Establishment of Suez Canal auto industrial zone contingent on new industry strategy

There is no point establishing the industrial zone without new strategy for automotive industry development, says chairman of engineering industries chamber

Agents in the Egyptian automotive market believe the establishment of an auto industrial zone in the Suez Canal Area is contingent on the issuance of the new automotive industry strategy to develop the industry and provide incentives to attract direct investments from international companies.
Chairman of the Federation of Egyptian Industries' (FEI) Chamber of Engineering Industries Hamdy Abdel Aziz said the government is seeking to establish an auto industrial zone in the Suez Canal Area for all automotive companies and feeder industries.
"There is no point establishing an auto industrial zone without a new strategy for the automotive industry's development," he said.
Abdel Aziz told Daily News Egypt the government is currently reviewing the new draft strategy, which is expected to promote the automobile industry and open the door for companies to manufacture new car components.
It is impossible to manufacture 60% of car components locally in the automotive industry, while manufacturers only seek to export their production, he said. The Suez Canal axis will provide an opportunity for the sector to establish an export base.
Secretary-General of the Engineering Export Council (EEC) and Executive Advisor for Projects in Manufacturing Commercial Vehicles Company (MCV), Amr Nassar, told Daily News Egypt the Suez Canal Area offers a major opportunity to establish an auto industrial zone. The zone can be the basis of logistics and exporting operations, in light of clear government vision to develop the industry.
There are two possible strategies for the development of the auto industry: the first is to rely on domestic manufacturers to increase the local components of cars.
The second lies in taking advantage of the rise in production and the size of the domestic automotive market through exporting in exchange for attracting investors and international companies to operate in Egypt. He considered the second strategy will be the most effective for the economy and the Egyptian automotive industry.
The state is responsible for setting a strategy to develop the auto industry by attracting international companies to operate in the domestic market, Nassar said. In addition, the government should provide incentives to these companies through creating industrial zones, subsidising the energy supply, and obliging them to export a part of their production in return.
Morocco has succeeded in attracting international companies, such as France's Peugeot, having become the manufacturing centre of its products in the Middle East.
Executive Director and spokesman of the Egyptian Automobile Manufacturers Association (EAMA) Hussein Mustafa said the Suez Canal Area Development project has enormous opportunities for investment, since it provides ample land and is near the ports, in addition to the road services and facilities.
"We look forward to the government's support and facilities to invest in the Suez Canal development project. We aim to establish automotive factories to export auto components through attracting direct investment and international technology partnerships," he said.
"There is a strong opportunity to establish an integrated industrial area to manufacture all automotive components, especially since there are many companies that are currently considering the establishment of major factories in that region."
Mustafa said the Suez Canal Area Development project is the automotive sector's last chance for development, after the success of Morocco, Algeria, and Tunisia.
CEO of GB Auto Raouf Ghabbour called on the government to take into consideration the successful experiences in other countries such as Turkey and Morocco, which offers numerous incentives to attract investors.
"During a meeting with an official in one of the top European auto companies with investments in Turkey and Morocco, the official explained that Morocco granted his company many advantages to build his factory, estimated at 47% of the value of the investment, while Turkey provided 42% of the company's investment," he said.
"Those incentives also include providing land with facilities for free, since the establishment of an auto factory requires at least 1.5m sqm. The government should also offer loans in local currency with low interest rates, and restore any funds spent by the company in research and development investments."
Ghabbour called for the implementation of programmes allowing the exchange of old cars with new ones manufactured locally and for other logistical advantages for loading and unloading operations, such as providing a fixed pier to facilitate the entry of the required raw materials.
Some countries grant the manufacturer the right to import a number of cars during the establishment of the factory, to be treated like local factories in term of the customs. If the manufacturer fails to implement the project on schedule, the government has the right to collect the value of customs tariff on the company's imported cars during that period, plus the accrued interest.
Chairman of El-Saba Automotive and member of Cairo Chamber of Commerce Alaa El-Saba told Daily News Egypt that the Suez Canal Area is a successful idea from the start. He noted however that it should be followed with governmental incentives.
He suggested offering land on both sides of the canal in accordance with the usufruct system, either at very low prices or completely for free, like other countries that aim to encourage investment in new areas. The government should also allow tax exemption for a long period to encourage Egyptian or foreign investors, as well as providing energy supply at low prices.
Suez Canal Authority (SCA) Chairman Mohab Mamish and CEO of Suez Canal Development Project said the studies for the projects scheduled to be established in the Suez Canal area have been completed. The projects will include a variety of industries, such as automotive assembly, logistics centres, shipbuilding and containers, furniture, textiles, manufacturing, and packaging of foodstuffs.
Mamish said these projects will play an important role in developing the Egyptian economy in the near future, according to the studies carried out on the world and domestic market.
The land in the canal area is subject to usufruct system and not for sale, and the government will provide infrastructure services in accordance with the volume of investment. Further, the whole area will be secured by the armed forces and the police to reassure foreign and Arab investors.
Mamish said well-trained Egyptian technical staff will participate in the establishment of the Suez Canal Area projects.