Business visit: over 30 companies from the Russian Federation are interested in an industrial zone in Egypt

Russia will expand access to African markets through its industrial zone in Egypt. More than 30 companies are already showing interest in locating production there, Roman Chekushov, Deputy Minister of Industry and Trade of the Russian Federation, told Izvestia. Russian business is exploring the possibilities of implementing joint projects in pharmaceuticals, petrochemicals, mineral fertilizers, automotive and food industries. Experts believe that the Russian Industrial Zone (RPZ) will help expand access to Middle Eastern markets. The advantages, timing and prospects of developing Russia's first industrial zone in Africa are described in the Izvestia article.

Advantages of the Russian industrial zone in Egypt

Egypt is acquiring an important role in expanding exports from Russia. A Russian industrial zone is being created here, in the area of the Suez Canal economic zone. A number of companies from our country are already showing interest in locating their production facilities on the territory of the Russian Industrial Zone, Roman Chekushov, Deputy Minister of Industry and Trade of the Russian Federation, told Izvestia.

— Yes, of course, the interest of specific companies is already being worked out. We have several priority industries, but I must say that the industrial zone in Ain Sokhna is multi-industry, so we don't focus on one or two industries," he said.

On September 15, representatives of relevant government agencies, businesses and business associations visited the site of the Russian Industrial Park in the Ain Sokhna area. The Russian delegation was headed by Deputy Prime Minister Alexei Overchuk. About 35 companies participated in the business mission in Egypt.

— This figure can be stated as exactly those who showed interest. Of course, it's a long way. In order to effectively launch the zone, we need to place several large anchor production facilities. I am absolutely sure that other companies will catch up further," he said.

Russian companies see the industrial zone project as a promising platform for expanding their presence in international markets and strengthening economic cooperation with Egypt. They are exploring opportunities to implement joint projects in sectors such as pharmaceuticals, petrochemicals, mineral fertilizers, the automotive industry, and food processing.

The placement of production in the Russian gas processing plant in Egypt brings the manufacturing process closer to potential sales markets both in the Arab Republic itself and in other countries in Africa or the Middle East, Russian Ambassador to Egypt Georgy Borisenko said in a conversation with Izvestia.

An important advantage of the country is its economic ties with the outside world. She is actively involved in several trade agreements in Africa, Latin America, the Persian Gulf region, Europe, and North America. Among them are the Greater Arab Free Trade Area (GAFTA), the Agadir Agreement, the common market of Eastern and Southern Africa, and the Association Agreement with the EU.

— Goods produced in Egypt have certain preferences and can be imported without excessive duties to these markets. Therefore, the products produced here receive the label "Made in Egypt" and can be more easily supplied to the markets of many countries, that is, almost half of the world. This is a great competitive advantage," the Russian ambassador pointed out. — I think that the Egyptian market as such is of great interest to many of our companies. And our Egyptian friends themselves are very interested in attracting companies from our country, as this means new technologies, jobs, and income for Egypt.

Among other advantages of the RPZ are full exemption from duties on all components imported for production, provided that the final products are intended for export; zero tax on land and real estate. In addition, residents will not need to pay VAT on purchases necessary for production and operation (including raw materials, components, spare parts, and so on), regardless of whether they are imported from the domestic or foreign market. There is also a corporate tax relief for seven years in the amount of 50% of the cost of capital investments in the project. Finally, resident companies and branches will have the right to import production resources and finished products from the parent company without restrictions.

Russia's access to international markets

Although Egypt has never been one of the largest economies in the world, its distinctive feature has always been its advantageous geographical location. A serious advantage is that the largest trade and transport artery, the Suez Canal, passes through the country.

The Suez Canal Economic Zone is a complex with six seaports providing 20% of the world's container traffic and 10% of maritime trade, as well as four industrial zones. The land plot of the Russian industrial zone with a total area of 50 hectares is located near the port of Ain Sokhna, about 120 km southeast of Cairo and 60 km south of the city of Suez.

The site has an advantageous transport infrastructure. It runs along major automobile routes and railway lines. This will make it possible to immediately send cargo to Egyptian ports located near the Mediterranean Sea. An electric grid, a highway connecting Ain Sokhna with the ports of Suez and Hurghada, and a freight railway line run along the border of the site. A cargo port with modern container and bulk terminals is 9 km away. Sewage treatment plants and an electrical substation are already located on the site itself.

— The zone is located in a unique location. There is a lot of maritime traffic here, including towards the countries of the Global South. Strategically, we see this project as an entry point to both Egypt and the African continent," Russian Deputy Prime Minister Alexei Overchuk said after meeting with Chairman of the General Directorate of the Suez Canal Economic Zone Walid Gamaleddin and inspecting the site of the refinery.

Russia hopes that the first companies will be able to start working in the Russian industrial zone near the Suez Canal before 2030, he noted.

Egypt as a location for an industrial zone looks quite logical and justified, according to Vsevolod Sviridov, an expert at the HSE Center for African Studies.

— Russia and Egypt are politically close, trade and economic ties are developing quite actively, and Egypt is located very advantageously logistically. This is access to the Middle East, Africa, and the Mediterranean basin," he told Izvestia.

The implementation of the project on the creation of the RPZ has been carried out for several years — since the signing of the intergovernmental agreement between the Russian Federation and Egypt in 2018. However, it entered the active phase only recently, after the protocol to the agreement was ratified in the Egyptian parliament. And in May of this year, Moscow and Cairo signed an agreement on the transfer of a land plot for a gas processing plant.

"This year we have signed a number of agreements that have allowed us to move the process forward, but there are certain difficulties that we hope will be resolved, as the project can be a landmark and a kind of model for African countries," said Vsevolod Sviridov.

On September 16, Alexey Overchuk will hold talks with Egyptian Prime Minister Mustafa Madbouli, Foreign Minister Badr Abdelati, and Deputy Prime Minister for Industrial Development, Minister of Industry and Transport Kamel Wazir.