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The Suez Canal city of Port Said will be the first in Egypt to witness the implementation of the government’s new e-payment act, effective on 1 May, that regulates cashless payments and assists the country on its journey towards digital transformation and financial inclusion.

The act obliges people to pay government fees, taxes and services electronically whenever they exceed LE500 at allocated points of sale (POS). If the payer chooses to pay in cash, a 10 per cent fee will be added.

The infrastructure for the new network in Egypt’s public-sector bodies has been completed, but as has been the case in the past with new e-payment systems, IT expert Khaled Derbala said that it was not enough.

People can pay their dues from salary e-cards, credit cards, debit accounts, and pension cards or buy rechargeable cards to conduct their transactions, said Mohamed Ibrahim, head of the digitization unit at the Ministry of Finance. A statement by the ministry noted that for six months, individuals may acquire, free of charge, prepaid cards at several banks including the National Bank of Egypt, Banque Misr, Banque du Caire, Commercial International Bank and the Agricultural Bank of Egypt. It added that different government bodies have already created databases that would enable citizens to pay directly for the services through their bank accounts.

The government is focused on applying the digital transformation to the country’s formal economy only, which represents 29 per cent of GDP, ignoring transactions taking place in the informal economy, Derbala told Al-Ahram Weekly.

He gave the example of the three million tok-toks that operate across Egypt, three-wheel vehicles which are part of the informal economy. If their daily revenues reach LE100 million, the government still does not receive any taxes from the LE36.5 billion earned annually in the business, he said.

In India, a country with a sizeable informal economy, Derbala said its government had included a financial-inclusion system for the informal sector, starting with street vendors who were given barcodes with which they could collect the value of sales via e-payment companies after their customers paid for their merchandise electronically.

India had been able to calculate the true size of its informal economy as a result, and integration between the formal and informal sectors had enabled this Asian giant to increase its GDP and tax revenues, he added.

The Ministry of Finance announced on 7 April the launch of a national project for digital transformation, which will eradicate transactions in banknotes in governorate administrations. As its digital infrastructure nears completion, Port Said is the first in line for the change, and it will be followed by Kafr Al-Sheikh, Ismailia and Suez in a later phase, the ministry said.

 

The shift to e-payments is meant to monitor public-spending programs more closely and increase the quality of government services and administration.

The e-payment system will help the government collect its revenues at a faster pace, decelerate the mutilation of banknotes, decrease the cost of transporting and safeguarding cash, raise the performance of the budget, and ease the process of integrating the informal sector into the economy, Ibrahim said.

He added that since e-payments were first introduced into Egypt, a database for financial transactions had come into being.

The Egyptian Centre for Economic Studies (ECES), a think tank, held a workshop in Cairo last week entitled “Trading Across Borders” to review the government’s efforts towards digitizing the economy.

In the Trading Across Borders Index, part of the World Bank’s “Doing Business” subnational project in Egypt, the country came in 171th out of 190 countries surveyed in 2019, down one place from last year.

The index measures the time and cost required to clear customs for exported and imported goods, and consequently studies the systems regulating ports, customs and the monitoring bodies involved in procedures such as quarantines, veterinary control, bomb detection and IT regulations.

The workshop participants agreed that Egypt’s low ranking in the Trading Across Borders Index could negatively affect its ability to attract investments in the field of logistics.

Clearing customs on exported goods takes 136 hours in Egypt, 37 in Morocco, 20 in Turkey and 33 in the UAE, while clearing customs on imported goods takes 505 hours in Egypt, 91 in Morocco, 14 in Turkey and 66 in the UAE, the index says.

A case study on Alexandria Port discussed during the workshop concluded that decreasing the customs clearance time on exports by 24 hours annually for three years could reduce the cost of imports by almost $283 million, increase port and customs revenues by around $63 million across three years, and lower the total customs clearance time to 361 hours instead of the current 505.

This would mean improving Egypt’s ranking on the index by nine places, decreasing customs clearance costs from $558 to $388 for every 20-foot equivalent unit and raising Egypt’s ranking by six points in the Business Efficiency Index.

Speaking at the workshop, Ahmed Abdel-Wahed, head of the Customs Clearance Division at the Federation of Egyptian Chambers of Commerce, discussed the problems facing people dealing with the customs and port authorities.

Challenges include customs clearance procedures that differ from one port to another, the absence of a unified price between ports to unload and palletize containers, and frequent malfunctions in electronic systems, he said.

These could cost investors large sums of money for their cargos to remain at terminals until finalizing customs procedures. These added costs were finally shouldered by the end-customer, Abdel-Wahed said.

He added that a single electronic system should be introduced for all ports that links customs and clearance procedures to facilitate the overall process. Port employees should be trained to use the new system and the electronics modernized to prevent malfunctions, he said.