Cabinet to approve auto industry strategy within days: Industry minister

Strategy to stimulate efficient environment for automotive industry in Egypt, says Qabil

Minister of Trade and Industry Tarek Qabil denied rumours that the cabinet rejected the automotive industry draft strategy presented by the ministry last month.
He told Daily News Egypt that the strategy will be issued within days, noting that a meeting was recently held to discuss the draft, and the main stipulations were agreed upon.
"The strategy will rely on developing the automotive industry to compete on a global level, and avoid any negative effects on Egyptian consumers," he said.
The minister explained that the strategy will stimulate an efficient environment for the automotive industry in Egypt, as the state will not be able to protect all industries. "Industries have to promote efficiency and the application of global standards to open a competitive environment in the Egyptian market."
He noted that the world is moving towards liberalising trade and abolishing customs. "Customs on all products must be waived to establish a genuine industry," he added.
On his part, the Chairman of the Federation of Egyptian Industries' (FEI) Chamber of Engineering Industries, Hamdy Abdel Aziz, said the cabinet will approve the strategy soon, as no reservations or comments were provided.
He added that the cabinet is mainly studying the application methods of the strategy to guarantee the development of the automotive industry in Egypt and the right to own cars at affordable prices.
He explained that the strategy imposes an additional tax on manufacturers and importers of cars to compensate for customs exemptions as per trade agreements, most notably the Agadir Agreement and the EU-Egypt Association Agreement.
"Both importers and manufacturers have the right to benefit from customs exemptions provided that the local components rate in locally-manufactured vehicles, as well as imported ones, is increased," he said.
Abdel Aziz said the cabinet agreed with the Ministry of Industry at the latest sessions to increase the rate of local components to 60% over the next eight years, instead of 54% over 15 years.
The amendment aims to reinforce the automotive industry and grant vehicle manufacturers exemption from sales tax to stimulate production.
He noted that automobile manufacturers did not demand the protection of the state, but only sought equality with importers and customs-exempted products. The Ministries of Finance and Industry presented a draft strategy to the cabinet for consideration last month, which will be presented to the presidency for final approval.
The Ministry of Finance's approval of the draft strategy indicates that new laws will be issued to amend the customs and taxes on vehicles and components, according to Abdel Aziz.
Abdel Aziz said the proposal will be considered by the cabinet's economic group, and the presidency. He noted that amending customs laws and taxes on cars will not necessarily be presented to the parliament, as the Ministry of Finance is entitled to amend laws on customs and taxes on certain goods without consulting the public.
A number of car manufacturers, in cooperation with the Chamber of Engineering Industries, held a meeting and put together a memorandum that includes strategic goals for the future of the automotive industry.
The strategy, which was prepared by Loic Company, focuses on preserving competition in the automotive industry, reducing the customs tariff and modifying the sales tax, in addition to deepening and developing the automotive industry.
It would also give vehicle manufacturers the privilege of exemption from sales taxes in accordance with their ability to increase manufacturing. Further, it would raise the minimum percentage of local components from the current 45% to 54% in 15 years. If the minimum percentage of local components is not reached, it could be made up for through exporting.
The suggestions, which the manufacturers agreed to put forth to the minister, included a programme to raise demand on cars by giving car owners an incentive to replace their old cars. It also included applying the same programme to microbuses and taxi vehicles.
The suggestions pointed to the necessity of agreement between the government and the banking sector on facilitating car loans, in addition to policies that reduce the cost of financing.
Raouf Ghabbour, Chairman of the Board of Directors and CEO at Ghabbour Auto, said a meeting was earlier held to reach an agreement between all automotive manufacturers in Egypt regarding the principles of the automotive industry strategy. He pointed out that they only designated the principles of the strategy and not the model of the strategy.
Among the attendees of that meeting were Ghabbour, and Bavarian Auto Group Chairman Farid El-Tobgy. The meeting was also attended by General Motors CEO in Egypt and North Africa Tarek Ata, FEI Board member Ahmed Fekry Abdel Wahab, and Chairman of the Egyptian German Automotive Company Karim Sami Saad.
Head of the Vehicles and Other Transport Equipment Division at the FEI Adel Bedeir, board member of the Chamber of Engineering Industries Abdel Moneim El-Kady, and Chairman of Egyptian Auto Feeders Association (EAFA) Ali Tawfik also attended the meeting.
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