Free zones in Egypt, a new beginning with Nuweiba
26 April 2018

A return to betting on free zones to sustain the economy in Egypt. Cairo has approved the institution of a new tax-free zone in Nuweiba, a coastal city on the Sinai Peninsula on the Gulf of Aqaba. The project will be carried out over a two-year period and will offer 14,000 job opportunities. The new area will enjoy incentives to investments with an important three-year tax exemption of 50% for projects that have already been launched that could be renewed over time. The governor of the South Sinai, Khaled Fouda, said the area will cover 26 feddans (nearly eleven hectares) and will cost a total of $400 million. Fouda added that the duty-free area will be host to light industries, navigation services, commercial services, food and pharmaceutical preservation and fish production. Trade and tourism will benefit the most from the new tax-free zone and the area will enter in synergy with the $500 million mega city Neom, destined to be the new capital of the country.

Nuweiba is the first free zone to be established in Egypt since 2005 and will make for a total of eleven in the country, following Nasr City, Alexandria, Port Said, Suez, Ismailia, Damietta, Media Production, Shebin El Kom, Qena Keft and Minya. They are considered “offshore” areas situated in the national territory. Egypt began construction of such free zones in the early seventies.

In 2015, when the country regained significant economic development, the government undertook various initiatives to attract foreign direct investments. One of the steps being taken in this direction is demonstrated by the amendments of the Investment Act for free zones. In 2017, the General Authority for Investment and Free Zones announced a strategy to establish them in each governate. Currently, there are eight governates with a dedicated investment zone. “The governor tries to direct investments in crucial areas, including Sinai and Upper Egypt, to accelerate economic growth”, declared the Minister of Investment and International Cooperation, Sahar Nasr.

The General Authority for Investment and Free Zones will give investors information and details on imminent projects present in Egypt’s free zones, which currently make up 24% of exports in Egypt. These areas also provide for about one million jobs, both directly and indirectly, and are considered one of the main instruments used to grow foreign direct investments and import-export. Recently, some countries including Russia and China, expressed interest in investing and setting up in these areas.

In addition to the creation of free zones, support infrastructures will be created. The Minister of Transportation is planning for the construction of a railway that will connect the port of Nuweiba with East Port Said, where there is a 1,600-hectare industrial park. The new line will primarily be used to transport goods and will serve exports to the Gulf countries through the shipping line Aqaba-Nuweiba. The new railway will allow Nuweiba to become a gateway to trade in the Gulf and alleviate road traffic. The railway is expected to travel at 120 km per hour. The ministry is looking to create a multi-purpose station for cargo and containers in the port of Nuweiba that will extend for more than 140,000 square meters. The goal of the station is to integrate the planned logistics area and the free zone in the city and the construction of the station should take place in six months.