The Egyptian government is heavily supporting the textiles industry especially investments in spinning & weaving.

 30 per cent (about one million) of industrial employment is employed in the industry  – 7 per cent of total employment.

The textile industry is a large income generator. Export revenues amounted to EGP 3 billion annually over the past few years, 24 per cent of total non-oil exports.

The Government is targeting an exports value of US $3 billion within the period 2006-2010.

Specialized institutes for intensive specialized training.

Egypt has a 21-million strong workforce, with graduating 232,000 students each year. Communications networks are exceptional and the highways and railways networks are up to international standards. Labour and electricity costs are low and there is water available for industrial usage served by the High Dam.

The textile and cotton industry is in the midst of change. The QIZ agreement has given an added push to Egypt’s export momentum.

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A major driving force in the pharmaceutical industry is population growth (currently around 1.94 per cent a year) which has encouraged manufacturing subsidiaries to set up in Egypt.

With low wages, a large pool of highly -trained pharmacists, engineers, and skilled technicians, pharmaceuticals has the potential to be one of the most profitable industry in Egypt

The government aims to expand the scope and improve the level of health care services. Per capita expenditure on health services were USD 138 in 2000, 3.8 per cent of GDP.

Egypt ranks 7th in pharmaceutical exports in the Middle East region and has a better balance than most of its regional counterparts, such as UAE, South Africa, Algeria, Saudi Arabia and Turkey.

Source: Information & Decision Support Center (IDSC)

Encouraging multinational companies to invest in Egypt, rather than export to Egypt, is vital for the growth and development of the Egyptian economy. Foreign investment would create jobs and transfer technology.

Opportunities

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Competitiveness - Food Processing

• A reasonable endowment of high quality, indigenous raw materials such as exotic fruits and wide varieties of vegetables, and different varieties of fruits and vegetables even in the off-season agriculture
• High potential agricultural base, especially in potatoes, tomatoes and olives, reflects extremely a high competitive advantage. Olive yields in Egypt are comparatively higher than other parts of the world.
• Low manufacturing wages in Egypt: wages in this sector are among the lowest in the region and the second lowest average labour costs per worker and average value-added per worker in manufacturing from Morocco, Turkey, South Africa, Spain, and China.

This reflects the low levels of capital to labor ratios and a lower level of technology, lower technical competence, insufficient training and weak marketing and management skills in many manufacturing firms, which attract investment in these areas for increased labour productivity and industry growth.

• The agricultural sector is able to produce different varieties of fruit and vegetables year round.
• Availability of indigenous agricultural inputs suitable for innovative speciality products for local and regional markets.
• Proven track record of export performance for selected products
• Egypt’s geographical location and its proximity to Gulf Arab States and Europe.
• The free trade agreements (EU, GAFTA, COMESA, QIZ, and Agadir)
  Scope for enabling structures (co-operatives, contract farming) to strengthen small farms and improve the supply of raw materials to EFPI.
• Potential to attract FDI and to establish Egypt as a regional hub for TNC’s marketing and R&D and other operations.
• Demand for ‘traditional’ FPI export products (frozen, pureed, canned fruit and vegetables) and rapid growth of ‘organic’ products and supermarkets ‘private’ labels (co-pack).
• Opening up of regional and world markets through free trade agreements and preferential access.
  

  Egypt's Regional FPI Exports

Egypt’s reduced customs and duties has created potential for increased trade with the EU.

Egypt’s processed food exports to the Middle East constitute only 15.7 per cent of total trade with the ME region. The ME region imports of processed food amount to USD 12.91 billion, and Egypt supplies around 0.81 per cent of its total needs.

Eastern and Southern African (ESA) imports of Egypt’s processed food has increased over the years with the signing of the COMESA agreement in 1981. Under COMESA, Egypt’s processed food exports to the ESA region amount to 11.3 per cent of total exports. The region’s imports of processed food amounted to USD 3.73 billion in 2003, and Egypt supplies around 0.93 per cent of its total needs.

This suggests a potential for increased trade between the ESA region and Egypt of USD 440.9 million in all areas of the food processing industry.
The Maghreb region includes Morocco, Tunisia, Algeria, Libya and Mauritania. For 2003, Egypt’s processed food exports to Morocco, Algeria, and Tunisia - which have signed the Agadir agreement - reached 10.7 per cent of the total exports to the Agadir region.

The three countries’ imports of processed food products amount to USD 3.36 billion in 2003, and Egypt supplies approximately 1 per cent of its total needs food. This suggests a potential for increased trade between the Maghreb region and Egypt of USD 460.6 million in all areas of the food processing industry.

The North American countries (USA, Canada, and Mexico) are major trade partners with Egypt and especially in the food processing industry. Egypt’s processed food exports to the North American countries constitute about 1.5 per cent, 3.3 per cent, and 4.7 per cent of total trade with the USA, Canada, and Mexico, respectively.

North American countries imports of processed food amount to approximately USD 58 billion, while Egypt’s exports only 0.04 per cent of its total needs of processed food. This suggests a potential for increased trade between the North American countries and Egypt of USD 475.4, USD 490.9, and USD 493.5 million respectively, in all different areas of the food processing industry.

