Egypt in­dus­try races to fill void as trade gap to narrow $11-12bn in 2016

Kuwait Times - - BUSINESS -

CAIRO: Egypt ex­pects to cut its trade deficit by $11-$12 bil­lion in 2016 as part of ef­forts to ease an acute dol­lar short­age and is en­cour­ag­ing do­mes­tic in­dus­tries to fill the void as imports plum­met, Trade and In­dus­try Min­is­ter Tarek Ka­bil said. Speak­ing as part of the Reuters Mid­dle East In­vest­ment Sum­mit, Ka­bil said Egypt had pro­duced about $4 bil­lion worth of im­port sub­sti­tutes since the start of the year and aimed to grow do­mes­tic in­dus­try by 8 per­cent in three years.

“If you look at last month’s re­port, in­dus­try grew by al­most 20 per­cent, be­cause it has to fill the gap of the imports. Some of (the imports) are un­nec­es­sary and some is real con­sump­tion that Egyp­tian in­dus­try has to fill the gap for,” he said in an in­ter­view at his wood-pan­elled of­fices in Cairo.

He said lo­cal com­pa­nies were pro­duc­ing sub­sti­tutes pri­mar­ily in food in­dus­tries, but also build­ing ma­te­ri­als, chem­i­cals, leather and fur­ni­ture. Egypt has strug­gled to over­come a crip­pling dol­lar short­age since the 2011 up­ris­ing caused for­eign in­vestors and tourists, key earn­ers of for­eign ex­change, to flee.

The short­age is ex­ac­er­bated by a se­vere trade im­bal­ance - Egypt im­ported $67 bil­lion worth of goods in 2015 but ex­ported just $18.5 bil­lion, ac­cord­ing to trade min­istry data.

Cen­tral bank gov­er­nor Tarek Amer said in Jan­uary Egypt aimed to cut its im­port bill by 25 per­cent to ease dol­lar demand. Egypt has this year raised cus­toms tar­iffs on lux­ury goods, plugged cus­toms loop­holes, and tight­ened qual­ity con­trols.

To­gether with dol­lar ra­tioning and cap­i­tal con­trols that have made it dif­fi­cult for mer­chants to ob­tain enough for­eign ex­change to pay for car­goes, the mea­sures have curbed imports.

Prices of im­ported goods have soared as mer­chants are forced to source their dol­lars on the black mar­ket for as much as 15.5 pounds per dol­lar, a wide spread over the of­fi­cial rate of 8.8 pounds. Some im­ported goods have be­come scarce. Ka­bil said the trade deficit had nar­rowed by $8 bil­lion in the first nine months of this year, with imports fall­ing $7 bil­lion but ex­ports - key to bring­ing more dol­lars into the econ­omy - ris­ing by only $1 bil­lion.

But the moves have prompted complaints from man­u­fac­tur­ers who say they strug­gle to im­port com­po­nents and raw ma­te­ri­als or pay more for them as they have to source dol­lars on the black mar­ket. The re­sult: more ex­pen­sive end prod­ucts that are less com­pet­i­tive abroad.

DOU­BLING EX­PORTS

The min­is­ter, a for­mer Pep­siCo ex­ec­u­tive, said low la­bor costs would help keep man­u­fac­tur­ers com­pet­i­tive as Egypt seeks to dou­ble its ex­ports in the next five years. Egypt has cre­ated an ex­port de­vel­op­ment agency to mar­ket Egyp­tian prod­ucts abroad, Ka­bil said. It is fo­cus­ing on Africa, where Egypt has a com­pet­i­tive as well as ge­o­graph­i­cal ad­van­tage. The aim is to in­crease ex­ports to Africa from $4 bil­lion now to $8 bil­lion five years, or 20 per­cent per year, he said. “We have al­ready opened a lo­gis­tics cen­tre in Kenya ... last month,” said Ka­bil. “We have a di­rect ship­ping line now from Egypt to Kenya and we’re ex­pand­ing on that ... Kenya is a no­brainer be­cause it has ac­cess to five im­me­di­ate coun­tries next to it.” To boost man­u­fac­tur­ing, Egypt has in­creased the amount of in­dus­trial land avail­able and will of­fer 10 mil­lion square me­tres on 30-year-leases this year, he said.

It has al­ready of­fered about 5 mil­lion square me­tres and is work­ing on fully in­te­grated in­dus­trial parks ded­i­cated to small man­u­fac­tur­ers. “We have been fo­cus­ing on this be­cause there is a se­vere short­age of in­dus­trial land,” Ka­bil said. “We are look­ing for ex­ports to be 50 per­cent of imports within three years.” —Reuters

Toma­toes for sale for 10 Egyp­tian pounds, or about $1.2, a kilo­gram, in Taw­fiqia mar­ket in down­town Cairo. —AP

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