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Wednesday, 24 October 2018

Egypt formally requests pushing back zero tariffs on EU car imports

** #2 EXCLUSIVE- Egypt has formally asked the EU for permission to delay 0% customs duties on car imports. The Trade and Industry Ministry has formally requested that Brussels allow Cairo to wait another 1-2 years before cutting to 0% the duties on European Union-assembled cars brought into Egypt. We confirmed the news with three senior government officials with first-hand knowledge of the matter. The three noted that the EU has yet to respond to the request. Custom duties on EU-made car are expected to fall to zero on 1 January 2019 under Egypt’s trade liberalization agreement with the union. If the request is accepted, this would be the second time the EU had agreed to push back the agreement.

Chances are good that Egypt will get the delay: There is a strong possibility that the EU will accept the request, one of the sources suggested, especially as Egypt had recently brought its customs duties in line with the World Trade Organization’s Harmonized System Code, a global standardized system of classifying traded goods to determine their customs duties.

How long can we keep relying on the kindness of strangers? The Madbouly government and the domestic car assembly industry industry have been kicking back and forth the so-called Automotive Directive — a proposal that would give incentives to local assemblers to move up the value chain to manufacturing in return for tax breaks that would give them an ongoing price edge against EU, Turkish and Moroccan-made imports. The status of the proposed bill, which has largely stalled due to a combination of haggling in the House of Representatives and lobbying by car importers, remains a mystery. A senior government source had revealed to us back in August that the Trade and Industry Ministry, along with the ministries of investment and finance, are reworking the incentives system in the law from a general, nationwide system to a program of auto freezones. Trade and Industry Minister Amr Nassar had said that the law would be ready for the House of Representatives in October.

New investment is at stake: A number of foreign car companies have expressed an interest in growing some combination of assembly and manufacturing operations in Egypt — provided the government is clear on the status of the automotive directive. Most recently, a group of French auto companies, including Peugeot, said as much to Egyptian trade officials on the sidelines of the SIAL Paris exhibition, the head of Egypt’s commercial office in Paris Gamal Faisal told reporters. He noted that Peugeot is in advanced negotiations with Egypt over potential future investments, though he did not provide details. Renault apparently said it was conducting a study of the Egyptian auto market ahead of making any investment decisions.

We did score some agreements at the exhibition: Egypt reportedly came out of the SIAL exhibit with a number of agreements. French maintenance company Midas has entered into a preliminary agreement to open a franchise in Egypt, while an unnamed French auto company is looking to contract 15 Egyptian auto parts factories to supply it with parts, said Faisal without providing details.

We’re not alone in courting global car companies, as the Wall Street Journal recently pointed out with a look at how the rest of North Africa (alongside Kenya, Rwanda, Nigeria and Ghana) is becoming a “global hub for the automotive industry, exporting parts and manufacturing cars that are sold across the region, in Africa and into Europe.”

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