For decades, local and foreign investors have faced two major issues — corruption and bureaucracy. In December 2025, Transparency International, an NGO, ranked Egypt 130th out of 180 countries, down from 94 in 2014. In March, the World Bank report measuring “Government Effectiveness: Percentile Rank” placed the country in the top 42% of nations, down from the top 25% in 2014.

The government has long-term plans to address these problems. It is currently in the third phase of the National Anti-Corruption Strategy (2023-2030) and is accelerating the digitization of its services and payments to bypass existing bureaucratic barriers. In December 2025, the World Bank’s Digital Government Index ranked Egypt 22nd worldwide, an improvement of 47 places from the previous year.

To accelerate legislative reforms, the government is developing special economic zones (SEZs) with distinct regulatory frameworks and oversight, separate from the rest of the country.

“The free zones system is one of the most important … systems … which states encourage foreign investment through incentives and facilitation,” noted research from the University of Béchar in Algeria published June 2025. “Most countries have adopted free zones as economic mechanisms for gradual and orderly transition, and as a means of attracting and localizing FDI and transfer and localization of modern technology.”

Types of zones

Egypt has two types of free zones. The first is “private” SEZs, each established for a specific project or a complex comprising a producer’s supply chain. They are usually located near major seaports, airports, and land borders to facilitate companies’ import and export activities. Additionally, companies own the land designated as a private free zone.

Typically, companies in these “private zones” are FDI entities or export most of their products. They interact only with the General Authority for Investment and Free Zones (GAFI) under the 2017 Investment Law. As of August 2025, there were 230 private SEZs across the country.

The second type is “public free zones,” also regulated solely by GAFI. There are currently nine of these nationwide. As of August 2025, their occupancy rate was 95%, Hossam Heiba, then GAFI CEO, told local media. Unlike private SEZs, companies in public zones lease their land from the government, which determines the sectors allowed within these zones.

In both types of SEZs, exemptions include assets and production inputs (except those used in passenger cars) from customs duties, VAT, and other levies. Imports and exports are free from all duties and taxes, and profits are exempt from domestic taxes.

If a “free-zone” company sells in the local market, only locally sourced components are exempt from customs and other import duties. Meanwhile, goods in transit stored within a free zone are exempt from entry and exit duties because the law considers them as goods that never entered Egypt.

The legal status of SEZs means projects cannot be nationalized or confiscated, assets cannot be seized or placed under protective custody. Legal proceedings against such projects require GAFI’s involvement, as the sole regulatory body of these zones.

In 2025, SEZs contributed $7.9 billion — 16.2% of Egypt’s total exports — compared to $4.1 billion — 15.3% of Egypt’s total exports –- in 2014. More notably, Zawya, a news portal, reported in August 2025, “Since 2017, these zones have consistently maintained a trade surplus with the world.”

Plans for 2026

Realizing the need for more public and private SEZs, then Minister of Industry and Transport Kamel El-Wazir approved three private free zones in July 2025, valued at $216.5 million.

The first is a $108 million plastics project in New Alamein City along the Mediterranean. The second is a $30 million garment facility in Beni Suef in Upper Egypt, while the third is a textile factory in 10th Ramadan City, between Cairo and the New Capital.

During the announcement event, El Wazir said the Industry Development Authority will review all requests from companies wanting to operate under the public or private SEZ system, as it is Egypt’s administrative one-stop shop for manufacturing.

El Wazir also mentioned that more plots will be equipped with industrial electricity, energy, water, and sewage infrastructure, especially in Upper Egypt, all of which will be available for companies operating within the private SEZ system.

In August, Heiba announced plans to add four public free zones in 10th Ramadan City, New October City (on the southwest outskirts of Six October City’s industrial zone), New Borg El Arab (a southern extension of Borg El Arab City), and New Alamein.

“Companies eligible to operate in those new zones must exclusively export their products,” Heiba said during the announcement event. “These free zones are the cornerstone of the government’s ‘investment for export’ strategy,” adding that there will be “a working group with representatives from [various] industrial sectors designing operating mechanisms for new [public free] zones.” He added, “There are three more public free zones under discussion.”

In March, the government announced that companies operating in public or private SEZs no longer need to have their leasing contracts notarized. “This decision removes procedural burdens and supports efforts to improve the business environment,” Mohamed Farid, the newly-appointed Minister of Investment and Foreign Trade, told the media.

Beware pitfalls

The Egyptian government is not the only African government developing free investment and economic zones to attract investment. According to a 2024 report from the Africa Export-Import Bank, SEZs already exist in 47 of the 52 African nations.

“Across Africa, [they] have become a central feature of industrial policy,” noted Julien Gourdon, Senior Economist at Agence Francaise de Développement, in a note from the OECD published October 2025. “The pitch is compelling.”

However, these SEZs don’t serve all types of investors. “Most of the industrial parks in Sub-Saharan Africa have been designed to house foreign investors, leaving little room for indigenous industrialists,” the African Export-Import Bank report said.

The issue with this setup is that “While foreign companies might serve as a springboard for developing competitive domestic industries, they also hinder progress by not passing on technology to local businesses.”

This explains why “Despite the promise of [these free zones], their record in Africa has been mixed. Compared with Asia, … they have underperformed,” Gourdon said. “[SEZs] became engines of industrial transformation thanks to strong state support, coherent national strategies, and deep linkages with domestic firms; most African zones have struggled to generate similar spillovers into the wider economy.”

Another important factor is making these SEZs highly specialized in administration and incentives. “One of the clearest lessons from the research is that governance and incentives matter,” Gourdon emphasized. “Zones with strong, targeted incentives, such as tax breaks tied to job creation, training programs, or technology transfer, achieve better export results than traditional free trade zones, which usually only offer customs exemptions and duty-free imports without fostering industrial upgrading.”

Next-gen free zones

To compete with the rest of Africa, Egypt’s SEZs need to adapt to a changing world, as “a new generation of zones is beginning to take shape, aligning with broader continental and global priorities,” Gourdan noted.

The first “standout” trend is “leveraging the African Continental Free Trade Area,” which is evident by “some governments … actively reorienting their [free economic zones] to serve regional rather than exclusively overseas markets.”

The second trend is that these zones will “drive greener and more inclusive industrializations,” noted Gourdon. That means “embedding environmental, social, and governance principles into zone design and management.”

The third shift is “integrating [free zones] into national strategies and infrastructure planning,” noted Gourdon. He highlighted Egypt’s Suez Canal Economic Zone as a case in point. “[It] is part of a national logistics corridor.” A second example is “Ethiopia’s industrial parks, [which] are connected to the country’s rail and energy networks.”

Ultimately, SEZ operations in Africa, including Egypt, can expand significantly if the potential of this investment model is fully realized. “Current research indicates that the continent’s industrial production has not yet become integrated into global value chains,” Afrexim Bank noted. “To unlock industrial parks’ full potential, countries should strive to develop vital infrastructure, reduce the cost of financing, consolidate MSMEs and major corporations, and design industrial parks based on benchmarks from developed countries.”