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Al-Ahram Weekly 11 - 17 March 1999 Issue No. 420 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 11 - 17 March 1999 Issue No. 420
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Special Features Travel Sports People Time Out Chronicles Cartoons Letters Pulling their weight
By Ibrahim Nafie
The Egyptian government has given more priority to stimulating export trade than virtually any other economic issue. In spite of the many incentives the government has implemented towards this end, however, Egyptian exports remain at unacceptably low levels. Egypt ranks 80th among exporting countries, with an export value of less than $5.1 billion for 1997-98. At the beginning of the '90s, the government set a target of $10 billion by 2000. Clearly, we will not be able to meet it.
It is true that Egypt's export trade has been severely strained by the succession of economic crises that have rocked the economies of southeast Asia in 1997, ricocheting through Japan, Russia and Latin America during the following year. These crises caused a drop in the international economic growth rate from 4.1 per cent in 1997 to two per cent in 1998 and, consequently, a drop in the value of world trade, from $5,433 billion in 1997 to $5,365 billion in 1998.
In addition to the international recession, certain Egyptian exports came under fire for dumping or failing to meet quality standards, as was the case with potato exports and unbleached cotton textiles. As a result, the value of Egyptian agricultural exports fell from $270.5 million in 1996-97 to $243.5 in 1997-98, both of which figures are very modest.
Plummeting oil prices, which dropped from $2,577.8 million in 1996-97 to $1,728.4 million in 1997-98, have also contributed to the declining value of Egyptian export trade. The major share of this primary product in our overall export figures does not augur well for our manufacturing enterprises.
The exceptional international circumstances that have hampered exports, however, must not prevent us from taking a long, hard look at the reasons for our paltry performance, and hopefully pinpointing the ways to bring our exports up to a level commensurate with Egypt's political and cultural standing.
The government has implemented many legal measures to boost export activity. It has abolished the export blacklists that had formerly restricted private sector export trade, and eliminated reams of bureaucratic red tape. It has set up mobile customs boards to perform customs procedures on site, sparing exporters considerable time and expense. The government has also abrogated the law requiring exporters to deposit their hard currency proceeds in Egyptian banks. The abrogation of this law, in particular, sent a clear signal to the private sector that the government is keen to see it enter a new phase of export promotion and assume responsibility for using its hard currency earnings to finance the imports necessary for production. The private sector has yet to rise to this challenge.
Egypt has also been actively engaged in seeking diplomatic avenues to stimulate export trade. The government has entered into negotiations with numerous countries to establish bilateral free trade zones. In its negotiations with the EU, it has been intent upon securing more favourable conditions within the Egyptian-EU partnership for Egyptian producers, particularly in the agricultural sector. Another major development occurred last year when Egypt joined COMESA. Last October, the trade bloc introduced a 90 per cent customs reduction on trade between its members, and in 2000 this trade will be deregulated entirely. Egypt's membership will certainly be a boon for the private sector. The combined value of imports of its member nations currently stands at $23 billion and is certain to increase rapidly. In addition to the potential of these markets, many raw materials essential to Egyptian industry will be more readily available at lower cost.
The Arab Free Trade Zone is another area in which Egyptian diplomacy is seeking to open new avenues. In the same spirit, Egyptian diplomatic missions abroad have intensified their efforts to support Egyptian exporters by furnishing them with data on the markets of other nations.
The government has also taken enormous strides towards developing the necessary infrastructure to facilitate the movement of export trade. Four new ports -- at Safaga, Nuweiba, Dumiat and Dekheila -- have joined Alexandria, Suez and Port Said, which have also been upgraded, bringing Egypt's total port capacity up to 52.2 million tons. In addition, the Egyptian cabinet has voted to increase the number of EgyptAir flights to COMESA countries and to establish Egyptian commercial centres throughout Africa. With the assistance of the National Investment Bank, Egypt has also founded a maritime transport company for Eastern and Southern Africa, in a bid to enhance the flow of Egyptian trade in general, and exports to COMESA members in particular.
Not only has the government taken all these actions for the benefit of exporters, it has backed up its commitment with the creation of follow-up councils to monitor progress. In light of these efforts, the responsibility for the paltry value of Egyptian export trade and the huge balance of trade deficit can only be attributed to the poor performance of the private sector. The government has announced repeatedly that it seeks to promote export production, a call that was taken up by Egyptian business organisations; one would therefore expect to see practical results in the form of Egyptian products that can compete abroad. This has not been the case, which is why the value of Egyptian export trade will not reach its $10 billion target by 2000.
Business organisations last year voiced a number of demands which they believe are necessary to stimulate the export trade. These include lowering the interest rates on loans for financing exports; abolishing the sales tax on capital assets, production lines and essential spare parts; reducing the entrance fees to domestic and foreign trade fairs; granting the private sector a share in operating and upgrading port facilities; eliminating all fiscal duties and administration fees on export activities; and offering assistance to insurance companies which cover exports against non-commercial risks.
Many of these demands are reasonable and can be met quickly. Others, such as the demand to reduce the interest rate on loans to finance exports to a level below the five per cent discount rate set by the Central Bank, are not. Regardless of its specific decisions, however, the government has been on the whole very positive in its response to exporters' demands. It would seem reasonable, therefore, that the exporters themselves take up the initiative. If the government is expected to enhance the competitiveness of the products produced by the public sector, the private sector should be expected to adopt a positive attitude in producing and marketing its products. It should relinquish the mentality of a bureaucracy safely ensconced in a domestic market and secured by protectionist barriers; it should bring every ounce of innovation to preparations for the age of deregulated trade. If the private sector hopes to garner a greater portion, and eventually the majority, of Egypt's foreign trade, it will have to prove itself worthy of the task by increasing production and enhancing the ability of its products to compete in the world market.
