Time will judge the soundness of the industrial development strategy announced this week, reports Niveen Wahish The Industrial Modernisation Centre (IMC) this week announced a national strategy for industrial development. The strategy, which provides a work plan up to 2025, seeks to enable Egyptian industry to improve its performance in the increasingly open local, and highly competitive global, economy. In the next six years the plan targets growth rates of six to seven per cent, leading to the creation of 4.5 million new jobs. An estimated 640,000 people enter the labour market each year, though currently the formal economy is able to absorb only 360,000 to 380,000. The Economic Research Forum (ERF), commissioned by IMC to devise the strategy, has fully costed the programme. Presenting his findings Samir Radwan, executive director of ERF, underlined that to be successful the strategy requires an increase in investment in the industrial sector to LE45 billion by 2011, and LE2.29 trillion by 2025. Exports would need to reach LE42 billion by 2011, increasing to LE2.91 trillion by 2025. The ambitious strategy seeks to engineer a gradual shift from resource-based to medium and high-tech industry, making Egypt a pioneer exporter in the Middle East and North Africa of medium-tech based products. Radwan outlines a number of sectors in which Egypt currently enjoys a competitive advantage, including textiles and clothing, engineering, food products and furniture. Improvements in quality, though, are necessary across all areas if these industries are going to capitalise on their export potential. He also identifies several medium-tech areas in which Egypt could carve a niche for itself, including labour intensive consumer electronics, automotive components and biotechnology. All of these, he stresses, will require substantial investment in human resources and technology. The strategy calls for major initiatives to build local capacities so that entrants to the job market are in possession of the skills employers seek. It also demands substantial improvements in the way the industrial sector is financed, calling for venture capital funds to be set up, bankruptcy procedures to be revised and closer coordination between the banking and industrial sectors. In the wake of loan defaults banks remain reluctant to invest in industrial projects. Radwan also calls for cheap industrial parks to be set up provided with all necessary infrastructure. Alongside building local capacities the strategy also calls for greater integration into the global market through better promoting Egyptian exports, improving their price and quality and boosting their technological content. And to monitor and follow up on the strategy Radwan believes an industrial policy unit needs to be created. Such an ambitious strategy does not come cheap. Rachid Mohamed Rachid, minister of foreign trade and industry, said the government has to be willing to provide land and invest in human resource development as well as provide support to nascent export industries until they are able to stand alone. But he believes the investment worthwhile: not only will it result in higher growth rates and new jobs but it will eventually generate more tax income, from both companies and individuals. Rachid points out that since Ahmed Nazif's cabinet took office more than a year ago the government has begun to address some of the questions highlighted in the strategy. Some 837 new factories have been set up in the past 12 months, representing LE6.2 billion worth of investment and creating 45,000 new jobs. An additional 339 existing factories have been expanded, representing LE5.2 billion of investment and creating 52,000 new jobs. Galal El-Zorba, head of the Federation of Egyptian Industries, supports the strategy. In the 1960s and 1970s, says El-Zorba, industries enjoyed the protection of high customs tariffs as well as non-tariff barriers. "But in today's global economy," he says, "industrial growth has to be export-driven. The local market is not enough to support it." But before the strategy can be implemented, says El-Zorba, problems such as a lack of financing and expensive land remain to be solved.
