1 - 7 February 2001
Issue No.519
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Al-Ahram Weekly On-line 1 - 7 February 2001 Issue No.519 |
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Winning away from home
By Ibrahim Nafie
No other domestic issue has generated the attention accorded to Egypt's export trade. Yet in spite of the endless committees formed to promote exports Egypt's export performance has consistently failed to match its potential.
The slogan "export or die" underscores how vital it is to initiate a broader and franker examination of the causes behind the failure to stimulate export growth. Exports in the last financial year totalled $6.388 billion, compared to $4.445 billion in 1998-99 and $5.128 billion in 1997-98, figures, it should be noted, that include exports from the free zones, some of which re-enter the Egyptian market.
That this fluctuation should so closely mirror vacillations in the price of oil is not a healthy sign. Petroleum exports reached $2.273 billion last year, $1 billion in 1998-99 and $1.729 in 1997-98. Consider, too, that in 1980 exports stood at $3.050 billion, meaning that it took two decades for our export trade to double. Exactly how slow this growth rate is can best be illustrated by comparing it to that of China, South Korea, Malaysia, Tunisia and Morocco, which achieved, respectively, 977 per cent, 720 per cent, 550 per cent, 232 per cent and 225 per cent growth in export trade over the same period.
Worse yet, Ministry of Economy figures show that our non-petroleum exports, adjusted to the 1999 price of the dollar, totalled $2.179 billion in 1952, $1.589 billion in 1982 and $2.132 in 1999. That non-petroleum export trade is still lurking at 1952 levels makes it all the more imperative that we pinpoint the causes of this chronic failure to develop export trade.
Meanwhile, Egyptian imports have soared, reaching $17.861 billion in 1999-2000, registering a 268 per cent rise over two decades. The resultant trade deficit has placed enormous strains on Egypt's foreign economic relations, on the pound and on our currency reserves. According to the IMF's Direction of Trade Statistics Yearbook, Egypt's trade deficit from 1990 to 2000 reached $97.872 billion, or 46.4 per cent of the total volume of foreign trade. That Central Bank figures for the same period are slightly less does not alter the fact that the deficit has reached untenable proportions.
One reason for sluggish export growth is the absence of a viable strategy for stimulating export trade. Only through a single, clear sighted strategy can we take appropriate and realistic measures to steer production and marketing.
Equally important is the need for strictly applied quality standards on Egyptian products, whether they are destined for domestic or foreign consumption. Nothing can be more detrimental to the reputation of Egyptian exports as a whole than the failure of some products to meet the standards demanded in international markets.
Competitiveness itself is a function of both the quality of the product and its pricing. By enforcing strict quality standards local industrial and agricultural producers will be encouraged to produce high quality goods as cost-efficiently as possible, which in turn will enhance the competitiveness of the Egyptian economy as a whole and facilitate its assimilation into the international economy. This process, however, demands that we overcome attitudes long entrenched by protectionist measures. For decades local producers in both the private and public sectors have enjoyed the luxury of maintaining production costs at rates higher than their international counterparts because they were guaranteed a secure domestic market. This, in turn, has worked to dissuade them from gearing production towards export markets where, in order to compete, they would have to sell their products at prices lower than in the domestic market. With the gradual deregulation of trade in accordance with Egypt's various international commitments, Egyptian entrepreneurs and producers will no longer be able to afford to be so complacent and will have to be much more realistic in their approach to both the domestic and international markets.
In spite of Egypt's long history of industrialisation, we are still overly dependent on raw material exports, particularly petroleum, which alone accounts for 35.6 per cent of our exports, although cotton and unfinished cotton products, too, account for a significant percentage. Clearly the manufacturing base desperately needs to be invigorated, perhaps initially at least through a focus on developing manufactures for export.
Any strategy aimed at stimulating export trade must also address the rising costs of export support services, such as shipping, lading and transportation, and solve the problems associated with the export of perishables. Some injection of government finance towards upgrading the transport infrastructure, along with a reduction in tariffs, would go a long way in helping products to reach foreign markets at more competitive prices.
For too long Egyptian exporters have relied primarily on the markets made available through the government's commercial relations and not enough on the dynamics of the free market. The long term growth of export trade requires a more acute sensitivity to the dynamics of a free market and greater initiative in exploring new markets. Perhaps one solution, here, is to take advantage of the services and expertise of the giant transnational marketing firms.
Finally, the fact that the Egyptian pound has been linked to the dollar has also hampered the competitiveness of Egyptian products in European and Asian markets. The rising cost of the dollar, and hence the pound, has caused the volume of Egyptian exports to the EU to drop from $1.621 billion in 1997 to $1.237 billion in 1999. Perhaps the new currency exchange policies will prove an effective step forward in helping our exports compete more favourably in major international markets and in stimulating production at home.
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