Highlights

On 4 June 2023, the Prime Minister issued decree no. 2140 of 2023 (the “Decree”) amending Article No. 76 and introducing a new Article, no. 76 bis, to the Executive Regulations of the Investment Law No. 72 of 2017 (the “Amendments”), which entered into force the following day. The amendments aim to facilitate investment in Egypt by providing more incentives for investors.

Scope of Application

The Decree amended the conditions to establish a Private Free Zone to alter the required conditions detailed below. Additionally, the Decree has created a new type of free zone: the Private Service Free Zone.

Amendments

I. Amending Article No. 76 of the Investment Law Executive Regulations

The Amendments under Article No. 76 tackle the conditions required to establish a Private Free Zone, whereas the Decree repeals:

1. the minimum capital and investment cost requirements,
2. the project’s area conditions,
3. the industrial projects’ workforce requirements; and
4. the previously required condition regarding the availability of a suitable place for the project at the Public Free Zone.

In addition, the Decree aims to maintain the conditions concerning the following:

1. the form of the project, which shall be in the form of a joint stock or a limited liability company,
2. the proportion of exports which shall be a minimum of 80% (eighty per cent) with the possibility of granting an exception to strategic projects,
3. the compliance with the requirements of industrial security, civil defence and fire hazards, and
4. the General Authority for Investment and Free Zones (“GAFI”) to supervise and monitor the activities of the Private Free Zone Projects to ensure their proper functioning. The Amendments stipulated that said monitoring would be per mechanisms specified by GAFI’s Board of Directors and approved by the Cabinet, ensuring better governance to such authority.

It is worth noting that, regarding the conditions of the required local component, which shall be at least 30% (thirty per cent), the Amendments have introduced a grace period of 3 (three) years starting from the date of operation to meet this condition.

Eventhough the Amendments eliminated multiple conditions concerning the establishment of a Private Free Zone, the Cabinet may still, for consideration purposes relating to each case and based on the presentation of the competent minister and the approval of GAFI’s Board of Directors, exempt a project from one or more of the applicable conditions.

II. Adding Article No. 76 bis to the Investment Law Executive Regulations

A new Article was added to the Executive Regulations under No. 76 bis upon issuing the Decree. The said Article creates a new type of free zone, namely, the Private Service Free Zone, which is not subject to the conditions set forth under Article No. 76, except for the conditions which fall under the supervision of GAFI. In addition, the Decree allows the establishment of a Private Service Free Zone, which shall be established by virtue of a Cabinet Decree based on a proposal by the competent minister following the evaluation by GAFI.

The Private Service Free Zone shall consist of a main service project aiming to establish, develop, manage, and allocate areas for certain sub-service projects carrying out similar activities, which fall under any of the sectors listed in Article No. 1 of the Executive Regulations, in accordance with the following conditions and regulations:

1. the main project of the Private Service Free Zone shall be in the form of a joint stock or a limited liability company,
2. the main service project shall comply with the civil defence and fire conditions in accordance with the Egyptian applicable laws,
3. GAFI’s Board of Directors will issue the procedures and the required conditions to establish the sub-service projects within the Private Service Free Zone. Such procedures will be approved by the Cabinet after the proposal by the competent minister, and
4. the Board of Directors of the Public Free Zone, where the geographical area of the Private Service Free Zone is located, will be authorised to approve the establishment of projects within the Private Service Free Zone and to annul them. Additionally, the Chairman of the Board of Directors of the concerned Public Free Zone shall be authorised to license those projects to carry out their activities as well as consider renewing and amending said license. Additionally, the relevant license shall include a statement outlining the project’s objectives, the duration of its operations, its boundaries and the value of the financial security provided to meet the project’s liabilities.

It is worth noting that the practical implementation of this Decree is not yet tested, especially in relation to the Private Service Free Zone.

Reliance, Scope, and Assumptions

• The purpose of this update is strictly to assist the reader in gaining an understanding of the matters stated herein, and is not to be read or construed as a legal opinion.
• Some of the views expressed in this update may be modified in supplemental reports or in the course of giving ongoing or future legal advice.
• This update should not be regarded as or relied on as being comprehensive concerning any matter referred to in it.