notice should be sent, and a second notice should be sent in a specified period of time that would allow them to utilize their resources to pay the belated debt especially since delay interest are applied according to the interest value issued in the bank.
  • To activate paragraph no.5, clause no.35, rule no.95 with regard to Industrial Development Authority and the noncompliance of the person of concern of the requested schedule; ‘’meaning that the investors must establish the executive time schedule themselves’’.
  • To validate the rights of the investor as the law did not specify the three-years established by the Industrial Development Authority without giving due consideration to the obstacles that might hinder the process during that time.
  • To specify a value that the investor gets by the end of the usufruct period in return to what have been established such as buildings or production lines in case the factory is not completely sold.
  • Changing the notion of the commercial price evaluation of the lands once owned, as the investor is the one that raised the commercial prices with the established investments since beginning the project. This has been objected by the FEI several times as the mindset of land trade still is dominated by the notion of selling the lands with the highest prices instead of maximizing production and industrial development.
  • In case of agreement on buying the land and owning it in a period of 5 years, the price of the land should be the same in the agreement as during usufruct period while deducting what has been paid during the latter period from the price value of the land.

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

  • 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. 

Industry-Specific Reforms > State Administrative Apparatus

  • Review and revamp all relevant laws, decrees, and regulations in order to reduce administrative burden and accelerate work processes.  In this regard, it is important to promptly constitute the Supreme Council for Administrative Development, which should have clear powers to address the challenges related to the legal and regulatory framework, and eliminate any existing inconsistencies, contradictions, and overlaps; this effort should be carried out in collaboration with the Central Agency for Organization, Administration and the Administrative Control Authority.

Industry-Specific Reforms > State Administrative Apparatus

  • Despite the passage of the Civil Service Law and its Executive Regulations, to date, jobs in the state’s administrative apparatus, have not been restructured. 

Industry-Specific Reforms > State Administrative Apparatus

  • Ministry of Administrative Development  should promptly finalize the plan to restructure the jobs in administrative apparatus of the state.

Industry-Specific Reforms > State Administrative Apparatus

  • Hesitation in decision making on the part of officials, for fear of assuming responsibility; this attitude further hampers processes and slows them down, and negatively affects the investment climate in Egypt.

Industry-Specific Reforms > State Administrative Apparatus

  • Amend Article 8 bis of the Criminal Procedure Code to read as follows: "For crimes stated under Article 116 bis (a) of the Penal Code, no criminal case may be filed except through the Public Prosecutor or the Attorney General. If the employee is one of the employees of the entities specified in paragraphs (a and b) of Article 119 of the Penal Code, the criminal case may not be filed except with the approval of the competent minister, who the employee falls under his authority, or the approval of the prime minister if the perpetrator of the crime was the minister or his deputy".  This amendment will enable the state body where the employee works to exercise their inherent right to approve the initiation of criminal proceedings in crimes of unintentional harm committed by employees falling under their authority.
  • Add a new article in Chapter V of Book Two of the Penal Code, to read as follows: "A sentence of imprisonment for not less than a month and not exceeding a year, or a fine of not less than LE 1,000 and not exceeding LE 50,000 shall be imposed on every employee who willfully and without justification refrains from performing work duties which constitute part of his job after it has been proved that they fall within his job competence and within the limits of his discretionary authority, and that the duties are in full compliance with the law and his action resulted in obstructing the execution of any decree, issuing a license, concluding contracts or agreements, or any other measures that impede any investments; the punishment will be imposed if refraining from carrying out the duties is intended to harm the interest of a natural, a legal person, or public interest.”
  • Amending the text of Article 115 of the Penal Code, to read as follows: “Every public employee who obtained or tried to obtain for himself, or obtained or tried to obtain for others, without a right, a profit or gain connected with the carrying out any duty of his office, if this was based on a previous agreement between them, shall be punished by imprisonment at hard labor; and shall be punished with imprisonment or a fine in other cases.” Amending the article by adding “…. he shall be punished with imprisonment or a fine in other cases” closes a loophole, which allowed public employees to escape punishment if it was not possible to prove that there was a pre-arranged agreement between the parties.  

