Cairo, Egypt | 22 June 2023
In June 2023, the Prime Minister issued Decree No. 2140/2023 amending specific provisions in the Executive Regulations of the Investment Law issued by Prime Ministerial Decree No. 2310/2017, in respect of private free zones (the “New Amendment”).
We will briefly touch upon the New Amendment. The New Amendment simplifies the process of establishing projects in private free zones by, inter alia, removing minimum capital and costs requirements, the previous requirement of a lack of appropriate location within public free zones as a precondition for establishing private free zones, and the minimum number of employees requirement. The New Amendment, additionally, introduces private service free zone.
The New Amendment permits establishing private free zone projects, where the General Authority for Investment and Free Zones (“GAFI”) is required to study and evaluate the expected implications of the establishment of such projects. The Egyptian Cabinet as per its discretion may approve the establishment of such projects and exempt any project – on a case-by-case basis – from one or more of the establishment conditions.
Conditions for establishing private free zones projects include:
- should take the form of a joint stock or a limited liability company;
- should have at least 30% local components, which may be achieved within a three-year timeline; and
- exports should not be less than %80; however, strategic projects of special importance could be exempted from this condition.
The New Amendment repealed the following conditions:
- lack of appropriate location within public free zones;
- the minimum issued capital for the project being at least USD10 million and investment costs being at least USD 20 million;
- the minimum number of permanent employees being at least 500 in industrial projects; and
- the minimum area in which the project is based being at least 20 thousand square meters.
GAFI must follow up on these projects’ activities after their establishment, to guarantee that they are properly operating and abiding by the provided security measures. The final approval for operation shall be revoked, if the investor – within six months – fails to take serious executive measures including initiating the incorporation procedures, submission of the technical drawings, and obtaining the relevant approvals for operation from the competent authorities.
Furthermore, the New Amendment introduces a landmark provision allowing the establishment of a private service free zone catering to multiple non-industrial projects. This innovative concept involves a central service project responsible for creating, expanding, overseeing, and providing premises for various secondary service projects operating within the investment sectors outlined in the Executive Regulations. These sectors encompass education, healthcare, transportation, tourism, housing, infrastructure, energy, and sports, among others.
The service project shall take the form of either a joint-stock company or a limited liability company, ensuring compliance with the relevant Egyptian civil defense regulations. Further, GAFI shall, in due course, issue the requirements and procedures for establishing and licensing such projects after the Cabinet’s ratification of the same. These measures aim to streamline operations, enhance business efficiency, and provide a favorable environment for sustainable growth and development.
The board of directors of the respective public free zone, where the private service free zone is located, holds the authority to grant approval for the establishment of these projects within its jurisdiction, as well as the power to revoke such approval if necessary. The Chairman of the respective public free zone holds the authority to grant the licenses for their operation together with the renewal and amendment of the same, according to the project’s objectives, duration, and the value of the financial guarantee provided.
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