Following President Abdel Fattah El-Sisi’s decision to raise customs on some 600 “luxury” commodities at the end of January 2016, a number of officials questioned the efficacy of the step as a bid to protect local production and industry, to eventually turn Egypt into an exporting country.
Ahead of the International Federation of Freight Forwarders Associations Headquarters Session (FIATA Headquarters Session), Daily News Egypt spoke to Ahmed Moustafa, chief of the Customs Clearing Agents Syndicate in Alexandria and chairman of Safety Link Company for shipping and trade said.
Moustafa addressed challenges faced by the shipping industry in light of the status of the domestic industry, as well as incentives that can be offered to
What are the incentives to encourage domestic industry in Egypt?
Encouraging the domestic industry requires many protection measures and incentives. The state should introduce new technological means to support small, medium, assembling and complementary industries, which are the basis of a renaissance for any country, through the formation of specialised industrial communities.
Customs amendments on finished goods are not enough to encourage exports, and will require many other incentive measures.
The tariff increase, approved by the president, will not directly affect the outcome of customs, as Egypt is bound to customs exemption agreements with several countries, at a time when most enlisted goods subject to the tariff increase are, in fact, exempted from customs.
Encouraging domestic production requires more support and preferential incentives, such as the provision of land, services, and customs and tax exemptions, in accordance with rates of employment and labour, which will help minimise unemployment rates.
What are the challenges facing shipping services in Egypt?
Shipping service prices in Egypt have been increasing randomly, amid a lack of oversight and controls, which challenges traders when communicating with their partners abroad, rendering them unable to provide a reliable list of shipping prices.
When shipping agencies send their prices, they note that the prices are only valid for the end of the month. Logistics cost 7% of the actual price of the goods in developed countries, while this increases to 35% in developing countries.
Liberalising energy prices should not affect prices of logistical services in the wake of the international drop of oil prices, which balances the prices at low levels.
I must commend the efforts of officials positioned at Egyptian ports and have been developing them and improving their performance indicators. However, their strategies rely on increasing revenues by raising the price of land or tariffs at gates and on weights.
Ports and airport are Egypt’s gates to the world. They should be making profits from exports, not imports; all tariffs imposed on contractors dealing with ports only affect the price of imports. Increasing the ports’ income this way will only affect consumers.
There is an urgent need to move storage areas to outside the ports, which follows global standards that limit the role of ports to the flow of goods only.
How has the dollar crisis affected shipping services?
The state’s economic policy is undefined. It is not clear whether the government will adapt open market strategies by floating the currency or by socialist policies through directing the economy.
All monetary policies indicate an intention to restrict currency trading and control the parallel market, although the exchange bureaus are legally licensed for operations.
Intervention to control market mechanisms has scared many dollar-holders in fear of price hikes, but at the same time, the Central Bank of Egypt capped dollar deposits and had to provide all the state’s requirements for foreign currency for imports. The CBE had to bin those protocols when they proved ineffective.
I believe that that the currency market will soon stabilise, leaving the dollar price at its current level. In fact, the low price of the pound can be utilised, following in the footsteps of China, a nation that deliberately depreciates its currency. The only way out of this crisis is through the support of domestic products and increasing the ratio of high-quality Egyptian components.
What solutions do you suggest for the shipping industry in terms of the lack of foreign currency?
We must find a number of alternative solutions to increase foreign currency, such as opening the door for transit trade with Libya, which was considered a source of dollar income.
Losing transit trade with Libya, due to security reasons, moved the trade to Turkey and Lebanon. I would like to establish cooperation with the Libyan side to revive the transit trade, especially as the eastern regions of Libya are safe zones.
Singapore port trades about 35m containers per year, while all Egyptian ports trade less than 5.5m containers, despite Egypt’s strategic location.
What inhibits better service in the shipping industry?
Customs clearance agents are a vital partner in trade, as they engage all problems of trade and currency, as well as international agreements and decisions of different entities.
Agents face many problems, especially in absence of electronic links between different authorities in the ports. We must stop working according to price guides and only follow international agreements and custom bylaws.
The lack of knowledge of some agents is a challenge; the syndicate, in cooperation with the Customs Authority, advises its members of the latest amendments and protocols.
Agents are willing to pay a fee of up to EGP 50 to the Customs Authority, provided that it uses this fee to upgrade its equipment and raises the salaries of its employees as well as increasing operational hours to speed up the pace of work, which will offer an alternative in case of outsourcing customs logistics to a private company.
The decision to prevent treatment for goods coming from abroad caused great losses to the Egyptian market and impacted importers, especially those who import finished goods. The decision resulted into getting rid of goods even if they matched specifications perfectly or re-exporting them for reasons like a lack of some data, even after paying the full shipment price. This affects importers as well as the Egyptian national income.
How has the conflict in the region affected trade and investments in Egypt?
Political unrest in neighbouring countries may actually represent an opportunity for Egypt to attract investments and increase the size of trade, due to its state of stability. Trade and transport agreements should be conducted between companies and entities, not between countries as the agreements between countries are affected by political relations, such as the case which broke the Roll-on/Roll-off (RO-RO) agreement with Turkey.
In your opinion, what is the future of the Suez Canal Development Project?
The Suez Canal Area Development Project is the logistic project of the century for the whole world and not just for Egypt. For this to be achieved, the project must be well-executed to at least equal quality of global logistic areas in Singapore or Dubai. This area should also be independent from local legislations and trade and customs laws and should be managed with advanced managerial thinking.
The role of the state in the management of the project should be limited to the provision of infrastructure and lands through usufruct system, and planning the project to include complementary industries so as to attract investments of foreign companies. This project is the lifeline of the Egyptian economy.
What were the benefits of Egypt’s participation in the FIATA conference for international shipping companies?
Egypt’s participation in the FIATA was exceptional. Egypt has taken it upon itself to market the Suez Canal Area Development Project during the coming round so as to call upon FIATA members, especially those in the Middle East, to invest in the project.
The FIATA conference is a great opportunity for marketing the project; especially as it is the largest assembly of cargo shippers in the world. Experts in this field should be invited to Egypt to contribute to the marketing conference of the Suez Canal area project.