doing business in egypt - assolombarda.it

Doing business in Egypt

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Economic Indicators 2009 2010 2011 2012

GDP (US$ bn)484.3 518.2 527.4 537.8

GDP growth(%) 4.7 5.1 1.2 1.9

Net FDI(US$ bn)8.1 6.8 2.5 1.1

Exports of goods (US$ bn) 24 25 27.9 28.3

Imports of goods (US$ bn) 45.4 51.5 57.4 58.7

Current Account (US$ bn) 3.1 -4.4 -6.5 -8.4

External Debt (US$ bn) 33 35.3 37.2 38

Exchange Rate (LE / $) 5.5 5.6 5.9 6.3

2,450 km Coastline

85 mn People

1 mn km2 Footprint

Economic Snapshot:

� Largest population in MENA;(85Million)

� Strong real GDP growth 5.1% (2010);

� Total FDI over the last five years US$ 45.3 bn .)

� Tax Rate ( corporate & personal): 20% .

� Partnership agreement with the EU, and FTA agreements with Arab countries, Comesa countries & Turkey , QIZ agreement with the USA .

� Labor Force:26 Million

� Industrial Zones:67.

� Major Commercial Ports:15.

� Road Network:91,173 Km

� Railway Network:6700 Km.

� Internet Users:25 Million..

Egypt: Country Profile

Source: AmCham, GAFI Information Center,

� Egypt’s competitive advantages

make a compelling case for

increasing FDI in Egypt.

Lucrative Returns Await FDI Inflow

Comparative Electricity Prices

Competitive Manufacturing

Costs

Access to Export

Markets

Large Domestic Market

Government policy

Strategic Location

Comparative Wages

Egypt India Tunisia Turkey

0.5

0.7

1.2

1.6Wages compared to Egypt in US$/ hr

Egypt Turkey India Tunisia

6

7

810Electricity prices compared to

Egypt (Cents KWatt/ hr)

Egypt: Competitiveness

Macro Overview | Longer-Term Outlook

Location

Solid Fundamentals

Demographics

Cost Edge

Economic Reform

Commitment to Economic Reform &Social equality

“New Egypt”

ClearGovernance

Reduced Corruption

InvestorConfidence

InvestmentGrowth

Improved Macro Fundamentals

&Growth Potential

Democracy

Why Invest in Egypt

• A sustained growth rate of 5% over the period between 2005

and 2010.

• Egypt has a diverse economy.

• A large population and hence a large consumer market

• Egypt has the largest labor pool in the region with a

competitive labor cost. (26.8 million).

• Time to establish a company: 72 hours

• Maintaining a flexible exchange rate set by free market forces,

while avoiding short term volatility.

Low Cost of Doing Business

Source: CBE, Ministry of Investment

• Competitive tax rates - corporate and personal

tax rates top out at only 25%

• Developed infrastructure with 15 commercial

ports in addition to 44 specialized ports to

serve importers and exporters, an expanding

airport network catering to both passengers

and cargo.

• An abundance of natural resources and

competitively priced water, power and gas.

Preferential Access to Key Global Markets

Source: CBE

The EU – Egypt Association Agreement grants Egypt preferential access to the EU market of 500 million

The EFTA-Egypt Free Trade agreements grants access to the markets of Iceland, Liechtenstein, Norway and Switzerland in industrial and agricultural products.

Free duty access to the US market of 300 million customers through the QIZ protocol.

The COMESA, a common market for Eastern and Southern Africa creates a free trade area among the 19 member states.

AGADIR Declaration creates grants Egypt a free trade zone between Egypt, Morocco, Jordan, and Tunisia in addition to a rules of origin advantage.

Egypt – Turkey free trade agreement

GAFTA: ratified by 22 Arab nations, involving the phasing out of customs and duties while eliminating non-tariff barriers

Special Economic ZonesInvestment ZonesInland InvestmentCategory

• 5% flat tax rate on personal income tax

• 10% tax on all activities within the zone

• 25% & 40.55% for oil and gas companies

• 10 years Exemption for Agriculture and animal production activities.

