Egypts RMG exports have fallen from US$1.55bn in 2012 to US$1.35bn in 2015

Egypt's RMG exports have fallen from US$1.55bn in 2012 to US$1.35bn in 2015

International brands and clothing manufacturers met in Cairo this week to discuss how to boost Egypt's overall potential as a production sourcing centre through improved labour efficiency, working conditions and personnel management.

The Egyptian Textiles Buyers Forum attracted representatives from Decathlon, Gap and PVH, although some brands stayed away – it is not known whether this was over security concerns.

Welcoming delegates, Peter Van Rooij, director of the International Labour Organization's (ILO) Cairo office, stressed the value of its Promoting Worker Rights and Competitiveness in Egyptian Export programme, which has involved working with supply chain data supply service Sedex and drawing funds from the US department of labour.

It supports better labour practices and compliance with social regulations within the garment, textiles and agrifood industries in Egypt. To date 55 clothing and textile companies have taken part in the programme.

Van Rooij said the project had been a "partnership…with employers" helping them see how compliance can boost labour standards. Training delivered through the programme also helps manufacturers understand global buyer standards and requirements, including on social issues, since buyers may not place orders where there is concern poor standards can harm a brand.

Amal Abd Elhamid, chairman of Port Said-based denim company Eurotex, said: "In our country we have a lot of social problems and we want to know how to solve them and convince the international market about the local market in Egypt." Amal felt that the ILO training had real market value: "If you have transparency between you and the workers, and if they feel stability, they will give you the maximum effort."

The programme comprised an ILO-organised conference, roundtables discussing challenges facing Egyptian manufacturers trying to meet buyers' needs, and a mini trade show showcasing producers.

Falling clothing exports

Egypt's unstable politics and economy have been reflected by uneven clothing exports, according to data from the country's Ready-Made Garment Export Council (RMGEC), which were discussed at the conference.

Since the revolution of 2011, overall ready-made garment (RMG) exports have fallen from US$1.55bn to US$1.35bn in 2015.

Exports to the US, Egypt's main market (accounting for around 50% of its RMG exports) fell from US$782m in 2012 to US$748m in 2015. The European Union (EU) currently accounts for 35% of Egypt ready-made garment (RMG) exports, the second largest market, but exports have fallen from US$471m to US$395m over this time period.

Challenges and opportunities keep on coming, conference delegates noted. For instance the announcement on 15 March by the Central Bank of Egypt of an imminent devaluation of the Egyptian Pound from EGP7.73 to EGP8.85 against the US dollar.

As usual, devaluation is a double-edged sword. Samy Beshay, sales and customer services manager at Ramadan City-based textile dyers and finishers Hesni, said: "There's a real need for hard currency for sourcing, [but] devaluation will help with exports."

A key problem is that many manufacturers rely on Egypt B2B sales and domestic retail, he said, adding: "The Egyptian local market is very big".

The sense of tension about the current government's attempts to stabilise the economy was palpable at the event, and doubts were voiced about whether the government is capable of implementing its many infrastructure programmes, even if it has the political will.

Samer Riad, owner of Cairo-based dyer and finisher the Riad Group, was however one executive who was "not worried" about political and economic stability in Egypt, although external factors such as the "devaluation of the euro and trade cycles in Europe" were external concerns.

And Cennydd Williams, hub leader for Africa and Middle East at PVH, was bullish. For US buyers, he said Egypt was "the cheapest, closest and most mature [sourcing option]," adding: "I'd say Egypt is a good place to invest."

Production capabilities

Egypt certainly has great capabilities for mass production, with key strengths in denim, jersey knitting, weaving and ready-made garments from casual/sportswear to tailoring for bulk clients such as Walmart and Target, as well as dyeing and finishing. Advantages include the Suez Canal easing imports and exports, the quality of Giza extra long staple cotton and 15 established ports, including Alexandria and Port Said.

Labour is also potentially a major advantage, with a population of 90m and an active industrial workforce of 27m – of which 1.5m work in the RMG industry, according to the ready-made garments council. But this resource, the conference was told, needs to be nurtured and developed.

A number of companies based in Egypt are foreign-owned, such as Turkish-owned garment manufacturer Jade, whose business operations director Mazher Kazancioglu said the company has reduced its annual Egyptian labour turnover rate from 8% to 6% through the ILO programme.

But problems persist. Hesham Bayoumi, ILO Cairo productivity programme officer, explained: "Labour turnover is a major issue here and a bit of a chronic problem. We are having problems with workers' skills, we are having problems between middle management and the workers. We have a huge problem with health and safety issues, and these issues are affecting competitiveness in these industries so we are trying promote the idea of social compliance."

Ahmed Fathy Ismail, of ready-made garment manufacturer Ruby Red, which supplies brands including Benetton and makes its own Egypt-based label, saw the recruitment of recent high school graduates combined with training as being important: "They feel this is my factory, I started here."

Difficult journeys to work is one significant cause of labour turnover. Eurotex spends US$150,000 per year transporting its staff to work as a result. Shimaa Ahmed, economic researcher for RMGEC, said: "The council is adopting an initiative called 'Your job next door', [with] small units related to companies in the big urban areas being set up in villages." ILO notes that 70% of the textile and clothing labour force are women who dislike long commutes either because of personal safety or family commitments.

Eurotex's Amal Abd Elhamid noted that "girls leave work when they marry or when they have babies; sometimes the husband doesn't want them to go to work."

Sharmila Nithyanand, senior social responsibility specialist at Gap Inc, said: "We need to move on from minimum compliance. This [forum] is a very good platform for bringing out different issues."

She added: "I see workers in factories with just a cheese sandwich, with Pepsi or Coke, and cigarettes. I think that it is our duty to provide these workers with subsidised food; this would help them come up to a level where they feel involved."

Companies such as Port Said-based Plaza Readymade Garments (owned by Port Said's Embee Group), have implemented a "'pay for performance' bonus system and a clinic with a certified full-time nurse and a doctor available two days a week," she said.