Up in arms
Exporters are unhappy with the government's latest decision to force them to relinquish their foreign currency holdings, reports Mona El-Fiqi
In an attempt to rectify a foreign currency shortage that has plagued the market since the floatation of the pound last January, Prime Minister Atef Ebeid issued a decree obliging both public and private sector companies to relinquish 75 per cent of their foreign currency earnings to banks at the official exchange rate set by the Central Bank of Egypt (CBE).
The decree, which will be applied retroactively from 1 January 2003, stipulates that foreign currency earners will have the right to keep 25 per cent of their foreign currency revenues in order to meet their needs.
The Ministry of Foreign Trade will be in charge of registering businesses that earn in foreign exchange. It will also calculate the portion of their revenues which should be handed in to banks seven days after being received. The Customs Authority will be responsible for registering export data and informing the General Authority of Export and Import Control.
According to a government statement, the new decision is expected to lead to a flow of $8 billion into the banking system.
The decision has made it necessary for Minister of Foreign Trade Youssef Boutros Ghali to make some amendments to the Export Promotion Law to fit the new regulations.
But government justifications for the decision seemed to fall on deaf ears. For exporters, this was a decision that essentially contradicts existing laws and will complicate export procedures, putting additional pressure on their businesses.
Helal Sheta, deputy chairman of the exporters division at the Egyptian Federation for Chambers of Commerce, said that the new decree contradicts Law 38 of 1994 that regulates foreign currency activities in Egypt.
Sheta explained that the law gives citizens the right to keep their foreign currency revenues or exchange them at banks and authorised companies. It also gives foreign currency earners the right to transfer their revenues to any bank abroad through legal channels.
"All this will now be prohibited by the new decision," said Sheta.
Exporters are also wary. "We lost confidence in banks when they refrained from opening letters of credit after the pound's floatation in January," said an exporter who preferred to remain anonymous.
"Why should I be forced to convert 75 per cent of my earnings at the official rate, when in fact, I use nearly 50 per cent of my dollar income to imports raw materials and other production inputs?" asked one angry businessman.
Exporters are also angry that failure to comply with the decision should be punished by the cancellation of their export licence. "It seems that the government completely forgets the thousands of labourers who work in these companies," said one garments exporter.
Moreover, exporters say it is unclear to them exactly why the decision is retroactive.
"Why would the government apply the new regulations from 1 January when the pound was floated on 29 January?" asked one exporter. "It would have been better if the government had imposed stricter penalties on foreign currency dealers on the black market," he added.
