Thursday,23 November, 2017
Current issue | Issue 1160, (15 - 21 August 2013)
Thursday,23 November, 2017
Issue 1160, (15 - 21 August 2013)

Ahram Weekly

Advantages of devaluation

The fall in value of the Egyptian pound has meant a pat on the back for the country’s exports, writes Hayat Yehia

Al-Ahram Weekly

With tourism revenues and foreign direct investment reduced due to post-revolutionary turmoil in Egypt and political bickering, news that the country’s exports had recorded a double digit hike during the first half of 2013 was much welcomed by commentators.

In the first two quarters of 2013, Egypt’s non-oil exports totalled LE79.3 billion, an increase of 17 per cent over the same period a year earlier. Moreover, total non-oil exports reached LE11.9 billion in the month of June 2013, the latest available figure, up by 21 per cent from their level in June 2012, according to Mounir Fakhri Abdel-Nour, the minister of industry and foreign trade.

The political instability that worsened with the election of ousted former president Mohamed Morsi in the summer of last year and was accompanied by violence, a lack of security and fuel shortages stripped exports of a lot of their strength to record a meagre two per cent growth in 2012.            

According to the State Information Service, Egypt’s non-oil exports rose by 18.5 per cent to LE130.1 billion in 2011.

In 2013, oil exports, which account for about a fifth of the overall figure, declined sharply as Egypt cut back on natural gas shipments, directing supplies to the domestic market instead to avoid power shortages.

The Arab countries were the largest importers of Egypt’s non-oil products, buying a total of LE33.4 billion this year, up from LE26.9 billion the year before. Saudi Arabia took almost 32 per cent of this sum, making it the largest single Arab importer of Egyptian products.

Hani Genena, chief researcher at Pharos Investments, explained that following the Arab Spring revolutions, markets had experienced a drop in most countries in the region, but had since rebounded. “Even the Libyan market is starting to demand more Egyptian exports and labour,” he said.

Egypt’s exports to Libya dropped earlier in the year because of security concerns and the repeated closure of the borders.

The European Union was the second biggest importer of Egyptian non-oil products, importing a total of LE20.7 billion’s worth of products in the first two quarters of 2013, a rise of 16 per cent on last year’s levels.

There have also been signs that some Egyptian exporters are starting to tap fast-growing demand in markets beyond Europe and the Arab world, their traditional focuses.

Non-oil exports to non-Arab African countries surged 28 per cent from a year earlier to LE4.85 billion in the first five months of this year, the devaluation of the Egyptian pound, caused among other things by the depletion of currency reserves, being one of the reasons for the extraordinary performance of Egyptian exports.

The pound has fallen nearly 10 per cent against the US dollar and 12 per cent against the euro since the beginning of the year, thus making Egyptian exports cheaper to importers, Genena commented.

Another reason for the boost in exports is that the members of Egypt’s various export promotion councils have been touring the world visiting fairs and talking to importers in other countries over recent months, and it seems that their efforts have now paid off.

Mohamed Kassem, chairman of the Egyptian Garments Export Council (EGEC), said that exports were expected to rise further by the end of the year. Contracts being signed at present would go into effect six months or so later, he said, and so the devaluation of the pound was likely to continue to help the economy for the rest of the year.

Kassem said that one of the main reasons for the growth in exports was improved promotional techniques. EGEC officials had travelled repeatedly in the first half of 2013, he said, to the US in January and April and to Italy, Germany and Spain since then.

 The EGEC was preparing another promotional visit to the US in the second half of September 2013, he added.

“We pay great attention to the US, which receives 80 per cent of the world’s garment imports, meaning that opportunities there are the highest. However, Europe is also an important market for Egyptian products,” Kassem said.

Ali Eissa, chairman of the Agricultural Products Export Council (APEC), agreed that better promotion had helped Egypt’s exports. “The APEC has gone to fairs and met with importers in various countries, and now we are starting to reap the fruits of this work,” Eissa said.

Egyptian agricultural exports increased by 38 per cent from September 2012 to reach 2.9 million tonnes in June 2013. In monetary terms, agricultural exports went up from LE8.5 billion to LE12.7 billion in the same period.

Good weather in Egypt, as opposed to the unfavourable climate in the north of the Mediterranean, has helped bring about this result. As Europe lost many of its crops to a chill wave, it had to buy more Egyptian citrus fruits, potatoes, grapes, onions, pomegranates, and strawberries than it usually does.

The export of potatoes alone rose from 293,000 tonnes to 417,000 tonnes in the past three-quarters.

“We are doing better with packaging, using sophisticated technology that has spared us the rejections we sometimes used to encounter in the past. The quality of Egyptian packaging now matches that of the most advanced countries,” Eissa said.

Eissa predicted that the exports curve would keep going upwards, backed by a devalued pound, though probably at a slower pace to reach a 15 per cent hike by the end of the year.

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