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Egypt: Keys for industrial growth

Localisation and specialisation have become keywords for the development of Egypt’s industrial sector

Safeya Mounir , Saturday 3 Jul 2021
Keys for industrial growth
Keys for industrial growth
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Egypt has been focused on industrial specialisation for the past seven years, with the sectors involved including textiles, pharmaceuticals, and furniture.

Specialised units and industrial zones targeting the development of small and medium-sized enterprises (SMEs) have been established in many governorates, with each finding the best industrial match for its resources. There are now 17 industrial complexes across 15 governorates, with these generating 84,000 direct job opportunities at a total cost of LE10 million.

The complexes have been established using the highest technological standards to provide the correct environment for industrial investment, said the Ministry of Trade and Industry.

“These complexes have been designed to house small enterprises,” Alaa Al-Saqti, head of the Small and Medium-Sized Enterprises Federation, told Al-Ahram Weekly. They were important since otherwise such enterprises could have set up shop on agricultural land or in inappropriate places such as the basements of housing units.

There are now industrial zones in the governorates of Gharbiya, Beheira, Alexandria, Fayoum, Beni Sweif, Minya, Assiut, the Red Sea, Sohag, Qena, Luxor, and Aswan. They specialise in everything from furniture to ready-made garments, plastics, food processing, engineering, chemical industries, and building materials.

Licensed factories can be rented, making things easier for young entrepreneurs who may not have the capital to buy their own facilities. Government bodies have contributed to providing services to these factories by establishing specialised centres for knowledge transfer, training, and technical support.

These facilities are one of the ways in which local components can be deepened in the country’s industries, avoiding imports wherever local alternatives are available.

Major industrial complexes exist in Badr, South Raswa in Port Said, Marghem in Alexandria, Al-Sadat City, Kafr Al-Dawwar, and Mahalla Al-Kobra. The Upper Egyptian governorates will be home to nine industrial complexes in Aswan, Sohag, Assiut, Beni Sweif, Fayoum, and Minya.

Egypt’s southern governorates have a lot of potential for investment in the industrial and export sectors, and the government is working on granting industrial land to investors for free. They can also benefit from advantages provided by the new investment law, which offers a 50 per cent reduction on investment costs from the tax base.

The cost of production is often cheaper in Egypt’s new cities, and ongoing investment in them encourages the workforce to reside in the new cities and contribute to their development and growth.

The industrial zones also help investors to set up the projects each governorate needs or those that help factories nearby, Al-Saqti said. The government is compiling a database on small industrial products that can be produced in Egypt, he added.

Building industrial zones in different governorates creates direct job opportunities for young people, reduces unemployment rates, makes new products available in the Egyptian market, decreases imports, and alleviates the pressure on hard currency needs, Al-Saqti said. 

In addition to complexes dedicated to SMEs, Egypt is also seeing a leap forward in its industrial cities. In 2018, several industrial cities were inaugurated, such as the Damietta Furniture City.

The infrastructure of this city, set up on 331 feddans, cost some LE2.5 billion. Work on 1,400 production units has been completed, and public utilities such as water, electricity, and roads are being finalised.

The Damietta Furniture City is expected to generate more than 100,000 direct and indirect jobs. It will include craft industries, SMEs, food industries, a centre for furniture technology, and exhibition halls, as well as a complex for government and administrative services, an integrated services area, stores, warehouses, and financial and banking institutions.

Industrial cities provide vital services for producers, instead of these being shouldered by investors alone, said Ahmed Khalifa, vice chairman of Evergrow for Specialty Fertilisers. He said that project owners are able to share the cost of services, including industrial waste stations, water desalination plants, and infrastructure services.

The Robbiki Leather City has recently been established and units for dying and gluing leather finalised. The City is now seeing its external infrastructure completed, and small leather-working establishments in the Magra Al-Oyoun area are being transferred to Badr City in Cairo, according to plans set out by the ministry of industry.

According to a study by the State Information Service, specialised industrial cities contribute to rebuilding and developing the Egyptian economy. They help to identify the problems facing each industrial sector, and what they need in order to develop.

They also help in assessing the energy and workforce needed for each industry, the waste produced and how to dispose of it safely, and the internal-trade arrangements and exhibitions needed for products. Industrial cities also result in the creation of residential complexes for employees and increased competitiveness domestically and externally.

They contribute to the integration of the informal economy into the formal one, supporting small industries and creating thousands of job opportunities, especially for young people.

In November 2016, former minister of trade and industry Tarek Kabil launched a strategy that targeted the development of industry and foreign trade in Egypt until 2020. The five-pronged strategy to develop Egypt’s industries included raising industrial growth rates to eight per cent of GDP, focusing on SMEs, creating jobs, and increasing Egypt’s non-petroleum exports from $18 billion to $30 billion, decreasing the country’s budget deficit.

The strategy was meant to turn SMEs into a key tool to increase industrial production and exports, and it included developing technical education and a governance and institutional development project.

It achieved considerable success. Minister of Trade and Industry Nevine Gamea said the industrial sector had seen positive indicators in the 2019-20 fiscal year despite the Covid-19 coronavirus pandemic. The industrial sector grew by 6.3 per cent of GDP, while industrial production contributed 17.1 per cent of GDP.

Gamea said that the industrial sector employs 28.2 per cent of Egypt’s labour force, indicating the pivotal role the sector plays in providing job opportunities, reducing unemployment rates, and bolstering economic sustainability.

To implement the strategy the government has in recent years issued a law that facilitates the issuing of industrial licences.

In its quest to provide funds for SMEs, one of the main obstacles to current projects, the Central Bank of Egypt (CBE) has allocated LE200 billion over four years to support 350,000 small projects.

The CBE has also launched an initiative to provide funds to the industrial sector at an eight per cent interest rate. What has been even more important, according to Khalifa, has been the CBE’s work to resolve problems emerging in the aftermath of the coronavirus crisis, including cases where investors were unable to pay their dues.

 

 

*A version of this article appears in print in the 1 July, 2021 edition of Al-Ahram Weekly

 

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