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Parliament's Industrial Committee completes auto strategy in November - Daily News Egypt

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Parliament’s Industrial Committee completes auto strategy in November

During the third session of the parliament, the Industrial Committee aimed to draft some laws, especially in the auto strategy, in addition to a draft law that regulates the work of the Industrial Development Authority (IDA). According to the chairperson of the Industrial Committee Ahmed Samir, the auto strategy is expected to be completed in …

During the third session of the parliament, the Industrial Committee aimed to draft some laws, especially in the auto strategy, in addition to a draft law that regulates the work of the Industrial Development Authority (IDA).

According to the chairperson of the Industrial Committee Ahmed Samir, the auto strategy is expected to be completed in November. He pointed out that the committee held 13 meetings in which it heard the observations of the manufacturers and traders of the feeder industries. Their observations on some articles—such as Article 2 and Article 6, as well as amendments to another article—were taken into account.

Moreover, he stated that the Ministry of Industry and Trade is currently contracting a German expert who has done similar strategies in so many other countries.

Additionally, Samir said that during the third session, the discussion of the draft law to deepen the local product will be concluded.

He also pointed out that the law of deepening the local product will help in the industrial expansion horizontally and vertically for each industry, in addition to the reduction of the dollar pressure and the control of prices. Also, it will provide other jobs.

Samir added that the law on regulating the terms of reference of the IDA will also be finalised, especially after the issuance of some laws that added new tasks to the authority, which requires the organisation of its structure and terms of reference.

On the other hand, he said that during the next few days, a meeting will be held to discuss the lack of commitment of some ministries to implement Law No. 5 of 2015 on the preference of local products in government contracts.

It is not acceptable to have local products of the same quality and efficiency imported, not used, which puts pressure on the state’s resources of foreign exchange, said Samir.

In the same context, Samir pointed out that the council’s industrial committee will focus in the coming period on the mineral wealth laws. He pointed out that the share of the mineral wealth of the national product is about 0.5%, which is an unacceptable ratio, especially that Egypt owns has a lot of resources.

The recent period witnessed many efforts by the Ministry of Industry to prepare a new proposal for the automotive industry strategy, after differences emerged over the latest proposal submitted by the ministry to the parliament last year.

Sources told Daily News Egypt that the Ministry of Industry and the bodies concerned with the automotive industry in Egypt are going to contract with German experts to develop a new draft law to regulate the development of the automotive industry in Egypt.

Furthermore, the sources pointed out that the recent draft law of the strategy of the automotive industry was marred by many defects, which would be in the interest of the factory or manufacturers of cars only. This would give rise to certain brands over others and will kill competitiveness in the local market, the sources added.

They pointed out that the strategy of the state is currently aimed at developing new incentives to attract investments in the automotive industry and the industries feeding them.

Meanwhile, the head of the Egyptian Auto Feeders association (EAEA) Ali Tawfik, said that the government’s decision to hire a foreign expert to develop a new strategy for the auto industry is a waste of time, effort, and money.

Tawfik explained that the idea isn’t a novel one, pointing out that it began under Rashid Mohamed Rashid, the former Minister of Industry since 2007.

He added that the Ministry of Industry and Trade was planning to provide direct financial support of EGP 129bn to the auto factories within a 10-year timetable for the development of local production lines to stand up to the fair against the imported product.

Minister of Industry and Trade Tarek Kabil said on 6 July that the ministry is in the process of contracting with a German expert in automotive strategy formulation, developing similar strategies in South Africa and Morocco.

Tawfik pointed out that the current strategy prepared by a foreign company has caused a state of incompatibility among the businesspeople of the automotive sector.

Kabil has previously recommended the formation of a committee that will combine the General Authority for Industrial Development with the Transport and Auto Feeding Industries sectors to formulate a proposal for the new rules for local manufacturing.

The ministry aims to resolve the recent disputes between the automotive companies on the draft law for the development of the automotive industry strategy prepared to the parliament for discussion by Mounir Fakhri Abd Elnour, the former Minister of Industry, and presented by Kabil. The fate of the draft law has not been decided yet.

