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Saturday, 14 December 2019

Egypt: Upgrading spinning and weaving public-sector companies

Comprehensive plans to develop the public-sector spinning and weaving companies are underway

Mona El-Fiqi , Sunday 7 Jul 2019
Upgrading spinning and weaving
Upgrading spinning and weaving
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The government has begun ambitious plans to upgrade the public-sector spinning and weaving industry at a total cost of LE25 billion and within a time frame of four years.

Public Enterprise Minister Hisham Tawfik said the plans included developing the infrastructure of the companies concerned and obtaining advanced new machines from Germany and Italy.

The plans will also provide extensive training courses for workers to enable them to use the new machinery.

Tawfik explained that the plans aimed at eliminating the losses of the spinning and weaving companies, estimated at LE2.7 billion in 2018, and turning them into profits of LE3 billion within four years.

Moreover, the plans merge the 32 companies affiliated to the Holding Company for Spinning and Weaving into 10 large companies while changing three of them, Mahalla, Kafr Al-Dawar, and Helwan, into integrated giant complexes.

The government’s plans also involve reviving cotton cultivation by increasing the exports of finished products rather than depending on exporting raw cotton, allowing the industry to benefit from higher added value.

Amr Nassar, minister of industry and foreign trade, said the government was giving priority to promoting the textiles sector not only through the development of the public-sector companies but also through attracting foreign investments to the sector.

The public-sector companies have long posted losses due to high production costs, debt to some governmental agencies, and the lack of a suitably qualified labour force. Factories and machines have not been upgraded for decades.

The government’s move to revive the textiles sector has been broadly welcomed by experts, but some believe there are loopholes in the plans that might hinder achievements.  

The government’s decision to support the sector was a positive one, Said, a former official in one of the companies who preferred to remain anonymous, said. But he said that not enough details on the plans were available.

He said that it was not clear if the government would use Egyptian cotton in the factories after their development. “If Egyptian long-staple cotton is to be used to produce ready-made garments, these products will be difficult to market as they will be expensive and global demand for such high-quality goods is limited,” he said.

The share of long-staple cotton in the international market does not exceed three per cent, while 97 per cent of the market depends on short and medium-staple cotton.

Said said that in order to achieve LE3 billion in profits after four years the sales of the companies would need to reach LE60 billion, impossible since current sales are estimated at LE1.6 billion.   

The plans also include the participation of the private sector in the developments, but it does not clarify how this will be regulated.

There needed to be further studies on how the funds would be directed, Said added, saying that it might be better to buy new machines from China instead of paying higher prices when getting them from Europe.

Another expert who also preferred to remain anonymous said the aim of the plans was a noble one, but they lacked details on important issues such as marketing and labour training.

He said that funds slated for the restructuring of the sector were more than adequate, but there was still the question of marketing. “It will be difficult for Egyptian products with their high production costs to compete in international markets,” he said.

The exports of the public spinning and weaving companies currently represent 12 per cent of total exports. In order to get more market share, producers will need to leverage competitive advantages in terms of price and quality, the expert said.

Workers in the sector also want quick action. Faisal Lakosh, an employee at the Mahalla Spinning and Weaving Company, said that workers had been hearing about development plans for years, but nothing had happened to improve the company.

He explained that the government was maximising investment benefits from the company’s assets but not paying enough attention to production. Some of the company’s land assets were being rented out, he said.

“It is a good idea to use the proceeds to pay company debts, but the company also has productive capabilities that need to be promoted,” he said. “The workers have the feeling that the government no longer needs the public companies, and that it will sooner or later shut them down,” he added.

There are some 54,000 workers in the public-sector spinning and weaving companies.

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