Industry-Specific Reforms > Property Registration

The process of proving and registering the right of possession of a property suffers from two problems:

  • Cumbersome, time-consuming, and bureaucratic procedures.
  • Costly process—high registration fees are paid to the Real Estate Registry and many other entities. 

Industry-Specific Reforms > Property Registration

  • Develop El-Segel El-Ainy (the Real Folio System): real estate property should be registered based on a unique number identifying the property, and the database of real estate properties should be linked with the national ID database of the Civil Registry.
  • Increase the automation budget of the Real Estate Registry; use advanced software to streamline procedures and reduce the time it takes to process the various transactions.
  • Consolidate all types of fees charged by the various entities so that clients make one single payment instead of multiple payments; make the Real Estate Registry the exclusive point of interaction with the public on matters relevant to real estate registration; and require that payments of all fees be made via electronic mechanisms.

Industry-Specific Reforms > Property Registration

  • Given the fact that formal property registration is low, it is likely that many disputes will arise in situations that involve proving ownership and possession, as well in other real estate transactions. 

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Property Registration

  • Introduce an efficient judicial mechanism to address disputes that arise between parties engaged in real estate registration matters. This mechanism should be an interim measure until comprehensive property registration is achieved.

Responsible Entities

Date 3/21/2019

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.

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.

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.

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 > Preference for Domestic Products

  • 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.

Industry-Specific Reforms > Preference for Domestic Products

  • 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. 

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

  • 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. 

Industry-Specific Reforms > Export Subsidy Program

  • 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.
     

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

  • 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.  

Industry-Specific Reforms > Export Subsidy Program

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.)

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 > Export Subsidy Program

  • 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.

Industry-Specific Reforms > Pharmaceutical Industry

  • Pharmaceutical pricing policies are out of sync with changing market conditions, including exchange rate movements, rising inflation, and increases in energy prices; operating costs; and interest rates.
  • The current pricing scheme— a cross-reference pricing scheme that takes into account the prices of pharmaceuticals in 36 countries— is unfavorable to the industry. Under this scheme, the lowest price in any of the reference countries is used to guide the pricing of pharmaceuticals in the Egyptian market, with no consideration for the difference in distribution margins, which should be a key factor in pricing. Thus, the current system needs to be seriously and comprehensively reviewed in order to make it more responsive to market changes, and render investment in the industry attractive.

Industry-Specific Reforms > Pharmaceutical Industry

  • Revisit the current pricing policy to bring it in line with the requirements of the global market and the practiced pricing methods. This should increase the volume of pharmaceutical exports, and make it commensurate with the size and capacity of the industry in Egypt.
  • For new Common Technical Document (CTD) submissions for generics, price them at 65% of the price of the innovator or branded counterpart (the patented).
  • Approve the pricing of registered pharmaceutical products, giving priority to alternative products that are in short supply or missing in the market.
  • Expedite the re-pricing of registered pharmaceuticals, which are not yet marketed, even if their notifications have lapsed (these pharmaceuticals were priced prior to the floating of the Egyptian pound).
  • Abolish the VAT on imported pharmaceutical raw materials, which are pre-blended and processed using two or more ingredients. At the same time, impose on them the 2% tariff rate prescribed for customs category No. 3003, rather than the 5%, tariff rate prescribed for customs category No. 3824, in addition to the 14%VAT. 

