Minister of Investment Ashraf Salman revealed the Egyptian government’s complete consensus in preparing to promote the final plan for the Suez Canal Axis Development project, expected at the beginning of 2016.
Salman told Daily News Egypt that President Abdel Fattah Al-Sisi will issue a presidential decree within 48 hours, to include the final outlines of the canal’s geographic borders. It is expected that this drawing will also include the lands under the Sinai Development Authority.
When will the Canal Economic Authority be established, along with its geographical borders?
President Abdel Fattah Al-Sisi will issue a presidential decree within 48 hours to determine the geographical borders for the canal’s economic area, located on 460 km in the three governorates of Ismailia, Suez and Port Said, and it includes six ports. I expect that the economic authority’s administrative structure, as well as establishing the authority and determining its geographical borders, will be concluded in one and a half months. This way, investors’ inquiries about investing in the axis could be met. The final plan for the axis will be announced on Thursday, during the canal’s opening.
What about the economic area located north-west of the Gulf of Suez, especially as it is within the Suez Canal Axis Development area?
In the Egyptian cabinet, it was agreed that the economic area in north-western Gulf of Suez will be merged with the economic area in the New Canal, to be under the New Suez Canal’s economic authority. This merging aims at saving expenditures. The Gulf of Suez administrative structure will be merged with the new authority, without prejudice the workers’ rights.
What about the main company responsible for developing the new zone?
The establishment of more than one developmental company, whether specialised or sectoral, will be allowed, but not public ones, as in the north-west of the Gulf of Suez. The last modifications on the Special Nature Economic Zones Law have exempted the economic authority from the condition of owning more than 51% of the main developmental company. We will witness main developmental companies owned totally by the private sector and other companies in partnership with the economic authority. The economic authority will not own 100% of any main developmental company.
How will the promotion for investing in the Suez Canal Axis Development project be done?
The cabinet achieved consensus in preparing for an international conference to promote the general plan for the Suez Canal Axis Development project. Senior international companies, local business leaders, as well as Arab and international ones, will be invited to propose intended investments in the canal’s axis, expected in 2016. The Ministry of Investment, in cooperation with Suez Canal Authority (SCA) officials, is preparing to start promotional campaigns after the Suez Canal Opening. This step will be implemented on an Arab and international level, to market for the general plan in a sectoral and specialised way. Specialists, whether from the public or private sector, will also be involved, each in their sector.
Amendments on the law of the economic areas eliminated the authority’s powers over the Ministries of Defence, Interior and Justice. What is the reason behind this, especially as most of the investors’ problems are with these entities?
We applied some amendments to Law 83/2002 regarding the economic areas. This was to form a legislative framework to organise and rule investments in the development project in the Suez Canal area. So the economic authority was provided full and complete power to avoid bureaucracy and delays when it comes to licence issuing, establishments and operations. The authority’s power over the Ministries of Defence, Interior and Justice was eliminated for national security reasons. I totally agree that there are disputes between investors and these entities to approve the purchase of lands and heights. But we will work on eliminating obstacles that cause these disputes, through the attendance of representatives from these entities at the economic authorities’ meetings, to develop great achievements in a short time.
What about the incentives that investors in the canal’s axis will get?
Labour-intensive projects, projects deepening local components in their products, projects investing in logistical services, trade development, or in the field of electricity including traditional, new and renewable energy, agricultural, maritime and land transportation, and railways, will receive non-tax and facilitated incentives. Investors in the axis will enjoy discounted prices for energy and will pay in facilitated ways. The incentive may also be that the authority would repay the cost of extending utilities to the land the project, in full or in part. The authority may also pay the share of the Egyptian employees and employers in insurance; whether in full or in part, for a certain period. Another incentive is that the authority may pay the cost of the technical training given to Egyptian employees.
What are your expectations for foreign direct investments over FY 2015/2016?
I expect foreign investments to flow into Egypt over this fiscal year (FY) 2015/2016, with the amount of $10bn, which means $2bn more than the last FY, the final details of which are expected to be published soon. The last FY’s investments amounted to $8bn, $5.7bn of which were achieved over its first nine months.
The size of the petroleum investments out of the foreign direct investments will decrease to 50%, instead of more than 80% over the past few years.
Will Egypt knock on the International Monetary Fund’s (IMF) doors during the current FY?
Borrowing from the IMF is not currently on the government’s agenda, but we are considering offering bonds in the international markets.
What about these bonds, and what is the offering price?
We succeeded in offering dollar bonds on the international markets at about $1.5bn for a period of 10 years, with a 6% interest rate. Subscription orders by investors exceeded $4.5bn. In the upcoming three months, we will offer bonds in the international markets at about $1.5bn. They have not been priced yet, but they will be followed by another offering before the end of this FY.
What about the new capital project; is there an agreement with a local alliance to execute it? Have the negotiations with the Emirati company been suspended?
Honestly, what I know is that the Ministry of Housing is still negotiating with Emirati investor Mohamed Alabbar, and there is still a dispute regarding the financial model of the agreement. The talks of an agreement with a local alliance are possible, but I would prefer a partnership with a local alliance and another international alliance to ensure the availability of hard currency and to benefit from foreign expertise. This does not mean I undermine local expertise, but I want the project of the new capital to be executed in a professional manner.