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After Years of Confusion, Port Said

After Years of Confusion, Port Said to Remain a Free Zone City
On the 26 February 2013, the Shoura Council issued a one-article law to end the ongoing issue of the Port Said free zone and affirm the continuity of the status of Port Said as a free zone city (the “Law”).[1]
Free Zones in General
Free zones are essentially domestic locations that are considered offshore ones; investors within these areas are lightly taxed if taxed at all as well as exempted from paying customs fees on imported goods. The Port Said and Nasr City free zones were among the first to be established in Egypt in the mid-70s, when Egypt first began establishing free zones. However, Port Said is different from Nasr City and the eight other public free zones that have since been established in Egypt in that unlike them Port Said as a whole city, not just a specific area within a city, is considered by the authorities a free zone. That, among other factors like the city’s unique location as a port, gave it an advantage over other Egyptian cities and made Port Said a hub for economic activity in Egypt throughout the 70s and 80s.
Frequent Changes in the Law
The Port Said free zone city was first created by Law No. 24 of 1976,[2] also a one-article law declaring the entire city a free zone and giving the President the right to issue laws regulating transactions within it. The statute regulating the functioning of Port Said as a free zone was issued by Law No. 12 of 1977 (the “Statute”).[3] It stipulated that the city would have its independent budget like that of a commercial projects and a board of directors headed by the Governor to draw the plans and policies for the zone and make the financial, economic and administrative decisions regarding the city, as well as determining the city’s exits and custom points in coordination with the general authority for customs. That Statute also expanded on the implications of Port Said being a free zone by lifting all restrictions on foreign currency transactions within the city as well as exempting from taxes and customs transactions of all legal consumer goods except alcoholic beverages and cigarettes. It is worth noting that throughout the Eighties many other goods like textiles, watches, spare automobile parts, chocolates, jewelry and precious stones etc., were added to the two exceptions mentioned above through three decrees issued by the Prime Minister; Decrees No. 695 of 1983, No. 1072 of 1984 and No. 1107 of 1985 respectively). The status of Port Said remained unchanged until 2002 when Law No. 5 was issued by Parliament (the “2002 Law”),[4] to abolish Law No. 24 of 1976 and Law No. 12 of 1977. The 2002 Law terminated Port Said’s status as a free zone city beginning from “five years” from the date of issuance of the 2002 Law i.e. starting January 2007, as well as gradually decreased the city’s share of imports in those five years in an attempt to end it completely by the end of the five-year period. The 2002 Law stated that starting from January 2007 Port Said would be governed, like all other Egyptian cities, by Law No. 34 of 1979 on the Administration of Governorates and Law No. 118 of 1975 on Imports and Exports. In reality, the 2002 Law was never actually implemented; it underwent several amendments to delay its implementation until it was finally abolished this year by the aforementioned Law. The first of those amendments was made by Law No. 1 of 2006 which replaced the term “five years” with “seven years” in the first Article, meaning that Port Said would remain a free zone for two additional years. Law No. 1 of 2006 also stated that the import shares of the city would remain as stated in the 2002 Law. In 2009, another Law was issued to amend both 2002 Law and Law No. 12 of 1977. The first amendment was to replace the term “seven years” with “ten years”, which gave Port Said another three years as a free zone. Secondly, the law removed “means of transportation” from Article 13 of Law No. 12 of 1977, which has defined the goods and commodities which were exempt from taxes and customs.
Port Said to Remain Free Zone City
In September 2011, Law No. 119 of 2011 was issued to once again amend the 2002 Law and postpone its implementation for one more year until January 2013 as well as returning the import share of the city to EGP 62,000,000 as well as adding another 20 million Egyptian Pounds during 2012. Two more amendments to the 2002 Law were made in 2012 via Laws No. 83 and No. 95 of 2012. The first added another 10 million Egyptian pounds to Port Said’s annual import shares, while the second postponed the termination of Port Said’s status as a free zone for another two years. Finally, the recent Law was issued to repeal the 2002 law and all of its amendments and keep Port Said as a free zone regulated by Laws No. 24 of 1976 and No. 12 of 1977.
Conclusion
It is unfortunate that the Port Said’s status as a free zone has had to undergo so many legislative changes during the last thirty-five years, and that this confused approach was always driven by politics and not economics. This remains true to this day. The new Law which allows Port Said to remain a free city is again driven by the need to resolve a political crisis, but unfortunately is not based on any economic considerations.   [1] Law No. 6/2013 abolishing Law No. 5/2002 which terminated Port Said’s status as a Free Zone City, Official Gazette, Issue No. 8 (bis) (c), 26 February 2013. [2] Law No. 24/1976 declaring Port Said as a Free Zone city, Official Gazette, Issue No. 14, 1 April 1976. [3] Law No. 12/1977 issuing the Statute which regulates the functioning of Port Said as a Free Zone, Official Gazette, Issue No. 13, 31 March 1977. [4] Law No. 5/2002 terminating Port Said’s status as a Free Zone City, Official Gazette, Issue No. 3 (bis) (a), 22 January 2002.