• 25% & 40.55% for oil and gas companies

• 10 years Exemption for Agriculture and animal production activities.

Income Tax

None

• Custom procedures for production input will be administered in the zone

• Equipment customs are paid in 5-10 years installments

• 2-32% depending on the product

• Flat rate of 5% of the value of imported machinery and equipments

Import Duties

• No duties when exported out of Egypt

• No duties on domestic components when sold in Egypt

• 10% of value of non domestic components when sold in Egypt

• Sales taxes are paid in 5-10 years installments

• Exported good are tax exempted

• 5-25% of value of all sale transactions

Export Duties and Sales Tax

• 5% for all salary levels• 10-20% depending on salary

level• 10-20% depending on salary

levelPayroll Tax

•Depending on zone board’s decision

NoneNoneExport

Minimum

• Egyptian certificate of origin for SEZ based exporters

• Integrated custom and tax administration, licensing, and dispute settlement

• Companies established within the investment zones are to enjoy incentives given to both inland and upper Egypt investment regimes.

• Protection against expropriation and compulsory pricing

• Full right of profit and dividend repatriation

Other Incentives

Investment Policy Framework

• The process of registering foreign company subsidiaries to only three days of processing time.

• The time to open foreign representation offices; 3 days while simplifying administrative steps related to

establishing a business.

• Enhancing import and export flexibility through import and export certificates that are available for 3-5 year

periods.

• New facilities for investors include:

� Paying subscription fees to chamber of industry and the federation of Egyptian industries at the one

stop shop

� Increasing GAFI’s processing centers.

� Lifting the security approval requirement for media companies. As well as lifting licensing requirements

for print publications.

� An initiative to provide resources for a credit risk guarantee program to help develop SMEs and help

them gain access to bank financing.

Support and Incentives for Investments

• A stimulus package has been introduced by The Ministry of Industry to facilitate investments in the

industrial sector through:

• Reducing the value of Letters of Guarantee required to acquire land from industrial zones.

• Inspections by the Industrial Development Agency(IDA) are to be done upon request by the IDA

chairman.

• Enforcing the role of IDA representative offices in governorates to issue all required approvals, except

for land allocation.

• In case of fulfilling required terms of issuing an industrial registry, a permanent industrial license is

issued and renewed every 5 years.

• Investor Care Department: established within GAFI to support and guide investors to resolve any

conflicts they might face with the different governmental authorities.

• Disputes Settlement Center: established in 2009 for the reconciliation and disputes resolution

between business partners.

Support and Incentives for Investments

FDI in Egypt Today

• Pegas Nonwovens SA (PEGAS), a Czech maker of special textiles used in hygiene

products and health care

• GlaxoSmithKline plc announced that it will invest US$ 84.7 million in Egypt’s healthcare

sector over five years to expand its product portfolio

• Al-Futtaim Group will invest about US$ 300 million in 2012 to continue construction of

Cairo Festival City project.

• In April 2011, the Kuwait Investment Authority (KIA), set up a company worth $1 billion in

capital to invest in Egypt's stock market

• Electrolux, the Swedish appliance company, acquired a 52 percent stake in Egypt’s

Olympic Group at a cost of US$ 350 million.

• The Turkish company KCG announcement to raise its investments in Egypt by

establishing 3 new projects valued at USD400 million in the textiles, electricity generation,

and mining in Sinai.

• The Indonesian company “Multistrada” announced establishing a tire factory in

partnership with an Egyptian manufacturer, the project value is USD320 million.

FDI in Egypt Today

• In April, 2011, China Development Bank signed a memorandum of understanding

and cooperation with Commercial International Bank and Commercial

International Investment Company in Egypt to cooperate in infrastructure and

loans for SMEs.

