NEW YORK — Egypt's apparel and textiles sector has had explosive growth since a 2004 accord among Israel, Egypt and the U.S. that allows Egyptian manufacturers duty free access to the U.S. market. But expansion is beginning to flatten, spurring the Egyptian government's efforts to jump-start the momentum.
Sourcing executives from companies such as Phillips-Van Heusen Corp., Jones Apparel Group and Mothers Work Inc. met at the Marriott Marquis hotel here on Jan. 16 to hear Egyptian officials present an update on the country's textile industry and their efforts to keep the momentum going.
The rise is a result of the 2004 pact permitting finished products manufactured in specific regions (Qualifying Industrial Zones) of Egypt to enter the U.S. market duty free as long as at least 11.7 percent of the garment's content contains material from Israel.
A 10 percent cap was placed on foreign workers to ensure that Egyptians benefit the most from the creation of new jobs. The strategy has helped Egypt avoid the types of labor abuses that have been alleged at factories in Jordan, which has a similar trade agreement and has relied almost exclusively on foreign workers.
"We have an industry," said Ali Awni, an Egyptian trade minister. "This is not a country where we have footloose sew-and-cut operations that will come and then migrate."
The impact of the program has been a significant driver of Egypt's rising apparel exports to the U.S. Apparel imports from Egypt rose 22.7 percent in 2006 to 202 million square meter equivalents valued at $624.8 million, compared with imports of 164.7 million SME valued at $444.3 million in 2005, according to the Commerce Department's Office of Textiles & Apparel. By the end of November, apparel imports from Egypt had already reached 195 million SME and Awni expected their value to be near $800 million. Cresting the $1 billion mark appears to be an immediate goal.
"Are we happy with this [growth]? Yes, but we can do better," Awni said.
Developing Egypt's labor pool is one area impeding expansion, although the government is working with factories and investing in training programs.
"When you're talking about growth, usually the bottleneck is skilled labor and we have our share of problems with skilled labor," Awni said.He noted that Egypt has historically been regarded as a manufacturer of cotton-based products, a perception that the government believes may be hampering efforts to expand into new areas of growth.
Cotton bottoms, particularly denim bottoms, are the country's largest export product, followed by T-shirts. As a result, Awni suggested there is ample opportunity for producing synthetic fiber-based apparel, as well as footwear, leather goods and jewelry. This will take a considerable investment to upgrade facilities and labor.
Relatively few of the textile companies operating in the Qualifying Industrial Zones program are able to meet the operating and record-keeping standards demanded by large U.S. brands and retailers. Egypt's foreign trade ministry said there were 547 textile companies operating in the zones last month. However, Awni indicated that the pool of viable factories exporting to the U.S. was closer to 200. Of those, Awni said only 40 to 50 had the operational efficiency and record-keeping capabilities to adequately meet the needs of U.S. clients. To address the problem, the government established teams to work with smaller factories to help them get up to speed.
"We're trying to enforce this kind of discipline on the remaining 150 companies," he said.
Ted Sattler, executive vice president of foreign operations at PVH, believes Egypt is missing opportunities to expand as a sourcing destination, especially given warnings from manufacturers in China regarding rising costs of labor and energy. During his presentation, Sattler shared an e-mail he received from one of the company's suppliers in China in which the factory owner said oil prices, higher labor costs and currency appreciation would force him to raise prices.
"I don't think this is a unique message," Sattler said, noting that PVH sources 7 to 8 percent of its product from Egypt. "I don't see us increasing that to a significant amount more, but I do see that it could be higher than it is."
Awni acknowledged that the Egyptian textile industry is facing a pivotal moment.
"We realize we have a window of opportunity and it's not going to last forever," he said.
The Fiber Price Sheet
The last Tuesday of every month, WWD publishes the current, month-ago and year-ago fiber prices. Prices listed reflect the cost of one pound of fiber or, in the case of crude oil, one barrel.
