Recent government decisions and regulations aim to boost the automotive industry. Mona El-Fiqi takes the wheel In an attempt to increase automobile exports, the government has taken several serious steps in recent weeks to improve the industry, including the establishment of new specialised industrial zones and new regulations to control local markets. It is also considering a package of incentives for investors interested in this field. Minister of Trade and Industry Rachid Mohamed Rachid signed an agreement with Russian Minister of Industry and Energy Viktor Khristenko on 10 April to create a specialised Russian industrial zone at Borg Al-Arab City. The Russian zone, located on one million square metres with total investments reaching $2 billion, will specialise in automotive and aeroplane feeding industries. "This industrial zone will deepen economic ties and boost bilateral trade and investment flow between both countries," noted Rachid on the eve of Khristenko's visit to Egypt. Rachid added that the industrial zone will also contribute positively to industrial development in Egypt, by "raising the local component and integrating more and more local producers into global manufacturing value-chains." A number of famous Russian companies such as Meg, Gas and Power Machines will have a stake in the new industrial zone to be established before the end of this year. The zone is expected to attract investments of around $550 million and to generate some $700 million in exports over the next five years. Moreover, Rachid's ministry is currently considering a package of incentives to encourage the local automotive industry to raise the volume of auto exports. The incentives will be applied in the Russian zone, as well as two more industrial projects in cooperation with Germany and China. The aim is to raise investments in this sector to $1 billion and raise the value of exports to $1.5 billion during the coming five years. According to Rachid, incentives include renting land to investors at a moderate price for 40 years and training labour as needed for the new factories -- with the Higher Council for Training footing 80 per cent of the cost. Other benefits are the establishment of a technology centre for automotive components that can certify products according to international specifications. The package also includes assistance from the Exports Support Fund starting next year to reduce production costs at the beginning of the project, a step that will encourage investors to construct factories in this sector and increase auto exports. Amr Assal, chairman of the General Authority for Industrial Development, announced that the new specialised industrial zones are expected to provide 70,000 jobs in automotive feeding industries. Assal added that this sector has great potential and is competitive compared to other countries, especially that costs are much lower than in the EU countries, for example, in light of the incentive package. According to him, the automotive industry is a rapidly growing sector, with the total number of locally-manufactured vehicles -- including buses, cars, micro-buses and trucks -- reaching 87,000 in 2006, compared to 72,000 the year before. The total number of automotive manufacturing companies is 21 with total investments of LE6 billion, while companies that manufacture automotive components are 375 companies worth LE2 billion. To boost the local share in this industry and achieve notable development in automotive feeding industries, the Ministry of Trade and Industry decided this month that factory licences will be revoked if manufacturers do not include a minimum 45 per cent local component in production. If this condition is difficult to fulfill, the factory should export local components to make up for the difference. Assal explained that this aims at encouraging investors to increase their investments, raise the local component in manufacturing and expanding automotive feeding industries. The government's concern is not only to boost local industry, but also to regulate the local vehicle market. In a move to control trading in vehicles on local markets and to protect consumer rights, the ministry announced several rules in February in reaction to many customer complaints that car dealers were dishonest. The new regulations stipulate that a car agent or dealer is not allowed to receive cash money from clients. Instead, down-payments should be deposited in a bank account and would only be dispensed to the dealer once the customer receives the new car. This procedure should take no more than six months, and installments should be paid through the bank. Moreover, the car dealer can keep 10 per cent of the down payment if the client decides to cancel the sale at any time. In response to these regulations, members of the Chamber of Car Agents, Distributors and Dealers (CCADD) at the Cairo Chamber of Commerce held several meetings to discuss the impact of these decisions on their business. CCADD presented Rachid with a memo earlier this month explaining their position, but have not yet received a response. Effat Abdel-Atti, chairman of CCADD, explained that bringing in a bank as a third party in the transaction is unnecessary and can be detrimental to car dealers. While Abdel-Atti agrees that the local auto market needs regulating, he did not think the new rules were obligatory since the ministry did not issue an official decree. "They are just guidelines," he asserted.
