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Mahmoud Al-Garf: A new road map for industrial investments is being implemented

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Daily News Egypt interviews Dr Mahmoud Al-Garf, president of the Industrial Development Authority (IDA)

 

Dr Mahmoud Al Garf, president of the Industrial Development Authority (IDA) (Photo by DNE)

Dr Mahmoud Al Garf, president of the Industrial Development Authority (IDA) 

Interview by Abdel Qader Ramadan

Egypt’s Industrial Development Authority (IDA) has begun implementing a new strategy to develop and distribute land under its jurisdiction and facilitate investment in industry.  This would be done by providing a new comprehensive roadmap for industrial development, working to strengthen the Land Facilitation Fund, and improving local industry.

Mahmoud Al-Garf, president of the authority, said that the IDA is currently working to create a new comprehensive industrial roadmap and to identify opportunities for investment available throughout the country. He said that in order to succeed, it would be important to first determine what one’s goals were in production, and identify the resources one has at their disposal. Otherwise achieving progress and development would be impossible.

This would first be done he said, by assessing the comparative advantages of various industrial pursuits, such as the mining of non-metallic ore, determining their location throughout Egypt, analysing the logistics required in extracting resources and the potential such resources have to contribute to local production, in addition to assessing the amount of foreign and local demand existed for such products. This would all be done in order to help determine which factories throughout Egypt would be best used to mine for ore and other resources.

He said that this information was available, but unfortunately it is scattered throughout various government agencies. The IDA, Al-Garf said, was working to gather all such data in one place. Upon doing so, the IDA would then be able to best determine which factories should be utilised based on their proximity to natural resources, ports, roads and water and energy reserves.

This new strategy he said would be the determining factor for identifying which sites to use for future industrial activities, in addition to the average lengths of new projects and the extent to which old factories could be renovated and revived for re-use. The IDA would also work diligently to single out and determine which territories were not suitable for production and which factories were beyond repair and could therefore no longer be used.

The new roadmap would also help address any potential issues with infrastructure or logistical problems/obstacles faced by businessmen and investors looking to do business in specific areas. In these cases, the IDA may request that the government construct new roads, ports and other facilities near targeted factories and regions in order to help jump start local industry and production.

He added that the IDA planned to bring in experts on mineral mining, logistical information and data analysis in order to help conduct their research regarding the potential for certain regions to yield results. According to Al-Garf, completion of this new roadmap would be finished by June, and that the Suez Canal region would be one of the first areas to be targeted by its programs.

The roadmap would also further work to determine how each available square meter of land in Egypt could best be used and by which economic sector, whether industrial, farming, tourism, housing construction or others. After this, a second stage of usage designation would then take place. For example, if a particular plot of land is set aside for industrial use, depending on findings conducted by experts using the standards set forth by the IDA’s new roadmap, this land would then further be designated as being set aside for chemical, engineering, or histological industrial use.

The IDA has also begun to develop a strategy regarding the industrial preparation and mechanization of land before it is distributed to investors. A majority of this land, Al-Garf said, was located in three provinces currently under the jurisdiction of both the IDA and Urban Communities Authority. Until now, the IDA has been responsible for overseeing and distributing land to businesses and investors under the jurisdiction of both entities according to a previous legal protocol signed between the two.

Recently, according to Al-Garf, seven billion square meters of land throughout Egypt under the supervision of the IDA has recently been identified as suitable for industrial use, most of which is located in remote regions far from any urban areas and devoid of any real infrastructure. He said that companies will be unable to actually see or view much of this land other than through Google maps, and they will be unable to reach it other than by helicopter.

For these reasons, the IDA has become dependent on the Urban Communities Authority to help install facilities and prepare the land for its first stage of development, in the hopes that this will help make the land more attractive to investors.

For these reasons, in addition to the existence of large amounts of minerals, mining ore and other energy resources on some parts of the land, many government officials have considered placing this land under the jurisdiction of the Ministry of Industry.

After completion of the roadmap, members of the IDA will discuss with the National Centre for the Planning of State Land Use (NCPSLU) as to how best to distribute the land under the IDA’s jurisdiction. Land under the IDA’s jurisdiction not currently fit for development or industrial use could, with permission from the NCPSLU, be swapped and exchanged for suitable territory in other provinces.

Al-Garf then discussed how the Land Facilitation Fund within the IDA, which was previously referred to as the Subsidized Land Facilitation Fund (LFF), had recently had the first word of its previous name dropped by the IDA’s board of directors, who decided after engaging in consultations with government officials, that the LFF’s funding would come exclusively from the sale of land under the IDA’s jurisdiction, as opposed to sales in addition to public subsidies from the state budget.

The LFF had previously ceased to distribute land under its jurisdiction due to pressures applied to the public budget as a result of Egypt’s political and financial crisis. However the IDA has stated that it will resume its activities now that it is not dependent on government finances for funding.

Al-Garf went on to say that land under the jurisdiction of the IDA leased to private companies, would be done as part of a usufruct industrial development scheme, held through public-private partnerships (PPP). This would be done so as not to put increased financial strain on state budgets.

Al-Garaf did however express his opposition to the complete ownership of plots of industrial land by investors. The implementation of a usufruct development scheme would prevent this, as it was a system used all throughout the world that would help keep the land under the partial ownership of the state, allowing it to be used by future generations of Egyptians.

