3 companies prepare studies to establish power plant, water desalination station: Head of SCZone

Ahmed Adly
9 Min Read
The Suez Canal region will become like Hong Kong and Singapore in terms of logistics services, Managing Director of Falcon Group said. (AFP Photo)

Singaporean company Hyflux, Mitsubishi Matoto, and Toyota Tsusho began conducting feasibility studies for the establishment of power plants and water desalination stations in East Port Said after having signed memoranda of understanding (MOUs) with the Suez Canal Economic Zone (SCZone).

Daily News Egypt conducted an interview with the Chairman of the SCZone Ahmed Darwish to discuss the latest developments and investment opportunities in the region.

You said the East Port Said area is the rising star of investment in the Suez Canal area. Why is this the case?

The East Port Said industrial area includes investment opportunities that make it a rising star among the other districts of the Suez Canal Area Development project.

This area is on a total of 40m sqm. It receives the highest number of requests for investment due to its vital location. However it will not be ready for the start of industrial projects for another two years due to the softness of the soil.

Chairman of the SCZone Ahmed Darwish (Photo Public Domain)
Chairman of the SCZone Ahmed Darwish
(Photo Public Domain)

What are the available investment opportunities in East Port Said?

The current investment opportunities are in infrastructure projects, such as the establishment of power plants and desalination stations, since the region majorly lacks water sources due to its distance from the River Nile.

The SCZone has opened the door for all international and local companies to establish infrastructure projects in the region.

What are the most important MOUs signed with international companies that operate as industrial developers?

Recently, the SCZone signed MOUs with Russia and a Spanish alliance to develop East Port Said industrial zones. The SCZone is continuing its negotiations with both sides in pursuit of a final agreement.

The nature of the soft ground for the East Port Said industrial requires processing to establish factories on it. This process includes water suction in the area.

The cost of processing just one sqm ranges between EGP 400 and EGP 500. I estimate the total cost of processing the area at about EGP 25bn, but the SCZone is currently considering modern technologies that would cost less than the current mechanism of processing.

The authority signed a MOU last week with a Spanish alliance including eight companies that will work as industrial developers in East Port Said. The authority had previously signed a MOU with Russia to allocate 2m sqm for the latter to establish an industrial zone.

The size of projects that the Spanish coalition is looking to implement has an initial value of €8bn over at least five years.

The MOUs the authority signed with different parties are considered the first phase of the agreement before the final signing. The company is carrying out feasibility studies, and in case a lack of commitment becomes evident, the MOUs can be annulled.

In addition to the industrial zone, the development process in East Port Said includes the establishment of a logistical centre on the area of 18m sqm. The drilling of a side canal for the East Port Said port will reduce the waiting hours for ships. Moreover nine platforms will be established, in addition to a number of tunnels and a residential area to serve the industrial zone.

The East Port Said port increased the value of the area economically and the inauguration of the side canal of East Port Said will be on 24 April.

What are the latest developments in the negotiations with the Singapore Ports Authority?

Negotiations are still ongoing with the Singapore Ports Authority to manage and operate the East Port Said port. We received three requests from global companies to manage and operate the port. However, I cannot reveal their names.

The East Port Said area is one of the development areas that surround the Suez Canal, as well as three other areas, East El-Qantarah, East Ismailia, and Ain Sokhna.

The development process includes developing six ports: East Port Said, West Port Said, Ain Sokhna, Adabiya, Al-Tour, and Al-Arish. The second area is the West El-Qantara, characterised by its closeness to 10th of Ramadan Industrial City.

The area of West El-Qantarah is expected to receive investments in the fields of agricultural and food processing.  The authority also received an offer from one of the global companies to establish an Olympic city in the area.

The third area is East Ismailia and will be allocated for medium industries; the fourth area is Ain Sokhna, which was allocated as an economic zone of a special nature since 2003. Ain Sokhna area is allocated for heavy industries, where the authority’s board of directors provided a new licence for the Egyptian Refining Company (ERC). There is also a plan to establish two petrochemical and steel factories in the area.

Will the authority work in all the areas at once or develop each area separately?

The authority will develop the four areas in parallel by allocating a team work for each zone.

It is useful to work in the four areas in parallel. For example, Russia offered to establish a factory for heavy industries in East Port Said but the authority rejected the offer and suggested to build it in Ain Sokhna.

What is the actual role of the authority and what is the nature of investment in the region?

According to Article 13 of the law governing economic zones of special nature, the authority is entitled to make decisions with regards to investment, without the approval of the cabinet.

The authority has its own commercial registry and can issue all types of permits. However it is still working in accordance with the Egyptian law. The authority has a different concept for the application of the law and the workflow. If the authority’s board of directors discovers that a certain project will bring added value to GDP and the authority is entitled to approve the project, it can allocate the land for the investor and establish his company within three days.

Legally, the authority is entitled to grant all licences and registration for companies. It is also responsible for the infrastructure in the region and the law allows the authority to establish its own investment or a joint investment with others.

The authority will open an office to collect taxes from companies operating in the development area and then it will be supplied to the Tax Authority.

Regarding taxes, has the dispute over the unification of the tax rate at 22.5% been settled yet?

There is still dispute over the unification of the tax rate for companies operating within the economic zone under the amendments to the Law No. 83/2002.

The reason for raising the tax rate to 22.5% in the economic zones from 10% is due the Minister of Finance’s fear that the investors will transfer their factories located in other regions to the economic zone to take advantage of the low tax rate.

A committee was formed to conduct a study over the most appropriate tax rate in the area.


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