A plan to set up a one million square textiles free zone in Minya to house $1.5 billion in Chinese investments is currently being studied by the General Authority for Investment and Free Zones. The news comes alongside the signing of a $60 million investment deal with a Chinese firm to establish a large textile manufacturing plant in Sadat city.
The plant, the first advanced textile factory in Egypt using state-of-the-art production technologies, will open in 2026. It will have an annual production capacity of 5,000 tons of flax yarn, generating $300 million in sales and creating 1,500 jobs for Egyptian young people, according to a statement by Chinese partner Kingdom Holdings.
Also, a major Turkish readymade clothing company has launched a factory in Qantara West with an investment of $51 million. This agreement was preceded by two other Turkish investments in the textiles sector, one worth $8.8 million and the other $700 million.
These facts and figures hold out the promise of expansion in the textile and readymade garment industry in Egypt. They also indicate that major international textile producers have learned a lesson from the Covid-19 and Ukrainian crises, leading them to search for new production and marketing locations situated at the intersections of global trade routes and major markets.
Egypt fits the bill in both cases, with its domestic market alone of over 100 million people and its proximity and easy access to other large markets. It also boasts vast human resources and a relatively inexpensive labour force.
But these are not the only reasons Egypt has become a leading investment destination for the global textile industry.
“Egypt has trade agreements with the most important commercial markets in the world,” Mohamed Al-Rashidi, head of the Textile Industries Chamber at the Federation of Egyptian Industries, told Al-Ahram Weekly.
“This allows tariff-free trade between Egypt and these countries. Turkish investors in Egypt can take advantage of this, as their products would be exempt from customs when exported from Egypt to these countries, which include the EU and the US.”
Egypt has numerous trade agreements with diverse partners. The most important are the European Partnership Agreement (signed in June 2001), the QIZ Agreement with the US (December 2004), the Inter-Arab Facilitation Agreement (February 1997), and the COMESA association with African countries, which Egypt joined in June 1998.
Under these agreements, Egypt can export products manufactured in the country without paying customs, regardless of the nationality of the investors in the manufacturing plants.
Investors are drawn to Egypt for many reasons, Al-Rashidi said. They are encouraged by the investment climate, assurances by the Egyptian leadership, the government’s consistent readiness to solve problems and facilitate transactions, and its determination to expand the manufacturing sector’s export capacities.
US President Donald Trump’s return to the White House has also galvanised countries to benefit from trade agreements, such as those with Egypt, because of his threats to impose tariffs on Chinese, European, and other imports.
“China, known for its vast production and industrial capacities, wants to invest in Egypt so it can have access to European markets at zero customs rates, which is the advantage of goods produced in Egypt,” Al-Rashidi said.
Al-Rashidi is not worried about the possibility of competition with Egyptian manufacturers, as the foreign investors concerned are not really targeting the Egyptian market. Their first aim is to export to Europe. But, even if some Turkish or Chinese products make it onto the Egyptian market, “some of them will raise quality standards, which will benefit consumers.”
Amr Hassan, former head of the Readymade Garments and Textiles Division at the Federation of Egyptian Industries, said that Turkish investors were looking for relatively cheaper countries, including Egypt, to counteract sharply rising raw materials costs.
The welcoming investment climate and the government’s encouragement of foreign investment and minimising of obstacles also attracts investors.
“This is why I believe we will see a larger influx of investors in Egypt soon,” Hassan said, adding that the trend does not only apply to the garment industry. Many fabric preparation and other intermediate industries are also moving to Egypt.
Recent Egyptian measures align with the directions Turkey and China are taking. For example, the government has reduced exports of cotton with the aim of increasing the production of readymade garments in Egypt in order to produce more added value.
It has facilitated the establishment of more factories and has helped to lease them out, which means that entrepreneurs will be able to put their investments directly into operations, instead of having to build them from the ground up.
“The low exchange rate to the dollar is in Egypt’s favour relative to other countries in the region that have been trying to attract industrial investments. Egypt also has the advantages of possessing the raw materials and the ability to implement an integrated system.”
However, Hassan also said that he believes that efforts to attract foreign investors should be complemented by efforts to support local entrepreneurs, especially in micro, small, and medium-sized enterprises (MSMEs).
“I hope that loans to support MSMEs will be consolidated into a fund that will orient them towards the needs of major enterprises. I want the loans to translate into the machines and equipment needed to enable young people to manufacture buttons and zippers and other things that if their supply was cut off due to disruptions in the supply chains for these industries, their prospects could be narrowed,” he said.
Despite the optimism inspired by the increased investments in the textile sector, there remain challenges in implementation, according to Magdi Tolba, former head of the Export Council for Spinning and Weaving, Textiles, Readymade Garments, and Home Furnishings. Moreover, he believes the Egypt could double the announced investments.
“The figures are paltry,” he said. “Bangladesh is exporting $40 billion in this sector, while we are still at around $2 billion. The government must commit the manufacturers to dates for completing these projects and beginning operations. Changes are taking place in the world that open opportunities to expand Egypt’s share of this sector by multiple times its current size.”
One obstacle that needs to be addressed is the land on which a foreign entrepreneur can establish a factory. “Most countries offer facilities to investors, whereas we are still caught in the problem of industrial-zoned land turning into a business generating millions of profits for developers and forcing entrepreneurs to spend huge amounts just to purchase the land and build their factories,” Tolba said.
“Ultimately, industrial real-estate developers are private-sector companies that want to make a profit. The state should intervene to establish regulations in order to bring down the prices of industrial land.”
Every possible support should be given to attracting, keeping, and increasing foreign direct investment in Egypt, Tolba said. He believes that not only does this not conflict with domestic enterprises, but that it also helps to stimulate them, improve quality, and create jobs and training opportunities.
One of the main challenges the industry faces is that “despite high unemployment rates, we suffer from a shortage of skilled labour. Reforming intermediate technical education is imperative if we are to supply this industry with its manpower requirements,” he said.
“Current global developments offer an opportunity that may not be repeated for generations if it is not lost forever. The US is imposing tariffs on countries, most notably China and Europe, while inflation in Turkey is driving major industries abroad.”
“Egypt must invest in this opportunity and thoroughly prepare to welcome these industries,” he concluded.
* A version of this article appears in print in the 6 February, 2025 edition of Al-Ahram Weekly
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