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Qualifying Industrial Zones Committee

• Investment incentives under QIZ
• Available industrial land and investment incentives

Investment incentives under QIZ

Hisham Hassan, chairman of Egypt's Export Development Bank, and Mahmoud Attalla, vice chairman of the General Authority for Investment & Free Zones (GAFI), spoke about the benefits of the Qualifying Industrial Zone (QIZ) Initative during a QIZ committee meeting on December 18 entitled "Investment incentives under QIZ." Attalla opened his presentation with a comprehensive explanation of the principles underlying the QIZ protocol, which allows eligible goods from Jordan, Egypt or the Palestinian territories to be shipped to the US duty free.

He explained that the QIZ model is intended to support a lasting peace between Israel and its neighbors, while promoting development of non-oil export industries in the region. There are three eligibility criteria for Egyptian products to qualify for the QIZ duty-free status, Attala said. First, a product must meet the country of origin criteria; specifically, a product must contain 11.7-percent Israeli input. Second, at least 35 percent of the cost of production must be borne in Egypt. Third, all products must be exported directly from the QIZ to the US.

Egypt has four QIZ clusters encompassing Greater Cairo, Alexandria, the Delta and the Suez Canal area. Companies in a variety of sectors have successfully made use of the QIZs. Producers of textiles, agricultural goods, glass and ceramics, which previously faced high tariffs in the US, are the main beneficiaries. Among these, the textiles sector has received the biggest boost from the protocol, with exports reaching $1.3 billion last year, double the year before. The QIZ agreement has enabled Egyptian producers to benefit from their comparative advantage without the distorting effect of US import tariffs, Attala said. The success of the textile industry has laid the groundwork for further investment in the QIZs, increasing the potential for growth in Egyptian exports.

Available industrial land and investment incentives

AmCham’s Qualifying Industrial Zones (QIZ) Committee held a meeting on November 21 with guest speakers Amr Assal, chairman of the Industrial Development Authority (IDA), and Ahmed Zaki, a representative of the QIZ Unit at the Ministry of Foreign Trade & Industry (MTI). The speakers discussed the availability of industrial land and investment incentives in Egypt. Assal spoke about the role of the IDA in promoting industrial development, while Zaki provided some statistics on QIZ operations. Assal began by explaining that the vision of the IDA is to help Egypt become an industrial leader in the Middle East and North Africa. In order to accomplish this, the IDA has four primary roles: to establish conditions for private investment in industrial zones, to implement MTI policies, to assign industrial zone status and to coordinate with other government agencies.

One of the IDA’s major intiatives is policy and regulation reform. The IDA has focused on increasing the ease of doing business and reducing the financial and administrative burden of regulation, explained Assal. The IDA is working alongside international organizations, including the World Bank, to simplify and automate procedures, in particular land registration. One measure aimed at encouraging development in these zones is to defer payment on the lease until construction has been completed, reducing the upfront costs to investors. However, he noted, it is important to ensure that investors are financially competent before allocating land to reduce inefficiency. Assal went on to discuss available business opportunities in Egypt’s industrial zones. He pointed out that there are currently 20 million square meters available in 79 industrial zones across Egypt. The IDA also has plans to create some 30 million square meters in new industrial zones. He encouraged businesses to invest in the zones’ infrastructure, especially in terms of energy and new factory facilities.

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