Русский
The Russian Deputy Prime Minister Alexei Overchuk, who is about to visit Cairo, is to follow up on issues relating to the development of the much-delayed Russian Manufacturing & Development Zone based at Port Said near the Suez Canal.
The intergovernmental agreement on the creation of the Russian Industrial Zone within the Suez Canal Economic Zone was originally given the green light by Russia and Egypt in 2018.
The zone is expected to provide Russian companies with a base to manufacture goods, using a mix of imported Russian and domestic components, for resale in the Egyptian and African markets. It has a total area of 50 hectares and direct access to the Ain al-Sokhna Port. The Suez Canal Economic Zone already has investors in the auto components, construction and building materials, home appliances and electronics, textiles and garments, agri-business and food processing and pharmaceutical sectors.
Overchuk said that he will assess the state of the infrastructure of the Russian site, after which it will become possible to determine the possible timeframe for starting construction of investing businesses in the zone. Overchuk said that preparations for such projects normally take up to three years.
Russia and Cairo finally signed a contract for the long-term right to use the land plot, which outlines the commercial conditions for its operation, in May. This caters for a three-year rent-free grace period for investors for lease of land plots at the zone. That period has not yet begun, giving investors the opportunity to decide on investing in the zone.
Russian companies operating in the pharmaceuticals, agro-industrial, and auto and machine-building sectors have already shown interest. Overchuk also mentioned that there are candidates for the status of anchor (primary) investors in the zone, whose presence may also drive their suppliers to invest. He stated, “We have gathered a group of interested Russian entrepreneurs, as well as representatives of business associations. We believe that the Russian industrial zone will become a convenient point for our business to enter both Egypt itself and the African continent. During the visit, we will go to the site, while the Egyptians will speak about the advantages of their economic zone.”
Overchuk commented on when the first Russian investors would commit, stating that “It is too early to say; investors need to be familiar with the zone, the conditions, the available incentives, and the quality of the infrastructure, and based on that, will be making their decisions. This is a big project, and it requires time.”
There are major incentives why investing in the zone makes sense. If production in the zone includes a proven 30% minimum of Egyptian manufactured components, the final product can obtain “Made in Egypt” status, which exempts products from customs duties when exported to other African countries, the Middle East, Latin America and other countries and blocs with Egyptian trade agreements. In total, Egypt has agreements covering markets of about 1.5 billion consumers, with 100 million in Egypt itself. The zone also connects investors with established and emerging markets: 8% of global trade passes through the Suez Canal. Shipping time and cost are lower from Egypt – 7 days less to the USA than from Vladivostok and 50% cheaper compared to the UAE.
Investing manufacturers in the Russian Industrial Zone are also exempt from import duties on equipment and materials and property tax, VAT, and can enjoy a 50% reduction of profits tax for seven years. Egypt’s standard corporate income tax rate is 22.5%.
Residents can also import unlimited production resources and finished products from the mother company of a non-resident.
The Russian Industry and Trade Ministry has said that their financing for the creation and development of the Russian Industrial Zone in Egypt between 2023 and 2026 has reached ₽9.5 billion (US$114 million).
Further Reading
