Last week's reductions on customs tariffs might be just the beginning of a series of comprehensive reforms, reports Mona El Fiqi Foreign Trade and Industry Minister Rashid Mohamed Rashid announced that last week's customs tariff reduction was just the first step in a government plan to bolster trust in the economy. The plan includes customs and tax reforms, as well as financial sector reforms, with an overall aim towards eliminating bureaucratic obstacles, and inducing decentralisation and legislative reform. Meeting with members of the American Chamber of Commerce in Egypt, Rashid said the recent decree did not just mean a drastic cut in customs duties; it also mandated a simplification of procedures. Thus not only was the average customs duty decreased from 14 to 9 per cent, the list of items susceptible to tariffs was also consolidated from 13,000 to 6,000 to facilitate customs procedures. The new decree has also adjusted what it called "distortions" on the customs' duties assigned to some 500 items, including raw materials, chemical components and production inputs. "By applying the new tariffs, the Egyptian customs system [has been brought] in accordance with international customs regulations for the first time," Rashid said. The new customs duties range between 2 and 40 per cent, with the raw material and production inputs enjoying the lower range, and finished products being near the ceiling. In an attempt to facilitate customs procedures, the decree also cut the number of tariff bands from 27 to six, and canceled all customs services fees, which had ranged between one and four per cent. The IT sector, meanwhile, will be enjoying a complete exemption from customs duties on the imports of its production inputs -- raw materials and spare parts -- in an attempt to both promote the sector and meet Egypt's commitments to a WTO Information Technology agreement. The customs reforms also aim at promoting industrial sectors like papers, textiles, furniture, food products and pharmaceuticals, with a goal towards catalysing a drastic rise in Egyptian exports. Economic and financial expert Doha Abdel-Hameed applauded the recent moves, saying they were "a step on the right track, since they will raise the competitiveness of Egyptian products, encourage investment flow to the country, and lead to more human resources development." Raising export levels is a major government priority, Rashid said, since doing so would have a direct positive impact on people's life. It would increase per capita income, and help create more job opportunities. Currently, exports represent only four per cent of Egypt's total industrial production. According to Rashid, Egypt's $8 billion worth of exports in 2003 are very moderate compared to Turkey, which has managed to raise its exports from $48 billion in 2002 to $59 billion in 2003 Na'la Aluba, chairman of the Egyptian Businessmen Association's (EBA) exports committee, welcomed the customs reform move, since it had been one of exporters' most fervent demands. Egyptian exports have not been able to penetrate international markets, Aluba said, because of their higher production costs. At the American Chamber, Rashid said the real challenge was in making products competitive. Speaking to Al-Ahram Weekly, Abdel- Hameed agreed, saying it was about time that the government stopped "shielding the production sector. Egypt has to open it up to cope with the global economy; otherwise [we] will be left behind. "Those products which are unsustainable and unprofitable will be eliminated," Abdel Hameed added, predicting that the industrial sectors that might be negatively affected by the reduction in customs duties would probably see a sudden increase of mergers in the near future. Driving industry towards producing high added value exports capable of penetrating new markets was at the very top of his ministry's agenda, Rashid said. The plan includes revolutionising the business environment, developing industrial sector strategies, supporting and promoting exports, re- engineering the Exports Development Fund, and modernising the industrial sector. Maximising the potential benefits of economic agreements, enhancing the contribution of human resources, mobilising financial resources, and building Egypt's image would also be significant factors in the quest to raise exports and attract new investments, Rashid said. In this vein, the minister said the government does not intend to continue providing industry with additional tax exemptions, since too much protection is not good for producers. "We have to give a fair chance to all producers," he said. Although reducing customs duties would help attract more foreign direct investment in industrial projects, the minister emphasised that raising the awareness of existing investment opportunities in Egypt was also very important. Rashid said people needed to know that Egypt was open for business, and that the government was going to tackle things in different ways that were more logical and simple. He said it was essential that the government work as one team moving in one direction with a great deal of transparency.
