Russia’s North African Free Trade Zone To Export US$3.6 Billion Goods By 2026

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Opportunities For Russian Businesses To Take Advantage Of The African Continental Free Trade Agreement

The Russian industrial zone currently being built at Port Said in Egypt will help Russian businesses enter new and under-penetrated markets, according to the Russian Export Center.

A statement made by the Center reads “Large-scale plans of entering markets that are new and under-penetrated by Russian manufacturers – African, Middle Eastern and South Asian – require a strong and reliable ‘entry point,’ and we hope that the Russian industrial zone under development in the Economic Zone of the Suez Canal of Egypt will assume the role of such stronghold on the African continent. This is literally the first infrastructural ‘mega project’ of such kind launched by the Russian Export Center. The process of creating a comprehensive industrial park for Russian companies entering the market of Egypt, its close neighbors and other countries of the Middle East and African region will be initiated in five coming years on the plot with the area of 525 hectares.”

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The Russian industrial zone project stipulates creation of a special zone with preferential fiscal conditions for Russian resident companies. The zone will be located in the east of Port Said in Egypt. The planned Russian state investments into the development of primary infrastructure will be about US$190 million, while the projected total amount of private investments throughout implementation of this project is estimated at approximately US$7 billion. Russia’s Ministry of Industry and Trade expects the project’s implementation to take about 13 years, while resident companies will be able to manufacture production worth US$3.6 billion per annum by about 2026.

Wages In Egypt Amount (Rs, monthly)
Skilled Factory Worker 14,430
Semi Skilled Factory Worker 8,720

Russia’s domestic Free Trade, or Special Economic Zones typically carry multi-year discounts against profits tax, reductions on social insurance contributions, and eliminate land use and property taxes. The significance of the Port Said Zone is that Egypt both has a Double Tax Agreement with Russia, which can further reduce profits taxes by using mechanisms to substitute royalties (which are subject to a lower, withholding tax) for profits, and because Egypt is also a signatory to the African Continental Free Trade Agreement (AfCFTA) which kicked in earlier this year and has eliminated import duties on 90% of goods destined for other African markets. This means the Russian Port Said Free Trade Zone can be a hub for Russian manufacturers manufacturing product there and selling not only back to Russia and the Eurasian Economic Union, but also to other African countries.

There are additional trends and benefits between Russia and Egypt. Bilateral trade has been growing at rates of close to 40% per annum while Egypt is also currently negotiating to join the Eurasian Economic Union, which when finalized will reduce tariffs on goods traded between Egypt and Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 27 years of operations in China and assists Russian and Foreign investors establish operations into the country. Please contact us at russia@dezshira.com or visit us at www.dezshira.com

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