Samir Allam, a member of the board of directors of the Federation of Egyptian Industries’ transportation department, said that the Ministry of Industry recommended that the IDA forms a committee to combine with the transport and food industries sector to formulate a new proposal for the rules governing the local manufacturing of cars, which gathered in the local market.

On the fate of the draft law submitted to the parliament for the development of the automotive industry, Allam said, “the position of the strategy is still unknown, and it is clearly no longer a priority of the industrial committee in the parliament in the coming period, if it continues in the current form without the introduction of amendments in the interest of all, and not a specific company.”

Allam said earlier that the Bavarian Auto Group, Fiat Chrysler Automobile, and Toyota Egypt made a number of proposals to amend a number of items in the bill.

He pointed out that the amendments revolve around the idea of adding clauses to introduce flexibility in dealing with incentives in the automotive strategy draft

Companies are required to give an incentive to companies in line with what they have implemented the programme, ie if the company has increased the local components to 55% instead of 60%, the latter figure which is required by the law. In this case, it will receive an incentive equivalent to the percentage it has implemented and not equate with other companies that do not achieve any increase.

Allam expressed his regret over the divisions the sector is witnessing regarding the amendment of the draft Automotive Strategy Law. A number of members rejected the principle. “It is not fair to consider companies that achieve an increase in their production or export or that have not been able to reach the required percentage, like other companies who hasn’t achieved anything,” some of them said.

“I am afraid of the continuation of personal preference over the public interest, and the strategy in its current form is in the interest of certain companies, so the consideration of the draft law was postponed indefinitely by the parliament to re-study the strategy,” said Allam.

Additionally, he stressed that giving the strategy more flexibility in dealing with the granting of incentives would be the solution to revive the idea of a strategy for industrialisation, adding that the sector will hold a meeting to resolve the fate of proposals submitted in the coming days.

The transportation sector of the Federation of Egyptian Industries held a meeting two months ago to discuss the implications of postponing the draft bill on the strategy of the automotive industry in the parliament and the possibility of reformulating the law again.

The draft law on the development of the automotive industry came in favour of one or two companies only, which prompted the parliament to postpone the discussion of the law until the review.

Parliamentary sources indicated that the Industrial Committee tried to contain the objections of automotive companies about the law and held a meeting with companies outside the parliament. The list included Volkswagen, Seat, Kia Motors, Auto Jamil, Ford, Daihatsu, and Brilliance, as well as a number of feeder companies.

The participants agreed to submit a memorandum covering all proposals of the importing companies on the draft law known as the “Automotive Industry Strategy” to the Industrial Committee, which will be delivered within 15 days after the end of the meeting.

The sources added that the companies discussed how to implement paragraph 3 of Article 6 draft law submitted, which offers incentives for exporting companies, whether cars or components.

Importers presented the challenges they faced during the supply of locally manufactured components to their parent companies, as to benefit from incentives for export.

The draft law gives incentives in the form of discounts to encourage the vehicle industry: 23.05% for passenger cars up to 1600cc; 50% for 1600cc to 2000cc; 57.45% for more than 2000cc; and 10-16 passenger cars are provided with a 23.05% incentive, and cargo lorries with a weight of less than five tonnes and 16.65%, and cargo cars weighing five to nine tonnes 9.05%.

This incentive is calculated from the value of the sales bill, including the value of the vehicle and the total taxes imposed on it.

The incentive is required according to specific cases, namely, the increase of the local manufacturing rate in locally produced vehicle gradually during the programme years, to 60% in the case of passenger cars and microbuses, 70% light and medium transport.

If the local manufacturing ratio is below the rates specified in the regulations, the incentive must be supplemented by the export of local components or the export of locally produced finished vehicles.

It is also possible to get the incentive if the production of the company is 60,000 cars for passenger cars with a capacity of 1.6 litres or microbuses, and 8,000 cars with a capacity of more than 1.6 litres, and 50,000 cars for transport vehicles, such as lorries.

The draft law provides for the establishment of a fund called the Fund for the Development of the Vehicle Industry. It follows the  Industrial Development Authority and is responsible for administering the program and granting the incentive.

Its resources consist of the proceeds of the industrial development tax due from the companies benefiting from the program. The Fund manages a board headed by the Chairman of the General Development Industrial Authority.

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