On the 4 June 2023, the Egyptian Prime Minister per decree amended the provisions of the Executive Regulations to the Egyptian Investment Law concerning the establishment of projects in private free zones.
On the 4 June 2023, the Egyptian Prime Minister per decree amended the provisions of the Executive Regulations to the Egyptian Investment Law concerning the establishment of projects in private free zones. These amendments come as part of the Egyptian government’s attempt to provide incentives for investors and attract more foreign direct investment to Egypt. The amendments abandoned requirements imposed on investors and introduced a new type of private free zone that would be open to service businesses.
The Egyptian investment law distinguishes between public and private free zones. Private free zones are zones set up for several investment projects, typically in related business sectors. Private free zones on the other hand are zones establish for a single investment project. Investors in both types of free zones benefit from certain incentives. The recent amendments to the Egyptian investment regime concerned only investments in private free zones.
The amendments to the Executive Regulations abandoned several restrictive requirements for investing in a private free zone. Hence, investors who wish to avail themselves of the inventive of setting up in a private free zone now can do so without fulfilling requirements they previously had to fulfil. Most notably, the minimum share capital requirement for the investment vehicle—which prior to the amendment was USD 10 million—and the minimum investment amount—which prior to the investment was USD 20 million—where stricken. Furthermore, the amendments repealed the requirement for industrial project to employ a minimum of 500 employees and the requirement of such projects to lease at least 20,000 square meters of land.
Investments in private free zones still must: (1) be made through an Egyptian joint stock or limited liability company, (2) export 80 percent of their production, and (3) source at least 30 percent of their supplies locally. However, these remaining requirements may now be waived by the Egyptian Cabinet on a case-by-case basis with the approval of the board of directors of the General Authority for Free Zones and Investment (GAFI).
The amendments to the Executive Regulations also introduced private services free zone project. These private services free zones be sector specific investment zones for service provided. They may be set up for for example for the tourism, transportation, health, and energy services sectors. These new private services free zone will be under the supervision of GAFI. Unlike investment project in other free zones investments in private services free zones only need to fulfil one require. The investment must be made through an Egyptian joint stock or limited liability company. There are no requirement to export services or source locally.
The amendments are a step in the right direction towards attracting more foreign investment to Egypt. However, It remains to be seen how they are implemented in practice. Furthermore, other investment factors such as quality of labour and infrastructure must to be addresses in addition to legislative reform to effectively attract foreign investors.
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