By Mausmi Ambastha / Threadsol
The Arab Republic of Egypt, or Egypt as fondly known by all, is the Mediterranean, transcontinental country, spanning through Africa and Asia, joined by a land bridge, Sinai Peninsula. Known for its earliest developments in the fields of writing, organized religion, agriculture, and urbanization, Egypt’s legacy is reflected in its rich cultural heritage and national identity.
Did You Know?
Egypt is considered as the cradle of civilization, where its longest histories recorded date back to 6th-4th millennia BCE
Egypt’s textile history is as rich as its cultural history. The textile industry in Egypt is its second largest industrial sector. Egypt is known for its Egyptian Extra Long Staple Cotton, competitive labour costs, geographical proximity to major markets, and centuries of textile experience.
Why Invest in Egypt?
The Egyptian garment and textile sector has seen a rebound and a new spurt of growth in the recent years. Egypt’s focus has shifted from imports to growing quality cotton crop.
MTI Egypt (Ministry of Trade and Industry) has shown faith in the industry for enabling in Egypt’s trade balance in 2017.
In the year 2017, Egypt’s exports increased by around 12% and the industry contributed to more than 3% of the country’s GDP, while providing employment to a third of Egypt’s total industrial labor force. By September 2017, the garment exports alone reached $951 million for the year, as per the data provided by the Readymade Garments Export Council of Egypt.
Policy Initiatives: The government is working on multiple policy initiatives to bring the garment and textile industry back to life in the country. In July 2017, the Ministry of Trade and Industry and Ministry of Agriculture signed a 2 year, $1.72 million protocol with the Italian Agency for Development Cooperation and the UN Industrial Development Organization, to grow value addition to Egyptian cotton. This agreement includes capacity-building for the training of 400 cotton farmers, workers, and students at around 15 textile businesses.
In 2017, MTI, Egypt has also announced that it is working for the development of a national strategy for readymade garment and textile industry in the country. In January 2018, MTI has also announced it plans (worth $2 Billion) to work on the development of the industry in Egypt’s biggest textile city of Sadat, over a period of 7 years, aiming for project completion by 2024.
International Trade Agreements: the US is the most popular export destination for the Egyptian garment and textile industry. 53.5% of RMG exports from Egypt go to the US. This is closely followed by Egypt’s EU exports (31.7% RMG), as per the General Organization for Export and Import Control data. Egypt’s Qualified Industrial Zone (QIZ) program, allows garment manufacturers in the Egyptian QIZ to export their output to the US at zero tariff rate.
Did You Know?
An HSBC 2016 report states that there are over 4000 companies operating in Egypt out of which around 196 are in free zones
FDI Inflow: the recent growth in the industry has garnered global attention. In May 2017, Chinese textile company Shandong Ruyi Technology announced its interest in building an $800 million RMG & textile industrial complex in Egypt. In the Cairo Fashion and Tex Exhibition, 2017, several Indian players announced their plans to collaborate with Egypt’s textile industry. Proximity to the EU, Africa, and the MENA region also makes Egypt an attractive destination for foreign players to invest in.
The enormity of the Egyptian Industry: Kenya, Ethiopia and Egypt are the major players in the African region if we talk about the textile and apparel industry. In 2017, the garment export value was USD 1377 MN for Egypt, USD 627 MN for Kenya and USD 68 MN for Ethiopia (Comtrade). This clearly displays the enormity of the Egyptian garment industry.
Strategic Location: Egypt is an intercontinental country, and multiple ports and facilities enable it to enjoy a strategic advantage, for exports to the US and the EU. The Canal region in Egypt is dedicated primarily to denim production. The Suez Canal facility is used to felicitate exports to the EU and Asian countries. The Alexandria region also enables exports due to the presence of various ports. The Middle Delta region is getting a lot of attention from new players entering into the sector.
Challenges faced by the Egyptian Textile & Garment Industry
The Egyptian textile and apparel industry in on an upward trend, but the biggest concern still facing the industry is the high worker turnover that affects the overall cost of doing business in this sector. The Egyptian factories employ a lot of migrant labour, which further worsens the turnover troubles for them. [3] Also, qualitative management issues and lack of health and safety awareness prevents the industry from creating a more promising work environment for the labour. As the global competition in this sector is intensifying, Egypt needs to focus more on R&D and invest in building technology to sustain its industry. The government does have a vision for the industry now, but this vision has to translate into strategic plans to ensure the industry keeps moving on a growth trajectory.
Future of Egyptian Garment Industry
Egyptian garment industry is trying to boost its overall potential as a sourcing destination on the world map. The industry still needs to work on its labour efficiency, working conditions, and personnel management factors, but it has started to gather global attention, from brands like Decathlon, PVH and Gap.
The Promoting Worker Rights and Competitiveness in Egyptian Export program run by the ILO, Cario is helping the industry in improving their labor practices and social compliances [4]
Country’s unstable political environment and the economy have reflected in its industrial performance in the past, and Egypt has to overcome this challenge to grow its prospects in the world garment market. The key to survival here is the Egyptian local market. The size of Egypt’s local market has the strength to support Egypt’s trade imbalances to some extent which can be very beneficial for the garment industry there.