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Competitiveness  - Cement

Foreign participation in the Egyptian cement market

Source: HC Brokerage. March 2005

*Majority Egyptian with foreign participation represented by Arab Swiss Egyptian Company

The Egyptian cement industry enjoys very low energy costs due to Egypt’s reserves of natural gas, and the closeness of the cement plants to gas fields helps producers save on processing and transportation costs.

The major export markets for Egyptian cement are Mediterranean Europe, the Gulf countries and North and East Africa. Smaller quantities are exported to the East Coast of the USA.

High quality limestone and clay, necessary for producing cement are readily available in large quantities throughout Egypt and are augmented with a major advantage of being above soil level that is an added factor in reducing the costs of extraction.

In 2004, export prices ranged between USD 32 per ton to USD 36 per ton compared with average international cement prices of USD 60 to USD 70 per ton.

Egypt can take advantage of major countries’ supply shortages and fill those market gaps.

Source: The Investment Map of the Cement Industry. Ministry of Foreign Trade and Industry and the General Organization for Industrialization

Strengths

• Low labor cost and subsidized energy costs
• Cheap local currency compared to other countries.
• Backing by global giants Strategic location

Opportunities

• Expected recovery of local demand and prices
• Construction boom in GCC countries
• Reconstruction in Iraq
• Environmental limitations in Western Europe
  

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Competitiveness - Steel

Egyptian exports of finished and semi-finished steel products have increased from about 652,000 metric tons (MT) to more than 700,000 MT since 2003.

Compared to other countries in Africa, Egypt ranks the third behind South Africa and Libya, and exports around 9.83% of the region's total steel exports.

Egyptian steel prices are among the lowest worldwide, and are extremely attractive in global terms. Continued improvement in Egypt’s steel exports is expected due to the comparative advantage of Egyptian prices in both regional and global markets.

EZDK is considered to be the market leader, controlling 50 per cent of steel rebars, and 80 per cent of flat steel. The second largest producer is International Steel Mills (BASHAY) which produces 23 per cent of the nation’s rebars.

Regionally, African countries’ exports account for 2.10 per cent in world steel exports, 9.83 per cent of which is exported by Egypt.

Egyptian imports of finished and semi-finished steel products have increased steadily during since 1999. Egypt ranks second behind Algeria, importing 17.17 per cent of the region’s steel (2003).

Net Egyptian Steel Exports (Thousand metric tons)

Source: International Iron and Steel Institute IISI; Steel Statistical Yearbook 2004.

Egypt imports comprise mainly of raw materials needed for the production process of steel falling victim to raw material price increases.

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Competitiveness - Automotive Assembly

Most of the foreign companies hold a minority stake in the joint ventures with their Egyptian partners and cannot be defined as FDI as they do not own their Egyptian operations.

The exception is Nissan, which has bought a majority stake in its Egyptian operation and has announced plans to invest significantly in upgrading it.

Nissan Motor Company invested USD 60 million during 2004 and 2005, aiming to introduce new models, both locally built and imported, into the Egyptian market and use Egypt as a competitive export base for neighboring markets. Nissan Motor Co. will further invest about USD 100 million by 2010 in expansion.

The new BMW group, which comprises a consortium of Egyptian, Gulf and German investors, will invest approximately USD 60 million in a new assembly plant in Egypt. Output will be marketed in Egypt , COMESA and other neighbouring counties.

The vehicles exports volume increased from 164 units in 1998 to approximately 2,100 units in 2002 due to the sharp decline in the local currency which has increased Egypt’s international price competitiveness. However, total vehicle exports fell to 1,379 units in 2003 due to significant reduction in commercial vehicle exports.

Egyptian exports are dominated by buses, accounting for 63 per cent of total vehicle exports.

The major destinations for the Egyptian vehicles exports are Gulf countries with the share of 73 per cent in total export volume in 2003.

Opportunities

The automotive industry has great potential for attracting FDI and stimulate Egypt’s exports. It is a technologically advanced industry with many linkages that can enhance the skills and technology base of the Egyptian industrial sector.

The structure of the Egyptian automotive assembly Industry is primarily represented in the form of joint ventures and licensing agreements between local automotive companies and international companies.

Egypt has attracted foreign investments from many of the world's largest producers: Mercedes, BMW, Peugeot, Suzuki, Hyundai, Nissan, Daewoo, Citroen, Chrysler, Opel, Kia, and Tofas.

The Egyptian automotive market is considered an important market by international automakers due to its growing population (almost 70 million), its leading position in the Middle East, and its central location bridging the three continents, Europe, Asia, and Africa.

Strong regional demand for vehicles, especially buses, and the non-emergence of clear hubs in the MENA region for regional production of specific vehicles, position Egypt as a potential regional hub for assembling buses and other vehicles.

The massive tariff reductions on imported vehicles and spare parts used in automotive assembly had and impact refreshing the market, encouraging foreign firms to invest in Egypt, and is attracting more FDI into the industry for expansion and growth due to cost competitiveness.

With the increased demand and the new tariff cuts the Egyptian components industry can capitalize on increasing production of local components as well as sources of revenue through exports.

As foreign component industries establish plants in Egypt to supply world wide markets the Egyptian automotive industry can integrate into the global automotive supply chain.

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