The revival of the spinning and weaving industry: The Public Enterprise Ministry has created a strategy to revive a number of industries and develop a few others through partnerships with the private sector. The spinning and weaving industry is included in the strategy.

It is part of a larger plan to localize industries as part of the state's efforts to reduce our significant import bill. This strategy includes both expanding current industries and introducing new ones. Reducing imports is a key component of narrowing the current account deficit, which narrowed to 3.7% in FY 2021-22, on the back of oil and non-oil exports, rising tourism revenues, and an increase in FDI. This also comes as we look to build a more resilient local industry (and economy) that is able to withstand shocks from the outside world, such as the effects of covid and the Russia-Ukraine war.

The strategy is all inclusive: The ministry’s strategy is open to all kinds of cooperation and partnerships with the private sector, Public Enterprises Minister Mahmoud Esmat told MPs earlier this month, adding that it falls under the new state ownership policy.

More investments from private sector players to come? The ministry has prepared a list of state-owned companies seeking fresh investment. It is also working on qualifying a number of companies to partner up with the private sector as part of the state’s efforts to drum up more local and foreign investments and encourage more private sector participation in our local economy.

The spinning and weaving sector is on the lookout for major investments: The state is working on a large-scale project for the sector’s revival. This will require major investments in factories and the cultivation of short-staple cotton in coordination with the Agriculture Ministry.

Why is the spinning and weaving industry receiving special attention? The government sees the sector as one of the most important ways to get the Egyptian economy back on track and boost exports. The government is aiming to increase exports to USD 100 bn a year within the next 4–5 years and reduce dependency on imported products.

Four phases for the sector’s revival:

• Phase one: Developing the cultivation and trade of cotton and upgrading cotton mills.
• Phase two: Upgrading and modernizing spinning, weaving, and dyeing facilities.
• Phase three: Launching local yarn and terrycloth.
• Phase four: Marketing, entering new markets, and keeping pace with global trends.

It’s been a long time coming: The Public Enterprise Ministry launched its EGP 21 bn plan to promote the spinning and weaving, which includes improving the efficiency of state-owned spinning and weaving factories, under a contract with Werner International Management.

In numbers: The ministry aims to more than double the production capacity of its mills to reach an annual 4 mn quintals of cotton, up from 1.5 mn, its spinning factories to reach a production capacity of 188k tons from the current 37k, and its textile factories to reach a production capacity of 198 mn meters a year from the current 50 mn. The ministry also plans to increase its ready-made clothing and knitwear production capacity from 8 mn to 50 mn pieces annually.

Merge and refocus: As part of the plan, the ministry will merge nine of its cotton ginning and trading companies into a single entity, and will merge 22 spinning, weaving, dyeing, and processing companies into eight companies.

The factories are also getting new machines: The state has signed contracts for new machinery with several major players based in Switzerland, Germany, Italy, France, and Japan. The equipment will be purchased with a loan of EGP 1.5 bn from the National Investment Bank.

Where does the private sector stand? Egypt has some 10k private sector ready-to-wear and textile production factories with an annual production capacity worth around EGP 200 bn, according to Chairman of the Federation of Egyptian Industries’ readymade garments division Mohamed Abdel Salam.

Spinning and weaving companies were sitting on annual losses of USD 3 bn prior to the state’s plans to revive the sector, Magdy Tolba, chairman of Cairo Cotton Center and former head of the Export Council of Spinning and Textiles, told us.

IPOs for textile companies? The private sector’s involvement with the industry will help companies operating in the sector become joint stock companies and offer their shares on the Egyptian bourse, Abdel Salam said.

Egypt has what it takes to become a hub for ready-made clothes and textiles, Abdel Salam said, adding that the sector has advanced over the past few years and is now able to keep pace with fashion trends.

Where do the sector’s exports currently stand? The sector recorded some USD 2.2 bn in exports last year and aims to push that number to USD 8 bn in 2025, Abdel Salam said, adding that Egypt exports textiles to the US, Europe, the African Union, and a number of Arab countries.

The sector is also struggling with rising material costs: Polyester prices have doubled over the short-term, jumping from USD 1k a ton to USD 2k on the back of global price hikes. The industry has also been impacted by the weakening EGP against the USD, which has doubled factory costs.

Investor demand for the sector is still lacking in the petrochemical space: Due to the high investment costs, which can range from USD 3-5 bn, no local or international investors have yet shown interest in the textile-feeding petrochemical industry. Due to this, the sector needs attractive incentives to attract foreign investment.

Industry players want tax breaks, Sayed Barhmatouchy, head of the International Textile Industry and member of the Federation of Egyptian Industries’ textile division, told Enterprise. the state should start giving businesses tax breaks in relation to employee growth, he added. The state could start offering companies a 5-10% tax break per 1k increase in headcount. This will help companies save the required funds to go ahead with a capital increase, expand locally and globally, and discount their prices, helping increase competitiveness in the market.

The main thing the sector needs: Cheaper energy, our sources tell us, adding that rising energy prices are one of the major challenges suppliers face when introducing new products.

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