On the 26 February 2013, the Shoura Council issued a one-article law to end the ongoing issue of the Port Said free zone and affirm the continuity of the status of Port Said as a free zone city (the “Law”).[1]
Free Zones in General
Free zones are essentially domestic locations that are considered offshore ones; investors within these areas are lightly taxed if taxed at all as well as exempted from paying customs fees on imported goods. The Port Said and Nasr City free zones were among the first to be established in Egypt in the mid-70s, when Egypt first began establishing free zones. However, Port Said is different from Nasr City and the eight other public free zones that have since been established in Egypt in that unlike them Port Said as a whole city, not just a specific area within a city, is considered by the authorities a free zone. That, among other factors like the city’s unique location as a port, gave it an advantage over other Egyptian cities and made Port Said a hub for economic activity in Egypt throughout the 70s and 80s.
Frequent Changes in the Law
The Port Said free zone city was first created by Law No. 24 of 1976,[2] also a one-article law declaring the entire city a free zone and giving the President the right to issue laws regulating transactions within it. The statute regulating the functioning of Port Said as a free zone was issued by Law No. 12 of 1977 (the “Statute”).[3] It stipulated that the city would have its independent budget like that of a commercial projects and a board of directors headed by the Governor to draw the plans and policies for the zone and make the financial, economic and administrative decisions regarding the city, as well as determining the city’s exits and custom points in coordination with the general authority for customs. That Statute also expanded on the implications of Port Said being a free zone by lifting all restrictions on foreign currency transactions within the city as well as exempting from taxes and customs transactions of all legal consumer goods except alcoholic beverages and cigarettes. It is worth noting that throughout the Eighties many other goods like textiles, watches, spare automobile parts, chocolates, jewelry and precious stones etc., were added to the two exceptions mentioned above through three decrees issued by the Prime Minister; Decrees No. 695 of 1983, No. 1072 of 1984 and No. 1107 of 1985 respectively). The status of Port Said remained unchanged until 2002 when Law No. 5 was issued by Parliament (the “2002 Law”),[4] to abolish Law No. 24 of 1976 and Law No. 12 of 1977. The 2002 Law terminated Port Said’s status as a free zone city beginning from “five years” from the date of issuance of the 2002 Law i.e. starting January 2007, as well as gradually decreased the city’s share of imports in those five years in an attempt to end it completely by the end of the five-year period. The 2002 Law stated that starting from January 2007 Port Said would be governed, like all other Egyptian cities, by Law No. 34 of 1979 on the Administration of Governorates and Law No. 118 of 1975 on Imports and Exports. In reality, the 2002 Law was never actually implemented; it underwent several amendments to delay its implementation until it was finally abolished this year by the aforementioned Law. The first of those amendments was made by Law No. 1 of 2006 which replaced the term “five years” with “seven years” in the first Article, meaning that Port Said would remain a free zone for two additional years. Law No. 1 of 2006 also stated that the import shares of the city would remain as stated in the 2002 Law. In 2009, another Law was issued to amend both 2002 Law and Law No. 12 of 1977. The first amendment was to replace the term “seven years” with “ten years”, which gave Port Said another three years as a free zone. Secondly, the law removed “means of transportation” from Article 13 of Law No. 12 of 1977, which has defined the goods and commodities which were exempt from taxes and customs.
Port Said to Remain Free Zone City
In September 2011, Law No. 119 of 2011 was issued to once again amend the 2002 Law and postpone its implementation for one more year until January 2013 as well as returning the import share of the city to EGP 62,000,000 as well as adding another 20 million Egyptian Pounds during 2012. Two more amendments to the 2002 Law were made in 2012 via Laws No. 83 and No. 95 of 2012. The first added another 10 million Egyptian pounds to Port Said’s annual import shares, while the second postponed the termination of Port Said’s status as a free zone for another two years. Finally, the recent Law was issued to repeal the 2002 law and all of its amendments and keep Port Said as a free zone regulated by Laws No. 24 of 1976 and No. 12 of 1977.
Conclusion
It is unfortunate that the Port Said’s status as a free zone has had to undergo so many legislative changes during the last thirty-five years, and that this confused approach was always driven by politics and not economics. This remains true to this day. The new Law which allows Port Said to remain a free city is again driven by the need to resolve a political crisis, but unfortunately is not based on any economic considerations.   [1] Law No. 6/2013 abolishing Law No. 5/2002 which terminated Port Said’s status as a Free Zone City, Official Gazette, Issue No. 8 (bis) (c), 26 February 2013. [2] Law No. 24/1976 declaring Port Said as a Free Zone city, Official Gazette, Issue No. 14, 1 April 1976. [3] Law No. 12/1977 issuing the Statute which regulates the functioning of Port Said as a Free Zone, Official Gazette, Issue No. 13, 31 March 1977. [4] Law No. 5/2002 terminating Port Said’s status as a Free Zone City, Official Gazette, Issue No. 3 (bis) (a), 22 January 2002.