Industry-Specific Reforms > Pharmaceutical Industry

A national body to oversee the safety of pharmaceuticals, the Egyptian Drug Authority (EDA), was created in 2019. However, the following requirements pose obstacles for manufactures:

  • The requirement that manufacturers obtain an import approval for each consignment of imported raw materials; the additional fees associated with this requirement result in raising the price of the final.
  • The extreme processing delays in obtaining certificates of Free Sale and certificates of GMP negatively affects the exportation of products.
  • The Central Administration for Pharmaceutical Affairs refuses to accept the trading certificates for non-sterile products, which are issued by the IDA and sent by express mail.
  • Exporters must fulfill additional requirements to be able to export their products, including a commitment to provide production materials for a period of 6 months; receiving visits for verification; and obtaining the approval of the Public Authority for Unified Procurement.

Industry-Specific Reforms > Pharmaceutical Industry

  • Abolish the requirement that manufactures obtain an import approval for each consignment of imported raw materials.
  • Expedite the issuance of the certificates of Free Sale and the certificates of GMP.
  • Refrain from issuing any new export requirements without consulting with exporters.

Industry-Specific Reforms > Pharmaceutical Industry

  • On August 25, 2019, the President ratified Law No. 151 of 2019; Article 14 established the Egyptian Drug Authority (EDA), and Article 16 specified its mandate. According to Article 14, “A public service authority, called the Egyptian Drug Authority, is created; it has a juridical personality and is affiliated with the Prime Minister; the location of its headquarters is to be determined by the Prime Minister, and the board of directors may decide to open additional locations.” 
  • Article 16 stipulates that “The new Authority aims to organize, implement, and control the quality, effectiveness, and safety of the medical preparations and devices provided for in the provisions of this Law.  It is also tasked with enforcing the  provisions of  the current law governing the practice of pharmacy, provided that they do not contravene any of the provisions of this law. To accomplish this, it shall also assume all the necessary powers, functions and legal actions.”

Industry-Specific Reforms > Pharmaceutical Industry

  • The absence of a clear legal framework governing the pharmaceuticals and medical devices sector.

Industry-Specific Reforms > Pharmaceutical Industry

  • Develop a new legal and institutional framework to govern the pharmaceuticals and medical devices sector.

Industry-Specific Reforms > Cosmetics Industry

  • The inclusion of cosmetics in the definition of pharmaceuticals is problematic as they will be subject to the same registration, pricing, and testing rules and procedures applicable to pharmaceuticals. This is contrary to the nature of the industry and how cosmetics are regulated across most countries globally. Cosmetics are non-medical products, and are treated as such; they are governed by separate laws and regulations in many countries (e.g., European Union countries, the US, Saudi Arabia, the Arab Gulf States, and all African countries). Categorizing cosmetics under the rubric of pharmaceuticals is likely to have a significant adverse impact on the industry, and its ability to attract future investments, which was estimated at approximately LE 18 billion in 2018.
  • The definition of cosmetics is inconsistent with the definition currently adopted in Egypt, which agrees with the internationally recognized definition of cosmetics. 
  • The draft law includes mandatory standard specifications for cosmetics.
  • The controls and procedures regulating the importing, exporting, registration, and pricing of cosmetics go against the nature of the product itself. 
  • The absence of a clear definition of the term “pharmaceutical entity”, which is to be licensed under this law. 
  • The release of imported medical products and other materials that fall under the jurisdiction of the Egyptian Drug Authority “EDA” is not allowed before all required tests and analyses are completed.
  • The trading of domestic pharmaceuticals and other related products that fall under the jurisdiction of EDA is not allowed before all required tests and analyses are completed.
  • Absence of a clear grievance processing procedures, including the specific time frame for filing a grievance and receiving a determination on it.   
  • The fees associated with the record-filing and inspection of cosmetics are excessively high. 
  • The cosmetics industry is a fast- moving and changing industry, where products develop periodically and 25% of the used formulas change annually. Thus, applying the rules and regulations pertaining to medical and pharmaceutical products on cosmetic products will hinder the development and prosperity of the industry.
  • Requiring that each shipment of cosmetic products be analyzed will cost the government and the industry large sums of money for intangible benefits, and does not provide any assurance that the products are safe for consumers. This requirement is largely applied to companies and products that conform and comply with required standards, while many cosmetic products illegally reach the Egyptian market.
  • Requiring that cosmetics be subject to testing prior to their release from customs release and their placing on the market is inconsistent with the global trend in cosmetic product control and analysis, which rely heavily on in-market control; this is more appropriate to the nature of the products, their volume of circulation, and the degree of potential health risks associated with using cosmetics, compared to other medicinal and pharmacological products.

