Interview: Mohamed Zaki El Sewedy
What are the biggest challenges facing the country’s manufacturing sector?
MOHAMED ZAKI EL SEWEDY: Traditionally, there are a number of challenges facing manufacturers in Egypt, including land allocation and pricing for industrial projects, licensing and permitting. For years, these challenges have impacted the growth of manufacturing companies by inhibiting their ability to make decisions based on their projections and the current economic environment. Instead, decisions had to be made about an unknown set of future circumstances due to the significant variability in approval and processing times.
However, the government has recently announced that a full industrial investment map of Egypt will be issued, with land plots allocated for industry investments, as well as the development of industrial parks or clusters. Most plots will be either free, or sold at low prices or through usufruct rights. This will help remedy the issue of land prices, which are currently very high due to the lack of readily available land registered for industrial development and the increased competition for land created by growing housing demand.
Given the beneficial impact of industry on the Egyptian economy, a serious dialogue is being held with the government on the price of energy for industries, especially after the currency flotation. We have managed to solve the industrial licensing and permitting issue with a new law that allows permits for most industries to be acquired through notification only.
In addition, the new Investment Law is now complete and will be discussed in Parliament. The draft of the Restructuring and Market Exit Law is in its final stages and should also see the light of day soon. As for value-added tax, implementation is ongoing. No significant issues have arisen as businesses – once registered – have no problem implementing it. All the progress achieved has been needed for years, and now that these steps are in effect, they will be key in supporting the growth of Egypt’s industrial sector in 2017.
How has the flotation of the Egyptian pound impacted manufacturing?
EL SEWEDY: Egypt’s decision to float its currency was the correct decision and one that was delayed for a number of years. This is a positive step that will lead to increased stability, as having two parallel rates for the dollar created a very difficult business environment. Nevertheless, some short-lived problems have emerged from the flotation. However, all of the concerned parties are in continuous dialogue to try to overcome key challenges, including the foreign currency debt exposure of companies that were negatively impacted by the devaluation. As a result of this, the FEI led an initiative with other stakeholders and reached an agreement with the governor of the Central Bank of Egypt whereby the government will work on a plan to allow the affected companies to repay their debts over a period of one to three years.
Egypt is entering a new period in which, for the first time, the currency is not fixed, requiring companies to adjust to projections for 2017 that are less certain than they usually are. One of the greatest benefits of the flotation, however, will be the increased access to foreign currency, as well as the boost the revalued Egyptian pound will give to industry exports.
How does the informal sector affect the competitiveness of Egypt’s industries?
EL SEWEDY: The informal sector is basically a product of bureaucracy, lack of transparency and regulations. In terms of competitiveness, the informal economy has a varying impact depending on the sector, with almost no effect on certain areas of industry, as it cannot compete in the local and export markets. The biggest challenges presented to industry by the informal economy are in the food industry, where it is difficult to compete on price with unregulated products. This matter will be solved after the passage of the Unified Food Law and the establishment of the Food Safety Authority laws.
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