Automotive industry strategy included in unified manufacturing law: FEI Chairman

Daily News Egypt
4 Min Read
Hamdy Abdel Aziz, Chairman of the FEI’s Chamber of Engineering Industries DNE Photo

 By Ahmed Amer

An automotive industry strategy drawn up by the Federation of Egyptian Industries (FEI) has been included in the draft unified automotive industry law, according to Hamdy Abdel Aziz, Chairman of the FEI’s Chamber of Engineering Industries.

The strategy was presented by the FEI to the Ministry of Industry three months ago, Abdel Aziz added.

He told Daily News Egypt that the automotive sector has been waiting for the Ministry of Finance to finish reviewing the law for its presentation to the cabinet and then the presidency for approval.

Abdel Aziz called on the Ministry of Finance to conclude its adoption of the law, as it is feared it will be postponed until after the upcoming parliamentary elections. Should the postponement occur, the law will then have to undergo a parliamentary review, which, according to Abdel Aziz, could take over a year.

Abdel Aziz said the chamber will meet with Minister of Industry and Foreign Trade Tarek Qabil to review the obstacles and problems the engineering industries sector faces, and the automotive industry’s position regarding the law.

He added that the worsening dollar availability at banks and issues with opening letters of credit for the import of raw materials are the most prominent problems facing Egypt’s automotive industry. This will continue unless the government comes up with urgent solutions for these problems.

A Ministry of Finance source told Daily News Egypt that the ministry has almost completed the unified automotive industry law review, which will then be submitted to the cabinet’s economic group.

The source added the ministry considers this law of great significance towards altering Egypt’s automotive industry, and noted that the law aims to increase investment in this industry.

Following meetings with car manufacturers, the FEI’s Chamber of Engineering Industries had previously penned a strategy for the automotive industry. The strategy covers the need to give manufacturers a sales tax exemption to match their ability to further industrialisation, and raise the current 45% minimum rate of local components every five years to reach 58% within 15 years. The gap that may arise from this exemption can be compensated for through exports if the local component rate is achieved, the strategy anticipates. Increasing local components in the automotive industry can also increase Egypt’s income from the industry.

The strategy includes mechanisms to increase investments in the sector, through investment in equipment and machinery, jobs creation, and increasing production capacity, whether in manufacturing or feeder industries.

In addition, activating signed trade agreements with Arab countries and the COMESA will aid exports. The chamber also called for the need to implement programmes that will stimulate demand for cars, by giving automotive owners an incentive to replace old vehicles. This comes  in addition to stopping the import of cars from non-origin countries, in addition to resolving the currency problem, if it begins to affect factory production.

The chamber also submitted a proposal to impose a 30% sales tax on domestic and imported cars, without affecting the price of cars for consumers. Furthermore, automotive component exports accounts for a 1-to-3 ratio of the engineering industries sector exports, that amounted to nearly EGP 15bn during the first half of 2015.

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