Thursday,14 December, 2017
Current issue | Issue 1361, (21 - 27 September 2017)
Thursday,14 December, 2017
Issue 1361, (21 - 27 September 2017)

Ahram Weekly

Moving towards a competitive economy

Egypt has embraced a radical economic reform policy that already is starting to reap dividends, writes Aisha Ghoneimy

 

Dependence on foreign investment and long-term development loans without bolstering domestic financing from competitive industries and investment will make the Egyptian economy more vulnerable to sudden external shocks that could threaten economic and social stability in a dramatic way. The main and more radical solutions for achieving sustainable economic development and catching up with the world trading system are to boost domestic industries and restructure Egyptian exports and imports in favour of increasing the former and lowering reliance on the latter along with addressing the competitiveness of Egypt’s industrial sector, particularly in quality and cost.

Despite current economic challenges, Egypt is moving at a quick pace towards a competitive economy. In this regard, it is useful to shed light on the Egyptian government’s initiatives towards fostering the quality of domestic industries in accordance with international standards, to reach a competitive position in international markets and be among the world’s top 10 economies by 2030. Competitive industrialisation has become one of the critical priorities of the Ministry of Trade and Industry, towards which it is working efficiently and in reference to the Sustainable Development Strategy 2030, which aims at achieving an annual industrial growth rate of 10 per cent by 2020. The importance of developing the industrial sector stems from its major contribution to Gross Domestic Product (GDP) by around 18 per cent, besides its linkages with other important economic sectors, such as agriculture and services, creating job opportunities especially in labour-intensive industries, transferring technology, opening channels for foreign direct investment and deepening the integration of Egyptian exports in world markets.

Among the key actions and initiatives implemented are the “Proudly Made in Egypt” campaign launched by Minister of Trade and Industry Tarek Kabil in August 2016 and that contributes to increasing the rate of industrial growth, expanding industrial investment, and reinforcing domestic industry. “Proudly Made in Egypt” aims at highlighting companies that apply quality standards accredited by Egyptian or international institutions. The aim is not only to assist in promoting the competitiveness of Egyptian exports in foreign markets, but also to take advantage of high quality Egyptian products that exceed the quality of imported products.

In addition, the ministry announced in November 2016 a five-pillar strategy for enhancing industrial development and foreign trade until 2020. The main goals include increasing annual industrial growth up to eight per cent, and the contribution of industrial product to GDP from 18 per cent to 21 per cent. The contribution of micro-, small- and medium-sized enterprises to GDP is to be enhanced, in addition to increasing the growth rate of exports to 10 per cent yearly, providing around three million productive job opportunities and achieving institutional development through good governance. The five pillars mainly focus on promoting investment and developing import substitution industries and supplying domestic demand, along with controlling imports through increasing non-oil exports, developing logistics and transportation projects, activating promotion programmes for Egyptian exports, promoting innovation, and building the capabilities and skills of labour through technical and vocational know-how provision to improve product quality.

From the various accomplishments reached by way of the industrial development strategy, more than 1,000 factories were opened, 15 industrial complexes launched for SMEs out of a targeted 22, and new executive regulations issued, in August 2017, to facilitate obtaining industrial licences and hence encourage domestic and foreign investors. In addition, new regulations facilitate SMEs specifically, exempting them from half of the usual registration fees.

On the other hand, the performance of international trade progressed due to the decline of imports by $15 billion and a surge in exports by $3 billion, narrowing the trade deficit by $18 billion. Moreover, significant steps have been taken towards enacting bilateral trade agreements that remove tariffs and non-tariffs barriers that hampered Egyptian products from reaching various markets around the globe. In that context, Egypt has consolidated trade ties with African and Asian countries and participates effectively in Arab and African regional economic integration. Furthermore, Egypt’s membership in COMESA and the establishment of a free trade area with the top three African economic blocs (COMESA, SADC and EAC) will create a wide market for Egyptian exports and investments.

In addition, Egypt has been seeking to increase its economic cooperation with BRICS countries.

It is worth mentioning that bilateral trade agreements cannot be achieved without a strong foundation of competitive industrialisation that increases demand on Egyptian products in international markets and enables competition on a larger scale.

Finally, competitive industrialisation is the engine and core of sustainable and inclusive economic development, as it leads to many positive returns on employment, sophisticated production, Egyptian exports and foreign direct investment that will steadily increase international reserves and thus boost the purchasing power of the Egyptian pound. Implementing the industrial development strategy established is thus a necessity and should be accompanied by continuous coordination between trade policy, monetary policy and fiscal policy.

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