Sunday, 24 July 2022

So you want to set up a factory in Egypt

Enterprise Explains: How to set up a factory in Egypt: After years of a slow and unclear process for industrial licensing (and plenty of complaints from industry players), the Trade Ministry now has clear and streamlined procedures. The IDA and the ministry outline this process in a recently-released detailed guide (pdf) — starting from how to find available land plots, through to securing permits and compliance requirements, and getting operations started. Enterprise breaks down these steps and requirements into an even simpler guide, covering factories inside and outside industrial zones.

If you’re going to set up shop within an industrial zones:

#1- Acquiring land: The IDA lists available lands and industrial units on their website. Potential investors can submit a feasibility study of their project to the authority, which reviews the studies and allocates land plots to approved projects based on their criteria.

#2- Applying for a building permit: Investors need to appoint an engineering office to prepare the facility’s technical design, which includes which machines and equipment will be used, specifications of construction works, and a timetable for the project’s implementation. Another office will also need to be appointed to prepare an environmental proposal that shows the project’s impact on its surrounding. These documents are then submitted to the authority for review and approval.

#3- Construction phase: The authority will follow up on the progress of the construction and then grant a “certificate of occupancy” — which stands as evidence that the building complies with the plans and specifications that had been submitted. It’s also at this stage that electricity meters are converted to commercial meters in preparation for the installation and operation of production lines.

#4- Requesting an operating license: Once the facility is ready for operation, investors must apply for an operating license. If investors’ applications are complete, the IDA will issue a stamped copy of the application on the same day, which investors can use as an official license to immediately begin operations. The authority will separately send an inspector within 90 days to verify the facility’s compliance with technical requirements. If the facility is compliant, the IDA grants an indefinite operating license, and if not, investors are given 180 days to rectify the situation.

Documents required for an operating license: Upon submitting a request for an operating license, investors must also submit several documents to ensure their activities are up to code. These documents — aside from the license application form — include an authorized document from the commercial registry, official proof of membership in the Federation of Egyptian Industries, an ownership deed for the facility, the technical and environmental details documents, and a receipt of payment of service fees and any other administrative expenses. Applicants also need to submit a safety report if their manufacturing activities use chemicals, and proof of identity, or power of attorney documents if they are authorizing another person to act on their behalf.

When do you need to renew your operating license? Renewals for operation licenses are required if investors implement any expansions or material modifications that could change the specifications stated when granted the license. The IDA also requires renewals if the factory is being moved to another location, if the facility’s purpose is changing to produce something different than what it was initially licensed for, or in the event of any administrative changes to the facility (such as trade name or logo changes).

#5- Operations phase: After finishing all these steps, factories will operate normally but will be subject to periodic inspections conducted by the authority or through an authorized accreditation office.

If you’re looking to open up a factory outside an industrial zone: The phases of the process are more or less the same, but there are some differences in how to proceed with each step.

#1- Acquiring land: Investors should submit the necessary documents to the governorate where the project will be implemented. After receiving approvals from the governorate, investors should head to the nearest branch of the IDA or apply for approvals from the authority’s website.

#2- Applying for a building permit: Investors should also go to the governorate office to apply for a building permit, also appointing an engineering office to detail the same technical requirements as factories within industrial zones.

#3- Construction phase: The governorate will send an inspector to ensure that the project implementation is in line with what was submitted in the technical report and all production lines and machines were included in the engineering drawings. After approval, a certificate of occupancy will be issued.

#4- Requesting an operating license: The requirements and process here do not differ from factories inside industrial zones (which we detail above).

#5- Operations phase: After finishing all these steps, factories will operate normally but will be subject to periodic inspections conducted by the authority or through an authorized accreditation office.

PSA- Industrial activities that are classified as high-risk will face additional inspections: Industrial activities are classified as low-risk or high-risk depending on their impact on the environment. Low-risk industrial establishments’ operations do not pose a significant risk in terms of environment, health, security and safety based on the assessments outlined in the European Directive. These include manufacturing wood, clothing, and carpets. Meanwhile, high-risk industrial activities include slaughterhouses, oil and fats manufacturing, and ethanol-related industries. High-risk activities will be subject to a more thorough inspection process to ensure that there are no violations to environment, health, and safety requirements. In case of any violations, these companies will need to adhere to the 90-day deadline — with the option of requesting a 30-day extension — or risk losing their operating license.

Your top industrial development stories for the week:

  • We could soon see an Egyptian-Serbian trade agreement: The two countries are studying the possibility of concluding a bilateral trade agreement, under an MoU they signed to boost trade ties.
  • The CBE wants exporters to use Buna: The Central Bank of Egypt (CBE) is calling on exporting companies to use the Arab Monetary Fund’s regional payment system Buna for cross-border bank transfers.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.