Egypt seeks to upgrade industrial sector through Siemens deal

An agreement with Siemens aims to improve industrial competitiveness and to establish ‘smart’ economic zones in Egypt.
Sunday 23/06/2019
Egyptian President Abdel Fattah Al Sisi (L) and Joe Kaeser, chief executive of German engineering group Siemens attend the inauguration of major power stations in the energy sector, at Egypt’s new administrative capital, north of Cairo, Egypt, July 24, 2018 in this handout picture courtesy of the Egyptian Presidency. The Egyptian Presidency/Handout via. (Reuters)
Egyptian President Abdel Fattah Al Sisi (L) and Joe Kaeser, chief executive of German engineering group Siemens attend the inauguration of major power stations in the energy sector, at Egypt’s new administrative capital, north of Cairo, Egypt, July 24, 20

CAIRO - The Egyptian government has signed an agreement with German electronics company Siemens to improve industrial competitiveness and establish “smart” economic zones.

The deal is to establish specialised industrial zones based on regional resources in each Egyptian province, harmonise industrial areas with local job markets and use best technological methods to solve problems and minimise human intervention.

The agreement is based on developing infrastructure, automation and digitisation of industrial zones; providing support to factories to optimise energy efficiency and adopting automated solutions; developing local machinery manufacturers; building capacity and improving technical and vocational education; and providing financial services to the industrial sector.

There are more than 121 industrial zones in Egypt. They have various issues and are considered obstacles hampering the general investment climate.

Cairo tried to address problems in industrial zones with a general plan for the Suez Economic Zone and announced that facilities and infrastructure for the project were implemented through “smart” design.

To maintain investment, Cairo needs to address the issues because neighbouring countries have outdone Egypt in establishing smart industrial zones.

“The situation of Egyptian industry has become complicated because of the deterioration of services in industrial zones, which runs counter to investment trends in infrastructure,” said Hisham Kamal, chairman of the Industrial Organisation of New Cairo.

“If the Ministry of Industry wants to develop industrial zones, it should ensure that all parties that deal with investors are computerised and digitised.”

Cairo recently completed a project that added 3,400km to the road network, linking various industrial and commercial cities in the country.

Transforming industrial zones into smart ones is difficult because the only digital transitions to have taken place benefited only a few financial services. Bureaucracy is prevalent in most sectors that interest investors, particularly insurance, water and electricity.

Kamel said the Siemens experience will — if applied correctly, precisely and without alterations — change the face of investment in Egypt.

Egypt does not have specialised industrial zones. The establishment of a first specialised area for the leather industry known as “Rubiki” in Badr, west of Cairo, is trudging along slowly.

Despite receiving grants for developing the area, basic facilities were never installed. This impeded transferring of tanneries that have been languishing inside residences in the Old Egypt area to the specialised leather region.

Investors questioned the success of the programme. In their opinion, the state of the industry is an integrated whole and mere development and modernisation are not enough.

“There is no clear will from the officials. Such reforms were scheduled to be implemented in the economic zone of the Suez Canal since 2016 and they have not been realised,” said Ahmad Shami, a member of the Suez Investors Association.

Shami said the infrastructure of the labour force is not trained in the use of technology.

Some investors see the necessity of establishing smart industrial zones while finding solutions for zones where the infrastructure of which is not up to date.

Samir Aref, chairman of the 10th of Ramadan Investors Association, said a digital transformation would eliminate red tape that investors must deal with but that the lack of mechanisms blocks needed changes.

“Egypt needs smart industrial zones that rely mainly on solar energy, digitised services, streamlined procedures and problem solving,” Aref said.

Egypt needs specialised industrial zones to streamline procedures to improve its No. 128 (out of 190 countries) ranking in last year’s Business Climate Report.

Such indicators confirm Cairo’s need to confront bureaucratic inefficiency through the digitisation of services offered to investors and by not limiting incentives only to establishment of companies.

Investors can start companies in Egypt through the internet but they face difficulties to obtain necessary licences to operate a factory and commence economic activity.

Majdi Sharara, chairman of the Small and Medium Industries Committee of the 10th of Ramadan Investors Association, drew parallels between the Siemens agreement and difficulties the Ministry of Education faced when it attempted to digitise secondary school exams.

The failed attempt resulted in the abolition of the tablet-based exam system in some school subjects and a return to a paper-based system.

“That was a concrete example of the general lack of preparation for digital transformations, which require initial groundwork and an upgrade of telecommunications systems before proceeding to the generalised implementation of the new system,” Sharara said.