Industry-Specific Reforms > Cosmetics Industry

  • Develop effective implementation mechanisms to facilitates the enforcement of the law. The mechanisms should be appropriate to the nature of the cosmetics market, which differs drastically from that of pharmaceuticals.  FEI’s recommendations should be taken into consideration when developing the executive regulations of the law.
  • Issue separate executive regulations to govern the cosmetics industry; the regulations should be appropriate to the nature of cosmetic products that are not used for medicinal purposes. 
  • Adopt the internationally recognized definition for cosmetics— “Any product containing one or more substances intended for use on the external parts of the human body, including skin, hair, nails, and lips, or on the external parts of the genitals, teeth, or mucous membrane of the oral cavity for the purpose of cleaning them, or perfuming them, or protecting them, or keeping them in good condition, or changing and improving their appearance, or correcting body odors and improving it”.
  • Delete the reference to “mandatory standard specifications” and replace it with “mandatory technical regulations based systems adapted from globally recognized systems, such as those adopted in EU countries.
  • Cosmetics should not be subject to product registration requirements but to a notification system. This aligns with practices in EU countries, Saudi Arabia, as well as all East Asian countries, and is in line with the discussions that took place between the Cosmetics Sub-Chamber at FEI, and the Central Administration for Pharmaceutical Affairs as directed by the Minister of Health and Population.
  • Cosmetic products should not be subject to an enforced pricing system 
  • due to their nature, the manner in which they are traded, and being consumer products that are used regularly and daily (shampoo, skin and shaving creams, and toothpaste). 
  • Include a definition for pharmaceutical entities.
  • Institute an in-market control system for cosmetic products to protect consumers.
  • The time frame for filing a grievance must be within 15 days from the receipt of the notice of the decision. 
  • Inspection should be limited to accessing and reviewing records, books, and other documents related to the products and manufacturing processes; manufacturers should be given sufficient time to provide the required documents. 
  • Include an article in Law No. 151 of 2019 to mandate the issuance of separate executive regulations to govern the cosmetics industry; the regulations should be informed by the draft paper under discussion between and the Central Administration for Pharmaceutical Affairs, and the Cosmetics Sub-Chamber at FEI. 
  • Develop a separate fee schedule, including reasonable fees for the administration and testing of inspecting cosmetics.
  • Similar to special food  products, registration of cosmetic products should be based on the product category and not the retail package.  

Industry-Specific Reforms > Cosmetics Industry

  • According to Law No. 151 of 2019, cosmetics are defined as “any preparations developed for use on the external parts of the body, teeth, or the mucous membrane of the oral cavity for the purpose of cleaning them, or perfuming them, or protecting them, or keeping them in good condition, or changing and improving their appearance, or any other existing preparations, or yet to be developed and will be categorized as cosmetics according to international standards”. 
  • Article 17, Section 2, Item 3 of the law vested EDA with the responsibility, among several  other executive responsibilities, of inspecting and analyzing cosmetic products. It stipulates that EDA will have the responsibility to inspect and analyze “pharmaceuticals, and biological preparations, medicinal plants and herbs, cosmetics and all other similar or related products, according to international standards and references to verify their quality, validity, efficacy, and safety, as well as ensure the compliance of pharmaceuticals with pharmacopoeia requirements and the mandatory standard specifications approved by EDA”.
  • FEI will continue to engage and advocate for improving the Executive Regulations to better serve the needs of the industry. 

Industry-Specific Reforms > Cosmetics Industry

  • The executive regulations of Law No. 151 of 2019.

