Al-Ahram Weekly 14 - 20 September 2000 Issue No. 499
Published in Cairo by AL-AHRAM established in 1875

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Boosting exports

By Sherine Nasr

Few would deny that the poor performance of Egyptian exports is one of the factors aggravating the country's economic recession. In a meeting by the Federation of the Egyptian Chambers of Commerce to discuss this situation, the organisations head, Khaled Abu Ismail, characterised Egypt's exports to imports ratio of 4:1 as "alarming."

Likewise worrisome are Ministry of Economy statistics which show exports dropping from LE16 billion in the mid-eighties, to LE12 billion in 1998, to LE10 billion last year.

The challenges of finding markets for exports aside, exporters with access to European and Asian markets found the past year extremely difficult. Since the Egyptian pound is pegged to the US dollar, the decrease in the value of European and Asian currencies against the dollar, ranging from five to over 30 per cent, struck hard at the earnings of exporters. Abu Ismail explained that "exporters trading with these [European and Asian] countries bore losses of approximately 33 per cent, simply because they are bound by earlier agreements to carry through their deals," said Abu Ismail.

Some producers see devaluation of the Egyptian pound as the solution to the problem -- something Prime Minister Atef Ebeid has said the government has no intention of doing. Participating in the federation meeting, exporter Abdu Badawi said, "The only solution is to let market forces determine the real exchange rate of the Egyptian pound." Devaluing the pound, exporters suggest, will make Egyptian exports cheaper and more competitive in foreign markets. This measure, they say, will also boost the performance of Egyptian products against those coming from east and north-east Asia.

But the weakness of Asian and European currencies is only one of the more recent problems faced by exporters. Egyptian exporters are burdened with procedures and costs that they view as inconsistent with the government's stated goal of increasing exports. Mustafa Zaki, an exporter, cited high electricity rates, taxes and import duties on machinery used in production as some of the costs the government could reduce.

As a result, Egyptian products are more expensive than foreign products. For example, a ton of imported sunflower seed costs LE700 while the same quantity of locally grown seed sells for LE1,000.

"Supporting a foreign product against the local product is a very serious matter," said Osama Khairallah, member of the association who underlined the great deficit in the trade balance between Egypt and most of its trading partners. Egypt even has a trade deficit with Bosnia. This situation prevails despite Egypt's production of an ever wider range of products which could be exported.

Studies conducted by the Ministry of Economy recommend that only 25 per cent of the labour force in Egypt should work to meet local demand for products, while the remaining portion should be employed in export activities. "Ideally, this should be the case, yet, only a small portion of Egyptian products is exported," said Ali Eissa.

Exacerbating the situation is the fact that machinery used by local industry comprises 70 per cent of Egyptian imports. "This means that we import equipment for billions to produce commodities that do not sell abroad," said Eissa.

Given these challenges, support from the government needs to be more forthcoming, exporters said. Some expressed concern about the impact of GATT, saying that Egyptian negotiators should have sought more protections for their country's products. Exporters also called for the establishment of a fund for the ongoing promotion of Egyptian exports. Such a fund, according to Helal Shata, Deputy of the Exporters Division of the Egyptian Chambers of Commerce, is something exporters have requested numerous times in the past 20 years.

"Support should also be extended [by the government] when a new market is opened or an Egyptian product that faces a fierce competition abroad is being promoted," said Shata.

In the meantime, exporters stressed that Egyptian production should target specific niches following thorough studies of foreign markets.

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