Issue No. 591
Economy
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20 - 26 June 2002 Issue No. 591 Economy |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
New export bill thrashed
The export promotion bill just passed by the People's Assembly falls far short of the business community's expectations. Sherine Nasr writes
Days before adjourning for the summer recess, the People's Assembly passed the export promotion law, turning a deaf ear to the business community's poignant criticism of the final draft.
Click to view caption"The law that has been passed is completely different from the draft law that was discussed and submitted by the businessmen's associations. Egypt's business community is deeply disappointed," said MP and exporter, Mounir Abdel- Nour, at a seminar organised last week by the Egyptian Centre for Economic Studies. Participants at the event discussed the pros and cons of one of the most controversial laws to be passed through parliament this session.
"This law sets a clear example of the government's inability to find serious solutions to serious problems. Its hesitation and lack of coordination requires no better evidence," he said.
The export promotion law was presented by the Ministry of Foreign Trade as a tool to boost Egyptian exports of commodities and services. "The ministry does not have a magic stick to solve all the problems facing Egyptian exports. This law is only one step in the right direction," said Sayed Abul Qumsan, first under-secretary at the Ministry of Foreign Trade. He believes a number of other measures are needed in order to achieve concrete results.
The business community is not convinced. "How can we speak of economic reform when we're taking the measures that counter any kind of real reform," Mohamed Qasim, a member of the Egyptian Exporters Association (EEA), asked.
Exporters have due cause for disappointment. During the period preceding the law's approval, businessmen and exporters were asked to submit proposals for a draft law to encourage exports based on their experience as key players in the field. "After months of discussions, we came up with a final draft that was later submitted to the Ministry of Foreign Trade. We were led to believe there was a leaning towards adopting the main issues of the draft in the proposed law," said Galal El- Zorba, head of the EEA.
One of the most crucial issues -- a proposal to consider exports a tax- free activity or, at the very least, levying a reduced tax rate on export activities -- was cancelled altogether, according to El-Zorba.
"To our astonishment, Egyptian exporters in the new economic zones have been given a five-year tax-free activity period as an incentive. Exporters in the same country should enjoy equal treatment," Qasim said.
According to Na'la Allouba, an exporter, tax exemption is a make- or-break issue. "The government has used this tool successfully many times," she said. Projects in the new industrial zones enjoy 10 years of tax exemption. The tourist sector now enjoys custom-free imports of equipment and appliances."
Allouba believes it is not a question of a lack of legislation, it is the lack of incentives that hinder the Egyptian exports sector from growing.
The new law establishes an export promotion fund to raise the competitiveness of Egyptian exports in world markets. An annual sum of LE400 million will be dedicated to upgrading the quality of exports and helping exporters enter new markets. However, the law fails to clearly define the areas of export promotion the funds will be allocated to.
According to Sultan Abu Ali, former minister of economy and professor of economics at Cairo University, export promotion needs training and rehabilitation of the workforce, participation in international trade fairs and the introduction of modern technology, to name but a few issues. "The law does not specify how much money is to be spent on each of these areas or which exporters will be entitled to make use of these funds," said Abu Ali.
A central administration at the Ministry of Finance will be set up to take charge of reimbursing exporters the customs dues paid on their imported production inputs. The General Export and Import Control Organisation (GEICO) will be entrusted with supervising the movement of exports and imports with an aim to abolishing administrative and bureaucratic obstacles that exporters frequently complain of.
Exporters are fearful that this central administration will be nothing more than a new form of bureaucracy they will have to deal with. "The Ministry of Finance is seeking more resources while the Ministry of Foreign Trade is advocating more incentives to encourage exporters. So long as this difference in vision exists within the same government, we can expect little to happen in the right direction," Abdel-Nour said.
"In Egypt, we have a tendency to solve problems through issuing new laws. Laws are issued and problems remain the same," Abu Ali said.
Abu Ali recollects the first call to push Egyptian exports in the mid- 1980s. "I still remember the motto at the time 'To export or to die.' Twenty years later, we have not exported and I hope we do not die," he said.
A comparison between the rate at which Egyptian exports have risen since the 80s and similar rates in other countries is shocking. While the increase in Egyptian exports in the period from the 80s to the 90s is nothing to be mentioned, Thailand's exports in the same period have increased by 237 per cent, the Philippine's by 58 per cent and China's by 399 per cent.
"The annual value of Egypt's manufactured goods is less than LE1.3 billion," Abu Ali said.
"Obviously, we are not doing anywhere near these progressively growing tigers. More alarming is the fact that local producers can hardly stand the fierce competition of the international companies that will soon come to control the Egyptian market," he said.
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