The Egyptian Tax Experts Association has welcomed the Central Bank's decision to launch a 1 billion EGP investment fund aimed at restructuring struggling factories. This move is seen as a crucial step towards preserving employment opportunities and enhancing domestic production capabilities. According to the association, this initiative aligns with the government's vision of increasing the industrial sector's contribution to the GDP from 17.1% to 20% by 2030.
The fund, established in partnership with the Ministry of Industry, will focus on investing in industrial facilities that face financial or operational challenges but possess promising operational assets. Its primary goal is to restore these factories' efficiency, promote growth, and ensure their long-term sustainability. By doing so, the fund aims to maximize the value of these industrial entities over time.
Statistics indicate that there are currently 11,300 struggling factories in Egypt, with 5,500 in the construction phase and 5,800 operational but non-functional. The association suggests that reactivating these factories can save on construction costs and other expenses, allowing them to resume production in half the time required to build new ones.
The association's founder, Ashraf Abdel Ghani, emphasized that finding unconventional solutions for the crisis facing struggling factories was a wise decision. This approach prioritizes preserving employment and boosting local production capacities, ultimately leading to increased exports and reduced imports.
According to the Central Bank, the fund will employ a specialized investment strategy focusing on serving industrial facilities encountering financial or operational difficulties. Despite possessing developable assets and production capabilities, these factories require comprehensive restructuring plans. These plans include loan restructuring, injecting new capital, implementing efficiency-enhancing programs, and promoting governance frameworks.
Abdel Ghani identified eight reasons for the distress of industrial facilities, including erosion of working capital, increased raw material prices, higher energy and service costs, elevated bank financing rates, inadequate feasibility studies, and inefficient management. He proposed seven measures to resolve the crisis, such as providing low-interest investments for purchasing machinery and raw materials, rescheduling bank debts, and reconsidering tax disputes.
The association's proposals also include promoting local component reliance, protecting domestic industries from unfair competition, offering technical and logistical support, and advocating for separating ownership from management in family-owned businesses. These measures aim to provide comprehensive support to struggling factories and stimulate Egypt's industrial sector.
Key points
- The Egyptian Tax Experts Association has praised the Central Bank's initiative to support struggling factories with a 1 billion EGP investment fund.
- The fund aims to restore the efficiency of struggling factories, promote growth, and ensure their long-term sustainability.
- The association proposed seven measures to resolve the crisis facing struggling factories, including low-interest investments and reconsidering tax disputes.
