By Ahmed Kamel Industrialisation is a must to increase Egypt's gross domestic product (GDP) for sustainable socio-economic development in the long term. The real challenge will be how to double the contribution of the industrial sector to the nation's GDP. The industrial sector currently accounts for 17.7 per cent of the nation's gross domestic product, according to data from the Trade and Industry Ministry. In Japan, Malaysia and South Korea, it accounts for 28, 44.3 and 36.5 per cent of GDP respectively, according to World Bank data. Industrial zones have been a strong support in increasing the contribution of the industrial sector to GDP in a number of emerging economies, i.e. China, Malaysia, Indonesia, India, Mauritius and Singapore. Industrialisation has been the mainstay of exports in these countries and many others across the world. Specialised economic zones (SEZs) have been the key instrument for boosting industrialisation to turn these countries into export-driven hubs. In Egypt, the long-term strategy should focus on the doubling of SEZs nationwide, particularly in the Suez Canal Area Development Project. Industrial zones With total investments worth LE700 billion, the industrial zones in Egypt stand at 119, according to data from the Industrial Development Authority (IDA). The Sherif Ismail-led Cabinet has launched a number of initiatives for public private partnerships (PPPs), foreign investors and private sector developers to boost industrialisation. The government is working hard on providing the investors with plots of land required for SEZs. It is coordinating with the World Bank and other international agencies to pave the way for attracting more and more investments into the industrial sector. Industrial developers are the key player in carrying out the government's plan to increase the number of SEZs nationwide. The long-term strategy for boosting industrialisation should bank on the private sector to realise that goal. Suez Canal The Suez Canal can be a magical wand to create an export-driven industrial hub in this country. Located at the junction of three continents – Europe, Asia and Africa, Egypt has the potential to become a global hub for industrialisation and trade. Egypt has taken a raft of measures to boost growth rates and attract more foreign direct investment inflows. Free industrial zones in the North Pole of the waterway in Port Said and South Pole in Sokhna and the Gulf of Suez should be the government's focus to achieve sustainable development and real economic growth in the medium and long terms. The Suez Canal Development Project is planned to house a slew of industries, i.e. pharmaceuticals, petrochemicals, textiles, automotive, cement, steel, ceramics and petrochemical plants and shipyards. The economic reforms taken since the currency float on November 3, 2016, should – in time – bring direct investment inflows into new SEZs. A devalued pound will encourage foreign investors to set up industrial clusters near the Suez Canal to draw on the country's one-of-a-kind location. The Malaysian way There have been a number of success stories over the past decades. In the mid 1970s, Egypt set up Port Said as a free trade zone. The move was part of the "Open Door" policy, which was initiated according to Law 43/1974. Although Malaysia set up free trade zones in 1971, the Southeast Asian country embarked on an import substitution strategy. It offered export manufacturers attractive investment incentives, particularly lower taxation directly linked to export performance. "Malaysia realised the limits of import substitution industrialisation well before most other developing economies, and its government embraced the export industry, despite the country's richly-diversified natural resource endowment," the World Bank said in a study entitled "Special Economic Zones: Progress, Emerging Challenges and Future Directions". "[Malaysia's free trade zones] conferred duty-free imports of capital and inputs for goods that were processed for export. Land within the zones was leased to firms at below-market rates, but firms normally built their own factories rather than leasing them. In addition, company tax relief was provided for specified periods," the study said. Between 1982 and 1993, the share of manufacturing in Malaysian exports surged to 74 per cent from 22 per cent, World Bank data showed. "The Mahathir government rashly launched a heavy industry drive in the early 1980s, just as the Republic of Korea was reacting strongly against that policy and the social and economic costs it had imposed on the majority of the population," the study added.
