Thursday,20 June, 2019
Current issue | Issue 1123, 22-28 November 2012-
Thursday,20 June, 2019
Issue 1123, 22-28 November 2012-

Ahram Weekly

QIZ in question

Any escalation of the situation along the border with Israel is worrying to Egyptian manufacturers operating under the framework of the Qualified Industrial Zones protocol, Mona El-Fiqi reports

Al-Ahram Weekly

Whenever there is tension with Israel, demands for an end to the Qualified Industrial Zones (QIZ) protocol signed with Israel come up. And that is what Egyptian exporters who operate under the protocol worry about. It happened before when Israel violently attacked Gaza in 2008 and it could happen again.
“I hope that the situation will not expand and will remain under control for the benefit of all parties,” explained Mohamed Kassem, chairman of the Export Council for Ready Made Garments.
Exporters believe that though the QIZ protocol was spurred by politics, Egypt should make the most of it economically.
On both political and economic levels, exporters say that existing agreements with Israel should be maintained so long as Israel abides by their terms. Kassem asserted that Egypt should respect the agreements signed with other countries, including the Camp David Peace Treaty and the QIZ protocol. But what if the situation escalates?
“Serious decisions should not be controlled by passion. I think that Egyptian officials are fully aware of their national responsibility when taking decisions,” Kassem said, pointing out that high-ranking government officials have reiterated that Egypt would respect previously signed agreements.
The QIZ agreement signed in 2004 permits the entrance of Egyptian exports to the US market free of customs duties provided that 11.7 per cent of a product’s components originate in Israel. In 2007, the percentage was reduced to 10.5 per cent.
In 2011 Egypt submitted a request to Israel to reduce the required percentage of Israeli components in products included in the QIZ agreement from 10.7 to eight per cent. Egypt is also seeking to add new zones to the initial agreement, including some areas in Upper Egypt. Kassem explained that Egypt asked to add two qualified industrial zones in Beni Sweif and Minya since Upper Egypt needs to attract new investment, to create jobs and promote exports.
But to date no decisions have been reached concerning Egypt’s request to cut the percentage or to add zones.
More than 800 Egyptian companies export to the US under the QIZ protocol. Their exports mainly include textiles, readymade garments and some processed food items. The volume of Egyptian QIZ exports to the US increased from $746 million in 2010 to $829 million in 2011 and is expected to reach $1 billion by the end of 2012, according to Kassem.
More than 80 per cent of Egyptian total exports to the US are concluded under the QIZ protocol, according to Khaled Al-Beheiri, executive manager of the Textiles Chamber at the Federation of Egyptian Industries.
Al-Beheiri agreed with Kassem that Egypt has no choice but to stick to its agreements. He said that the QIZ helps Egyptian exports to enter duty-free and then be competitive in the US market. “There is no such opportunity in other markets like Europe and Arab markets, particularly for textiles and readymade garments. It would never be easy to find alternative markets if a decision were taken to cancel the QIZ agreement.” Al-Beheiri added.
Commenting on a recent move by a Freedom and Justice Party member, the political arm of the Muslim Brotherhood, to call for the cancellation of the QIZ protocol, Al-Beheiri said: “Any decision taken should put into consideration Egypt’s general economic benefit as well as that of hundreds of companies who export under the QIZ agreement.”
Al-Beheiri said that Egyptian businessmen do not like to deal with Israeli companies but they are obliged to do so. “I am sure that if there were alternative markets, Egyptian business would refrain from dealing with Israeli businessmen,” Al-Beheiri added.

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