31 Jan. - 6 Feb. 2002
Issue No.571
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Al-Ahram Weekly Online 31 Jan. - 6 Feb. 2002 Issue No.571 |
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| Published in Cairo by AL-AHRAM established in 1875 | Current issue | Previous issue | Site map | ||
On the home front
The door will soon open to imports from all corners of the world. Sherine Nasr wonders if the "Made in Egypt" label will be strong enough to withstand the competition
I have just received a couple of dresses, a pair of shoes and some kitchen utensils from a friend in the US. The label on each item reads "Made in China." If Chinese products have managed to infiltrate the notoriously competitive American market, how hard can it be for them to do the same in Egypt? This question is timely. Within the next couple of years, several of the international agreements protecting Egyptian industry will expire (the exact date varies according to the industry), and the barriers to import will come tumbling down.
In fact, you can already find Chinese, Indonesian and Malaysian products everywhere inside Egypt, even though many are on Egypt's import ban list. Significantly, their reasonable quality and good prices have put them in demand with Egyptian consumers. For small traders exhibiting their wares on the sidewalks of downtown Cairo, the risk of getting caught with smuggled goods is outweighed by the prospect of a quick sell.
But while importers clean up, the sands of time are running low for local industry. According to Egypt's commitment as a signatory to the World Trade Organisation agreement, the doors will soon be flung wide, not only to Asian goods but to products from all over the world.
Not much, it seems, has been done to ready local industry for the coming assault of foreign competition. For example, the European Union's 250 million euro Industry Modernisation Programme, which was intended to help develop Egypt's industries ahead of trade liberalisation, was due to start in 1998. In fact it was only activated late last year and will expire in 2002.
Foreign goods have long been part of Egypt's daily life. "The most heavily consumed soft drinks, toothpastes and soaps belong to international, not Egyptian brands," says Sabri El- Shabrawi, professor of management and marketing at the American University in Cairo.
El-Shabrawy, who is also a member of the Shura Council and the chairman of the National Democratic Party's Human Resources Committee, explains that this situation was not reached overnight.
"This is the result of the lame policies we have been following since the '60s," he argues. "Protected industries eventually grow sick and incapable of competition." He explained that in the 1960s, the government dictated a "closed-door" policy that allowed a few national companies to monopolise some industries which then failed to develop. In the 1970s and 1980s, tack was changed completely and the doors were thrown wide open to every foreign product. "Society was hungry for foreign products and everything was imported. Egyptians started to look down upon their national products. Unfortunately, we have not been able to overcome this phenomenon," he claims.
As a result, measures that El-Shabrawi terms "panicky" have been resorted to in a bid to protect local industries. El-Shabrawi cites the recent tariffs imposed on imported ready-made garments as a "last-minute decision that can harm an industry rather than benefit it. The doors may be locked before foreign goods but will this make Egyptian products more competitive? I doubt it." Earlier this month, the government imposed prohibitive tariffs on imported clothes. Production inputs for local industry, such as accessories, zips and buttons, remained exempt.
The clothes-makers are unimpressed, though. "I am afraid that the [tariffs] lately imposed by the government to encourage the national industry will do us little help," declared Malak Yassin, owner of a factory for children's clothes. "The decision coincided with the dollar crisis, so, practically, we could not make use of it," she said.
She also laments the fact that even with one simple product such as buttons, Egypt does not have an advantage. Yassin explains that using locally made accessories and materials gives her very few items to choose from and this, in turn, puts her at a disadvantage. "It is the beautiful accessories, once imported from far eastern countries, that make my factory's production attractive and special," she says.
The other weakness among Egyptian industries is the failure to achieve economies of scale. "Without mass production, it is almost impossible to have a competitive price," says Yassin. And with the buying power of Egyptians suddenly so eroded by devaluation, the chance for any industry aggressively to grow ahead of trade liberalisation is slight.
In a bid to help local industries, the government is portraying the buying of Egyptian products as a national obligation. President Hosni Mubarak, speaking at the inauguration of the Cairo International Book Fair, called on Egyptians to support local industries.
"We have to encourage these industries and use their production," Mubarak said. "They are able to export to Europe and the United States. It is time for us to rid ourselves of this foreigner complex, because there is no longer any reason for us to prefer imported products over those of our national industries."
The Federation of Egyptian Industries (FEI) has lately launched the "Buy Egyptian" campaign, too. "The campaign started a month ago with the aim of encouraging not only the Egyptian consumer, but also manufacturers to use locally made products and materials" says Mustafa Wali, general manager of FEI.
"The government is facing an unpleasant situation," he continues. "Egypt's exports hardly reach $2.5 billion while our imports jumped to $16 billion in 2000, which, with relentless efforts, have been reduced, the prime minister stated, to $12 billion in 2001," he adds.
Wali believes that Egypt is nowhere close to being able to compete on an open market. "We do not manufacture cars, trains, planes, or electronics. We buy wheat, steel, and intermediate materials. We lack professional labour, marketing skills, technology, long term planning. We are stuck," Wali says.
Local industrialists agree with the president that the remedy is for Egyptians to buy local products. "To buy Egyptian products is perhaps the only way out of this dilemma," suggests Khaled Hamza, a board member of the Egyptian Businessmen's Association. "The market is slowing and buying power is getting weaker. As a result, many private enterprises have shut down."
Wali explains how Egyptian industries hope to encourage Egyptians to buy locally. "Through the media, we aim to raise the awareness of the Egyptian consumer that to buy national products is the guarantee that people will maintain their own jobs," he says. He adds, "We hope that we can eventually reactivate the market and lift the burden imposed on the government by ultimately reducing imports."
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