The government is directing a message during the Euromoney Conference this year to emphasize that Egypt is moving steadily in the right path of development. All indicators confirm that the package of economic reforms adopted by the Egyptian government was right, the Minister of Trade and Industry said, directing a message to investors and participants in the Euromoney Conference.
According to Ministry of Planning indicators, the growth rate is 4%, although tourism did not return fully. The cash reserves stood at $36 billion. The surplus in the balance of payments this year increased $11 billion. Furthermore, the trade balance showed significant progress, as imports decreased by 29% and exports rose by 8%, while the unemployment rate fell to 12%, the minister said.
Daily News Egypt sat down with Minister of Trade and Industry Tarek Kabil to talk about the developments of the trade and industry sector.
What does Egypt need after all these indicators to increase investment rates?
In fact, Egypt needs to diversify investments to include various industrial sectors, rather than focusing on high investment rates in general.
The ministry has completed the preparation of investment opportunities for more than 15 governorates. By the end of September, the industrial investment map will be completed, including all governorates.
The ministry has organised a number of visits by its employees to visit all the factories in different governorates in order to know the manufacturers’ needs.
The map is used to determine the types of employment and training programmes to achieve integration of factories and networking between factories and workers, as well as to diminish the volume of imports. The ministry is working on implementing this strategy in 6th of October City.
Is there a new package of decisions on which the ministry is working to curb imports?
There are no new decisions that the ministry is currently working on to limit imports, especially since Egypt is bound by the World Trade Organisation (WTO) agreements and its trade agreements with different countries.
The ministry follows two methods to limit imports. The first is a set of decisions adopted by the ministry during the last year to limit the entry of imports, such as the registration of foreign factories’ imports to Egypt in the records of the General Organisation for Import and Export Control (GOEIC).
The second method is to encourage the local industry to become an alternative to these products, which is the focus of the ministry during this period.
Among the positive indicators, most imports recorded marked declines in the period from January to August. The imports of ready-made garments fell by 64%, leather by 52%, upholstery by 44%, and furniture by 40%.
What is the target rate of reduction of imports by the end of the year?
It is difficult to determine the proportion of the reduction of imports, especially as part of these imports are a key input to production in some industries, and some other imports are strategic commodities, such as wheat, corn, and beans.
The ministry is currently seeking to reduce the trade deficit by 50% by 2020. I draw hopes to achieve those rates during the current year, considering the rates of exports and imports, as imports amounted to about EGP 24 billion and exports achieved EGP 12 billion.
Is the decision of the ministry during the last year to register foreign factories’ imports to Egypt a temporary decision?
No, it is a permanent decision to ensure the continuity of quality of imported products for the domestic market, especially as this decision is inconsistent with the WTO.
Exports have increased since the beginning of the year by 8% by the end of June. Is it a real increase or an increase driven by the currency flotation decisions?
Egyptian non-oil exports in the first half of the current year rose to $11.13 billion, compared to $10.295 billion during the same period of 2016—an increase of 8%. This increase is not due to the flotation, but the new markets opened by some export councils.
Some exports are difficult to be measured by quantity. For example, ready-made garments are difficult to measure by metre, but are measured by the markets that were exported to and the new export markets that were opened.
But on the other side, there is a complaint from some manufacturers regarding declining demand rates and the existence of a recession in the local market?
Industrial output figures do not indicate a decline in production capacities of factories.
The ministry announced previously that it follows a strategy to increase the number of exporters. Is the ministry achieving that increase?
Exports rose during the current year to $1 billion, and the number of exporting companies increased, especially small and medium enterprises (SMEs), so the industry needed time to increase production capacity.
The ministry has established an Export Development Authority and launched a general strategy for all exports and target markets. The ministry has undertaken a special strategy for Africa and a sectoral strategy for the chemical, spinning, and weaving industries. The ministry’s strategy focuses on specific markets, such as Africa, Arab countries, and the European market.
What is the ministry’s objective to increase export rates by the end of the year?
At the rate at which exports are increasing, it is likely to rise from $2 billion to $3 billion by the end of the year compared to last year.
What is the target industrial growth?
The targeted industrial growth rate is 8% by 2020.
What are the rates of industrial production growth?
According to World Bank data, industrial production growth rates in June 2016 increased by (-17%) while in April 2017 (+26%), with an increase 44%.
What are the ministry’s plans to establish an integrated industrial city?
The ministry is seeking to expand the establishment of integrated industrial cities. There are negotiations with a number of foreign investors to establish an industrial city in the north of Fayoum governorate, in Kom Oshim north of Qaroun Lake, on an area of 33 million square metres. We target the establishment of integrated industrial cities with all services, such as housing for workers, hospitals, and schools.
This does not mean that we will be stopping the establishment of industrial zones, but there is a new idea for the establishment of industrial cities next to industrial zones. The ministry has not yet determined the industrial sectors to be established in the industrial city of North Fayoum. The construction of this industrial city is to be assigned to a global technical office.
