No more help
An official decision to halt added financial support for the export sector depresses exporters, Mona El-Fiqi
Last week, Rachid Mohamed Rachid, minister of trade and industry, announced that starting this month, the government will no longer be providing additional financial support to the export sector. The stated reason is to give the government a chance to support other industrial sectors. The extra export support afforded represents a heavy burden on the government's budget.
The additional export support has been provided since January 2009 to lighten the negative impact of the international financial crisis and maintain Egypt's share in international markets. According to figures of the Ministry of Trade and Industry, the exports support programme provided in 2008/2009 by the Exports Development Fund cost an estimated LE4.2 billion and was received by 1830 companies in 15 different exporting sectors, including agricultural products, ready-made clothes, textiles, food industries and engineering.
Rachid explained that the financial support provided to exporters achieved its aim since it helped them to raise non-oil export figures and succeeded in keeping labour employed and in creating new job opportunities.
According to a report received by Rachid, evaluating the export support programme and its beneficiaries during the fiscal year 2008/2009, the total value of non-oil exports reached $6.5 billion, an increase of 62 per cent compared to 2007/2008.
Mohamed Ragi, executive manager of the Export Development Fund, said that agricultural products achieved the highest value of non-oil exports during 2008/2009, estimated at $1.5 billion. The ready-made garments export sector stood in second position, achieving $1.4 billion in total exports, representing 22 per cent of total exports. The number of companies that received support in this sector was 268. They received LE549 million in financial support.
Despite halting extra financial support, Rachid asserted that the government is committed to continue supporting the export sector through its usual programmes provided by the Export Development Fund. Government export support began six years ago across nine programmes. Currently there are 27 programmes.
Rachid explained that during the coming period financial support for the exports sector would be provided according to labour numbers involved and conditioned on providing added value to local industry.
The government's move to cease additional support has disappointed exporters. Mohamed Qassem, an exporter of ready- made clothes and chairman of the World Trading Company, explained that the decision is premature, particularly when compared to export support programmes provided in competing countries, such as China and India. Qassem asserts that the extra export support programme helped exporters to sell their products at very competitive prices -- and hence keep market share -- since the additional support was provided in cash according to the export's total value.
Exporters said that the decision to end the programme of additional support would have a negative impact on their business since they had already signed contracts for the coming six months assuming that the extra financial support would be available.
Further, Qassem called for more transparency in economic decisions, underlining that would have been better had the government announced its intentions as early as possible, rather than at the last minute.
As for future expectations, exporters say that indicators show that the impact of the international crisis will continue at least through the second half of 2010. The result, according to Qassem, is that the exports sector would be worst affected since it is more difficult to keep a share in a shrinking market than to keep it in an increasing market.
Exporters decided to present a memo to the Ministry of Trade and Industry lamenting the government's decision to halt additional support.