The Central Bank of Egypt (CBE) has issued an important circular on August 7, 2024, addressing the procedures for banks operating in Egypt regarding the opening of…
MAJOR AMENDMENTS TO FREE ZONE REGULATIONS UNDER CABINET DECREE NO. 2140 OF 2023
In a significant move to attract more investment and boost economic growth, the Prime Minister of Egypt issued Cabinet Decree No. 2140 of 2023 on June 4, 2023. This decree introduces crucial amendments to the Executive Regulations of the Investment Law No. 72 of 2017, specifically targeting free zones. With the new amendments coming into force immediately after their issuance, the government aims to streamline the establishment of Private Free Zones and introduces a new type of free zone known as the Private Service Free Zone.
Amendments to Article No. 76 of the Investment Law Executive Regulations
Under the amendments to Article No. 76, several conditions required to establish a Private Free Zone have been repealed. These include the minimum capital and investment cost requirements, project area conditions, and workforce requirements for industrial projects. Furthermore, the previous requirement of having a suitable place for the project at the Public Free Zone has been eliminated.
However, certain conditions remain intact. The project must be in the form of a joint stock or a limited liability company, and a minimum of 80% of exports must be ensured, with exceptions possible for strategic projects. Compliance with industrial security, civil defense, and fire safety requirements is also necessary. The General Authority for Investment and Free Zones (GAFI) will oversee and monitor Private Free Zone projects to ensure their proper functioning. The amendments emphasize the importance of better governance within GAFI by specifying that the monitoring mechanisms will be determined by GAFI’s Board of Directors and approved by the Cabinet.
It should be noted that the requirement of a local component of at least 30% has been given a grace period of three years from the date of operation to be fulfilled. Additionally, the Cabinet retains the authority to exempt a project from certain conditions upon evaluation and approval by GAFI’s Board of Directors, based on the recommendation of the competent minister.
Introduction of Article No. 76 bis to the Investment Law Executive Regulations
Cabinet Decree No. 2140 of 2023 also introduces a new article, Article No. 76 bis, which establishes the Private Service Free Zone. This type of free zone is subject to different conditions compared to Private Free Zones. While the conditions outlined in Article No. 76 do not apply to the Private Service Free Zone, GAFI still maintains supervision over certain aspects.
The Private Service Free Zone comprises a main service project responsible for establishing, developing, managing, and allocating areas for specific sub-service projects within sectors listed in Article No. 1 of the Executive Regulations. The main project of the Private Service Free Zone must be in the form of a joint stock or a limited liability company and comply with civil defense and fire safety regulations.
GAFI’s Board of Directors will issue procedures and conditions for establishing sub-service projects within the Private Service Free Zone, which will subsequently be approved by the Cabinet based on the proposal of the competent minister. The Board of Directors of the Public Free Zone where the geographical area of the Private Service Free Zone is located will have the authority to approve or annul projects within the Private Service Free Zone. The Chairman of the Board of Directors of the relevant Public Free Zone is responsible for granting licenses, considering license renewals and amendments, and ensuring the inclusion of necessary project details and financial security provisions in the licenses.
Conclusion
The recent amendments brought about by Cabinet Decree No. 2140 of 2023 represent a significant shift in Egypt’s free zone regulations. By removing certain conditions and introducing the Private Service Free Zone, the government aims to attract more investment and encourage economic growth. However, it remains to be seen how the practical implementation of these changes will unfold, particularly with regard to the newly established Private Service Free Zone.
Please note that this article aims to provide an overview of the recent developments and should not be construed as legal advice. For comprehensive information or specific legal inquiries, please contact us at [email protected]
