Egypt’s exporters are awaiting the announcement of a new export support system, after the current framework faced challenges due to the devaluation of the Egyptian pound in March 2024.
The new system is expected to be ready by the end of March, according to Minister of Investment and Foreign Trade Hassan Al-Khatib. It will include measures aimed at increasing export revenues and volumes while also enhancing the added value of Egyptian products to boost their competitiveness in global markets.
The anticipated support programme is projected to be implemented in early 2026. It is designed to address the challenges exporters face, particularly delays in receiving financial support that can undermine their ability to compete in foreign markets.
Mohamed Al-Bahi, a member of the Federation of Egyptian Industries, said that “during various meetings with the minister [Al-Khatib], we called for criteria to be put in place to ensure that support is distributed fairly among companies and increasing support is given with the rise in the percentage of domestic components.”
Egyptian exports reached a record $40 billion in 2024, Al-Bahi said, noting that the government aims to boost exports to $145 billion by 2030.
Al-Bahi said that the new export support system should include support for small companies and start-ups in order to expand the exporters base instead of directing support mostly to companies according to the value of exports, which benefits large companies.
The export support programme began in the 1990s and focused at first on the clothing sector and then agricultural exports.
“We need to transition from refunding dues to incorporating investment incentives in order to achieve the target of $145 billion in exports,” said Mohamed Qassem, head of the Egyptian Exporters Association. “The current level is insufficient to meet this objective.”
The export support system is designed to alleviate the burdens exporters may face in competing with companies from other countries, rather than as a privilege that is granted to them, Qassem said.
The export target is ambitious, and it requires a set of incentives beyond merely addressing exporters’ burdens, he added.
These should not only focus on exports but also prioritise fostering investment, as has been the case in Turkey and Bangladesh, where investors are incentivised through the reimbursement of a portion of the capital spent on machinery, effectively providing them with a percentage of their investment as support, Qassem said.
The ministries of finance, investment, and foreign trade have announced a new mechanism to settle late dues owed to exporters, amounting to LE60 billion and covering late dues on shipments completed by 30 June 2024, through the Export Development Fund.
The announcement was made during the cabinet’s weekly press conference on 8 January.
The payment structure includes a dual approach: 50 per cent of the late dues will be paid in cash over four consecutive fiscal years, with annual disbursements of LE8 billion. The remaining 50 per cent will be cleared by cancelling old and future company debts to the tax authorities, customs, and electricity and gas companies.
The government is targeting the first payments of late dues to exporters this month, Al-Khatib said. Over the past five years, LE70 billion of late dues owed to more than 2,800 companies were disbursed, he added.
Ahmed Gaber, former head of the Printing Chamber at the Federation of Egyptian Industries, said that “export support should increase proportionally to the quantity of local components in exported products. Previous initiatives also offered support to companies exporting for the first time, a measure that should be revisited.”
Export support is calculated at seven per cent of a shipment’s value. The depreciation of the pound against the dollar has led to the accumulation of dues owed to exporters.
“Delays in disbursing export support payments leave exporters unable to incorporate them into their cost calculations, thereby weakening their competitiveness,” Gaber said. “With support payments now being disbursed retroactively by as many as three years, many exporters view these amounts as bad debts.”
He added that the new system should offer support for exporters to be present at foreign trade shows and exhibitions.
Al-Bahi explained that the arrears had accumulated due to the rise in the value of the dollar against the pound and increased shipping and raw materials costs since the Covid-19 pandemic.
These factors had raised the cost of production, making it challenging for the Ministry of Finance to maintain pre-estimated percentages for export support allocated in previous budgets.
The draft budget for the 2024-2025 fiscal year saw an allocation of LE23 billion for export support, up from LE20 billion in the previous budget and LE6 billion in 2022-23.
* A version of this article appears in print in the 16 January, 2025 edition of Al-Ahram Weekly
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