1A free zone (FZ) is a defined perimeter in which businesses are exempt from the standard operational regime in matters of customs and taxation. In return the State expects that the accredited companies will assist in the increase of national exports, the creation of employment, and the diversification of the economy. The first FZs were established under Sadat as a logical extension of the infitah* policies and in the context of the reconstruction of the Suez Canal region after the 1973 war. Faced with the challenge of unemployment in the mid-1990s the FZ concept was relaunched in order to make the country more attractive to foreign investors. This direction of travel was followed into the 2000s, and from Mubarak to Sisi, in order to develop industrial FZs aiming at the export market, since many investors, both Egyptian and foreign (such as the Chinese), were using FZs essentially to access the vast Egyptian market.

2The most represented sectors are textiles, leather, agri-food processing, chemical products, home electronics, medicines and medical equipment, as well as shipbuilding, car assembly, logistics, warehousing and market services. Industrial relocation in the high-tech sector is rare due to the inadequate level of skilled labour.

3President Sisi is counting on FZs and foreign capital to strengthen the national economy, and is simplifying administrative procedures (single window systems), offering incentives, and building quality infrastructure. The investment law of 2017, which replaced that of 1997 (amended in 2015), defines the areas of investment and proposes tax breaks of 30% to 50% on investment costs (within a limit of 80% of the initial paid-up capital) over a maximum duration of seven years. The legal regulatory range of the different exempted zones – public FZs and private FZs (roughly 200), SEZs, investment zones and technological zones – is somewhat complicated.

A plethora of free zones

4Nine Public Free Zones (Law no. 8 of 1997) depend on the General Authority for Investment and Free Zones (GAFI); in 2018 they employed roughly 100,000 people and hosted more than 1,000 companies, mostly industrial, half of which were joint ventures. Their locations are essentially in the largest towns, Mediterranean ports, and the Suez Canal zone. Ten other FZs are planned or are ongoing projects in regions lacking development, notably at Nuweiba (2018) and at Aswan (2019).

5Greater Cairo holds three public FZs: Nasr City (70 hectares) established in 1974 (car assembly, electronics and clothing), Shibeen el-Kom (28 hectares), and Media City (200 hectares) located since 2000 in 6^th of October City.

6On the Mediterranean coast the Amreya-Alexandria FZ (chemical industries, oil sector services, clothing, warehousing) extends over 600 hectares in proximity to the port and the international airport. Damietta FZ (80 hectares) was hit by controversy surrounding the installation of a polluting fertiliser plant belonging to the Canadian group Agrium (2008), since taken over by a public company MOPCO (Misr Oil Processing Company).

7The FZs of the Suez Canal are mostly engaged in trade, logistics (storage, transhipment and redistribution of merchandise) and services. At Port Said the FZ was created in the wake of the canal’s reopening. The FZs of Ismailia and Suez deal largely with business from Arab countries, East Africa, Asia and the Indian Ocean.

Qualifying Industrial Zones and SEZs

8Since 2005, Qualifying Industrial Zones (QIZ), a Jordanian model, have been spread across Egypt with a view to creating 300,000 jobs. Articles made on site with added value from Israel (10.5% since 2007) can access the American market without tariff or quota restrictions. In 2018 QIZs hosted some 1,000 companies (90% textiles) and their exports exceeded $850 million, according to the Egyptian Ministry of Trade. This concept was topped in 2002 by two vast Special Economic Zones (SEZ) at Ain Sukhna: the Economic Zone Northwest Gulf of Suez (20.4 km²) and the TEDA Suez Economic and Trade Cooperation. This latter was created in 2008 along the lines of the Chinese model at Tianjin and covers an area of 10 km²: it’s a managed by an Egyptian-Chinese joint-venture company.

9In 2015 a presidential decree transformed the length of the canal into the Suez Canal Economic Zone (SCZone, 460 km²) under a General Authority with direct links to President Sisi. It is intended to become a world-class centre of logistics, industry and services, reflecting the regime’s policy of grand development projects, and is hoped to create one million jobs by 2030 and suck in $100 billion of investments. Chinese and Russian companies have already taken on concessions.

10The Free Zone gambit as a kick-start for economic development is daring: in terms of jobs and taxation, the contribution has remained modest. Within a context of changeable political circumstances and with profit as the goal, FZs were launched from within the heart of the State without any apparent reflection as to the needs and issues of local development.

6.8 Free Zones in Egypt