May 7, 2017

New Law for Simplification of Industrial Licenses

The long-awaited law on the Simplification of Industrial Licensing Procedures is finally issued by virtue of Law no. 15 of 2017 ("Law"). The Law comes into effect on the 3rd of May 2017.

The Law is a major step toward streamlining the licensing procedures which is one of the chronical challenges facing the industrial sector in Egypt.

The Law overrides the antiquated Industry Law no. 21 of 1958 and Industrial and Commercial Workshops Law no. 453 of 1954.

The application of the Law depends to a great extent on issuing the needed executive regulations and putting in place a prompt plan for establishing the special committees mentioned in the Law. The Law provides that the Minister of Industry shall issue the executive regulations within 3 months from the date of the Law, i.e., before 2 August 2017.

According to the Law, the license of the Industrial Development Authority (IDA) became the sole license required for establishing and operating an industrial facility. The Law explicitly provides that no approvals or licenses shall be required from any other authority.

Below is a summary of the main provisions of the revolutionary Law:

Scope of Application

The Law applies on all industrial facilities inside and outside the industrial zones including free zones and investment zones (regulated under the Investment Law). The Law shall apply also on warehouses, showrooms and sale points annexed to an industrial facility.

An industrial facility is defined as any factory, company or workshop, whatever its size, which carry out one of the following activities:

  • Physical or chemical transformation process to raw materials.
  • Changing any product, including, assembling, packaging, sorting, recycling or other processes determined by the Minister of Industry.

Two Types of Licenses

The law categorizes industrial facilities into low risk and high risk. For the first time, low risk facilities shall be established by simple notification to the IDA subject to subsequent inspection and a grace period in case of non-compliance. On the other side, high risk facilities as well as facilities established in certain geographical areas shall require a prior approval of the IDA.

(1) License by simple notification

The executive regulations of the Law shall determine the forms of the notification as well as the information and documents required to be submitted therewith.

The IDA is explicitly mandated to give the applicant a written confirmation in the same day upon receiving the notification and its supporting documents. Such confirmation shall be the license upon which the facility can officially operate.

The IDA is required to inspect the facility within 90 days from receiving the notification. In case of non-compliance it shall give the facility 180 days to rectify or complete the missing requirements. This period can be extended once for another 180 days. The facility will be closed in case of non-compliance within the grace period.

Except as determined by the Minister of Environment, low risk industrial facilities are exempted from submitting the environmental assessment study required under the Environment Law.

(2) License by Prior Approval

High risk projects and facilities established in certain geographical areas require the prior approvals of the IDA in order to be established and to operate.

To control bureaucracy, the Law provides for short periods during which the IDA is mandated to review the application and issue its decision. IDA shall review the application and confirm its completeness within 14 days from its receipt. It will then have another 30 days to approve or reject to issue the license. Reasons for the rejection must be disclosed. Non-reply by the IDA during the said periods shall be considered a rejection. In this case, the applicant can file a complaint before the special objection committee formed by the Law.

The Law allows the issuance of a ‘temporary license’ of 1 year to be renewed for 3 years in case the requirements which are not met by the high-risk project are considered as ‘insignificant’. The special "Licensing Requirements Committee" shall determine which requirements are considered ‘insignificant’.

Licensing Requirements Committee

The Law provides for the establishment of a special committee to be responsible for identifying all the requirements for obtaining the industrial license, including the environment, the safety and civil defense requirements. This committee will further categorizes these requirements according to their significance and impact from the safety and environmental perspective. The law requires all governmental entities to cooperate with the committee in identifying their requirements for the establishment and operation of an industrial entity.

Heavy Industry Licenses

Licenses for heavy industry projects (like steel and cement projects) can be granted against a fixed amount to be determined by the Cabinet. Selection among the competing financially and technically qualified investors shall be according to the most favorable offer from an economic stance as determined by the Cabinet, rather than through a bidding process.

For more information on this topic, you can contact Dr. Fatma Salah, or Heba Elkady.

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