Responsible Entities

Date 2/2/2020

Industry-Specific Reforms > Cosmetics Industry

The following elements should be taken into consideration when developing the executive regulations of Law No. 151 of 2019.

  • Amend Article 1 of Chapter 1, Definitions, by including the following: “Medical products and devices are the medical products and medical devices as defined in Clauses 2 and 3 of Article 1 of the law”.
  • The fee schedule included in Law 151 of 2019 should make reference to medical devices. 
  • Ensure making reference to the European standards that are adopted by medical equipment and laboratory reagents manufacturers, who have ben l under the supervision of the Ministry of Health for the past 20 years.  
  • Licensing local factories and warehouses: Factories should obtain their licenses from IDA and EDA to ensure that they adhere to GMPs, which are included in ISO 22716 or its equivalent.
  • Oversight, inspection and market surveys: EDA must assume the responsibility to overseeing, and periodically inspecting cosmetics establishments, including factories, warehouses and places of sale. In carrying out their responsibilities, inspectors should be vested with law enforcement authority and powers. To ensure product compliance, EDA’s inspector may enter cosmetics factories, warehouses and places of sale for the purpose of inspection; they have the right to review the relevant records and documents, as well as collect samples of cosmetics products for inspection and analysis in the EDA’s laboratories or other accredited laboratories.
  • Adopt an Egyptian system for cosmetic products that aligns with international practices adopted in EU countries, Saudi Arabia, as well as all East Asian countries; adopting such a system promises to expand Egypt’s cosmetics exports.
  • Cosmetic products should not be subject to registration requirements; a notification system, which is adopted worldwide, should be used instead.
  • Use international standards as a reference for setting the mandatory standard specifications for cosmetics. 
  • Institute an in-market control system for cosmetic products instead of requiring that products be tested prior to being placed on the market. In-market control system, which relies heavily on carrying out the needed testing while the product is on the market, is more appropriate to the nature of the cosmetic products, their volume of circulation, and the degree of potential health risks associated with using cosmetics, which is drastically lower than that of other medicinal and pharmacological products. This system will ensure the safety of customers, especially that many cosmetic products reach the Egyptian market in an illegal manner.
  • Include representatives from the Cosmetics Sub-Chamber of FEI’s Pharmaceutical Chamber in the technical committee that will be set up for developing the executive regulations of the law. 
  • Exceptional Measure: Take advantage of the existing production capacity in the cosmetics sector to meet urgent needs; allow cosmetics manufacturers to obtain alcohol in order produce disinfectants for hospitals and other facilities.

Responsible Entities

Date 2/2/2020

Industry-Specific Reforms > Medical Devices Industry

  • Imports of medical appliances (for the benefit of public hospitals and universities) are granted exemptions under Chapter 4 of the new Customs Law; this undermines the competitiveness of local industries as they do not enjoy the same exemptions, which range between 5-30%, on imports of production inputs; thus, both domestic and foreign investors are disincentivized from investing in these industries.

Industry-Specific Reforms > Medical Devices Industry

  • Eliminate any preferential treatment given to imported products or grant domestic manufacturers the same advantages; develop an investment plan to encourage the production of needed products that are currently imported, including making available low-interest, medium and long-term loans.

Industry-Specific Reforms > Medical Devices Industry

  • Ineffective oversight over the legal and illegal markets for medical devices—failure to follow a robust supply chain monitoring process to detect informal markets.  

Industry-Specific Reforms > Medical Devices Industry

  • Enforce the law, and criminalize the sale and purchase of unregistered medical devices.  

