Declaring the Golden Triangle in Egypt's Eastern Desert as Special Economic Zone

The Presidential Decree No. 341 of 2017 was issued on 17 July 2017 to declare the lands located in the Golden Triangle area in Upper Egypt (Al Qoseer - Safaga - Qena - Qeft) as an economic zone of a special nature (“Golden Triangle Area”). The Golden Triangle Area is expected to lead to substantial investment in Upper Egypt especially in fields of mining, industry and tourism sectors.

This zone shall be governed by Law no. 83 of 2002 on Special Economic Zones ("Special Economic Zone Law") and its Executive Regulations issued by virtue of the Prime Ministerial Decree no. 1625 of

According to Law 83/2002, a special economic zone is administered by a governmental authority to be established by the Prime Minister and affiliated with the Cabinet. This regulatory authority shall bear the name of the special economic zone, and shall have its headquarter inside the zone or any of its affiliated areas.

Golden Triangle Authority

In 16 August 2017, the Prime Minister issued the Decree no. 1788 of 2017 establishing the General Authority for the Economic Zone of the Golden Triangle ("Golden Triangle Authority") as the regulatory authority, affiliated to the Prime Minister, responsible for administering the Golden Triangle Area in Upper Egypt, having its headquarter in “Safaga City” at the Red Sea Governorate.

According to the abovementioned Decree, all lands and establishments owned by the Government inside the Golden Triangle Area shall be transferred to the Golden Triangle Authority without the need to take any legal action. In addition, all rights and obligations arising from contracts and transactions related to these lands and establishments shall be transferred to the Golden Triangle Authority.

The Golden Triangle Authority shall have the right to incorporate companies whether by itself or in participation with public or private legal persons in order to achieve its purposes and objectives.

Incentives and Guarantees

One of the main features of the special economic zones is that they will have special taxation and customs systems which are characterized to be more flexible and autonomous.

The Special Economic Zone Law sets a number of incentives and guarantees for projects established inside the special economic zones. The following table summarizes such incentives and guarantees:

Taxes and Duties

Companies established in a special economic zone are exempted from sales taxes, stamps duty tax and the state resources development tax.

Entities operating in a special economic zone are allowed to import machines, devices, raw materials, spare parts and any other materials or components necessary for performing their licensed activities free of any customs, sales tax and any other taxes or duties. However, customs tax, sales tax and all other taxes and duties shall be imposed on the imported components of the products produced by these entities only when they enter the Egyptian local market.

Also, all kinds of cars and vehicles used in the production or services activities of these projects are exempted from all taxes and duties.

Labor and Social Insurance

A special economic zone shall operate under a more flexible labor and employment rules. Limited period employment contract shall terminate automatically by the expiry of its duration. If the parties continue to execute the contract after its expiration, it will be renewed for another period similar to the period of the expired contract. This is different from the regular rule which provides that in such case, the contract will convert into an unlimited one.

Each of the employer and the employee may terminate a definite employment contract before the lapse of its period with 60 days’ prior notice.

In case of unlimited employment contract, each party shall have the right to terminate it, at any time, with 90 days’ prior notice. The employer here is not restricted by the limited causes of termination stipulated in the Labor Law. Employees, however, shall be entitled to compensation in case there is no mistake attributed to them justifying such termination. The compensation will not be less than that provided for in the Labor Law.

The internal labor regulations of entities operating within the special economic zone shall be approved by its authority. The board of this authority shall be competent to issue work permits for foreigners after obtaining the security approvals and to determine the work permits’ requirements.

Exports and Imports

Entities operating within the special economic zone can import or export all its needs from
raw materials, equipment, tools, and spare parts for the construction, expansion or operation of its project, without prior permit or being registered in the importers register. At the same time, they may export their products without permit or prior approval, and without being registered in the exporters register. Products imported from the special economic zone inside the country shall be treated as if they are imported from abroad. Accordingly, they shall be subject to customs duties, sales taxes and all other taxes and fees. Products exported from inside the country to the Special economic zone shall be treated as if they are exported abroad, and shall fulfill all export and monetary requirements.

Dispute Resolution

The Special economic zone shall have an independent dispute settlement center (“Center”), which shall be competent to settle the following disputes:

  • tax disputes,
  • customs duties disputes,
  • individual or collective labor disputes,
  • social insurance disputes,
  • disputes concerning the execution of contracts, if all or one of the parties operates a business in the zone,
  • disputes resulting from tortious liabilities committed in the zone, and
  • any other dispute to which the Authority or the development company is party.
    The Center shall only have the jurisdiction to settle the above disputes in case the parties agrees to this effect, or in case the residence, work premises, head office or branch of one or all parties to the dispute is located in the special economic zone.

Other Incentives and Guarantees

Projects operating in Special economic zone may not be subject to nationalization, sequestration, freezing of assets or confiscation except by a judicial judgment.

  • Lands and buildings in the Special economic zone shall be allocated by its authority by a long term usufruct agreement which can reach a period of 50 years.
  • Entities operating in Special economic zone have the right to determine the prices of their products and services.

There are also further non-tax incentives for labor-intensive projects and investments in remote areas and in certain sectors such as energy, agriculture, logistics, and transportation. Such non-tax incentives include:

  • Subsidizing and facilitating the payment of the price of the power needed to operate the project.
  • Refunding the expenses paid to extend infrastructure facilities to the project’s land.
  • Subsidizing the technical training programs of the employees as well as the social insurance subscriptions.
  • Allocating the land owned by the government by usufruct against trivial or postpone the payment of whole or part of the price.

Posted in News on Aug 27, 2017