Price on 1/28/08*
Price on 12/26/07
Price on 1/29/07
August Synthetic PPI
*The current cotton price is the December average on fiber being delivered to Southeastern region mills, according to Agricultural Marketing Services/USDA. The wool price is based on the average price for the week ended Jan. 25 of 11 different thicknesses of fiber, ranging from 15 microns to 30 microns, according to The Woolmark Co. Information on polyester pricing is provided by the consulting firm DeWitt & Co. The synthetic-fiber producer index, or PPI, is compiled by the Bureau of Labor Statistics and reflects the overall change in all synthetic-fiber prices. It is not a price in dollars but a measurement of how prices have changed since 1982, which had a PPI of 100. Oil prices reflect last week’s closing price on the New York Mercantile Exchange of future contracts for light, sweet crude oil to be delivered next month.
Exclusive: Nicola Formichetti is parting ways with @diesel after nearly four years. Formichetti, who served as Lady Gaga’s stylist in 2009, joined Diesel in 2013 as creative and artistic director. His first show debuted in Venice with a show held at the Venetian Arsenal. #wwdfashion #wwdnews
The polo shirt - an icon of preppy style - is roaring back into fashion in many creative guises, like this A-line polyester top from @carven, worn with @31philliplim cotton and elastane pants. Designers stretched a fashion classic into all kinds of new permutations this season. See how @mayteallende styled the preppy trend on WWD.com #wwdfashion (📸 : Kinya)
(Market Editors: @andrew_shang and @elmercer, Makeup: @amandawilsonmakeup using @fentybeauty, Hair: @gonn24, Model: @bara_holotova at @women360mgmt)
“I do like period [projects] a lot because I like creating those worlds, a world that is different from today," costume designer Mark Bridges said about the '50s British couture featured in @phantomthread. Bridges created the overall aesthetic and individual fashion looks for the film, which stars Daniel Day-Lewis, Lesley Manville and Vicky Krieps. Pictured here is a gown he designed for Krieps who plays Alma – the love interest of Day-Lewis' character, Reynolds Woodcock. #wwdfashion
@prada is embracing the holiday season with a series of short movies about the art of gift-giving. "The Postman's Gifts", which was directed by American filmmaker Autumn de Wilde, focuses on the brand's signature Prada Galleria bag and features Elijah Wood as the postman. In the first two episodes, Wood's delivers the iconic bag to @emmaroberts, who plays herself as a movie star, and Sasha Frolova. #wwdfashion
“I think I never met the person while we were working,” Vicky Krieps said of Daniel Day-Lewis, who she plays the love interest of in “Phantom Thread.” Day-Lewis remained perennially in character, so much so that she feels she’s just meeting him now. “It’s interesting to see how different he is in real life to the character,” Krieps said. WWD sat down with the 34-year-old actress to talk about her new role in the period film, which brings the fifties’ gender dynamics into the mix. Read more on WWD.com. #wwdeye (📷: @lexieblacklock)
@gucci has expanded its “Places” project to include six new cities. The initiative, which was first unveiled in July, aims to invite people to explore inspirational locations for the brand. On the list is the Biblioteca Angelica library in Rome pictured here. See the other five new venues on WWD.com. #wwdfashion (📷: @massimo_listri_official)
#ad From tools to lashes, WWD rounded up wellness and beauty products guaranteed to take your skin care and makeup routines to the next level in 2018. Follow along as @laceandleatherbyelyse, @ashnfashn and @elleisalwayshere experiment with these products on their Instagram profiles and blogs. #NewYearBetterYou
Blogger @camilacoelho is one of the fastest growing beauty influencers around the world. The bilingual blogger has worked with brands like @revolve Beauty, @dior, @louisvuitton and more and has an Earned Media Value of $34,338,441, according to @tribedynamics. But Coelho isn’t the only influencer making a major impact — head to WWD.com to see the other fastest-growing influencers in six key global markets. #beautyfridays (📷: @zefashioninsider)