Egypt’s Ministry of Finance suggested creating a sub-branch within the IDA responsible for preparing the necessary documents needed for government agencies to enter into business partnership with the private sector. These would then be presented to the Ministry of Finance who would finalise the documents and present them to Egypt’s Cabinet then formally enter into negotiations with investors.

Al-Garaf added that industrial development in this day and age would require that government agencies cooperate with large companies in order to secure investment and required funding needed to build and construct roads, gas and electrical stations, water purification centres and other facilities in remote areas.

Companies, he said, would participate in auctions to buy the land, and upon doing so would then be able sell particular territories to investors along with necessary tools and facilities to begin production. Under such a scheme, companies would be required to pay a percentage of their yearly profits to the government during this time, and would also be responsible for overseeing maintenance and upkeep on all job sites.

The IDA president predicted that 30 million square meters of land in the province of Fayoum would be the first territory to be auctioned off and sold to companies looking to engage in production.

He added that once other lands under the jurisdiction of the IDA were developed and equipped with proper tools and facilities that it was only a matter of time before they too became increasingly desirable to businessmen and investors.

According to Al-Garaf, money made from the sale of these territories to developers would then go into the coffers of the LFF within the IDA. These funds would then be used to help further prepare and equip those territories which had not yet sold and were not ready for purchase by companies or investors with the proper tools and facilities. Money might also be used to expand the IDA’s search for suitable land into territories that had not yet been pursued.

The IDA, he added, would soon seek the aid of the Executive Body for Mineral and Industrial Plans within the Ministry of Industry to help play the primary role in preparing and equipping territory in remote areas in order to better help attract large scale development companies.

He went on to say that the ministry would then work to help pave roads and construct water and electrical stations in these remote territories.

Ideas were also being considered, he said, to create a jointly run company with the IDA, Arab contractors and Egypt’s Armed Forces that would be responsible for overseeing projects located in the Sinai Peninsula. This would be done seeing as the latter is currently the primary party concerned with ongoing events in the area.

Because of these developments, in addition to the state of Egypt’s current political and economic crisis that has persisted over the last two years, the IDA took it upon itself to sign a new protocol with the Urban Communities Authority, that would free it of the responsibility of having to distribute land under the jurisdiction of both authorities, as was stipulated in the previous protocol.

The process that the IDA would take when distributing these territories to government agencies and investors would begin with the announcement of available land open for development. Offers would then be collected and reviewed, followed by prices for land being set. However under the new protocol, the IDA would only have the authority to review offers made by companies, and determine the extent to which they met the standards and requirements for purchasing land in said areas. The IDA would then grant “No Objection Certificates” to qualifying companies, which would be presented to city authorities who would then determine the price of the land and allot it to companies, in a way that was consistent with and met the standards of the Urban Communities Authority.

Al-Garaf added that despite this new system, there still did exist a serious desire on the part of Egypt’s government to establish one authority responsible for overseeing all aspects of land distribution. Unfortunately the idea had still not been seriously addressed, and such a body was not yet in the process of being created. He went on to say that until this body was established, the IDA would continue to cooperate with the Urban Communities Authority.

He added that standards and protocols regarding the new roadmap and its land distribution program were nearly complete and that now it was only necessary to start making land available. To do this, he said, the IDA would soon begin auctioning off specified plots of land periodically to companies every two to three months.

He added that so far nearly 3,000 investors had made offers to the IDA for over 1962 industrial projects located in 10 cities throughout Egypt.

He went on to say that the Urban Communities Authority was currently working to set prices for targeted land, which would most likely begin from between EGP 200 to EGP 300 per square meter.

The authority was also seeking to introduce laws and measures governing state policy in the case of more than one investor competing over one plot of land. This would begin by first determining whether or not either investor owned other factories in the surrounding area. If matters could not be resolved, the Authority would resort to holding a draft or lottery to choose between the competing investors.

Al-Garaf stated that this new strategy would put an end to some of the destructive policies adopted by factory owners over the last two years since the outbreak of the revolution and onset of Egypt’s political and economic crisis. These ranged from investors reneging on contracts, to companies and investors holding onto purchased territory without utilising production for the purpose of waiting until property prices rise, at which point they would sell the land, in addition to land owners simply raising prices artificially on buyers due to the scarcity of available land.

He went on to say that the IDA was attempting to free itself of the responsibility of having to distribute land under the jurisdiction of the Urban Communities Authority, focusing only on lands directly under its purview. Responsibility for this would gradually be transferred to various city authorities.

The IDA, according to Al-Garaf, wanted to clarify that it would not serve as the police force of Egypt’s industrial sector, and that it was not actively working against it. Rather, he said, it sought to play the role of lawyer who supported the industry’s growth and sought to help pave the road ahead of it.

He went on to say that the IDA’s goal was to help spur local industry and production, particularly food products, and what was required would be to build and construct new specialised industrial complexes, in addition to helping Egyptian factories better design their own industrial die.

The development of locally made industrial die would be critical to the expansion of local industry, seeing as most of the country’s supply had been purchased from abroad at highly inflated prices, preventing Egyptian factories from modernising their facilities and products. For these reasons, Egyptian factories have been hard pressed to keep up with world developments in industry and production techniques.

He acknowledged that there existed industrial die production centres in Egypt but that they were few and far between; many of them did not meet the needs or standards of the industry. He called on the IDA to cooperate with both the public and private sectors, in addition to Egypt’s armed forces, to unify their efforts to encourage the production of locally made industrial die.

 


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