(DNE Photo)
By Abdel Qader Ramadan
The Industrial Development Authority (IDA) and the New Urban Communities Authority (NUCA) has halted its allocation of land for industrial activity over the past three years. For nearly the past year and a half, more than 7,000 investors submitted applications to acquire land being advertised.
NUCA recently announced that it is conducting a public drawing to allocate 1,962 plots of land in various industrial areas. However, the dispute over which governmental body should oversee the plots, specifically those allocated for industrial activity, has yet to be resolved.
The IDA has devised a new cooperation protocol with NUCA, which falls under the Ministry of Housing, to regain its role and authority in the planning and allocation of land for industrial activity.
The new protocol is seen as a way to resolve the conflict between the two that has stretched over the past three years, over the control of lands for industrial activity. The argument arose out of a cancellation of a protocol from 2006 that stipulated IDA’s authority to plan and allocate industrial lands according to its own rules and regulations. However, following the 2011 revolution, the protocol was repealed and NUCA re-assumed management over the land.
In an exclusive interview with Daily News Egypt, Ismail Jaber, Chairman of the Industrial Development Authority, said the new protocol regulates the relationship between the two bodies and the responsibility of each in setting up and allocating land for industrial activity.
What is the IDA’s plan for providing lands completed with utilities to investors and reducing conflicts between the various parties responsible for the allocation of land for industrial activity?
According to the law establishing it, the IDA has an essential role and mission that includes organising all aspects of industrial activity, especially in land allocation, the planning of industrial zones, and determining their locations based on where sources of raw materials and natural resources are located. This is regardless of who the land belongs to– whether it is NUCA’s, the governorate’s, or the Ministry of Industry itself. That said, there are some pieces of legislation or decisions issued after the January revolution which restricted and weakened IDA’s role and cut down its authorities to the point that it is no longer responsible for anything other than issuing industrial records.
How were the IDA’s authorities reduced?
The reduction came as a result of the cancellation of the protocol signed in 2006 with NUCA. The protocol gave the IDA the right to exercise its role effectively in planning industrial zones, offering land for investment, allocating it, installing utilities, and taking care of all procedures with investors until completion of the project. And all of this is regarding lands which fell under the jurisdiction of NUCA. Cancellation of the protocol restored these powers to NUCA, which lead to a decline in industrial activity and lands not being offered for investment or allocated for industrial activities over the past three years.
What is your plan to overcome this problem?
The IDA is moving to restore all these authorities and rearrange them so the IDA is fully responsible for industrial activity from start to finish—with planning, installing utilities, maintenance, putting lands up for bids, and allocations, as well as issuing operating licences, rather than the local agencies in the governorates doing this. All of this will be done through one unified window through the IDA…We have nine branches with 11 offices under them in different industrial areas for services for investors and we are the most qualified to deal with these activities. NUCA on the other hand, is generally responsible for various activities in the new urban communities whether residential, commercial, or otherwise.
Will a new protocol be signed?
Yes. We are in the process of making an agreement with NUCA to sign a new protocol to ensure the restoration of the IDA’s authorities. The protocol will regulate the relationship between the two bodies, and the responsibility of each one in terms of planning, allocation, and utilities installation for industrial lands…it will make the IDA solely responsible for taking care of all actions needed by the investor rather than it being dispersed across multiple bodies. This comes after the new system, which came into place after the 2006 protocol was abolished, was unable to achieve success in the way the former system was in terms of establishing a large number of industrial projects. This arrangement was agreed upon during the last meeting NUCA Board of Directors meeting, which was attended by Mounir Fakhry Abdel Nour, Minister of Industry and Trade.
What are the terms of this protocol?
The protocol puts in place a mechanism for the IDA to be responsible for the allocation, utilities, maintenance and distribution of industrial lands that fall under NUCA. This is done by breaking lands into three categories. The first is vacant land with utilities currently in industrial cities. For these lands the IDA will only be putting them up for investment and allocating them while the investors will receive the land and its licences from the local agency that belongs to NUCA. The second type of land is that without utilities and that is considered an extension of the industrial cities, and for which utility attachment is planned. For these lands, NUCA will install the utilities and deliver the land to the IDA to plan, offer them up for bids, allocate them, and do maintenance and all procedures will be done through a single window [centralised and carried out]at the IDA including the issuing of operating licenses, which investors previously never received from NUCA, until having received approvals from the Ministry of Environment, Civil Protection, the armed forces, and industrial control. Thus, the process will be easier for investors as it will be done through one window in the IDA encompassing all of these bodies…and there will be nothing left for the investor to do outside of getting a building permit, which must be obtained from NUCA until the IDA is prepared to issue them as well. The same procedure will apply to the third category of land, which is land without utilities that NUCA is not planning to install utilities for. This land will be handed to the IDA to install utilities (internally and externally), as well as to carry out maintenance, offer it up for investment and make allocations. Agreements are currently being made for these lands, which will require large investments.
