Daily News Egypt was informed about a tendency to postpone the issuance of the auto industry strategy to re-discuss it again in light of notes from the European Union’s organisations for producing cars and car accessories.
The sources told Daily News Egypt that the economic delegation accompanying the German chancellor Angela Merkel encouraged delaying the strategy during her visit to Egypt.
The sources pointed out that the German side received assurances from Mps, industrial figures, and leaders of Egyptian business organisations regarding postponing the issuance of the auto strategy to re-discuss it, considering the notes of the manufacturers of automotive and feeding industries in the EU.
European car manufacturers last week sent an official letter of objection against some items of the automotive draft law. They stressed that the items contradict the Egyptian European partnership approved by Egypt earlier.
Ahmed Fikry Abdel Wahab, chairperson of FAW Industrial Group and deputy chairperson of the Chamber of Engineering Industries at the Federation of Egyptian Industries expressed his discontent regarding postponing the issuance of the automotive strategy, because it is not helpful for the government’s credibility in front of manufacturers.
He emphasised that the strategy took into account the trade agreements signed by Egypt with other countries, including the European partnership agreement.
He added that delaying the strategy after two years of consideration already helped neighbouring countries— that stepped ahead of Egypt—to achieve greater success in this field. Our slow movements indicated the regress of Egypt’s reputation before foreign companies, and increases their fear of investing in Egypt—especially as the market is going through a state of instability, in addition to manufactures’ reluctance to increase production, fearing a decline of demand.
He stressed on the importance of issuing a complete strategy as soon as possible.
Farid El-Tobgy, chairperson of the Bavarian Auto Group, and BMW and Mini agent, said that the items of the strategy must be accurately reviewed, according to the recent updates and allegations of various European organisations to avoid any mistakes.
However, he added that not all employees working in the market are pleased with the delay of the issuance of the strategy, as it significantly harms the Egyptian industry’s reputation. Despite disputes on some items, the law should be completed and issued. He furthermore stated that the country should also take demands of the companies operating in Egypt into consideration, as they are aware of the global companies’ demands and are able to attract these companies’ investments to increase the size of investment and production in Egypt.
The European Automobile Manufacturers’ Association (ACEA) and the Egyptian Auto Feeders Association (EAFA) sent a joint letter to Jean-Luc Demarty, director general of the French Directorate-General of Customs and Indirect Taxes, expressing their complete rejection of the automotive draft law, scheduled to be passed by the Egyptian House of Representatives in the coming period.
ACEA and EAFA expressed their understanding of the purpose of the draft law, which is to increase cars and auto-parts production in Egypt. This strategy, however, raises huge concerns among its members, since it would lead to the elimination of imports, and set up new obstacles for European investments into the automotive sector in Egypt.
The letter pointed to several issues: replacing current customs duties on vehicles with unified customs tariff of 10%—regardless of the existing trade agreements; developing a new industrial development tax ranging between 30% to 135% on cars—according to engine capacity and type of vehicle; and providing an exemption from the industrial development tax for companies that can achieve the local component ratio, the economic quantity of production, and the value of export with incentives ranging between 23% and 57%.
They added that the tax incentive scheme will negatively impact business activities of members of the ACEA in Egypt. They also noted that the eight-year period, suggested for achieving the required local production rates, starts on the date of publication of the law in official newspapers.
The two associations expressed their concerns over the additional administrative burden imposed by the Egyptian Customs Authority, which led to the cancellation of some imports due to high customs duties. The two associations demanded the EU to keep pushing Egypt to reconsider the application of this scheme.