Wednesday,14 November, 2018
Current issue | Issue 1412, (4 - 10 October 2018)
Wednesday,14 November, 2018
Issue 1412, (4 - 10 October 2018)

Ahram Weekly

In need of a leap

Head of Egypt’s Engineering Exports Council Amr Abu Freikha Tells Niveen Wahish that there is more to exports than the mere product

 

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Engineering products include a wide array of goods from home appliances such as refrigerators, ovens and heaters to cars, heavy machinery and even tractors, with some 21 sub-sectors being involved in the engineering industries, Amr Abu Freikha, chair of Egypt’s Engineering Export Council explained to Al-Ahram Weekly this week.

The country sells $2.7 billion worth of engineering products abroad annually, he said. This figure may sound high if seen as around 11per cent of Egypt’s total exports, but in a global framework where some multinational companies export more than all of Egypt’s exports combined it is still quite small, he added.

“When we researched where Egypt stood among 80 exporters, we found it was in the bottom 10. If we want to move to the middle, we should at least double our exports,” Abu Freika said.

Finished goods represent around half of Egypt’s total exports. Fertilisers, textiles, ready-made garments, home appliances and wires and cables top the list of finished goods, according to 2015-16 data from the Central Bank of Egypt (CBE).

Other exports include crude oil and oil products, raw materials such as crops, and semi-finished goods such as iron and piping.

Not all Egypt’s engineering companies export. Of the 4,000 companies included in the Egyptian Chamber of Commerce engineering sector, only some 250 are members of the Exports Council, Abu Freika said. Fifteen of those account for 85 per cent of exports.

“Should any of those face problems, then the country’s overall exports will be affected,” he added.

Abu Freikha said the council had set out to change these figures and to set up new companies to export and increase the exporter base. It was doing this in addition to traditional services such as organising trade missions and taking part in exhibitions abroad.

One project is with the Confederation of British Industry (CBI), with which the council is implementing a coaching programme to help manufacturers in Egypt to export regionally to the Middle East and Africa. It is hoped that as they gain experience they will be able to compete against suppliers from Turkey and China in the European market.

Egypt’s Engineering Exports Council is an advisory board, as Abu Freikha defines it. It does not wait for the Ministry of Trade to ask for advice but takes the initiative to advise itself on changes of policies or the removal of obstacles.

The current board decided in 2015 that the council should play a role towards exporters and not only policy-makers. “We want to be not just the voice of the exporters, but also to play a role in their development,” Abu Freikha said.

While the council cannot itself improve exports, it can aim to be an enabler towards increasing them. But in order for this to happen there needs to be a total orientation towards exports, not just among manufacturers, he stressed.

One example Abu Freikha gives is of Mohamed Salah, a midfielder with the Liverpool Football Club in the UK. Salah cannot deliver alone, he said, despite his international status. “The same applies to exports: there are many factors, and the product is only one of them,” he added.

A revivified export culture is important for the companies concerned as well as to the economy as a whole, Abu Freikha said. “We can tackle certain problems but doing so will not increase exports dramatically on their own. A real increase can only come from having the whole society rethink the way it does business.”

 “We do not have a vision at the moment, though we have the will to do something when we want to,” he said, citing the example of the New Suez Canal which was completed in record time.

He is also not convinced by long-term visions that are not tangible to people. He said that the council had carried out a study on the strategies of successful exporters like India, Turkey and Morocco, and what it had found was that “countries that have succeeded as exporters have had a simple vision that is understandable to the layman.”

 India had targeted the IT sector, Turkey had wanted to join the EU, and Morocco had decided to focus on the car industry, he said.

Moreover, everyone has a role to play in promoting exports, Abu Freikha said, pointing out that for example, consumers often evaluate products by the TV programmes they watch, and this means that Turkish goods are valued because Egyptians love Turkish TV soap operas.

In Egypt, there have been some good initiatives, but they are still too individual and haphazard and are not part of a collective effort. “If Egypt wants to move a couple of positions up on the list of top exporters, it can easily contract a multinational or two to increase its exports. But what the country needs is a leap,” he explained.

“Our target is to open up new markets.” At the moment, the domestic market is too small, Abu Freikha said, because the majority of the population has limited purchasing power.

The UK, the UAE and Saudi Arabia are currently top markets for Egypt’s engineering products, and they import double-decker buses, car components, and home appliances. Engineering products are also exported to Germany, Hungary, France, Gulf Cooperation Council (GCC) members, Algeria and some markets in Africa.

Abu Freikha wants to see exports of Egyptian engineering increase 10-fold, with 40 per cent of that targeting Africa. He stressed that it was important when working with other countries to encourage their exports to Egypt to create a win-win situation.

The turmoil in the region is another factor Egyptian exports have been battling with, causing them to lose markets torn apart by war such as in Yemen and Libya. However, politics can also affect business, he said, citing the example of Turkey.

Turkey exports $200 billion worth of goods annually, while Egypt exports one tenth of that amount. The two countries export around $1.5 billion worth of goods to each other. “If we take measures against Turkey, we will be harming ourselves most of all, as its exports to Egypt are nothing compared to its total exports, while ours are a considerable portion of our total,” Abu Freikha said.

“We should not involve business with the economy. We may be at odds today but become friends tomorrow. We should use business to develop good relations,” he said.

Abu Freikha also called for greater support for industrialisation, though not by increasing import tariffs. These encourage manufacturers to be content with the local market, he said.

Egypt should use its mega-projects to encourage the setting up of new industries and the improvement of local industry, he added, pointing out that it had paid billions for equipment used in the mega-projects. Instead of importing such machinery, Egyptian policy-makers should have pushed for it to be manufactured domestically, thus initiating a new industry and creating jobs.

However, Abu Freikha acknowledged that this would have taken time and would have meant delays in the completion of projects as it can take years for industries to start production.

Egypt’s Industrial Development Strategy (IDS) for 2016-2020 targets increasing the annual industrial growth rate to eight per cent. It also wants to increase the contribution of industrial production to GDP from 18 to 21 per cent.

The IDS wants to boost the contribution of micro, small and medium-sized enterprises to GDP, and it hopes to achieve a 10 per cent annual growth rate in exports, all with the aim of providing three million job opportunities.

In order to increase exports Abu Freikha encourages setting up companies that specialise in exporting and act as agents for several exporters. This is how Japan had started, he said. Not all companies have the capacity to work in foreign markets, and this meant that they should pool their resources. 

He also called for the government to deliver the export subsidies to exporters more promptly. In recent years delays have plagued the system.

Some LE4 billion has been earmarked in the current budget for export support, an improvement on the LE2.5 billion the previous year. However, Abu Freikha has reservations about the system, and he has called for its reevaluation.

“Subsidies should be given for a certain time and later weaned off from,” he said, noting that they have not helped increase exports or the number of exporters. “Any support system must have a timeline and not be open-ended,” he concluded.

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