A delegation from the Export Development Authority met with the Saudi Development Authority to provide funds to support Egyptian exports, especially to Africa. What is the size of funds provided to exporters?
The ministry is negotiating with a number of export support agencies, including the Saudi Development Bank, the African Development Bank (AFDB), and other export guarantee agencies. Through the Export Development Bank of Egypt, about EGP 841 million were provided for Egyptian exports.
What is amount of importers’ dues in the export refund programme for exporters?
The total arrears were about 11 months, and there are no current adjustments in the export burden refund programme.
Is there an intention to increase export support burden refund?
At present, the ministry is not seeking to negotiate to amend or increase it.
What is the ministry’s plan to benefit from the Mercosur Agreement after the approval of the Argentine Parliament?
The ministry is adopting a number of awareness campaigns about the importance of the agreement and its impact on the trade movement with the Mercosur countries, the terms of the agreement, and the advantages and mechanisms of benefiting from it.
Furthermore, the ministry is seeking to organise a visit before the end of the year by a delegation of businessmen to visit the Mercosur countries to start work and to hold bilateral meetings with the members of the agreement.
What is the extent to which the Industrial Licenses Law and the Implementing Regulations of the Investment Law reflect the attraction of foreign investment, and are there international companies that show their desire to invest in Egypt?
The decision to invest from any international company needs a long time and long internal procedures in companies, especially as international and investment decisions are not taken between day and night.
First, the investment law is important, but the facilitation of the procedures is more important. Accordingly, the licensing law and other procedures are more important than the articles of the law. Finally, the advantages of the investment law are available.
The ministry is now talking with an international Chinese company to invest $1 billion in the spinning and weaving sector in the Suez Canal axis, and, through the Industrial Development Authority, there are ongoing negotiations with more than 17 projects with investments of $16 billion. However, these investments will not be implemented on the ground unless the owner of the project receives the project’s land and begins the legitimate executive procedures.
What are the most important steps that the investor is considering to make his investment decision? What role did the government play?
The first thing is security and political stability, and Egypt has achieved this compared to what we have been going through during the last three years. Then, the investor looks at the size of the market and growth rates. The third element to be seen by the investor is monetary policies and legislative policies, and begins to ask a set of questions about the availability of the dollar in the market.
Do inflation and interest rate increases affect investor decisions?
The investor studies all these elements, including inflation rates and increased interest rates, in his feasibility study. The feasibility study has assumptions, and usually the feasibility study is over 10 years. Within 10 years, things change as the exchange rate and inflation rates change.
Overall, Egypt is not expected to continue with its current inflation rates, which are only temporary figures and will decline next year. The investor puts the figures in the worst and hence takes the investment decision.
Additionally, I am very optimistic about the economic situation of the country, and we are currently in the middle of a “disaster”, but we seek to look forward in the future within three years and expect that the situation will vary completely within that time period.
The current economic reforms were supposed to take place 30 years ago. The current problem is that we do not have the luxury of time, so the ordinary citizen feels the length of the procedures and suffers from a number of reforms that came very late. The economic reform prescription is “a bitter drug, but essential.”
Does the government intend to increase the burden of factories and stimulate energy prices?
There are two parts to the answer. The first is the industry must stand on its feet. I defend the industrial sector, but every citizen has to pay the actual cost of the service, which requires him to rationalise consumption.
Consumption of electricity, water, and labour reduced the cost by 20% to solve the problems of recession.
Furthermore, the ministry is now working with 71 energy-intensive companies and helping them with energy savings programmes to increase their competitiveness.
The cost of gas for plants is higher than the price of gas globally. Will the government move to reduce gas prices?
The average price of gas is from $4.5 to $5, but Egypt does not have self-sufficiency of gas; therefore, the country imports gas, processes it, and then provides it factories. Any factory that wants gas at a simple price can import it and pay the connection cost.
The government may cut energy subsidies to factories in accordance with the gradual subsidy cut programme.
How do high interest rates affect investments?
Interest rates in their current value certainly affect the investment climate, but this value will not continue as so in the long term, as it is a temporary measure.
What are the latest developments in the signing of a free trade agreement with the United States of America?
Egypt is not seeking to sign a free trade agreement with the USA because of US administration policies that do not comply with free market policies. There are currently no negotiations with the US on a free trade agreement.
What are the developments of the law of giving legal personality to export councils and the establishment of a company to manage the industrial zones?
The parliament is currently discussing giving legal personality to export councils to be legal entities. Its purpose is to grant more codified influences to the export councils. Its role is currently advisory. It cannot open a logistics centre in any foreign market, but the new law grants it the authority to open logistics centres.
The Industrial Zone Management Law, a decision approved by the cabinet, is currently being studied by the Ministry of Industry. The idea is to ensure the continuity of the quality of the infrastructure and maintain and manage industrial development proposals.
The ministry is studying the participation of the private sector in the management of industrial zones.