• In July, 2011, the Egyptian Hydrocarbon Company (EHC) was established with

paid-up capital of USD150 million; the first private sector industrial project to be

implemented in Egypt at international prices with no subsidies. Total investments

of the project are USD454 million.

• In June 2011, Cisco announced it will invest USD10 million. The venture capital

investment will be targeted at high-potential small businesses that provide

innovative products and services.

• The Turkish group “Limak” to carry out enhancement capacity project of Terminal

3 in Cairo International Airport with investments worth USD387 million.

• The Indian company Dhunseri petrochemicals Ltd. established a 160 million

dollars company in Sharkyia governorate in the field of plastic production

providing 500 job opportunities

• The Malaysian Islamic Finance company, AMANI , announced the establishment

of a USD 500M fund.

Egypt & ItalyTrade & Investment

Bilateral Trade(Egypt-Italy)

Mutation2012

201120102009CategoryYear

+3%1358.51319902772.3Petroleum

Egyptian Exports

-22.5%937.212091000.3669.8Non

Petroleum

-9.2%2295.825281902.31442.1 Total

+10.3%2862.82589.82939.62603Egyptian Imports

+0.7%5122.75117.84841.64045.1Trade Volume

-94%-567-61.8-1037.3-1160.1Trade Balance

Source:ISTAT

Million Euro

Egyptian Exports (2010-2012)(Million Euro)

201220112010Sectors

1358.91319902Oil & Gas

220219.5169.8 Aluminum

119.6127.998.2Textiles &ready made garments

8411271.5Fertilizers

64.548.464.9Organic Chemicals

7986.579.6Agricultural Products

4561.239.5Food Industries

21.524.517.1Engineering Products

Source:ISTAT

Italian Exports (2010-2012)(Million Euro)

201220112010Sectors

857974.81208.7Machinery &Mechanical appliances

854400310.9Petroleum products

28.320.329.3Electrical appliances

88.474.159.6Plastic products

93.891.3125.8Organic Chemicals

5855.797.8Iron & steel

66.3142.3156.2Engines and Turbines

38.738.855.8Paints

Source:ISTAT

Italian Investment in Egypt

Italian investments in Egypt :� Total investments: 4 bn euro.

� Italian investing companies:809

Thirty six Italian companies invested in Egypt in 2011 after the revolution.

Main sectors:� Industrial (258 company)- Services (254 company)-

Tourism(169 company)-Construction (83)- Agriculture(25)-Financial (6).

Main investors:� ENI

� Intesa Sanpaolo

� Italcementi.

� Finmeccanica

� Italgen

� Mapei

� Cotonificio Albini

� Pirelli

� Domina

� Filmar

Recent Investors in 2011:

• Danielle

• Tecnimont

Priority Sectors and Clusters

The Industrial Sector

• The sector represents an important and advanced rank in the national economy

and is strongly interrelated with several production and service sectors along

with boosting foreign trade and improving the balance of payments.

• The sector amounts to 6.3% of growth rates from 2005 till 2010.

• Total investments are worth EGP 25.5 billion and EGP 8.8 billion were poured

into the industrial sector during FY 2009/10 and Q1 of FY 2010/11 respectively.

Source: GAFI

Priority Sectors and Clusters

• The Egyptian government aims to transform the

country’s infrastructure to a booming sector through

raising infrastructure spending.

• There are currently 4 utilities projects among 7 PPP

projects.

The Electricity Sector

• Total investments reached EGP 13.4 billion during FY

2009/10.

• The rate of growth of the electricity sector has reached

8% in Q1 of FY 2010/11, with a 6.9% increase in

consumption during the same period.

Egypt Infrastructure Industry

• Strengths:

• The government has ambitious plans to transform the country’s infrastructure,which include several mega-projects such as the US$9.5bn refinery andpetrochemical plant at Kafr-al-Shaikh, and US$8.7bn container terminal atEasternPort Said.

• Egypt has had one of the fastest-growing infrastructure sectors in the world,covering all segments including transport, tourism, commercial, industrial, etc.