When will the new protocol be signed?
We are currently holding meetings to agree on a final version of the protocol to be presented to the ministers of housing and industry, so that they can adopt and put [the protocols] in force directly …So that planning can be done and bids set up immediately.
What about the land that belongs to the Ministry of Industry?
The Ministry of Industry has very large tracts of unused land with no utilities installed, but they are located in remote places…The IDA is currently working to prepare a tract or two to attach utilities to and offer for investment during the coming period. It is possible to assign private companies as developers, but there has not been agreement on how to install the utilities. There is an area in the north of Fayoum that is currently the closest to being offered for investment as it is close to essential utilities and the capital. The IDA has received some offers from Egyptians and Arabs to work on this area… Studies are currently being completed on the land and approvals are being sought from various authorities.
(DNE Photo)
How will the IDA attach utilities to these lands?
We are currently thinking about offering this project to industrial developers from the private sector, especially after their great success in doing this in the Sixth of October City and Tenth of Ramadan…This is the direction the state is now leaning—relying on the private sector for infrastructure work which the government can no longer afford—this will alleviate pressure on the public budget. We are currently reviewing the system for contracting with developers to avoid the types of flaws in their projects we saw previously, and also to regulate the relationship between them, the investors, and the IDA.
Are you looking into these new projects with existing developers?
Yes. I have visited these areas and have agreed with a number of developers to study the possibility of setting up this project with the usufruct – or right to utilisation system – which is the system the state is leaning towards using more for land allocation during the coming period. Some of them expressed interest in participating, particularly Saudi Arabia’s CPC, at a time when Polaris and Sami Saad preserved their right to use. There are talks with them to convince them to participate so they do not leave the market.
What is your assessment of the industrial development project?
This project has had substantial positive results, contributing to the establishment of developed industrial cities with good infrastructure, and it is being maintained and marketed to investors domestically and abroad…and if there were any drawbacks these will be remedied through new contracts.
Are there any offers from other companies to establish industrial zones through the industrial development system?
Yes. There are several offers from Arab companies, and Saudi Arabian companies in particular, and these offers include large tracts of raw lands for development and for establishing projects. A large turnout is expected when these lands are offered for investment to domestic and foreign companies.
What is the status of the amendment the Ministry of Industry made to the industry law to grant them full oversight of industrial lands?
The law has been approved in the Council of Ministers and is supposed to be released shortly and is consistent with the protocol…We will sign this protocol to speed up the process of offering land so investors who want to establish projects are not slowed down…The new amendments do not call for the transfer of the care of land from NUCA or the governorates to the IDA, but enables the IDA to fully oversee these lands as long as they are designated for industrial activity.
Will all the lands be offered under the usufruct system?
It is true that no law has been issued on this matter, but the state is headed in this direction in the coming period. This is the system currently used in all neighboring countries. The land being allocated for the right to utilisation has been very modest because the goal is to establish factories and raise employment, not to make land deals. It is likely that there will be some exceptions made for small investors who are accustomed to the ownership system and who are passing their factories down to their families.
Is there co-operation in the establishment of industrial zones with Russia?
Through agreements signed between Egypt and Russia, especially after the visit of President Abdel Fattah Al-Sisi to Moscow during his time as defense minister, Russia asked to establish an industrial zone in Egypt for heavy industries and for the production of agricultural equipment. The IDA prepared a group of lands suitable for this purpose and offered them to Russia, who is now studying the project. The lands are located in the south of Port Said, Fayoum, and Upper Egypt. The Russian side also offered to possibly participate in developing some of the factories it helped establish, such as those for iron and steel.
What is the status of the approved investments—worth EGP 3bn—to complete the installment of utilities for industrial areas?
EGP 1.5bn has already been distributed to the governorates through the utilities fund that belongs to the IDA, and that includes 36 areas across 22 governorates. And there has been agreement to try and move the remaining amount of money to the coming year’s budget. If the support from the fund continues, it is possible to complete all the utilities installations over a short period of time.
What is the IDA’s role in saving distressed factories?
In the beginning, the number of distressed factories was being inflated as a result of calculating every facility they had as part of these factories, despite the fact that large portions of them were not established, and not a part of the original factory. Also, most of the problems of non-performing factories were in regards to bank funding and were not matters relating to the IDA, we are thus working with the banks and the tax authority to resolve these problems.
How do you solve the problem of energy shortages for factories—w ill prices be raised?
There is a big problem with regards to energy, not only in industrial activity, but in all activities in Egypt. The solution is to deal with worsening energy subsidies and get these subsidies to those who need them most. As for the industry sector, prices of energy must be gradually liberalised to at least the level of cost. After this point all possible means must be made available to offer energy at global prices. And most likely, during the coming period the trend will be for factories, especially high-energy consumption factories, to be compelled towards rearranging their energy sources themselves.
