The Chinese company OPPO announced that it has reached an agreement with the Egyptian government to establish a factory in Egypt with investments of $30m.
At the same time, a Chinese website published a report on Chinese manufacturers searching for alternatives to transfer their factories in India, and Egypt was on the list, along with Indonesia, Malaysia, and Bangladesh. This situation must be used correctly to turn Egypt into a manufacturing and export hub, but what are the incentives that manufacturers need?
Bassem Megahed, CEO of Raya Trade, an authorized agent of a number of mobile brands, said that there are some companies that started working on establishing their factories in Egypt, such as Vivo, Oppo, and Nokia, which represents a good opportunity to transform Egypt into an export and manufacturing hub.
Megahed added that manufacturers are dealing with a major challenge, which is the manufacturing cost in Egypt being higher than in its Chinese counterpart due to the lack of industries feeding the mobile industry. This is why investment must be enhanced in the mobile industries, which can give the Egyptian market a competitive advantage and reduce the cost of manufacturing.
Megahed believes that one of the investment incentives that investors need are guarantees that the investment laws will not be changed. This would ensure that factories will have sufficient freedom to import production components into Egypt.
According to Megahed, incentives can be provided to manufacturers to attract them to the Egyptian market by allowing them to import part of their devices to the Egyptian market if a certain percentage of the products offered in the Egyptian market are manufactured, especially that a single manufacturer cannot manufacture all of its phone models in only one factory.
He stressed the importance of deepening and activating trade agreements with countries in the region to ensure that products exported from Egypt enter markets with tax exemptions, in order to entice manufacturers to consider Egypt an export hub.
He added: “Egypt already has signed many agreements, such as the Agadir Agreement with North African countries, COMESA, and others, but manufacturers also need trade agreements with West African countries such as Nigeria as it is a huge and important market for Chinese mobile manufacturers.”
Chinese Global Times, said in a report on its website, that the agreement concluded by the Chinese company OPPO with the Egyptian government to establish a factory in Egypt may signal a mass exit of Chinese mobile phone companies from India amid the country’s escalating crackdown against Chinese companies.
According to the newspaper, the executive said that Chinese smartphone brands are also considering Indonesia, Bangladesh and Nigeria (along with Egypt) as an alternative to India. He noted that the companies will evaluate bilateral relations, market potential, preferential policies and labor costs in that order.
Waleed Ramadan, a board member of the Cairo Chamber of Commerce, said that there are currently about four mobile factories in Egypt, an important step towards transforming Egypt into a hub for the electronics industry, but a number of investment incentives must be provided to manufacturers to attract them to the Egyptian market.
He explained that the Chamber of Commerce is currently working to submit a document to government agencies on the incentives that the market needs to localize the mobile industry in Egypt.
Ramadan said that the Egyptian market sales of mobile devices range between 15 and 18 million phones, and if the existing mobile factories operated at full capacity, their entire production will not exceed 10 million phones, which is much less than the market needs. Therefore, some incentives can be provided to attract new investors to this industry to cover the needs of the local market and export to African and Arab markets.
He believes that one of the incentives that the market needs is to provide tax exemptions to manufacturers on production components, especially that the factory can import enough raw materials as stock for the next six months.
Ramadan also believes that the state should allocate factories at a specific value with long payment periods over 10 or 15 years, with an exemption from paying the value of the factory in the first three years, for example, provided that investors start operating the factory within a short period determined by the state.
He demanded that mechanisms be developed to issue licenses for the factory in a quick and simple way away from the localities, especially that the issuance of licences using the current procedures may take two years.
Karim Ghoneim, head of the Digital Economy and Technology Division at the Cairo Chamber of Commerce, said that Egypt has advantages compared to India, such as energy prices, as well as incentives in some industrial areas that are good for the local manufacturer.
Ghoneim believes that more incentives must be given to investors so that Egypt would be a preferred destination for them as a manufacturing hub. Among these incentives are tax exemptions specifically for this industry. Feeding industries, as well as the government’s follow-up to manufacturers must also be reinforced to overcome obstacles, especially with regard to licences.