• Opportunities:

• A growing number of visitors drawn to a relatively cheap country means there is thepotential to build more hotels and resort areas

• There is a strong demand for housing in Egypt; increasing population andurbanisation has resulted in the government undertaking major urban planningprogrammes

• Raw material costs are falling due to the global economic downturn

Egypt Infrastructure Industry

Egypt Petrochemicals Industry

• Strengths:

• Egypt’s abundant natural gas reserves provide a competitive advantage in terms of petrochemicals production

• Egypt is relatively low risk in commercial and political terms, and offers competitive labour costs and tax exemptions

• It has a well-established fertiliser sector

• It is well-placed to export to Europe

• The Ministry of Trade & Industry is working towards improving trade relations worldwide, protecting the rights of exporters and, above all, sustaining Egypt’s exports to foreign markets

• Opportunities:

• The government has launched a 20-year US$20bn petrochemicals development plan

• The sector is due to expand rapidly; petrochemicals output should grow substantiallyin the coming years if all the projects go ahead as planned

• There is the prospect of large-scale fertiliser and petrochemicals developments basedon the country’s gas reserves

• Early privatisation efforts, involving initial public off erings (IPOs) of successfulcompanies, have generated encouraging results and are likely to promote investment

Egypt Textile Industry

• INDUSTRY HIGHLIGHTS:

• The Textile industry contributes with one quarter of Egypt’ s non-oilexport proceeds.

• The public sector accounts for 90% of cotton spinning, 60% offabric production and 30% of apparel production in Egypt.

• The private sector apparel industry is one of the most dynamicmanufacturing processes in Egypt.

• Egyptian wage levels in the Textile industry are among the lowest inthe world, not exceeding one Dollar per hour.

• Cotton textiles comprise the bulk of Egypt’s TC export basket

• Egypt is the second largest MENA exporter of Textile products tothe US, with woven apparel as the largest category.

• MFN treatment grants Egypt the lowest entry rates as mandated byUS commitment to the WTO.

MEGA Projects

To achieve integrated development of East Port Said , open prospects for new development outside the Nile Valley and Delta, and contributes to the re-distribution of Egypt’s population during the next 30 years, creating more than half a million new jobs and resettlement of nearly 1.5 million people in Sinai and the implementation of the integrated development strategy of Sinai (touristism ,urban, service ,agricultural and industrial), many of the national projects need to be achieved, as follows:

Second: New urban city (millions) in Port SaidThe total area of about 13.6 thousand acres and is expected to accommodate about 1.5 million people.

First: East Port Said Port�One of the most important ports to the major hub in the Mediterranean region and expected to be the largest in years.�The current area of the port 17 thousand acres ,to include all maritime transport activities ; containers and general ,dry and liquid cargoes

Integrated development at suez canal project

Fourth: Other projects(Suez Canal tunnel, Port Said)(Electric train crossing the Suez Canal)(Urban aquaculture center)

Third: industrial Zone Eastern Port-Said Area•The largest industrial zone in Egypt with an area (10 thousand acres)Includes a full range of export industries heavy, medium and light (chemical industries, electronic, basic construction materials, glass, food, metal, textile, car, business district, ..)•The area includes research and studies center, logistic zone and an exhibition’s area.

Fifth: New Free Trade Zone on an area of 2300 acres.

Integrated development at Suez Canal Projects

Different Investment Opportunities In Arab Republic of Egypt

1. East Port Projects

Residential city (13.650 acres)

Sensitive area – future phase (15.000 acres)

Lands for existing society (1.100 acres)

Port and its extension (17.130 acres)

Industrial area and transit trade (10.000 acres)

Military Forces (3.06) Thousand Acres

Fishing farms and recreational / sport areas

(12.000 acres)

Free Zone (2300 acres)

3

6

7

8

1

International coastal road Arish

MEDITERRANEAN SEA

1

2

3

4

5

6

7

8

2

4

5


ا�� ا�� ر – PPPو�دة ا��رو��ت ا��و� � و�رو��ت ا�ـ

East Port Said Port:

• one of the most important ports to the major hub in the Mediterranean region is

expected to be largest during the years.

