Egyptian businesses in priority industrial sectors will need to put up letters of credit (L/Cs) if they want to benefit from the government's ambitious initiative to bolster sectors facing increasing competition from Turkey and China.

The initiative is reportedly offering a total of 30 billion Egyptian pounds (LE30 billion - US$593 million) in financing at a subsidised interest rate of 15 per cent over five years, aimed at facilitating the acquisition of machinery, equipment, and production lines. As of September 2024, the average bank lending rate in Egypt was reported at 25.4 per cent per annum.

Underdeveloped areas and core sectors

The initiative particularly focuses on underdeveloped areas, including border governorates, Upper Egypt, and the Suez Canal region, encompassing Port Said, Ismailia, Suez, and East of the canal.

The government's industrial support initiative prioritises seven core sectors: pharmaceuticals; machinery and equipment; renewable energy; food industries; chemical industries, mining and building materials.

Value added incentives

The programme also incentivises value added activities. Companies increasing local value-added content in their products by seven to ten per cent over the previous fiscal year will receive a one per cent reduction in the interest rate, which rises to 1.5 per cent if the increase exceeds 10 per cent.

New and innovative industries not previously producing locally may qualify for a two per cent interest rate reduction if they demonstrate substantial import substitution.

Qualifications

To qualify for the programme, companies must meet specific conditions, including obtaining a construction license, completing construction, and opening L/Cs for imported machinery, equipment, and production lines.

Alternatively, they can provide tax invoices for locally sourced purchases. They will not be able to use funding to settle existing debts with banks.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.