Industry-Specific Reforms > Medical Devices Industry

  • Egypt bans the importation of used medical devices, and does not make a distinction between electronic and non-electronic ones. Such devices do not pose any health risks, and many are given as donations from reputable medical establishments.  Additionally, the procedures for importing any medical device or equipment is too cumbersome.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Medical Devices Industry

  • Review all import procedures related to medical devices, and do not restrict importation to agents. At the same time, develop standard specifications for medical devices.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Medical Devices Industry

There are number of concerns regarding the Executive Regulations of Law 151 of 2019, including the following:

  • EDA’s is given oversight responsibly over the manufacturing of medical devises, which is primarily an engineering industry; EDA lacks the technical and engineering expertise to fulfil this responsibility, which will negatively impact the engineering industries in Egypt.
  • The overlapping jurisdiction between EDA and IDA regarding the licensing of factories that produce medical devices.
  • The authority to accredit factories and medical products has been transferred from the Egyptian Accreditation  Council to EDA.
  • The imposing of price controls on medicinal products, which are sensitive to market conditions and changes. Thus, it is not possible to fix prices; more so in any case, this requirement  contradicts what is stipulated in the Investment Law.
  • EDA did not set any guidelines and specifications for registering medicinal products;  at the same time, it is not allowing the trading of any product without being registered.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Medical Devices Industry

  • Take the necessary action to immediately halt the implementation of the Executive Regulations; put forward Law 151 of 2019 for discussion and ensure that all stakeholders, including technical and oversight agencies, are involved to provide the needed support for the medical devices industry. 

Responsible Entities

Date 6/30/2020

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

  • 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. 

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

  • 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.

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

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

Industry-Specific Reforms > Food Safety

  • The National Food Safety Authority (NFSA) has a number of weak spots, particularly with regards to its independence and effectiveness; there is jurisdictional overlap between NFSA and other agencies. 

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Food Safety

  • Activate the role of NFSA, and enable it to exercise the authorities vested in it by law; prevent other government entities from interfering in its operations. 
  • Expedite the issuance of the executive regulations of the Food Safety Law.
  • The Board of Trustees of NFSA should coordinate all food safety efforts, and clearly define the roles and responsibilities of the different bodies concerned during the transitional period in order to ensure complementarity. 
     

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Food Safety

  • On February 18, 2019, the Executive Regulations of Law No.1 of 2017 establishing the National Food Safety Authority were issued. 

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > Food Safety

  • The unified food has not yet been issued.

Industry-Specific Reforms > Food Safety

  • Expedite the issuance of the unified law to replace all other existing relevant laws.

Industry-Specific Reforms > Food Safety

  • The lack of human resources within NFSA to effectively and efficiently carry out their functions and adopt new work mechanisms that are in line with international food safety control systems. Under the pretext of an increasingly bloated bureaucracy, competent authorities continue to deny the requests of the newly- established NFSA to recruit or contract with qualified individuals with diversified expertise to assist in meeting its mandate. Additionally, lack of awareness and appreciation of the important role to be played by NFSA is further aggravating the situation; competent authorities are requested NFSA to shrink its already-approved organizational structure, which is necessary for implementing the type of integrated activities and mission NFSA aims to achieve. So far, NFSA did not receive the necessary approvals from the Central Agency for Organization and Administration regarding the staffing table and job descriptions, at the same time, in an effort to undermine NFSA, agencies that were assigned the oversight functions prior to its establishment either refuse to second their employees to it, or prevent them from joining its ranks. 
  • All powers and prerogatives granted to NFSA under Law No. 1 of 2017, are ignored; it is treated like any other public agency with regards to public expenditure rationalization. Thus, NFSA is not able to secure the needed resources, such as vehicles, for its staff to carry out food safety inspections of food establishments. More generally, the lack of an adequate budget is impeding NFSA for fulfilling its expansive and important mandate, entails ensuring the food safety for millions of Egyptians, including vulnerable groups such as children, the elderly, the sick, and others; the work of NAFS also safeguards investments in two major revenue-generating sectors: the food processing sector, one of the leading sectors in terms of exports, as well as the tourism sector by ensuring the provision of safe and hygienic food in tourist facilities, being one of the most critical success factors in tourism. 