• The area of the port is 17 thousand acres, in order to include all maritime

transport activities of container and general cargo, dry and liquid.

• The Cabinet approved in its meeting No. (20) dated 06/06/2012 to Establish and

Operate and re-delivery of the second container terminal (CT2) in Port Said East

Port with BOT system provided in one condition the foreign investor's share

dosnt exceed 25%.

• The proposed site for a container terminal (CT2) is within the first phase of the

port development plan and is located south of the container terminal (SCCT1)

on an area of 540 thousand square meters and quay length of 1,200 m.

• In the process of making the pre feasibility study to review the planned

distribution of land uses in the port


New terminal cargo in East port

City for International transit trade and industry c enter and maintenance of ships and containers

ا�� ا�� ر – PPPو�دة ا��رو��ت ا��و� � و�رو��ت ا�ـ

MEGA Projects unit- GAFI


Center for industry and maintenance of ships and containers

Transit city

The main features of the scheme for the East Port Said.

N

Example: projects available to developers for logistics areas and free zone).

• Each administration free zone system • Each area about 10-15 km 2• Each project is thrown as an independent investment

Port utilities

Stage 2Stage 1 Stage 3

General Cargo Terminal

Liquid cargo Terminal

Multi Purpose Terminal

Dry Bulk Terminal

Agri-Shipments Terminal

Roll-On Ships Terminal

Bunker Terminal

Ships Yard

2010-2012 2012/2015

2400 m(1) 3600 m(2)

4

1500 m(1)

450 m(1)

500 m(1)

450 m(1)

500m(1)

2020

7200 m(4)

7

2700 m(3)

600 m(1)

900 m(1)

1100m(2)

500m(1)

1000m(1)

2030

12000 m(7)

10

5600m(4)

1000(2)

900m(1)

1500m(2)

500m(1)

1000m(1)

Stages of Development


N

1-Business Area2-Univercities Area3-Housing4-Tourism

4

1

2

33

3

33

3

3

Port Said new urban residential city (millions)in a total area of about 13.6 thousand acres and is expected to

accommodate about 1.5 million people


Residential city East Port Said

East Port Said Industrial Area

Industrial area east of Port Said targeted investments of more than 120 billion pounds over 20 years and have charts and detailed studies.

� The largest industrial zone in Egypt on an area of (10 thousand acres)

� Includes a full range of export industries; heavy, medium and light (chemical industries, electronic, basic construction materials, glass, food, metal, textile, car, business district, ..)

� The area includes a center for research and studies ,logistic zone and an exhibition's area.


Project Description:

Development and Upgrading of Safaga mining port.

Authority Responsible of the Project: Ministry of Finance.

Project Objective: The Project include exporting for exporting crud phosphate to

be an industrial port with 8 platforms to receive bigger vessel and adding 3 more

industries (Exporting phosphoric Acid – Importing & exporting Grain – importing

live stock – maintenance dock Shipyard).

Location: Safaga Port.

Government: Red Sea Governorate.

Notes:

• Expected Time to finalize pre-feasibility studies in February 2012.

• Expected Time for tendering is July 2013.

• Expected time for Contract signature is Q4 2014.

Investment Opportunities In Arab Republic of Egypt

Safaga Industrial Port

Project Description:

Construction (Design, Develop, Duplicate, Finance, Operate and maintain) of

Passenger and freight link from Ain Shams (Cairo Suburb) to 10th of Ramadan

(Inudstrial City), Passing by Belbes City. Total length 72 Km, with 17 Stations.

Authority Responsible of the Project: Ministry of Finance.

Project Objective: Construction of Passenger and freight link from Ain Shams

(Cairo Suburb) to 10th of Ramadan (Industrial City), Passing by Belbes City.

