Supporting Private Sector
Saturday، 24 September 2022 - 11:53 PM
Over the past few years, the State, along with its various institutions, has encouraged the engagement of the local and foreign private sector, as engines for the economic growth, in supporting national development plans through the implementation of several infrastructure development projects. Moreover, the State exerts efforts to provide a supportive climate for investment through making legislative amendments aimed at encouraging investors and the private sector to lead the development process, along with focusing on ensuring a fair competition and protecting the citizens' interests from any monopolistic or negative practices.
The government is also taking several measures at the current stage to support the private sector, including providing support in the energy field for production projects, paying export-subsidy arrears, as well as the comprehensive development and mechanization of the tax and customs systems. This is positively reflected on the business climate in Egypt, as the industrial sector records an increase in the contribution percentage to the gross domestic product (GDP), and many foreign companies start to take Egypt as a regional base for their business, in addition to encouraging the emergence of a new generation of young Egyptian entrepreneurs.
Initiatives To Encourage Small And Medium Enterprises
The micro, small and medium enterprises (MSMEs) sector plays an important role in boosting and developing the production in various sectors, and providing job opportunities. The government directs its efforts to support and develop MSMEs sector through providing the necessary funding to establish new projects or to expand existing projects, along with marketing the products of these projects, implementing various training programs to enhance the skills of their workers, and putting Law No. 152 of 2020 on the Development of MSMEs into force through the issuance of the Executive Regulations of the Law, as well as the issuance of a guide for licensing new projects.
A. Fekretak Sherketak:
Driven from the Egyptian government's vision for achieving comprehensive and sustainable economic development, and to complement GAFI's efforts to pay attention to startups and micro- sized enterprises as one of the most important pillars for confronting the challenges facing the global economy, due to the strong interlocking relationships that these projects have with all economic sectors and being a meeting point for various dimensions and axes of the sustainable development strategy “Egypt Vision 2030"; and in the context of working to adopt integrated programs and policies aimed directly at supporting innovative entrepreneurial projects in their various stages of growth, GAFI has directed its efforts through the Central Department for Entrepreneurship “Fekretak Sherketak" to work on spreading the thought and culture of entrepreneurship, as well as providing integrated packages of technical support to entrepreneurs and startup owners at all project stages.
B. SMEs Development:
MSMEs Development Law:
Law No. 152 of 2020 and its Executive Regulations on the enactment of MSMEs Development Law are considered the beginning to approve many incentives and financial privileges, the most important of which is the exemption of projects that submit applications for adjusting their positions to the Small & Medium Enterprise Development Agency from stamp duty, notarization and publicity fees for companies' articles of incorporation and land registration contracts necessary for establishing projects, as well as collecting a unified customs tax not exceeding 2% due on machines, equipment or devices imported by those projects.
These incentives also include the exemption of capital gains resulting from the disposition of assets or equipment by all projects, provided that these gains are used to purchase new assets and production equipment. In addition to the exemption of the units built for small and micro-sized enterprises from real estate tax for a period(s) estimated by the Board of Directors or the Council of Ministers.
MSMEs Development Agency:
MSMEs Development Agency was established by the virtue of the Prime Minister's Decree No. 947 of 2017, which was amended upon Decree No. 2370 of 2018. It is the body concerned with developing MSMEs and entrepreneurship, in addition to coordinating and consolidating the efforts of all concerned bodies, non-governmental organizations (NGOs) and initiatives operating in this field.
MSMEs Developement Agency aims to set a national program for developing projects and creating the necessary environment to encourage them. It works through a network of regional branches spread across governorates, which is considered the executive arm of the agency with a total of 33 branches comprising one-stop-shops, in addition to partnering with about 600 NGOs concerned with the development of micro-sized enterprises, 1800 bank branches spread throughout the Republic's governorates, and a number of local development partners. Among the most important initiatives adopted by the agency are:
1. The Egyptian Rural Development Initiative "Haya Karima":
MSMEs developement agency, in association with various State bodies, has contributed to the implementation of the presidential initiative "Haya Karima" through providing a conducive economic environment to creat job opportunities in the governorates targeted by the Initiative, and providing various financial, training and technical services to help villagers in setting up small and micro-sized enterprises that help providing them and others with stable job opportunities.
Within the framework of the Egyptian Rural Development Initiative and the promotion of national industry, 317 vocational and occupational industrial complexes have beenestablished in the targeted villages. These complexes are considered one of the pillars of the plan to promote the industrial development, increase the contribution of the industrial sector to GDP, provide job opportunities for youth, and meet the needs of the local market for industrial products.
2. The National Project for the Conversion of Cars to Run on Dual Fuel:
“Towards Natural Gas" initiative launched by MSMEDA and the Ministry of Petroleum and Mineral Resources, aims to convert cars to run on dual fuel, enhance the cooperation in strategic projects with a social, economic and environmental dimension, and implement the State's strategy to rationalize energy consumption and reduce the dependence on liquid fuels.
