Egypt turns to Emirati model for better management of industrial zones

There are more than 121 industrial zones in Egypt, which all face issues that have become major hurdles for investment.
Saturday 19/10/2019
A worker is seen at a company for engineering industries in Cairo. (Reuters)
Major hurdles. A worker is seen at a company for engineering industries in Cairo. (Reuters)

CAIRO - The Egyptian Industrial Development Authority recently signed a cooperation agreement with the Industrial Development Company, owned by the Emirati Industrial Development Authority and the Emirates Foundation for the Management of Industrial Projects and Logistics.

The Emirati company is to manage Egyptian industrial zones and complexes and integrate their services and logistical activities while enhancing sustainability as well as establishing a system for recycling industrial waste.

Cairo is hoping to develop 22 specialised industrial zones for small and medium enterprises, which require special care in the performance of government administration, away from bureaucracy.

“The UAE model is unique in the Middle East in the management of projects, complexes and industrial zones and we want to reinforce our plans to expand these activities,” said Magdy Ghazi, Industrial Development Authority chairman.

The Egyptian move coincides with the announcement by the World Economic Forum of the index of competitiveness. The United Arab Emirates ranked first in the Arab world and 25th out of 141 countries worldwide. Egypt was 92nd.

Cairo has established specialised industrial cities but they suffer because of the usual bureaucracy. The most important of the cities are in Damietta on the Mediterranean Sea, dedicated to the furniture industry; the industrial zone in Mirghem, Alexandria, dedicated to plastics; in Atfih, Giza governorate, specialising in construction materials; a fourth city dedicated to textiles in Minya governorate; one in Rubiky in Cairo, dedicated to leather goods.

The agreement covers the creation, development, management, operation, maintenance, exploitation, improvement and marketing of industrial zones, provision of needed service activities in industrial zones, as well as provision of accreditation, inspection, evaluation and follow-up services for industrial facilities, logistics and technical studies related to industrial activities.

Egypt needs the United Arab Emirates’ experience to shorten licensing procedures and solve problems that placed Cairo low in a business climate ranking. In last year’s report, Egypt ranked 128th out of 190 countries. The report gave Cairo a bad rating on property registration and a score of 7 out of 30 points in the Land Management Quality Index. Cairo was penalised for slow registration procedures, which can take up to 75 days to be completed.

These indicators underscore the urgent need to address the bureaucratic nightmare by making the registration procedure online and fully digitising services provided to investors. The only service available online is registration of new companies. The United Arab Emirates’ experience in the region in this area is legend.

The first phase of working with the United Arab Emirates includes industrial zones in Badr in eastern Cairo, Sadat City in the province of Menoufia, Mirghem in Alexandria and Port Said on the Mediterranean coast.

Alaa Al-Saqati, a Badr Investors Association board member, said: “The UAE has been ahead of [Egypt] in the management of industrial zones through modern systems that have changed the face of the industrial map in the region.”

He said managing the zones is not easy because it involves providing services and logistics for purchasing raw materials and the collection of waste and recycling.

The United Arab Emirates is implementing a system of bulk purchasing of raw materials, which gives it leverage in negotiating prices and allows savings that can be passed on to customers. Such a method is ideal for small businesses because they usually can’t get competitive prices by making individual purchases. Small businesses can use the savings realised through bulk purchasing to grow.

Factories in Egyptian industrial zones often operate in isolation, which weakens their competitiveness. Applying the United Arab Emirates’ integrated model in managing industrial zones is expected to enhance competitiveness of Egyptian industry.

There is the problem of industrial waste. With the Egyptian-UAE agreement, the issue is addressed through a system of recycling solid waste. The World Bank estimated Egypt’s losses because of non-recycling and utilisation of waste at about $5.7 billion, about 1.5% of the country’s GDP.

The Egyptian-UAE agreement includes implementation of a system for management of industrial waste in the complexes by making recycled materials from one industry available as raw materials to another type of industry. The system includes adopting clean production processes and mechanisms within the same complex to reduce waste and water consumption.

There are more than 121 industrial zones in Egypt, which all face issues that have become major hurdles for investment. They also suffer from a lack of visibility and poor information for investors, despite the creation of a unified industrial investment map.

An integrated system of industrial zones would open new prospects for coordination and cooperation between factories across Egypt, improving on the current random system of production and importing raw materials that may be available in Egypt.