Industry-Specific Reforms > Food Safety

  • Allocate sufficient resources to NFSA to attract qualified professionals, and provide professional development training to its staff.
  • Provide NAFS with a realistic budget allocation commensurate with its expansive responsibilities and functions to allow it to carry out its mandate in an effective manner (e.g., procure vehicles needed for carrying out actual food safety inspection nationwide).

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

  • 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).

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.  

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

  • 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.

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 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.

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 > 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.  

Industry-Specific Reforms > Nitrogen Fertilizer Industry

  • Despite being one of the most important Egyptian industries, the nitrogen fertilizer industry faces challenges and problems due to the high price of energy. The industry is one of the most important Egyptian industries; the industry’s total investments reached approximately LE 200 billion, and it directly employees 50,000 workers.
  • It is worth noting that natural gas is a main input in the manufacturing of nitrogen fertilizers; the cost of natural gas represents approximately 75-80% of the variable input costs for producing nitrogen fertilizers.
  • Between 2014 to 2020, the price of supplying natural gas to nitrogen fertilizer factories have been fixed.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Nitrogen Fertilizer Industry

  • Lower the price of natural gas supplied to nitrogen fertilizer factories to $3/million British thermal unit. 
  • Adopt a product-linked natural gas pricing formula, such as the one applied to several urea-producing Egyptian companies—the price of natural gas is linked to the selling price of urea.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > Petroleum and Mining Industry

  • Expedite the formation of the advisory committee referenced in the Law on Mineral Wealth No. 198 of 2014 and its Executive Regulations, and their relevant amendments. The committee should be granted greater authority, such that implementing bodies abide by its resolutions regarding the setting of rental payments and royalty rates, according to the circumstances of each case, in other words, the opinions of the committee should be binding and not only of an advisory character. The Prime Minister should issue a decree requiring the committee to include individuals with professional knowledge and expertise and to meet at least four times a year, as mandated by the law, to carry out its responsibility of refining and further developing procedures, in light of what transpires from implementing the law and its regulations (Ministry of Petroleum and Mining). For example, some issues that need addressing include: Setting the royalty for copper at 8%  (compared to a 4% globally) is considered high, and works against attracting any investor; the unclear and confused treatment of white sand—whether it falls under the purview of mines or quarries; and the shale oil royalty rate.

Industry-Specific Reforms > Petroleum and Mining Industry

  • The committe that is headed by the Minister of Planning and Economic Development and includes the Minister of Local Development should continue operating to develop a clear and well thought out
  • strategy that is centered on the national needs and priorities, promotes vertical integration in the mining sector and value-added production of minerals, and takes into account the resource abundance and scarcity. In this regard, it should be recognized that the responsibility for and interest in these resources go beyond the purview of the Ministry of Petroleum or the Mineral Resources Authority), management of mineral resources is a state-wide matter, and all efforts have to be directed towards maximizing the state’s resources

Industry-Specific Reforms > Government Contracts

  • There are no previous businesses with any governmental authority. Many corporates whether large, small, or micro, are unable to contract with governmental agencies in any contracts as most governmental authorities request a history of previous governmental business, even though that exists with the private sector, it is not recognized by the government.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Delaying the financial dues of private sector enterprises/companies/corporates with governmental agencies, delay of their financial dues despite the completion of the inspection, addition, installation, operation or initial receipt of the project, for unclear and unknown reasons, which negatively affects them in fulfilling their obligations towards other entities, in addition to their financial inability and the lack of sufficient financial liquidity to continue their activity.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Obliging governmental agencies to write the date of receipt of financial dues in the attribution order or supply order issued by them, explaining that in the event of the implementation of the company's work, the financial dues are paid within fifteen working days, and in the event of delay for this period, delay fines are calculated on the government entity estimated at 5% of the total attribution order or supply order for each month of delay, and transferring employees to investigation to hold the erring and the cause of the delay accountable.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • The prices of services provided by the state change suddenly, such as the increase in customs tariffs, the change in the exchange rate, or the increase in tax obligations, which causes the company financial losses due to the obligations it previously had before this increase with government sector agencies, and some micro-companies are even reluctant to participate in the field of government contracts due to this problem.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • The State's obligation to establish a transitional period of at least six months in the event of a desire to change the prices of the services it provides or the obligations it imposes on the private sector.
  • Establish an insurance fund to protect small and micro businesses from sudden price changes.
  • In case of a sudden change in the prices of services or government obligations, the State shall be obliged to hold private contractors accountable with the State before the application of these obligations by accounting them at the old prices until the completion of their contractual obligations.
     

