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Demian's dismissal revives Investment Ministry’s hopes to return private free zones system - Daily News Egypt

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Demian’s dismissal revives Investment Ministry’s hopes to return private free zones system

Ministry to forward amendments to the cabinet within days, hopeful for acceptance, says government official


The Ministry of Investment continues to push for the cabinet to permit the return of the private free zones system cancelled in March 2015, due to pressure from the former finance minister Hany Demian, according to a government official.

One day before the economic conference held in Sharm El-Sheikh in March 2015, in the absence of parliament, President Abdel Fattah Al-Sisi, as the representative of the legislative authority, cancelled work in the private free zones system under an amendment to Investment Law No 8 for 1997.

The official hinted that former investment minister Hany Demian, who was a staunch opponent to the system of private free zones, was dismissed from office during the ministerial reshuffle because he feared that smuggling to local markets would increase, and that would open the door to a new round of negotiations with the cabinet to return work in the free zone system.

Private free zones are state territories within political borders and are subjected to their administrative authority, enjoy exemptions from customs and taxes, and have a special system of goods movement—entry and departure. Additionally, the state aims to increase its exports portfolio through them.

“[The Ministry of Investment] will send the amendments [to the investment law] to the cabinet within days, most notably the return of private free zones,” the official said.

In the case that the amendments are rejected, the official said the ministry will allow the existing projects that received preliminary approval before 13 March 2015 [when Al-Sisi cancelled the private free zones system] to work in the private free zones system until the end of the licence period.

The official said that the new amendments will allow the General Authority for Investment and Free Zones (GAFI) to renew the licence of the existing projects for one or more agreed-upon licence period. This will also allow the Ministry of Investment to replace the article in the Investment Law regarding “the continuation of the projects list until the end of the licence period” to the end of the project “that will allow the investor to expand work under the umbrella of private free zones”.

Article 29 of the Investment Guarantees and Incentives Law stipulates that work with the private free zone system has stopped. The Ministry of Investments put pressure on the government to modify it, notifying the government that it has investment applications worth billions of pounds to invest under the private free zones system. At the end of 2015, Minister of Investment Ashraf Salman dropped his demands as all his attempts to revive the law were in vain.

Demian previously told Daily News Egypt that there is no intention to return the private free zones system, not even with limitations. He said: “The investor does not care about the return of the private free zones so much as he cares about the investment climate in general, the elimination of bureaucracy, providing lands and facilitating licensing procedures.”

However, Salman previously told Daily News Egypt that resuming work with the private free zones system is economically beneficial, and added that the private free zones contribute to about $2.5bn worth of exports.

GAFI received about 10 new requests from Arab and local companies in December to set up projects with the private free zones system. They were shocked to discover that the system is cancelled.

Egypt has 10 private free zones, comprising 262 projects, with total investments of $21bn and capitals of $10bn. It employs approximately 196,000 workers and foreign workers represent about 3,500 of these workers.

It is distributed geographically in Alexandria, Nasr City, Port Said, Suez, Ismailia, Damietta, Media Free Zone, 6th of October City, Qena, Shebin Alkum, and East Port Said.

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