Client Alert – IDA Temporary Operation License Launched (June 2023)

June 2, 2023

On 28th of May, 2023, the Ministry of Trade and Industry published decree No. 149 of 2023 regulating the issuance of a temporary operating license for industrial facilities (“Decision”).

The Decision sets out the rules and the procedures to be implemented in the application of Law No. 19 of 2023 related to the reconciliation of unlicensed industrial facilities (“Law”). The Law and the Decision have granted the Industrial Development Authority (“IDA”) the power to issue temporary operation licenses to unlicensed industrial facilities in Egypt.

Below is an overview of the Decision.

1. Scope of the Decision

The IDA, being the governmental authority responsible for industrial activities in Egypt, is now granted the power to issue a one-year temporary operation license (“Temporary Operation License”) to unlicensed industrial facilities in Egypt existing at the time of the issuance of the Law.

The Decision came as an awaited step to encourage existing unlicensed industrial facilities to reconcile with the regulatory requirements pertaining to carrying out and operating industrial facilities under the applicable laws.

Generally, industrial facilities are required to obtain an operational license and register in the industrial registry. The requirements to obtain an operation license vary and could be quite extensive depending on the type of activity carried out in the industrial facility. Therefore, the enablement of a Temporary Operation License would facilitate the steps to procure the operational license for existing unlicensed industrial facilities.

This process is enabled to the IDA within only three (3) years from the date when the Law came into effect (i.e., three (3) years starting from 31st of March,2023).

2. Conditions:

Granting the Temporary Operation License is conditioned by the following:

To be an already established industrial facility in Egypt, meaning that newly established projects post Law promulgation will not benefit from the Temporary License; and
To submit an undertaking to commit to the environmental requirements, civil protection procedures, and all established controls in this regard.

3. Procedures:

Granting the Temporary Operation License shall follow the below procedures:

Submitting the supporting application to the IDA, appended by a copy of the land title deed (or lease or usufruct agreement), and the commercial register extract, if any;
Submitting an undertaking to commit to environmental requirements, civil protection procedures, and all established controls in this regard; and
Submitting an undertaking to commit and to adapt to the requirements of Law No. 15 of 2017 issuing the facilitated procedures to procure a license for industrial facilities (“Industrial Facilities Law”), within the term of the Temporary License.

Noteworthy to mention that the Decision stressed that the industrial facility, if granted the Temporary Operation License, shall be obliged to start the procedures, and finalize the requirements to obtain the regular operational license, before the date of expiry of the Temporary Operation License. The industrial facility will also be required to provide the IDA with a quarterly report from the industrial facility depicting the steps and obstacles to achieving the reconciliation.

The Temporary Operation License shall be granted within three (3) working days from the date of submitting a satisfactory application, or from the date of inspecting the facility, if any. The IDA would reserve the right to make site visits within 7 days from the date of submitting the application for a Temporary Operation License.

4. Limitation:

The Decision expressly states that the Temporary Operation License shall not grant legal status to third parties or the right to obtain the operation license except after fulfilling the activity requirements. This means that the Temporary Operation License is an interim process that enables the industrial facility to reconcile its position and obtain the operation license.

5. Exclusions:

The Decision excluded heavy industries. This means that the Temporary Operation License cannot be granted to industries projects working in the fields of heavy industries, which are enumerated under the Egyptian cabinet decision No. 47 of 2020.

6. S&P insights

It is clear that the Egyptian government aims to facilitate the licensing of industrial projects in Egypt, in order to be able to face the slow economic growth, that resulted from the harsh economic measures taken by the government to curb the soaring inflation rate. Also, this step shows that Egypt is willing to integrate small and medium-sized industrial projects, that are currently working informally in the shadow, to be formally licensed under the IDA’s umbrella.

S&P understands that further updates will be available soon on this topic and which will be published in due course, so stay tuned. S&P is currently advising and assisting a number of international clients in relation to the establishment of their industrial projects in Egypt, including renewable energy. If you wish to have detailed and insightful advice in this regard or any other legal support, please don’t hesitate to contact S&P.

By: Nevine El-Shafei (Partner) and Youssef Emam (Associate).