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Al-Ahram Weekly 8 - 14 June 2000 Issue No. 485 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 8 - 14 June 2000 Issue No. 485
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Travel Living Sports Profile People Time Out Chronicles Cartoons Made in Egypt
By Ibrahim Nafie
Over the last decade, Egyptian imports have more than doubled, rising from $7.862 billion in 1991 to $16.502 billion in 1998. During the same period, exports have refused to move above $4 billion, resulting in a growing trade deficit, climbing steadily from $4.2 billion in 1991 to $13.2 billion in 1998.
While many of the obstacles to the development of our export trade have been eliminated, a number of major impediments remain. Some are structural, emanating from the fact that industrialisation in Egypt was the infant of a production strategy that aimed to supplant imports with locally produced goods, targetting the needs and tastes of the local market, a focus that ultimately weakened the competitivity of Egyptian-made goods.
Although production has begun to reorient itself towards exports, the transition has brought a curious phenomenon in its wake. Goods produced to export standards are almost invariably "copied," without the necessary quality controls. These cheap copies, intended for the local market, often find their way into foreign markets, distorting the image of Egyptian manufactures as a whole.
Another problem is that Egyptian industry is still hampered by extra-production costs beyond its control. Customs duties on the import of spare parts and production components, high shipping and storage charges and a panoply of other taxes and fees all contribute to the relatively high price of finished products that must compete in quality and in price in international markets.
Compounding this situation are low rates of production and inadequate technological input. Among the primary causes for this is the rift that exists between the manufacturing and research and development sectors. Technical expertise and training within the industrial sector are both, unfortunately, lacking.
Another debilitating factor is that the export sector lacks the infrastructure capable of supporting and stimulating trade. Existing organisational structures are ill-equipped to meet exporters' needs.
To properly develop exports we must begin at the bottom. Only by revamping the manufacturing base can we generate the appropriate material foundations for export trade. Figures illustrating the breakdown of Egyptian export trade over the past decade indicate how important this task has become. In 1990 raw material exports accounted for 44.8 per cent of our exports, rising to 56.2 per cent in 1996, then falling slightly to 52.4 per cent in 1997. In contrast, while manufactured products rose from 14.9 per cent of the export total in 1986 to 37 per cent in 1990, they dropped off to only 29 per cent in 1996. Although their share rose again to reach 40 per cent in 1998, this figure is still less than the level needed to boost export trade. We see a similar trajectory in our export of processed goods, which rose from only 12 per cent of commodity exports in 1983 to 37 per cent in 1997, a modest increase in comparison with Korea, say, whose processed exports reached 87 per cent of total commodity exports.
We must restructure our economy in a way that allows for industry, and processing industries in particular, to gain a greater share in export trade. As a first step towards this end we must increase the overall level of domestic investment in the industrial sector so as to create a powerful and diverse base for export production. Although investment in processing industries has risen from 15.7 per cent of total domestic investment in 1993-4 to 17.7 per cent in 1996-7, this rate of investment is still far too low.
Stimulating export trade will entail extensive market research. In this regard, China offers an excellent model. Through its studies of market needs in the Arab and Islamic world, for example, it has generated successful industries specifically targeting these markets. Chinese-made prayer beads, prayer rugs, Ramadan lanterns, watches that announce the times of prayer and other such items may have a relatively simple technological component but they have high consumer appeal. We would do well to emulate the Chinese example through the creation of specialised market research centres in Egypt and by establishing links with marketing organisations in targetted countries.
Funding exports is also a matter of immediate concern. Late last year the government announced a set of measures intended to stimulate export trade. In effect, these measures make up a comprehensive package that ensures that various types of funding are available during every phase of the export process, from pre-production research and investment, through production, marketing and shipment, to assessing the direction of future growth and demand. These important measures come a long way to meeting demands long voiced by Egyptian exporters, but to put them into effect and guarantee their efficacy we must also enhance the capacity of the banking system to participate in the financing of export production and trade. The Export Development Bank, the Egyptian Company for Export Guarantee and the Industrial Development Bank, in particular, have a central role to play, and we should work towards augmenting the financial resources of these institutions and solidifying their links with international financial agencies supporting exports.
Finally, the export process has become highly complex, demanding an increasingly broad diversity of skills and expertise. Perhaps we can better meet this demand through the creation of specialised institutes to train new generations of exporters, along the models of the academies that were established in China and Korea for this purpose.
