Sunday, 16 October 2022

Enterprise Explains: Golden licenses for industry

The Enterprise guide to GAFI’s golden licenses: Introduced in the Investment Act, which was passed in 2017, golden licenses create a streamlined process to set up new industrial and infrastructure projects that fit a certain list of requirements and criteria. The licenses — also known as “single approval licenses” — allow some investors to obtain one single approval that covers everything from establishing the project, including land allocation and building licensing, through to the operation and management of the project, according to a guide (pdf) from the General Authority for Freezones and Investment (GAFI)

The license doesn’t exempt anyone from any requirements — it just crunches it all down to a one-stop-shop: Investment projects eligible for these licenses remain compliant with all the usual regulatory requirements from various government entities. The critical difference is that investors go through a much simpler, more streamlined process that cuts down on the time and trouble of seeking out individual approvals from each of the entities. Real estate and construction requirements are all part of the singular license. In other words, once you’ve got a golden license in your hands, you’re good to go.

Who gets access? Companies working on national projects, projects that are so-called strategically valuable, or those that generally fall in line with the government’s countrywide development initiative will be given preferential access to the licensing scheme. That generally refers to private sector players working on public utilities, infrastructure, renewables, roads, transport and ports.

Getting top priority for now: Green hydrogen facilities, EV manufacturers, water desalination projects and renewable energy producers will be the most prioritized industries eligible for the new licensing system, Prime Minister Moustafa Madbouly has said.

There are some more specific eligibility guidelines outlined by the government. Projects need to meet at least two of the following criteria:

  • Exporting at least 50% of its output every year, with a maximum grace period of three years from the date the project was established;
  • Relying on financing from foreign funders and investors, with the funding transferred from abroad through an Egyptian bank;
  • Meeting a 50% minimum local component quota in its products;
  • Setting up or operating the project in one of the areas cabinet previously identified as most in need of development;
  • Contributing to the localization and deployment of cutting edge technology;
  • Contributing to securing the country’s supply of strategic commodities and cutting down on their imports;
  • Being labor intensive and relying primarily on domestic laborers;
  • Helping to reduce harmful emissions.

And fall under one of these sectors:

  • Electricity and renewable energy (including green hydrogen and energy transmission);
  • Petroleum and mineral resources, natural gas expansion and conversion or transformation, oil and gas-related water treatment facilities, and petrochemicals or silicon production facilities;
  • Transportation (including maritime transport, maritime and dry ports, railway and metro, and logistics centers);
  • Housing and utilities (desalination plants, urban development projects, and affordable housing);
  • Tourism, youth and sports, agriculture, environment, and military production (specifically waste-to-energy plants) projects.

Specific industrial projects that are eligible:

  • Manufacturing components for renewable energy production;
  • Automotive and automotive component production, including electric vehicles and charging stations, as well as traditional and natgas-powered cars;
  • Wood and furniture manufacturing;
  • Pharma production, including antibiotics and cosmetics products;
  • Food production;
  • Engineering industries, including electronic devices, electric engines, blank circuit boards (BCB), and multi-layer printed circuit boards (PCB);
  • Designing and producing solar PV panels;
  • Designing and producing semiconductors and silicon wafers;
  • Designing and producing LED lighting chips;
  • Producing LCD open cells and other production outputs that rely on LCD open cells, including smartphones and tablets;
  • Producing lithium batteries.

There are a few more technical specs to keep in mind: The registering company needs to be gunning for either joint stock or limited liability status with issued capital worth a minimum of 20% of the project’s total investment figure to become eligible for the fast track licensing procedure.

Some documents companies need to have on hand when they apply for the new license: You’ll need to have your company’s incorporation contract, a recent excerpt from your commercial register, a copy of your tax ID card, an initial feasibility study, proof of financial solvency and project implementation timeline and approval from the company’s legal representative.

We’ve already seen a few companies get their hands on these coveted golden licenses: At least three companies have benefited from the golden license so far. GAFI approved licenses for Japanese automotive components and braided cables producer Yazaki, which was awarded a license to set up shop in Fayoum, as well as Emirati fertilizer company CFC Group for its USD 400 mn industrial complex in Qena, GAFI boss Mohamed Abdel Wahab previously told Lamees El Hadidi (watch, runtime: 7:39). Plasma derivatives producer Grifols Egypt was also granted a golden license to set up and operate 20 centers to process blood plasma, according to a copy of the decision in the Official Gazette (pdf).

Your top industrial development stories for the week:

  • Cement producers are going to be paying more than double what they used to for natural gas after the government issued a decree enforcing a price hike of c.108%.
  • Our non-oil trade deficit widened 13.7% y-o-y to USD 47.8 bn in FY2021-2022, as non-oil imports jumped 18.7% y-o-y on the back of rising commodity prices, namely that of agricultural products — wheat, soybeans and corn.
  • New incentives for industry coming? Global economic conditions demand new investment incentives to shore up local manufacturing and the agriculture sector, Finance Minister Mohamed Maait said at a conference.

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