Regional Focus
In the
ZONE
Egypt touts the Suez Canal Special Economic Zone as an investment hotbed in Africa and the Middle East. However, it faces stiff competition from Morocco, Kenya and Saudi Arabia. By Tamer Hafez
W
ith five of the world!s 10 fastest-growing economies located in Africa, the continent is witnessing an unprecedented economic boom. To sustain it, governments have to quickly implement strategies and policies favorable to potential and existing foreign investors. To avoid being bogged down by incumbent administrative and regulatory problems, almost all those countries are fasttracking construction of Special Economic Zones SEZs that have their own administrative and regulatory frameworks. The Suez Canal Special Economic Zone SCZone is Egypt!s most ambitious attempt to date to compete with 236 other SEZs in Africa, according to a 2019 report by the United Nations Conference on Trade and Development UNCTAD . However, despite being in the works since 2015, the SCZone is still years away from completing phase one. We have a nearly completed master plan of the project, Yehia Zaki, chairman of the SCZone, told AmCham Egypt in January. Worryingly, the UNCTAD report conducted a global survey that ranked competition from neighboring countries 47 percent of respondents as the top threat to the success of SEZs.
26• Business Monthly - MARCH 2020
Testbeds for investors
An SEZ is commonly defined as a geographically limited area with its own infrastructure, incentives and more favorable legislation than the rest of the country. SEZs are often used as a proving ground for reforms that can then be spread to the broader economy, according to the Policy Center for the New South, a Moroccan think tank, in June. There are three basic types of SEZs. The first is free-trade zones, which are most common in the MENA region. Most prominent is Jebel Ali in the U.A.E. that focuses on trans-shipment and re-export of goods. The second type is export-processing zones EPZs , such as the Qualifying Industrial Zones QIZs in Egypt and Jordan. Exports are exempt from customs at the destination market if they meet specific criteria. The third type is an SEZ with a variety of industrial sites, residential areas, services and ports. The most prominent in the Middle East and Africa are the SCZone and TangierMed in Morocco. Other types of SEZs are hybrids,
but with a competitive edge. For example, there are green SEZs, urban zones, single-factory export processing zones, sustainable SEZs and public-private partnership zones. According to the UNCTAD report, Egypt has 10 SEZs, ranking third in Africa behind Kenya 61 SEZs and Nigeria 38 zones . Cameroon is a close fourth with nine. The majority attract labor-intensive, low-skill manufacturing with high potential for export, such as textiles and garments. Some are linked to surrounding natural resources, such as the Golden Triangle in Egypt that targets mining investments. The most common types of Egyptian SEZs are industrial zones. Some are free zones, while others are private with only one company. Businesses in those zones are legally outside Egypt and don!t pay taxes or customs, and exports are processed faster than those outside the areas. The government categorizes goods produced in SEZs as imports, subject to standard customs and duty fees if sold in Egypt.
