How the Suez Canal Economic Zone is aiding Egypt's economic resurgence

Spread along the maritime route that connects the Red and the Mediterranean seas, Egypt’s 460-square-kilometre Suez Canal Economic Zone (SCZone) lies at the crossroads between Africa, the Middle East and Europe. Established as part of Egypt’s sustainable development strategy, Vision 2030, SCZone aims to bring in foreign investment, especially to the country’s fast-growing manufacturing industry. 

With 8% of the world’s seaborne trade passing through the Suez Canal each year, SCZone is well placed logistically. Ongoing port expansion will increase its capacity, enabling it to take better advantage of the 18,000 ships that use the canal annually. SCZone also has links to the Trans-African Highway network, which connects Cairo to Dakar, Cape Town, N’Djamena, Djibouti, Lagos and Mombasa. 

“The economic zone is well suited to be the gateway to Africa. Egypt has the connectivity, the availability of manpower, and the availability of resources,” says Yehia Zaki, chairman of SCZone. The zone has four industrial areas and six seaports. 

In terms of global market access, investors can also benefit from Egypt’s many free-trade agreements, such as the African Continental Free Trade Area, signed in 2018. 

Manufacturing hub

Although SCZone is in its early days, Egypt’s economic climate is positive. In 2019, the country achieved its highest GDP growth rate in a decade, and welcomed an unprecedented number of greenfield foreign investment projects, according to fDi Markets data. 

Foreign investment in manufacturing, the country’s leading market for greenfield FDI, has been particularly strong since 2016, hitting record highs in 2018 and 2019, thanks in part to several companies setting up shop in SCZone. 

For example, China-based Xiamen Yanjan New Material, a producer of non-woven perforated films and isolated layers, invested $50m in a new manufacturing facility in SCZone in 2018. “SCZone is the place for FDI. It is the key to manufacturing for logistics and we have huge areas for greenfield investment,” says Mr Zaki.

Foreign companies operating within the SCZone are exempt from customs duties and sales tax on imports. Beyond these tax incentives, SCZone allows 100% foreign ownership and full control of import/export activities to foreign investors. “Everyone has their own incentives, so we’re looking to enhance our incentives and provide additional services that will enable us to be one of the most successful zones in [north Africa],” adds Mr Zaki.

Investors also benefit from a one-stop shop when registering with, and getting licences and permits from, the Suez Canal Economic Development General Authority.

BRI developments

SCZone has attracted investment from a range of countries, especially China. “I have been the chairman for five months and most of the people I have met with have been Chinese,” says Mr Zaki. China has been the leading greenfield foreign investor in Egypt since 2016, spending $27.2bn, according to fDi Markets. 

China’s state-owned TEDA, a major industrial developer with a large stake in SCZone, recently completed its first development phase at Ain Sokhna port, as part of a wider plan to develop 7.2 square kilometres across the zone. These developments, proposed to Egypt in 2013, form part of China’s Belt and Road Initiative to build an infrastructure and trade network along the ancient Silk Road.

Such interest means that all eyes will be on SCZone, as local authorities and investors alike hope it will continue to play a leading role in Egypt's continuing economic renaissance.