Mona El-Fiqi examines how the crisis will take its toll on Egyptian exports

Crisis casualties

Egyptian exports and imports are expected to fall victim to the global economic slowdown

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Like it or not, Egyptian exports and imports are bound to be affected by the current financial turmoil. Government officials, experts and exporters have all admitted that forecasts of lower demand on the back of a shortage in liquidity will mean a drop in the volume of Egyptian exports. In the meantime, imports on which Egypt depends to provide the bulk of its local needs -- including the raw materials necessary for local industry and commodities -- will also be harmed, as producers and exporters abroad are expected to reduce their production levels through the coming period.

To try and ease the situation and identify areas where the government could help, Minister of Trade and Industry Rachid Mohamed Rachid met with representatives of Egypt's industrial and trade sectors as well as members from the banking community to discuss the potential impact of the unfolding situation on exports to the US and the EU, two of Egypt's main trade partners. "We all know that we will be impacted. The question is how much and what are the steps that we can take in order to minimise this impact. We have an advantage at the moment because we have a head-start over others who are still distracted by the banking crisis and are not yet focussing on the economic impact of the current events," he said.

The slowdown in the global economy means Egypt will not be able this year to achieve its annual target of raising the volume of non-oil exports by 35 per cent. But a change in the Egyptian exports map may help relieve the problem. Over the past few years, Egypt succeeded in attracting new trade partners, among them Arab and Asian countries. According to Minister of Investment Mahmoud Mohieddin, a few years ago Egypt's trade volume with the US and the EU represented 90 per cent of its total trade volume, but today they represent 65 per cent. This means that one third of Egypt's trade relations is with states excluding the US and EU members.

However, experts are not convinced with the government's rosy outlook. Nader Noureddin, professor of agriculture at Cairo University, asserted that Egyptian agricultural exports to the EU, estimated at $2 billion, will face a clear drop. He added that local agricultural production will also suffer. "The government is going to restructure its budget to overcome the crisis. It is expected that the budget allocated for land reclamation, 200,000 feddans annually and agricultural investments will be lower than before," Noureddin added.

On the other hand, exporters are concerned about their business, particularly because experts are predicting low global growth rate figures for 2009. Naala Alouba, an exporter and advisor to the Export Committee at the Egyptian Businessmen Association (EBA) said, "What we are facing now is a direct consequence of globalisation. We are paying the price of others' mistakes."

Alouba asserted that the volume of Egyptian exports will definitely be reduced since the majority of Egyptian exports are directed to the US and the European countries that have suffered the most harm from the financial crisis. "Our clients in these countries are expected to cut their needs," she said. To keep production at the same level, according to Alouba, producers who used to export should target the local market in order to cover the reduction in international demand.

EBA board member Khaled Hamza said no one knows what the real impact of the crisis on Egypt will be. "These are all speculations," Hamza said. However, he expects the situation to be worse for importers in terms of quantity and pricing. "The quantity of imports, which represents 70 per cent of Egypt's needs, will never be as before since the exporters we used to deal with are currently facing great financial problems. Some of them may well announce their bankruptcy," he added.

The exchange rate is another factor that is expected to have an impact on the crisis. A more expensive dollar means an equally expensive import bill, Hamza noted. He added that looking for alternative import markets, such as Arab states, may well be the way out. At any rate, an effective escape plan must be accompanied by a clampdown on bureaucratic procedures and a boost in local production.

Additional reporting Sherin Nasr