Egypt’s Suez Economic and Trade Cooperation Zone and E-commerce Market Analysis

The Egypt Suez Economic and Trade Cooperation Zone is a national-level overseas economic and trade cooperation zone approved by the Chinese government. It is located in the northeast of Egypt, at the southern end of the Suez Canal, 120 kilometers away from Cairo and 40 kilometers away from the city of Suez. It has convenient transportation and strong radiation capabilities. The cooperation zone is developed, constructed and operated by Egypt TEDA Investment Company, established in Egypt by Tianjin TEDA Investment Holding Co., Ltd.

Features of the Cooperation Zone

Egypt’s domestic political situation is stable, its policies and finance are stable, its economic order is good, its labor force is sufficient, and wages are low. In addition, all products exported from the cooperation zone to Europe, the United States, Southeast Africa and Arab countries are exempt from import tariffs. Enterprises investing in cooperation zones can also enjoy a series of preferential policies.

Investment model

The cooperation zone provides two main investment models: the industrial zone model and the free zone model.

• Industrial Zone Model: For investment projects adopting the industrial zone model, imported mechanical and electrical equipment and instruments used in investment projects are subject to a 5% tariff, but are exempt from customs fees. 10% sales tax exemption for 10 years, and the product sales tax (value-added tax) rate is 10%. Products can be sold in the domestic market with no restrictions on the proportion of exports. Exported products can enjoy export tax rebates. Raw materials imported for the production of export products can be subject to the customs temporary release system. Investors can purchase land titles from the Egyptian government and own the land indefinitely.

• Free zone model: Under the free zone model, imported mechanical and electrical equipment, raw materials, etc. for investment projects are exempted from customs duties, sales tax and other tax rates, and are only taxed at 1% of the sales tax (export value). Exempt from other tax rates. Products sold into the country from free zones are considered imported and taxed in accordance with the law. The export of products produced by investment projects established in free zones must reach more than 80%, and investors can only rent land.

Overview of Egypt’s e-commerce market

Although the Egyptian e-commerce market is developing rapidly, it still faces many challenges. For example, except for big cities, the Internet penetration rate in other areas is low, the majority of the population is rural, logistics and distribution are difficult in remote areas, and consumers prefer cash on delivery, etc. Egypt’s communication resources are unevenly distributed, and 4G networks are mainly concentrated in the Nile Delta and large cities along its coast, such as Cairo and Alexandria.

The importance of Cairo as an e-commerce center

Cairo is not only the capital of Egypt, but also one of the largest cities in the Middle East and Africa. Its annual GDP accounts for one-third of Egypt’s total, and it has a large population and a large number of middle-class consumers. These factors have made Cairo the core of Egypt’s e-commerce market.

Competition between major e-commerce platforms

Currently, the Egyptian e-commerce market is mainly dominated by Jumia and Souq. Jumia was co-founded by Rocket Internet and MTN Group. It operates in 23 countries in Africa. Its Egyptian website has a market share of 48%, making it the largest e-commerce platform in the country. However, with Noon entering the Egyptian market in 2019, this pattern may change. Noon is already operating successfully in the UAE and Saudi Arabia and has set up its third stop in Egypt.

Despite this, the Egyptian e-commerce market is still in its infancy and faces many challenges. For example, the credit card holding rate of users is low, there is a lack of laws and regulations specifically targeting the e-commerce industry, and there is a lack of tax incentives for small and medium-sized enterprises to join the platform. In addition, the complex customs clearance process also brings troubles to cross-border e-commerce business.