Sunday, 19 March 2023

What exporters need in terms of reforms, according to industry players

Foreign trade, exports and international investment in focus at IDSC-led workshop: As Egypt works to grow its exports and slash its import bills, industry players and other stakeholders have called for the government to enact certain reforms that they believe are necessary to prop up exporters and streamline their work. During a workshop discussion held earlier this month by cabinet’s Information and Decision Support Center (IDSC), participants suggested expanding qualifying industrial zones, reducing red tape for customs duties and increasing the Export Development Fund as some of the most important steps to strengthen Egypt’s export game. The workshop brought together lawmakers, industry experts, and business leaders for a policy discussion on how to mitigate the impact of external disruption to various Egyptian non-oil export industries. Also attending the workshop were representatives from the food, raw materials, textiles and ready-made garments and engineering, as were members of export-focused organizations and authorities.

REFRESHER- Prime Minister Moustafa Madbouly tasked the IDSC last month with coming up with policy proposals on how to reduce the country’s exposure to external risks. The center is holding a number of sessions with experts on how to strengthen food and energy security, bolster supply chains, boost tourism and manufacturing, and prevent a repeat of the economic crises of 2016, 2020, and 2022. The government is aiming to increase exports to USD 100 bn a year by the middle of the decade and reduce dependency on imported products. The state has identified nine sectors to focus on, including food, textiles, pharma and metals.

Our exports at a glance: Egyptian non-oil exports rose 10% y-o-y in 2022, recording USD 35.6 bn from the USD 32.3 bn in 2021, according to figures from cabinet and the General Organization for Export and Import Control (GOEIC). This increase in exports was led by chemicals and building materials, followed by textiles and engineering products.

The Madbouly government has been working overtime to boost exports, having introduced a number of initiatives and funding programs to push industrial sectors to step into new markets. The government has also inked a number of trade agreements to enhance the presence of Egyptian products in global markets.

The state has been lending exporters a hand with subsidy arrears: The Export Development Fund has so far paid EGP 42.5 bn in overdue subsidies to 2.5k exporters under its export subsidy program, which allows exporters to receive their subsidies in a single payment rather than in installments over four to five years, in return for a haircut.

These are all positive steps, but the food and readymade garments sectors want to see more of where that came from: Edita Chairman Hani Berzi and member of the Federation of Egyptian Industries’ readymade garments and home furnishings division, Hany Salam, both voiced their support for the Export Development Fund, but called for more regular pay-outs to allow exporters to calculate the percentage of reimbursement of export burdens within their production costs.

Less red tape: Cutting down on bureaucratic procedures and expenses was also a key request made at the workshop, with Readymade Garments Export Council head Marie Louis Bishara urging the government to reduce red tape for the ready-made garment industry to export products. She suggested lowering the cost of administrative expense and customs duties on export alongside removing the number of procedures required to grant or renew industrial licenses to speed up the production process.

Industry players also want lower interest rates to unlock CAPEX: Industrial sectors should be granted low interest rate loans to help spur capital expenditure investments, Amr Fattouh, member of the Federation of Egyptian Chambers of Commerce’s investors division said. Fattouh suggested offering loans at an 11% interest rate, instead of the current 18%, for “productive” industries, which he said would remove the pressure on the Egyptian manufacturing sector.

Producers need to be export-focused: With the ongoing war in Ukraine delaying supply chains and imports of grain and raw materials, Egypt has a chance to accelerate its production of natural gas and fertilizers, Fattouh said. Producers need to be encouraged to be export-focused, added Mohamed Sami, a director at the Export Council for Engineering Industries, and educated about the various support programs and agencies offered by the state aimed to help boost exports.

This will all require developing local production: Localizing production of components will reduce import costs, added head of the Trade Ministry’s Commercial Representation Sector Yahya Al Wathiq Billah. Private local fertilizer producer EverGrow agreed, with group Vice Chairman Gamal El Khashen, calling for the introduction of initiatives that will speed up the incorporation of machinery and specialized equipment needed to manufacture fertilizers in factories.

Adding Canada + Mexico to the QIZ? Magdy Tolba, board of directors chairman of T&C Garments, called for Canada and Mexico to be included in the Qualified Industrial Zones export agreement. Egypt signed the QIZ agreement with Israel and the US in 2004, allowing participating companies to no-tariff access to the US market provided they meet a minimum required amount of Israeli content. The Egyptian Federation of Investors Association voted against a request for Canada’s inclusion in 2020.

Authorities are also doing their part: GOEIC helps provide information to export companies about the most prominent products required abroad and the agreements regulating their circulation, in order to facilitate a targeted exports program, head of GOEIC’s Central Department for Exports and Origin, Dalia Shehab said. The organization also provides companies with information on how to reimburse their export burdens from the Tax Authority.

Your top industrial development stories for the week:

  • New logistics zones, factories in the SCZone: Mercedes-Benz, local shipping firm Kadmar and two Chinese companies inaugurated new logistics platforms and factories in the Suez Canal Economic Zone.
  • Military firm to construct rail parts factory: The Transport Ministry signed an MoU with military-affiliated company Lenza Egypt to build a factory producing spare parts for the Egyptian Railway Authority.
  • Germany grants EUR 6.5 mn to Ghabbour Auto, Dara’s Ice Cream to boost manufacturing jobs: The jobs investment arm of German development bank KfW will grant Dara’s Ice Cream EUR 5.5 mn towards a new EUR 13 mn ice cream factory, creating some 700 jobs. Investing For Employment (IFE) will also provide EUR 1 mn to Ghabbour Auto subsidiary Ghabbour Foundation for Development for an EUR 1.3 mn project set to create some 500 jobs in the EV sector.
  • Egyptalum could partner with Emirati aluminum producer on a new factory: The Public Enterprises Ministry has opened talks with aluminum conglomerate Emirates Global Aluminum to partner with Egyptalum to establish a new plant in Egypt.
  • Home appliances company Haier Egypt kicked off the construction of its ecological park — a 200k square meter environmentally friendly industrial complex in 10th of Ramadan — on Wednesday, the company said in a press release (pdf).

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