During the past years, Gastec and Cargas, with the cooperation of MSMEDA, have financed the conversion of cars to run on natural gas through concessional loans provided by MSMEDA for car owners to convert them to run on natural gas with the lowest interest and the longest repayment period. Cars are converted at the two companies' branches and stations are located in most of the Republic's governorates, using the latest advanced technologies in this field.
C. Central Bank of Egypt (CBE) Initiatives to Support SMEs
CBE initiatives to support SMEs represent a turning point in supporting these enterprises, as one of the main drivers of the economic growth, especially in light of the increasing need for providing job opportunities, facing unemployment, and raising the economic and social development rates. Among these initiatives:
1. Nile Pioneers Initiatives:
The initiative aims to provide consulting services and assistance in establishing and expanding projects, turning ideas into reality, and conducting feasibility studies, as well as providing awareness and knowledge services, among others, and establishing specialized units within banks to serve these projects. In addition, the initiative includes other programs to support youth, entrepreneurs, startups and SMEs.
2. Initiatives to Encourage Banks to Increase Financing Volume:
CBE has launched three initiatives to encourage banks to increase the volume of financing granted to SMEs, the most important of which are the following:
"5% interest rate" initiative: finances small-sized enterprises and targets all sectors with paying attention to important economic sectors, especially industrial companies and establishments, those producing intermediate components, and labor-intensive activities, along with focusing on projects with innovative ideas and projects targeting export.
"7% interest rate" initiative: medium and long-term financing of up to 10 years to purchase machinery, equipment and production lines for medium-sized enterprises operating in the industrial, agricultural, and new and renewable energy sectors, with a maximum of EGP 40 million per enterprise.
"12% interest rate" initiative: short-term financing for the working capital of medium- sized enterprises operating in the industrial sector, agro-processing, and new and renewable energy.
D. Egy Truck Initiative:
The Ministry of Local Development in partnership with The Ministry of Youth and Sports has announced the “Egy Truck" initiative. This initiative comes within the framework of the President's focus on youth and on encouraging them to invest, as well as the President's directives to expand towards supporting entrepreneurship and developing MSMEs, given its role in providing job opportunities for youth and opening new horizons for them.
The initiative provides a package of services for those willing to benefit from it, including training applicants on how to manage food trucks, introducing the necessary laws and requirements, facilitating the process of obtaining the necessary licenses, and introducing truck specifications. In addition, the initiative works on providing a group of truck suppliers at competitive prices and comparative advantages, providing distinct locations for food trucks, coordinating with food and beverage suppliers from major national companies at competitive prices, and providing financing from various sources in case of need.
This initiative benefits all segments of society from the age of 21 to 55, as well as people with special needs. The initiative is implemented in locations designated by each governorate, in addition to youth centers, authorities and facilities affiliated to ministryof youth and sports.
It is expected that the outputs of the first phase will be the creating about 5400 direct job opportunities arising from 900 mobile food trucks, which will result in increasing the supply opportunities for these trucks products, contributing to satisfying the demand for this type of goods and services.
Supporting Investment In The Industrial Sector
In the light of the State's keenness to promote the industrial sector to make Egypt one of the industrially leading countries in the Middle East and Africa through increasing the local manufacturing, expanding industries of high added value and high technological component, and creating an attractive climate for Arab and foreign investments, the Industrial Development Authority (IDA) has worked on establishing several specialized industrial complexes that support the sustainable development plans, and achieving the optimal utilization of available resources in order to increase the added value of the Egyptian industrial product.
"Your Factory is Ready" Initiative:
It comes within the framework of the Ministry of Commerce and Industry's plan to support the SMEs sector, aiming to offer 22 specialized industrial complexes for small and medium industries in 14 governorates. As part of the initiative, IDA undertakes the process of constructing factories, providing them with utilities, issuing their licenses and making them ready for investors at the actual cost price of utilities and industrial plants.
Initiative to Allocate Industrial Lands in Upper Egypt Free of Charge:
The initiative aims to allocate lands in Upper Egypt free of charge to include many governorates from Fayoum to Aswan. The allocation will be free of charge or through the usufruct system with the aim of establishing plants, emphasizing that the goal is to invest in industry and not just trade.
Industrial Crises Management Initiative in Partnership between Investors and IDA:
IDA has adopted an initiative to establish an information system and a database regarding the industrial crises management, through which an integrated archive of previous and expected future industrial crises will be created, serving as a supportive information bank for the decision maker to predict crises that may occur in the future, then develop solutions and procedures mitigating the harmful effects of the expected crisis and ensure not to be repeated in the future. Such system is based on the idea of predicting a potential future crisis based on negative variables that may occur either due to a change in the industrial activity inputs (an increase in the price of crude oil or energy) or due to the negative performance of the local or global market.
