The Historical Bond
The Arab Republic of Egypt and The United Arab Emirates share a deep and longstanding bond on both governmental and people’s level. These relations were strengthened by historical ties that go beyond political and economic aspects. Historically, the relations between the two countries embedded in the past were further strengthened with the declaration of the Union in 1971 and the fundamental support of Egypt, through sending teachers, engineers and doctors from Egypt, to support the UAE’s union and its institutions. The UAE in turn provided all forms of support to the Egyptian army and people, supporting Egypt’s efforts in claiming back its occupied territories in the 1973 October war.
UAE’s national anthem “Ishy Bilady”- Live my Country – which was composed by the Egyptian musician Saad Abd Al-Wahhab is perhaps one of the most significant testaments of the ties between the two nations.
The UAE’s late founding father, Sheikh Zayed bin Sultan Al Nahyan, believed in Egypt’s position in the Arab world, and its pivotal and pioneering role regionally. He supported Egypt and Syria in their 1973 war for the liberation of the Arab Occupied Territories by imposing an oil boycott, making his famous declaration: “Arab oil is not dearer than Arab blood.”
Today, around 600,000 Egyptians live in UAE, working in various sectors such as education, construction, health care, administrative and judiciary services, supporting the progress and development in the UAE, while also representing one of the important pillars of the Egyptian economy through annual remittances reaching 2.1 billion dollars in 2022-2023.
On the other hand, Egypt continues to welcome UAE nationals visiting for tourism, as Egypt remains as one of their favorite touristic destinations in the Arab, African and southern Mediterranean regions. It is worth mentioning that the number of visitors to Egypt has increased to 15 million tourists in 2023.
On the political level, continued coordination is taking place between both leaderships as well as exchange of high official visits.
The Economic Ties
Economically, both the Arab Republic of Egypt and the United Arab Emirates are members in the Greater Arab Free Trade Area. The solid trade exchange between the two countries increased during the first 11 months of 2022 by 6.5 % compared to the same period in the previous year (2021) recording 4.6 billion US$; 1.8 billion exports from Egypt in the first 11 months of 2022 compared to 1.4 billion US$ during the same period in 2021 (increase of 14.4%). On other hand, the value of Egypt imports from UAE increased from 2.7 to 2.8 billion US$ in the first 11 months of 2022 (increase of 1.9%), Precious stones, pearls and jewelries are the major exports (799.6 million US$) then tools and electric machineries along with spare parts (219.6 million US$), clothes (164.3 million US$), vegetables and plants (58.7 million US$) and finally furniture and readymade facilities worth 31.7 million US$.
In terms of UAE investments in Egypt, it has witnessed a significant growth up to 5.7 billion US$ during the financial year 2021-2022 compared to 1.4 billion US$ during the same period during 2020-2021, an increase of 300%. The “Ras Al-Hikma” deal also signed between both sides in February 2024 worth 35 billion US$ considered to be the largest direct investment deal in the history of Egypt, confirming Egypt’s position as one of the most attractive destinations for foreign direct investment, and moving the country to the 32 rank worldwide in 2023, after it was ranked 45 in 2014. This progress has been achieved following the Egyptian State’s efforts to encourage foreign investment, as one of the Government’s economic plan priorities.
The increase in foreign investment flow to Egypt is related to many factors, including availability of trained workforce at competitive prices, large consumer market, competitive tax rates, access to global markets and diversified economy, in addition to a general atmosphere that encourages and attracts investment.
FDI Support
In more details, the legislative system in Egypt provides several forms that are compatible with the needs of each investor, including:
Free Zones System
Projects operating under the Free Zones System enjoy many incentives, guarantees and exemptions granted through Investment Law No. 72 of 2017, and the most important of which are:
• Profits of companies and their subsidiaries subject to the free zone systems are exempted from the tax on revenues from commercial and industrial activities and dividend income tax.
• Capital assets and production requisites necessary for practicing the project’s activity are exempted from the value added tax.
• Domestic components are exempted from the custom duties in case these goods are sold inside the domestic markets.
• All imports and exports of companies operating under the Free Zone System are exempted from custom duties and taxes.
• The projects operating under the Free Zones System and its profits are not subject to laws and regulations of taxes and customs applied in Egypt, these projects are subject to:
– 2% of the value of goods upon entry (CIF) in respect of storage projects, and 1% of the value of goods upon exit (FOB) in respect of manufacturing and assembly projects, and direct transit goods consigned to specific destination are exempted from paying such fee.
– 1% of the total revenue generated by projects maintaining activities which require no entry or exit of goods, based on financial statements approved by legal accountants.
– 1% of the total revenue generated by manufacturing and assembly projects upon exportation of commodities abroad, and 2% of the total revenue generated thereby upon entry of commodities into the country, and direct transit goods consigned to specific destinations are exempted from paying the fees.
– 2% of the total revenue generated, regarding any other projects aforementioned in the previous provision.
Investment Zones System
Investment Zone is a specific area designated for some developers to establish investment activities, and its borders shall be established by virtue of decree of Prime Minister, and the developer is responsible for carrying out the establishment, development and implementing the infrastructure of the zone, the developer can be a private company or government agency.
According to Investment Law No. 17 of 2017, investment zones are established as follows:
• By virtue of decree of the Prime Minister upon a proposal of GAFI BoD, Appropriate Minister and the Minister concerned, it is permissible to establish investmentzones specialized in various fields of investment, including logistic, agriculture and industrial investment zones, provided that the decree shall include the location, nature of activities permitted to operate and the schedule for establishment, in addition to any general conditions related to such activities.
• The developer, who is in charge of the investment zone, shall take the necessary procedures for carrying out the construction works in accordance with the schedule stated in the license.
• It is permissible, upon the decision of the Prime Minister or a delegate thereof, to grant the licensee an additional period in light of the justifications presented by the developer, subject to GAFI BoD approval.
Technological Zones System
Investment projects established within Technological Zones are projects operating in the fields of communications and information technology, including industrial activities, electronics design and development, data centers, outsourcing activities, software development and technology education. Also, all machinery and tools required by projects operating within Technological Zones may not be subject to taxes and custom duties within Egypt, and these projects enjoy special investment incentives permitted by Investment Law No. 17 of 2017.
Economic Zones System
One of the most important zones in Egypt is the Special Economic Zones in the Northwest of Suez Canal, offering a number of benefits to the projects located there, as part of the Zone management’s vision to provide factors that guarantee lowest cost of production for projects operating therein. These advantages include:
• 10% of the unified income tax within the Zone (versus 20% outside) applicable on the profit of the capital companies and on income on natural persons and on revenues derived from land and non-residential buildings.
• 5% of the income tax (versus 10% outside the Zone).
• A one-stop shop that provides the investor with single- point authority over other government agencies in core areas.
• The Economic Zone has a supreme committee that supervises the taxation system.
• The Economic Zone has a special customs service specialized to serve the Zone.
• Allowing access to the domestic markets, duties on sales to domestic market will be assessed on the value of imported inputs only.
Golden License
The golden license is a comprehensive approval on the set up, operation and management of a project, including building licenses of such project and the allocation of the real property required therefor. It may be granted to companies upon a decree of the Council of Ministers. This approval may also include providing incentives, and is valid on its own without the need to take any other action.
The total number of projects that have been granted the Golden License has reached 29 (March 2024) since the launch of this license in 2022, with a value of about 10 billion US$.
These efforts are part of Egyptian government’s ongoing efforts to encourage the foreign direct investment flows.
More information
More information about the advantage of investing in Egypt can be found on the website of the General Authority for Investment and Free Zones: www.gafi.gov.eg
