Helped by its QIZ programme, Egypts garment exports rose 9.5% in 2018 to US$1.59bn – but arent hitting its ambitious targets

Helped by its QIZ programme, Egypt's garment exports rose 9.5% in 2018 to US$1.59bn – but aren't hitting its ambitious targets

Egypt is moving ahead with its Vision 2025 strategy to quadruple garment and textile exports, employ a further 1 million people, and attract US$17.5bn in investment – even though the double-digit growth needed to achieve the goals has yet to be reached.

Launched in 2015 by the Ready-Made Garment Export Council (RMGEC), a public-private partnership between the ministry of trade and industry and manufacturers, Vision 2025 has set a goal of Egypt's clothing and textile sector earning US$10bn from exports by 2025.

This would require 15% annual growth in overseas sales per year – but while the sector was achieving this kind of growth before the 2011 revolution, it has struggled to get back on track amidst the political and economic dislocation that followed.

"Our exports are recovering from a few years going down, and the devaluation of the Egyptian pound in 2016. In 2017 and 2018 we saw a modest increase, 7-8%, although less than the increase before the revolution, when exports were US$2.4bn," Mohamed Kassem, former chairman of the RMGEC and chairman of the Egyptian Company for Textile Parks Development told just-style. "Nevertheless, we are going in the right direction."

In 2011, Egyptian garment exports grew by 12% to US$1.55bn, then dropped by 8% in 2012 amidst the turmoil of the revolution. Exports dropped again in 2015 and 2016, by 3% and 8% respectively, then grew by 15% in 2017, and by 9.5% in 2018 to US$1.59bn, according to the Apparel Export Council of Egypt, which replaced the RMGEC at the end of 2018. Upstream textile exports in 2017 generated US$800m in receipts.

In the meantime, the Egyptian government is carrying out economic reforms in an attempt to bolster the investment needed to improve output – with a new investment law passed in 2017 modernising regulatory controls and reducing barriers for international investment. It is also overhauling 32 state-owned companies that have dominated local production, accounting for 50% of spinning and 60% of weaving production. Some factories have been closed while others merged, with new investment in ginning and spinning.

"There's been a lot of activity on the public sector side to revive the industry as it was stagnant for a long time. The government has also created a dialogue with exporting communities across the sector. It is a positive move to provide additional value to the industry, especially in textiles," says Samer Riad, general manager of the Riad Group for Textile & Manufacture, in Cairo.

Value chain vision

The Vision 2025 plan includes commitments to establish the whole value chain in Egypt, particularly upstream in textiles and yarns to supply local manufacturers as well as for export.

That said, Kassem notes: "There is investor interest in upstream and downstream, but garment manufacturing is happening faster. The influx in the garment sector will act as a pull effect for developing the upstream side, as investors want to see strong demand before making investments. This is already happening."

Chinese textile and clothing manufacturer Shangdong Ruyi has committed to invest in Sadat City, north of Cairo. And Ningxia Mankai Investment Co in January said it will invest US$121.6m for the first phase of developing a Mankai Textile Industrial Park, which will cover 3.1 million square metres and host 592 factories.

As reported on just-style earlier this year, Chinese clothing companies are increasing their investment in Egypt to take advantage of the country's Qualifying Industrial Zones (QIZ) programme. This gives Egyptian goods duty-free access to the US if at least 10.5% of a product's inputs is sourced from Israel – and offers an alternative way to supply the market amid fears an accelerating Trump trade war risks exports through standard channels.

Egypt also plans to attract textile companies from China, South Korea and Bangladesh to a new 1.2 million square metre textile park in El Minya in Upper Egypt, while another project is being developed in Suez, east of Cairo.

Kassem expects US$370m to be invested in the sector in the next few years. While this will not achieve the US$10bn target of Vision 2025, he thinks US$5bn in exports is achievable by 2025 or earlier.

There is also not likely to be a doubling of workers from the current 1 million. "Doubling the number of employees will take some time as development is not happening at the same pace as when we envisioned Vision 2025," he explains.

Among other efforts to boost exports, the Cotton Egypt Association and the United Nations Industrial Development Organisation (UNIDO) have teamed up on a pilot launch of the Better Cotton Initiative (BCI) for the first time in Egypt