Minister of Industry and Transport Kamel Al-Wazir announced the framework of plans to revive Egypt’s industrial sector this week, with a view to increasing its contribution to exports, a major source of the hard currency needed to finance oil and food imports.

The announcement is in line with cabinet plans over the next three years, which focus on incentivising export-oriented industries, import substitution, and boosting competitiveness.  

But the main pillar for supporting industry is boosting investment, which necessitates the construction of new factories, according to Mohamed Kassem, chair of the Egyptian Exporters Association, in an interview with Al-Ahram Weekly.

Noting that clothing exports rose by 19 per cent to $1.08 billion in the first five months of this year, Kassem said that “we have a golden opportunity to attract foreign capital to build new factories in the textile sector. The restructuring in global production chains that is taking place right now is generating demand for investment in Egypt.”

However, while there is a growing demand for new factories, the industrial sector is having problems finding the necessary land equipped with the utilities needed to operate production facilities, he said.

The provision of such land is the role of industrial developers.

“If I were in a position to take decisions, I would allocate at least five million square metres to each of the licensed industrial developers, of which we have 12. Within two years, we would have 60 million square metres of serviced industrial land ready to receive investors,” Kassem said.

“It wouldn’t cost the government a piastre. Plus, the industrial developers would take charge of promotional campaigns and attracting foreign investors.”

The plans announced by the minister of industry this week aim to rationalise and reduce imports and increase the country’s industrial production base and exports.

They will focus on promoting green and electronic industries while upgrading the technical capacities of manufacturers through modernisation. An important component of the plans is an “instant verification” procedure to help struggling factories resume operations and increase production capacities. They will also receive technical support to enable them to qualify for international certificates testifying to compliance with quality and environmental standards.

The plans simultaneously contribute to job creation and reducing unemployment, not only through the establishment of new factories, but also through human-resources training, rehabilitation, and capacity-building.

The fertiliser sector shows promise for further development. After successive years of growth, its exports climbed to $6 billion in 2023, placing Egypt fourth globally among urea fertiliser exporters, according to statements by the Ministry of Agriculture.

Unfortunately, production in this sector recently ground to a halt due to the natural gas shortage that struck some weeks ago.  

“This is one of the sectors that generates the most hard currency through exports,” said Mohamed Al-Khishin, head of the Fertilisers Division at the Federation of Chambers of Commerce.  

Al-Khishin has been critical of decisions to cut down gas supplies to fertiliser plants in response to recent gas shortages, forcing them to suspend production.

  He has called on the government to support the sector by foregoing profits on the natural gas supplied to fertiliser plants. This means making locally produced gas available to the plants at cost price, while charging the import price for any imported gas they use, which comes to about 40 per cent of total gas consumption.

Al-Khishin said that the government obliges fertiliser producers to sell 30 to 50 per cent of their production at below-market prices to the Ministry of Agriculture to cover the needs of the local market. They are able to export the rest.

He said that if the government is to oblige producers to furnish the ministry with fertilisers at a rate below the market price, the government should also offer fertiliser plants natural gas at a lower price.

“This is because gas is not just a source of energy for these plants, as it is for steel factories or other manufacturing industries. Gas is also a raw material used to produce nitrogen-based fertilisers,” he said, adding that this does not apply to plants that produce phosphate-based fertilisers.

The government is considering raising the price of subsidised fertilisers by up to 30 per cent, or from LE4,800 to around LE6,250 pounds per ton, in order to offset rising production costs.

According to a government source cited by various news outlets, all fertiliser firms have complained of rising production costs and have urged the government to raise the price of the fertilisers it distributes to farmers at subsidised prices.

Another promising sector that has experienced steady growth in recent years is the food-manufacturing sector. Recently it was reported that in the first five months of 2024 food exports increased by 30 per cent over the same period in 2023, reaching $2.7 billion compared to $2.1 billion last year.

Alaa Al-Wakil, a member of the Board of the Food Export Council, offered pointers that could ensure exports in this sector increase further.

Careful attention must be given to the design and content of Egyptian pavilions in food manufacturing fairs abroad, he said, and it is essential to upgrade the standards and production lines of food companies having their eyes set on exporting their products.

Al-Wakil noted that during the recent dollar shortage, some companies in the sector had rushed to export their products without being fully aware of the quality standards and other conditions they should meet. The consequences of such oversights could harm the reputation of export companies in this sector, he warned.

Thirdly, the Ministry of Agriculture should train farmers on the proper use and optimal quantities of pesticides employed, he said. There should be no traces of pesticides in produce that food manufacturers use to produce products manufactured for export abroad.

* A version of this article appears in print in the 25 July, 2024 edition of Al-Ahram Weekly