Location: Ain Shams / 10th of Ramadan.

Area: 72 Km.

Government: Cairo / Sharqeia Governorates.

Notes:

• Expected Time to finalize pre-feasibility studies in February 2013.

• Expected Time for tendering is June 2013.

• Expected time for Contract signature is Q1 2015.


Ain Shams-10th of Ramdan Railway

Area: 60 acres next to the land of golf was allocated from the Governorate of the Egyptian General Authority for Exhibitions and Conferences.Investment Cost of the Project: USD 2 Billion for City exhibitions, conferences and monorail project.Government : South Sinai Governorate.Notes: • The profitability study has been prepared architectural and structural designs and drawings by the International Advisory Zaha Hadid has won the project designs several international awards.• Cooperation protocol was signed between the Egyptian General Authority for Exhibitions and Conferences and the General Authority for industrial and mining projects as a consultant for the project.• Project land has been allocated from the Government and the Egyptian General Authority for exhibitions, conferences and Gary dependence of the Council of Ministers.• Immediately after the adoption of the Higher Committee for participation between the state and the private sector will take executive action to put locally and internationally between specialized companies.

City exhibition and conferences in Sharm El Sheikh

Investment Cost of the Project: USD 200 Million.

Government : South Sinai Governorate.

Notes:

• The distance between the port of Sharm el-Sheikh and developed port 100 km

and so when developing the port will be developed to reduce the burden on

the port of Sharm el-Sheikh.

• Port has scaffold consists of a length of 200 meters and a depth of 8 meters,

and pavement of iron curtains length of 75 meters and a depth of 8 meters.

• There is also a port hinterland length of 150 meters and width of 75 meters,

where the port to receive vessels operating in the field of petroleum services,

and bunkering mineral water, and replace rigs for maintenance for commercial

ships and tourist no more than Rasfha 5 meters, as the Annual Return for Port

EGP 1.4 million other than maintenance and development work.


Developing tour sinai Port

Project Description: 55,000 m3 of water / day. Type of treatment: Active sludge.

Authority Responsible of the Project: Holding Company for Water and Waste

Water – Qena Governorate.

Project Objective: Using treated wastewater in agriculture, according to the

Egyptian code.

Investment Cost of the Project: EGP 100 Million.

Location: Qena Expansion Forest.

Area: 4000 Acres.

Governorate: Qena Governorate.

Notes:

• After triple treatment, its possible to use traditional agriculture according to the

Code.

• The Project is tendering by Usufruct system.

Re-use Of Treated Wastewater In Agriculture – Qena Expansion Forest

� Project Description:Area of 16.4 Km2 North East Suez Canal – Special Economic Zone (Sokhna). Attract the private sector to develop the first phase of the project with an area of 6.8 Km2 to manage, operate and maintain the infrastructure and utilities, and promote the Zone

� Sponsor:The General Authority for Investment

� Investment Cost:800 Million pounds

� Status:The Chinese Company “TIDA” has been contracted for developing phase one of the project

Special Economic Zones North West Suez Canal

Mega Projects

Alexandria Medical City

Mega Projects

• GAFI is adopting a project to establish a Medical City in Alexandria

through the Mega Projects Unit in order to achieve the vision to support

investment projects in the medical field by coordinating efforts between

them and the Alexandria Governorate and the Ministry of Health.

• The project is located on a 500 acre lot, at a prime location, at the

entrance of Alexandria on Cairo-Alex desert road.

• Alexandria governorate will avail the land under a usufruct arrangement.

• The project will include specialized hospitals, emergency centers,

wellness facilities, administrative areas, and clinics. In addition to

commercial and hospitality developments.

• Anticipated investments of the project are around 8 Billion LE.

• Project Sponsor : General Authority for Investment / Alexandria

governorate.

• Proposed Investment Mechanism: Investment Zone.

Thank you

doing business in egypt - assolombarda.it

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