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Presidency Excludes Suez Canal Spec

Presidency Excludes Suez Canal Special Economic Zone from Restrictions for Investing in the Sinai Peninsula
President of Egypt issued a decree excluding the Suez Canal Special Economic Zone (“SCZ”) from the scope of application of the Law for the Comprehensive Development of the Sinai Peninsula (the "Decree").[1] The new Decree expressly establishes that solely the Law on Economic Zones of Special Nature shall govern the SCZ.[2] The Decree means that the SCZ will be excluded from the restrictions on granting usufruct rights and on granting licenses to establish projects in the Sinai Peninsula, as well as the need to seek approvals from the National Authority for Comprehensive Development of the Sinai Peninsula.
Background
In August 2015, and four days following the inauguration of a major extension of the Suez Canal, the President issued Decree No. 330 of 2015 establishing the Suez Canal Special Economic Zone.[3] However, the SCZ fell within the scope of two legal frameworks; that for Economic Zones of Special Nature on the one hand, and that of the Law for Comprehensive Development of the Sinai Peninsula on the other. The present decree, hence, comes to exclude one of these frameworks; instead, it establishes that the SCZ shall be governed only by virtue of the Law on Economic Zones of Special Nature.
Consequences of the Decree
As clarified in the August and September Issues of the Egypt Legal Update, considering the SCZ an economic zone of special nature means that any investor, whether Egyptian, Arab or foreign, may only acquire usufruct rights on land lots within the SCZ, instead of owning or leasing them, as is the case in other investment areas. However, investors in the SCZ will benefit from several advantages. The Law on Economic Zones of Special Nature provides for tax and custom exemptions; such as those for the income realized from bonds, loans and credit facilities (Article 39), mergers, spin-offs and transformations (Article 40), and tools, equipment, machinery, raw materials and spare parts necessary for the activities conducted inside the special economic zones (Article 42). On the other hand, excluding the SCZ from the provisions of the Law for Comprehensive Development of the Sinai Peninsula means that the legal framework established by the Law of Economic Zones of Special Nature for establishing projects and granting usufruct rights shall be applicable in the SCZ. A principal consequence of such a conclusion, for instance, is that land lots of the SCZ will not be governed by the obligation to get approvals of the Board of the National Authority for Comprehensive Development of the Sinai Peninsula, the Ministry of Defense, the Ministry of Interior and the Egyptian Intelligence in order to acquire usufruct rights over a piece of land in the SCZ.[4] Instead of following this legal regime, the new decree establishes that the granting of usufruct rights in the SCZ falls within the competence of the General Authority for the SCZ.[5] In general, the new decree means that the legal regime for granting licenses to establish projects, issuing decisions on land division and licensing construction and deconstruction within the SCZ shall be that of the General Authority for the SCZ.[6]
Conclusion
The main effect for the present decree is that makes it clear that the authority with which potential investors in the SCZ need to deal is the only the National Authority for the SCZ. This shall be read in line with the special characteristics the National Authority for the SCZ enjoys. Indeed, it enjoys considerable amount of independence and margin of freedom to manage the activities of the SCZ. All these measures were clearly taken with the purpose of removing any bureaucratic obstacles that might hinder investment in the SCZ. [1] Presidential Decree No. 323/2016, Official Gazette, Issue No. 23, 9 June 2016; Decree-Law No. 14/2012 on the Comprehensive Development of the Sinai Peninsula, amended by virtue of Decree-Law No. 95/2015. [2] Law No. 83 of 2002 on Economic Zones of Special Nature. [3] Presidential Decree No. 330 for the year 2015 for the establishment of the Suez Canal economic zone; Official Gazette, Issue 32 (bis c), 10 August 2015. [4] Article (2), Decree-Law 14 of 2012 for the Comprehensive Development of the Sinai Peninsula. [5] Articles (38), (48), Law 83 of 2002 of Economic Zones of Special Nature. [6] Article (14), Ibid.
President of Egypt issued a decree excluding the Suez Canal Special Economic Zone (“SCZ”) from the scope of application of the Law for the Comprehensive Development of the Sinai Peninsula (the "Decree").[1] The new Decree expressly establishes that solely the Law on Economic Zones of Special Nature shall govern the SCZ.[2] The Decree means that the SCZ will be excluded from the restrictions on granting usufruct rights and on granting licenses to establish projects in the Sinai Peninsula, as well as the need to seek approvals from the National Authority for Comprehensive Development of the Sinai Peninsula.
Background
In August 2015, and four days following the inauguration of a major extension of the Suez Canal, the President issued Decree No. 330 of 2015 establishing the Suez Canal Special Economic Zone.[3] However, the SCZ fell within the scope of two legal frameworks; that for Economic Zones of Special Nature on the one hand, and that of the Law for Comprehensive Development of the Sinai Peninsula on the other. The present decree, hence, comes to exclude one of these frameworks; instead, it establishes that the SCZ shall be governed only by virtue of the Law on Economic Zones of Special Nature.
Consequences of the Decree
As clarified in the August and September Issues of the Egypt Legal Update, considering the SCZ an economic zone of special nature means that any investor, whether Egyptian, Arab or foreign, may only acquire usufruct rights on land lots within the SCZ, instead of owning or leasing them, as is the case in other investment areas. However, investors in the SCZ will benefit from several advantages. The Law on Economic Zones of Special Nature provides for tax and custom exemptions; such as those for the income realized from bonds, loans and credit facilities (Article 39), mergers, spin-offs and transformations (Article 40), and tools, equipment, machinery, raw materials and spare parts necessary for the activities conducted inside the special economic zones (Article 42). On the other hand, excluding the SCZ from the provisions of the Law for Comprehensive Development of the Sinai Peninsula means that the legal framework established by the Law of Economic Zones of Special Nature for establishing projects and granting usufruct rights shall be applicable in the SCZ. A principal consequence of such a conclusion, for instance, is that land lots of the SCZ will not be governed by the obligation to get approvals of the Board of the National Authority for Comprehensive Development of the Sinai Peninsula, the Ministry of Defense, the Ministry of Interior and the Egyptian Intelligence in order to acquire usufruct rights over a piece of land in the SCZ.[4] Instead of following this legal regime, the new decree establishes that the granting of usufruct rights in the SCZ falls within the competence of the General Authority for the SCZ.[5] In general, the new decree means that the legal regime for granting licenses to establish projects, issuing decisions on land division and licensing construction and deconstruction within the SCZ shall be that of the General Authority for the SCZ.[6]
Conclusion
The main effect for the present decree is that makes it clear that the authority with which potential investors in the SCZ need to deal is the only the National Authority for the SCZ. This shall be read in line with the special characteristics the National Authority for the SCZ enjoys. Indeed, it enjoys considerable amount of independence and margin of freedom to manage the activities of the SCZ. All these measures were clearly taken with the purpose of removing any bureaucratic obstacles that might hinder investment in the SCZ. [1] Presidential Decree No. 323/2016, Official Gazette, Issue No. 23, 9 June 2016; Decree-Law No. 14/2012 on the Comprehensive Development of the Sinai Peninsula, amended by virtue of Decree-Law No. 95/2015. [2] Law No. 83 of 2002 on Economic Zones of Special Nature. [3] Presidential Decree No. 330 for the year 2015 for the establishment of the Suez Canal economic zone; Official Gazette, Issue 32 (bis c), 10 August 2015. [4] Article (2), Decree-Law 14 of 2012 for the Comprehensive Development of the Sinai Peninsula. [5] Articles (38), (48), Law 83 of 2002 of Economic Zones of Special Nature. [6] Article (14), Ibid.