Grace Ashiru
Foreign currency shortages and bureaucratic obstacles are driving Egyptian startups to move overseas, but Cairo is responding with a new incentive: tax-free zones aimed at helping tech companies grow. The government aims to keep entrepreneurs in the country and draw regional investors by offering simplified regulations, customs exemptions, and expedited licensing. However, it remains uncertain if these measures will be sufficient to stop the outflow.
The General Authority for Investment and Free Zones (GAFI) has announced that startups in the service sector, especially those specializing in software exports and artificial intelligence, are now allowed to set up their headquarters in designated free zones. These businesses will receive complete customs and tax exemptions, simplified business registration, and access to a range of support services such as legal, consulting, and marketing firms.
This initiative seeks to establish Egypt as a regional center for tech entrepreneurship, inspired by the UAE, Bahrain, and Morocco, where free zones have significantly contributed to the growth of startups.
Free zones are specific areas where companies benefit from special economic rules, including lower taxes, simplified import-export procedures, and reduced bureaucracy. For startups, these zones can decrease operating expenses and facilitate growth into international markets.
Egypt’s free zones will dedicate approximately 9,000 square meters to startup activities, emphasizing AI, fintech, and software development. GAFI CEO Hossam Heiba stated that this effort is part of a larger plan to enhance Egypt’s entrepreneurial landscape, which has already included the creation of government-supported organizations such as Egypt Ventures and the Bedaya Center for Entrepreneurship.
“This move matches the needs of startups, which demand quick document processing and access to international markets,” Heiba said. “We are also collaborating with the EU, Saudi Arabia, and Morocco to facilitate the expansion of Egyptian startups and prevent double taxation.”
GAFI has launched a fast-track registration system that enables entrepreneurs to create a single-person company online within two hours, drastically shortening Egypt’s typically long business setup procedure.
The initiative arrives as Egyptian startups demonstrate resilience amid a challenging funding environment. According to Africa: The Big Deal, startups in Egypt secured $61 million in Q1 2025, a 15.1% rise from $37 million in Q1 2024, with logistics ($23.5 million) and e-commerce ($22.5 million) following behind.
Drawing Lessons from Regional Examples
Egypt’s strategy reflects proven free zone models in the Gulf. In the UAE, Ras Al Khaimah Economic Zone (RAKEZ) and Dubai Silicon Oasis provide startups with flexible licenses, visa services, and investor connections. Bahrain’s FinTech Bay offers tax exemptions and affordable startup costs, supporting companies’ expansion throughout the GCC.
“A free zone for startups has been a topic of discussion in Egypt for a long time,” said Dr. Heba Medhat Zaki, Director of the Egypt Center for Entrepreneurship and Innovation. “The challenge will be making sure the incentives go beyond tax breaks to truly attract companies.”
Although the policy marks progress, experts emphasize that its success depends on implementation. Rafiq Dalal, co-founder of Intercap Capital, pointed out that startups need more than tax incentives—they also need access to funding, mentorship, and international markets.
“If free zones can incorporate venture capital firms and simplify regulations, they have the potential to prevent Egyptian startups from moving to other hubs,” Dalal said.
Economic analyst Ahmed Khattab added that free zones could lower import and export costs for startups, enhancing their competitiveness. “This signals a green light for Egyptian startups to expand globally,” he said.
GAFI intends to pass a new law this year creating “financial and business zones” to draw venture capital funds. If effective, Egypt’s free zones could attract tech talent and investment—provided the government fulfills its commitments to efficiency and support.
For now, this move reflects Egypt’s desire to rival regional tech centers. The real question is whether startups will respond.
