GENEVA — Egypt is counting on investment to improve productivity and a recently completed free-trade agreement with the U.S. to help it keep its competitive position in the post-quota era.
Egyptian Minister of Investment Mahmoud Mohieldin said in a recent interview that his country’s textiles and apparel industry is shaping up and “can secure a market for our products.”
As part of the Middle East peace process, in 1996 the U.S. Congress authorized an agreement to allow Egypt and Jordan to export products to the U.S. duty-free, as long as products contain a specified amount of inputs from Israel.
The success of Jordan’s Qualified Industrial Zone program, which has seen the country’s exports increase to $674 million last year from $31 million in 1999, according to U.S. government data, also spurred Egypt to pursue the QIZ option.
In 2004, Egyptian firms exported $534 million worth of textiles and apparel to the U.S.
The government now wants to sharply increase exports to the U.S. market “with the possibility of reaching $4 billion within the next five years,” according to projections by Egypt’s ministry of foreign trade and industry.
Such a sharp increase would require Egyptian exporters to barrel ahead of the competition. Currently only two countries — China and Mexico — ship more than $5 billion of apparel and textiles to the U.S. a year.
Increasing investments and productivity to benefit from access to the U.S. market could provide 250,000 jobs in the industry, the Egyptian government estimated.
“We have comparative advantage in textiles and garments,” Mohieldin said. “It’s not just based on the tradition and history in the sector but as well on the high quality of inputs we are using, including the international trademarks of cotton and other fabrics used.”
The opening up of the sector during the last 10 years, including many joint ventures with South Korean, Chinese and Indian investors, he said, made Egyptian manufacturers better able to compete.
“We don’t fear anymore the challenges of competition,” said Mohieldin, who projected that foreign direct investment in Egypt this year will double from $408 million last year.
Recent initiatives launched by the Egyptian government include the reduction of import tariffs to 9 percent from 14 percent and slashing the time required to register a company from six months to three days.
Moreover, the government has also proposed to cut the corporate tax rate to 20 percent from 42 percent.