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Sunday, 28 July 2019

Egypt targets USD 5 bn auto sector FDI over two years

EXCLUSIVE- Gov’t targeting USD 5 bn auto sector FDI over two years: The government is hoping to attract USD 5 bn of foreign direct investment into the automotive sector within the next two years, two government sources told Enterprise. The target is part of a plan to develop the sector by growing local car assembly and manufacturing through a package of incentives authorities revealed last month, one of the sources said. The proposed incentives program could see the finance and trade ministries provide custom breaks to local assemblers and manufacturers that use at least 45% local components.

Expect agreements with US companies soon to help reach our goal: Government officials were in discussions last week with US-based auto manufacturers, including Ford, on the sidelines of a meeting on procedural and administrative matters for the Trade and Investment Framework Agreements (TIFA) in Washington last week. TIFA — which could lead to freetrade with the US, provided Egypt relaxes non-tariff trade barriers and tackle several other issues — will “pave the way for American auto manufacturers to set up shop here,” one of our sources said. The ongoing talks will likely result in a number of agreements by the end of the year, according to the source.

The Japanese are also looking to get in on the action, but want more benefits: Four Japanese companies with which the government is in talks are “welcoming” of the idea of setting up shop here, the other source tells us. Toyota, Suzuki, Nissan, and Isuzu have, however, requested a 100% customs discount for imported materials if they achieve the 45% minimum for domestic components. “We have rejected this request to drive more assemblers past the 60% mark [for the minimum use of local components],” the source said. Companies which reach 60% already pay close to 0% customs, he added.

BMW, Honda are queuing up, too: Officials are also in talks with BMW and Honda to assemble motorbikes locally, the source added. Since assembling motorbikes is similar to putting together passenger cars, motorbikes will also enjoy custom breaks too, he pointed out.

Who else is looking at the sector? Sources told us last month that the discussions underway involve US, Chinese, Japanese and Korean automakers. Alongside the four Japanese companies, China’s Dongfeng and India’s Tata joined in as potential investors. Brilliance Bavarian Auto is also planning to invest USD 120 mn to return to domestic assembly in Egypt using the existing facilities of its parent company, BMW Bavarian Auto Group.

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