‘Step aimed at limiting import of low-quality products’
CAIRO: Egypt’s Trade Ministry has issued tough new regulations on importers by sharply raising the minimum capital they need to operate. The step is part of the government’s latest effort to curb foreign-made goods and spur local manufacturing.
Under the ministry’s executive regulations, the minimum capital required for the smallest companies to register was hiked to 500,000 Egyptian pounds (about $28,000) from 10,000 pounds previously. For limited companies, the minimum threshold was raised to 2 million pounds from 15,000 pounds previously.
“This is in line with measures taken by the ministry in the past to limit the import of low-quality goods,” the Trade Ministry said in a statement.
“It also aims to encourage new investments in national industries and protecting them from unfair competition from imported products,” it added.
The new regulations also raise the minimum capital required for a joint stock company to get registered to 5 million pounds. Importers will have six months in order to adjust to the reform, which was contained in an amendment to the Importers Register Law passed in March.
Import-dependent Egypt is struggling to revive its economy and curb a trade deficit since a 2011 uprising drove away tourists and foreign investors.
Importers have criticized previous government measures aimed at reducing demand for foreign goods, saying local producers do not have the capacity to fill the gap.
Last week, Egypt issued a long-delayed investment law, which cuts bureaucracy, especially for new projects.
The new incentives include a 50 percent tax discount on investments made in underdeveloped areas and government support for the cost of connecting utilities to new projects.
“The highlight of this law is that it gives targeted incentives for investments based in geographical locations in a variety of sectors, mainly in the form of tax credits,” said Mohamed Abu Basha, an economist at EFG Hermes.
Under the law, investors can recoup half of what they pay to acquire land for industrial projects if production begins within two years. It also restores private-sector free zones — areas exempt from taxes and customs — a policy that had held up the law’s passage because of objections to forfeiting tax revenues at a time of austerity.
Reham El-Desouki, an economist at Arqaam Capital, said the law looked like an improvement on what was there before as it sets a time cap on several bureaucratic processes but investors will wait for more details before rushing into Egypt. “This law is a positive development for the investment scene but the devil is in the details,” she said, adding that investors would wait to see the executive regulations that will follow.
“The general investment atmosphere is challenging, what with high interest rates and FX reforms. The Egyptian economy is still recovering,” El-Desouki said.