The Egyptian Association of Tax Experts has welcomed the Central Bank's decision to launch a 1 billion EGP investment fund aimed at restructuring struggling factories. The fund, launched in partnership with the Ministry of Industry, seeks to support the industrial sector and increase its contribution to the country's GDP. According to the association, this move is a crucial step towards preserving employment and enhancing local production capabilities.
The fund will focus on investing in struggling industrial facilities with promising operational prospects, aiming to restore their efficiency and promote growth and sustainability. The Central Bank's governor, Hassan Abdullah, and Minister of Industry, Khaled Hisham, announced the initiative, which is expected to have a positive impact on the national economy. The association's founder, Ashraf Abdel Ghani, expressed concerns that the fund might become a partner for all industrial entities, potentially hindering further investment.
According to official data, there are currently 11,300 struggling factories in Egypt, with 5,500 in the construction phase and 5,800 operational but non-functional. Abdel Ghani noted that reviving a struggling factory can save construction costs and return to production in half the time required to build a new one. He emphasized that finding unconventional solutions to the crisis is essential for preserving employment and promoting local production.
The Central Bank's fund will employ a specialized investment strategy targeting factories facing financial or operational challenges, despite having developable assets and production capacities. The fund's team will collaborate with the management of these facilities to implement comprehensive restructuring plans, including loan restructuring, injecting new capital, and applying programs to enhance operational efficiency and governance.
Abdel Ghani identified eight reasons for the distress of industrial facilities, including the liberalization of exchange rates, which eroded working capital, particularly for small and medium-sized enterprises. Other factors include rising raw material prices, increased energy and service costs, high bank financing interest rates, and inadequate feasibility studies. He also highlighted the importance of separating ownership and management in family businesses.
The Egyptian Association of Tax Experts proposed seven additional steps to resolve the crisis of struggling factories. These include the fund providing investments to purchase machinery, equipment, and raw materials at an interest rate not exceeding 10%. Other suggestions include rescheduling bank debts, reconsidering tax disputes, and waiving fines for struggling factories. The association also recommended increasing reliance on local components and supporting small and startup companies.
The initiative aims to enhance the industrial sector's contribution to Egypt's GDP from 17.1% to 20%, as envisioned in the country's 2030 strategy. By supporting struggling factories, the government hopes to promote economic growth, increase exports, and reduce imports. The Central Bank's fund is seen as a vital step towards achieving these goals and revitalizing Egypt's industrial sector.
Key points
- The Egyptian government has launched a 1 billion EGP fund to support struggling factories and promote industrial growth.
- The fund aims to preserve employment and enhance local production capabilities.
- Experts propose additional measures, including low-interest financing and tax dispute resolution, to resolve the crisis of struggling factories.
