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Al-Ahram Weekly 8 - 14 April 1999 Issue No. 424 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 8 - 14 April 1999 Issue No. 424
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Profile Features Travel Living Sports People Time Out Chronicles Cartoons Letters A new golden age?
by Sherine NasrAfter recent visits to Egypt to explore its potential, a number of foreign experts on the manufacture and marketing of gold have asserted that the country's gold market is ripe for expansion.
"Egypt is perhaps the oldest user of gold and can be a major player in the region's gold market," said Rolf Schneebli, head of the World Gold Council (WGC). Arguing that tourism can boost any gold market, Schneebli said, "This was our experience in Turkey and in Dubai." He said that in Turkey, 60 per cent of total domestic gold sales were to tourists.
"Egypt has a booming tourist business, but it is still important that both sectors cooperate to achieve the best results," he said.
According to Sabri Abdel-Nabi, head of Egyptian tourist bureaus abroad, gold sales increased during the first Shopping Festival held in Cairo last August, even though only a few gold shops participated in the event. "This year, the festival will include the Khan Al-Khalili district, where there is the biggest concentration of gold shops," said Abdel-Nabi. "We will talk to goldsmiths about the possibility of special gold offers to boost the event," he said.
In 1996, the government ended the sales tax for imported gold ingots and cut the customs duties from five per cent to one per cent in an attempt to boost the industry and counter smuggling. But, according to Mahmoud Ali, head of the Sales Tax Authority, these procedures are not enough on their own. "Gold smuggling is continuing, with at least 600 tons of gold being smuggled into the country every year," he said. Ali stressed that it is up to the gold traders to cooperate by refusing to buy smuggled gold.
The Gold Manufacturers Division, however, argues that the facilities approved by the government are little more than ink on paper. "It is only on paper that the customs duties were reduced to one per cent," said Atef Ibrahim, a gold trader. "But, in reality, we pay more than four per cent of the purchase price for imported gold ingots," he said. He explained that traders have to pay two per cent of the total value of the deal for what is described as "unloading of the shipment" and one per cent for "services". "I don't know what services the authorities offer, but we have to pay for them anyway," he said.
Egypt which is one of the world's oldest gold markets should aim for international competition
photo: Adel Ahmed
Fabio Torboli, an international expert on gold marketing and trading based in Italy, said the higher the taxes, the more likely it is that traders will try to avoid paying them.
Mohamed Jahangir, an Egyptian-based country manager for the Bank of Nova Scotia which is highly active in gold trading with branches in 44 countries, suggests that gold loans would be one solution to the problem of gold smuggling. Explaining that this is common in many countries, particularly those with gold-mining industries, he said, "The bank lends money against a proper security asset. The borrower has the option to repay it in gold or in money, and the loan can last from two days to two years."
Jahangir said banks in Egypt should be allowed to trade in gold. "There are a number of benefits from trading in gold. I deal with international insurance companies which buy gold for the bank at a good price, and therefore, the bank can price the product more competitively. This advantage is passed on to the gold trader," he said.
Torboli said that a recent study of worldwide gold markets showed that during the past 30 years, the Middle East has witnessed the biggest growth in gold manufacturing. In 1968, the manufacture of gold in Europe was estimated at 400 tons, increasing to 785 tons in 1998. In the Middle East, however, gold manufacture soared from 95 tons to 660 tons in the same period. "This is something we should consider very carefully," said Torboli, adding that Egypt is poised to become a major market player in the region not only because of its booming tourist activity but because of its reputation for fine gold work.
He said there was a lesson to be drawn from another country, Italy, which is also renowned for its quality workmanship. He pointed out that the country managed to expand its gold manufacture industry and dominate the international market, despite the existence of a number of bureaucratic procedures. According to Torboli, Italy produced 70 per cent of Europe's total gold items in 1998. "Italy produces 133 million pieces of jewellery per year," he said.
Torboli said Italy succeeded in establishing a large industrial base thanks to the expansion of local demand, particularly in the tourist sector, which has been flourishing since the 1960s. The country also adopted advanced techniques, which helped goldsmiths gain an advantage. "Italy's influence on the quality of the product has always been appreciated worldwide," said Torboli. "Moreover, Italian gold manufacturers have been able to create styles which appeal to different tastes and cultures."
Drawing on Italy's successes, Torboli said investment in quality rather than quantity and innovative marketing were the way forward for Egypt's gold industry. "It is not enough to produce a good product. Marketing is the key to a successful business," he said, adding that America, for one, would be a promising market for Egypt's gold production. Closer to home, Torboli said Libya and Sudan, which do not have gold industries, are potential importers of gold items. "Goldsmiths in Egypt have to consider the fact that international competition is tough, and where there is an oversupply of gold production, the ability to anticipate what the consumer will want is essential," said Torboli.
