Background
Since its establishment in 2005 by virtue of Presidential Decree Number 350 of 2005, the Industrial Development Authority (“IDA”) has been the agency in charge of the development, supervision and promotion of industry in Egypt. As part of this overall mandate, IDA has been in charge of issuing the rules and requirements for industrial licenses, as well as actually issuing the licenses for industrial projects located outside of dedicated industrial zones. So far, issuing industrial licenses has been one of the most complicated and lengthy procedures affecting Egypt’s investment environment due to the centralization of license issuing, the various approvals and permits needed to be obtained as a prerequisite for issuing the license and the lack of transparency with respect to some of the rules and procedures. Moreover, once an industrial project has obtained land (in a dedicated industrial zone) then it was required to use only a percentage of that land for construction of the facility, again a source of complaint as prices of land have gone up and availability is a chronic complaint.
In response to this, and to the growing consternation by the investment community with the licensing process, the Minister of Trade and Industry has issued two new decrees – Ministerial decrees No. 825 and 826 of 2008 – which were published in the Egyptian Gazette on October 23rd, 2008.
Industrial Permits
The first Decree No. (825 of 2008) provides for a fast track procedure for issuing the Permit to Establish an Industrial Project (“Industrial Permit”). It should, however, be noted that the Industrial Permit in the meaning of the new Decree does not refer to the final industrial license, but is one key step in obtaining it. According to the new procedures, IDA shall issue the Industrial Permit from either its main office (in Cairo) or from any of its branches in the Governorates of any of the Investment Authority’s One-Stop-Shops immediately following the submission of the request, but provided the industry meets the following conditions:
- That it is not one of “Exempted Industries” as defined in Article Two,
- That it is within one of the dedicated industrial zones,
- That the Industrial Permit is valid for one year – renewable for another two years – during which time the industrial investor needs to obtain all the other permits and approvals.
If, however, the industry for which the Permit is sought is one of the “Exempted Industries”, then the Permit is issued within seven days from date of submission of required documents according to the laws and regulations governing the specific industry. The «Exempted Industries» are: high energy consuming industries (flat glass, ceramics, chemicals, cement, copper and iron and steel),tobacco, pesticides, pharmaceuticals, oil refineries, fertilizers (non-azotic), paper, sugar, mining, and private free zone projects.
The Decree further lists the various industries which are prohibited by virtue of previous laws, regulations or international agreements, and these are: Azotic fertilizers, aluminum, oxygenated water, tyre renewal, industries using asbestos, chemicals needed for nuclear fusion and fission, military industries, fireworks, red brick made from silt, industries using aerosols, manufacturing of cutlery using certain chemical products, certain motorcycles, and industries using PCBS material.
Land Usage in Industrial Zones
The second Decree No. (826 of 2008) changes the specifications of land usage in dedicated industrial zones, allowing the manufacturer to use a larger foot-print that hitherto was permitted. The new rules apply to smaller industries occupying up to 4000 m2 (Four Thousand Square Meters) to have a recess of only 2,5 m (Two and a Half Meters) from three sides, and none from the back side. Overall, the footprint of the plant should not exceed 65% of the total land surface, provided industrial safety standards are observed.
The same Decree further grants IDA the right to delegate its authority in issuing building permits in dedicated industrial zones to other governmental entities, specifically new cities councils and boards of directors of industrial zones. This, however, is an overall rule and no specific delegation is stated yet.
Conclusion and Assessment
In spite of the well intended approach of both decrees, their effect will be limited for the foreseeable future. With respect to industrial licenses, as previously said, the Industrial Permit is only one preliminary step in the process of issuing the full Industrial License, and the rest of that process seems unaffected by the new rules. As to the impact of changes in use of industrial land, it will be felt and considered positive by smaller industries but not by medium and larger ones. Both Decrees are steps in the right direction, but much larger ones need to be taken.
Background
Since its establishment in 2005 by virtue of Presidential Decree Number 350 of 2005, the Industrial Development Authority (“IDA”) has been the agency in charge of the development, supervision and promotion of industry in Egypt. As part of this overall mandate, IDA has been in charge of issuing the rules and requirements for industrial licenses, as well as actually issuing the licenses for industrial projects located outside of dedicated industrial zones. So far, issuing industrial licenses has been one of the most complicated and lengthy procedures affecting Egypt’s investment environment due to the centralization of license issuing, the various approvals and permits needed to be obtained as a prerequisite for issuing the license and the lack of transparency with respect to some of the rules and procedures. Moreover, once an industrial project has obtained land (in a dedicated industrial zone) then it was required to use only a percentage of that land for construction of the facility, again a source of complaint as prices of land have gone up and availability is a chronic complaint.
In response to this, and to the growing consternation by the investment community with the licensing process, the Minister of Trade and Industry has issued two new decrees – Ministerial decrees No. 825 and 826 of 2008 – which were published in the Egyptian Gazette on October 23rd, 2008.
Industrial Permits
The first Decree No. (825 of 2008) provides for a fast track procedure for issuing the Permit to Establish an Industrial Project (“Industrial Permit”). It should, however, be noted that the Industrial Permit in the meaning of the new Decree does not refer to the final industrial license, but is one key step in obtaining it. According to the new procedures, IDA shall issue the Industrial Permit from either its main office (in Cairo) or from any of its branches in the Governorates of any of the Investment Authority’s One-Stop-Shops immediately following the submission of the request, but provided the industry meets the following conditions:
- That it is not one of “Exempted Industries” as defined in Article Two,
- That it is within one of the dedicated industrial zones,
- That the Industrial Permit is valid for one year – renewable for another two years – during which time the industrial investor needs to obtain all the other permits and approvals.
If, however, the industry for which the Permit is sought is one of the “Exempted Industries”, then the Permit is issued within seven days from date of submission of required documents according to the laws and regulations governing the specific industry. The «Exempted Industries» are: high energy consuming industries (flat glass, ceramics, chemicals, cement, copper and iron and steel),tobacco, pesticides, pharmaceuticals, oil refineries, fertilizers (non-azotic), paper, sugar, mining, and private free zone projects.
The Decree further lists the various industries which are prohibited by virtue of previous laws, regulations or international agreements, and these are: Azotic fertilizers, aluminum, oxygenated water, tyre renewal, industries using asbestos, chemicals needed for nuclear fusion and fission, military industries, fireworks, red brick made from silt, industries using aerosols, manufacturing of cutlery using certain chemical products, certain motorcycles, and industries using PCBS material.
Land Usage in Industrial Zones
The second Decree No. (826 of 2008) changes the specifications of land usage in dedicated industrial zones, allowing the manufacturer to use a larger foot-print that hitherto was permitted. The new rules apply to smaller industries occupying up to 4000 m2 (Four Thousand Square Meters) to have a recess of only 2,5 m (Two and a Half Meters) from three sides, and none from the back side. Overall, the footprint of the plant should not exceed 65% of the total land surface, provided industrial safety standards are observed.
The same Decree further grants IDA the right to delegate its authority in issuing building permits in dedicated industrial zones to other governmental entities, specifically new cities councils and boards of directors of industrial zones. This, however, is an overall rule and no specific delegation is stated yet.
Conclusion and Assessment
In spite of the well intended approach of both decrees, their effect will be limited for the foreseeable future. With respect to industrial licenses, as previously said, the Industrial Permit is only one preliminary step in the process of issuing the full Industrial License, and the rest of that process seems unaffected by the new rules. As to the impact of changes in use of industrial land, it will be felt and considered positive by smaller industries but not by medium and larger ones. Both Decrees are steps in the right direction, but much larger ones need to be taken.