Supporting Investment In the Green Economy
The green economy can be defined as an economy in which income and employment growth are geared through investments in the public and private sectors, leading to promote optimal utilization of resources, reduce carbon emissions, waste and pollution, as well as preventing biodiversity loss and ecosystem degradation. These investments are also driven by a growing market demand for green goods and services, technological innovations, and by correcting tax policies to ensure that prices adequately reflect environmental costs. The green economy is considered one of the mechanisms for achieving sustainable development, as it includes various opportunities such as encouraging innovation, establishing new markets, creating job opportunities and contributing to poverty reduction. Moreover, the green economy is an opportunity to move beyond development stages and apply advanced technologies in order to achieve food security, ensure access to energy for rural areas, as well as providing clean water supplies, housing, sanitation facilities, and public transportation. The most important initiatives and State's efforts to support the green economy are represented as follows:
The Ministry of Electricity has made the share of renewable energy reach 20% of the energy consumed in Egypt in 2020, 12% of which is wind energy and 8% is hydropower and solar energy.
The government gives great attention to generating electricity from solar energy, exploiting the Western Desert economically, and intensifying investments in it, whether through investing in biofuels crops, or through establishing solar energy project to generate the electricity that Egypt needs as well as countries in North Africa and Central Europe.
The price structure of petroleum products has been reformed as well as restructuring the energy sector to ensure that subsidy reaches to those entitled to it.
The Ministry of Environment, in cooperation with the Ministry of Finance and Nasser Bank, has implemented a project to replace the taxi in Greater Cairo, aiming to reduce 264,000 tons of carbon dioxide emissions annually, in addition to the economic and social return of this project.
The Ministry of Environment is implementing an ambitious program to convert government vehicles to run on natural gas instead of gasoline.
The Ministry of Environment, in cooperation with the Ministry of Trade and Industry, has successfully banned the production and import of two-stroke motorcycles, and replaced them with four-stroke motorcycles, as a step to reduce air pollution caused by these motorcycles.
The Ministry of Environment executes an indicative program on the sustainability of transport systems.
The State supports mass transportation systems, as the third metro line has been established.
A draft law is prepared on the participation of the public and private sectors in infrastructure projects in order to attract more investments, including investments in the energy sector, allowing adaptation to the effects of climate changes.
The Ministry of Environment executes the industrial pollution control and environmental protection programs for the private sector and the industrial public business sector, which include 120 projects, to reduce the industrial pollution.
It encourages the shift towards industries that rationally consume natural materials, energy and water.
The Industrial Map of Egypt has been redistributed, as well as settling industries in the new cities.
Increasing the support for small and medium industries in the field of environment.
Reusing water and controlling industrial effluent.
Achieving sustainable use of natural agricultural materials, and focusing on integrated agricultural management methods.
Raising the efficiency of water use in agriculture, improving irrigation and sanitation systems, and adjusting crop structure for less water-consuming agricultures.
Reusing agricultural wastewater and sewage.
This is in addition to many serious steps taken by the State in a number of green projects, including:
"Environmental Sustainability Standards Guide" has been issued for projects within the State's development plan, in addition to issuing green bonds in cooperation with the Ministry of Finance, and consolidating the efforts of the government and the financing and executive sectors with the Ministry of Environment to keep projects and policies in line with the global trends, international obligations, and national priorities in the field of protecting the natural resources, and limiting negative effects of climate changes.
The State emphasizes the importance of green incentives and their role in attracting investments in the private sector, especially after 30% of the State's general budget investments have become green investments in the fields of transportation, water, sanitation and irrigation, and electricity. Besides, the government aims to reach the percentage of green projects to 50% of budget projects in 2024.
The State is keen to double the percentage of green public investments from 15% in 2020/2021 to 30% in the 2021/2022 plan, and then to 50% by the end of 2024/2025. The State is also keen to prioritize financing green investment initiatives and projects, within the framework of the government's vision and directions for green recovery, and to make Egypt take the lead in the Middle East in the field of greening the State's plan.
Egypt will host the 27th Conference of Parties on Climate Change (COP 27) in 2022 within the context of enhancing the cooperation with the Green Climate Fund (GCF) and in light of the national strategy for climate change in accordance with Egypt's priorities during the coming period, representing a good opportunity for Egypt to obtain financing for climate change projects, and to ensure the effectiveness of the resources allocated to climate change.
The government has also taken many measures to accelerate the transformation towards the green economy, through issuing green bonds , making Egypt the first country in the Middle East and North Africa to issue green bonds, as well as adopting sustainability standards to ensure the transition to a green economy.