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Failure to accept significantly low-value bids.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Monopoly of contracts on specific entities and contracting by direct agreement in Article 78 of Law 182.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Activating the accounting and complaints system for the concerned authorities
  • Reduce dependence on the human factor and automate tenders.
  • Activating the points evaluation system (sound evaluation bases) by amending Law 182 and setting specific percentages for administrative bodies.
     

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • In the case of disbursement of the dues of the supplier companies on which the tender is awarded, the items shall be supplied within ten days of receiving the supply order, but the disbursement of extracts shall be suspended by the finance representative until the contract is drafted. 

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • In the case of supplying items that do not have a guarantee after supply, such as (stationery - carpentry - plumbing tools) it is not necessary to make a contract for them, or to make ready-made contracts with specific values for a specific amount from 1000 EGP to 50000 pounds whose use does not disrupt the disbursement of extracts, except (maintenance) or any devices that have a guarantee for which contracts are issued according to the concluded agreement.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Government agencies face the problem of writing contracts for all operations, even for simple amounts such as 1000 EGP and above, which represents a burden on the supplier himself because his dues are delayed until the contract is completed, despite its supply and receipt from him due to the urgency of the entity to obtain its needs - which led to the reluctance of some suppliers to conclude any contracts and their refusal to deal.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Not being obliged to write a contract up to a certain financial limit, which is proposed to be 50,000 pounds, and allows the entity to spend directly from its budget.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Exclusion of companies due to the lack of some documents that must be attached to the technical offer during the opening of technical envelopes, noting that companies have documents such as (proof of subscription document in the public contracting portal - proof of the presence of a maintenance center - another tax return document - previous work - etc.)

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Giving a grace period of three days from the date of opening the envelopes, and in the event that the entity is not provided with these documents within the period, the company will be excluded before transferring the process to the decision committee.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • In the event of awarding a single bid, some members of the accounting unit do not comply with the application of Article 39 of Law No. 182 of 2018 by notifying the successful bidder of the payment of the insurance and after 7 days the supply order is issued to the company, which entails a delay fine thereafter.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Commitment to implement in accordance with the provisions of Article 39 of the Tenders Law 182 of 2018 that the sole proprietorship is notified that it has been awarded and the attribution order is issued within two days only after the expiry of 7 days without making the supply order.  

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • In mechanical works, the company is required upon contracting to pay the insurance of irregular workers at the insurance office of the operation, and the payment order is delayed until payment, and upon delay, interest is paid. 

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Deducting the insurance of irregular workers from the government entity that made the offering and is paid from that entity to the insurance directly without delaying the dues, or providing a place where the share of the insurances is paid directly, and thus saving time and effort for business owners, especially in the case of carrying out work at in the whole country, which requires travel to the governorates to the insurance offices for payment, which causes a delay in the process of paying contractors' dues and an increase in costs and implementation time.

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • The length of the documentary cycle and the return of the document more than once to meet the payment of corporate dues (15 days for auditing and disbursement of dues within 60 days) and partially reviewing the document, which results in a long period and returning the document more than once to complete it. 

Responsible Entities

Date 9/26/2022

Industry-Specific Reforms > Government Contracts

  • Reducing the time period where companies wait to pay their dues for at least 6 months, which is a very long period on the capital cycle, which leads to the reluctance of many companies, especially small ones, to participate in government contracts.

Responsible Entities

Date 9/26/2022