Stalled in troubled waters

How will Egyptian exporters cope with the aftermath of 11 September? Mona El-Fiqi finds that the war on terrorism has dealt another blow to Egypt's economy
Egyptian exports, which were enjoying an encouraging period of steady improvement over the last two years, have been hit hard by political instabilities following the 11 September terrorist attacks in the US. Exports, along with tourism, the airline industry and the Suez Canal, are all sectors that have been severely affected by the attack and the subsequent war in Afghanistan.
Exports increased from $4.5 billion in 1998 to $7 billion in 2000, but hopes that this figure could reach $10 billion in the coming years were shattered by the September events. Exporters say that there has been a clear drop in demand, particularly in the US, for Egyptian goods in the international market and it is expected that export figures will drop by 10 to 15 per cent.
Exports to the US represent 11 per cent of Egypt's total exports and the US is Egypt's second-largest trading partner after the European Union. Burt exporters say that some US importers have cancelled their contracts and, in some cases, shipments have been refused and returned to Egypt. The result is that Egypt is fast losing one of its most important markets, and it does not appear that this trend will abate for at least another year.
Helal Sheta, deputy chairman of the exporters division at the Federation of Egyptian Chambers of Commerce, told Al-Ahram Weekly that a reduction of US demand for Egyptian products was already expected due to the recession in America, but the attacks have taken this contraction beyond any expectations. "Some export deals with the US have been cancelled and others have been postponed," Sheta said.
Sheta suggested that the problem runs deeper than edgy importers. He said he believed that even if the door was re-opened to Egyptian exports, it will not be easy to overcome resentment toward Arab countries among American consumers. Sheta says that Americans are so shell- shocked by the attacks that "they might refrain from buying a product made in an Arab or a Muslim country."
Despite this stumbling-block, Sheta insists that the only hope for the Egyptian export industry with regard to the US market is to accelerate concluding a trade agreement between Egypt and the US. Under an existing agreement, Egyptian exports to the US are subject to tariffs and quotas. Egypt faces quotas on 18 textile products, including cotton yarn, cloth and various ready- made garments, especially T-shirts and cotton blouses. But textile exports have been most affected by current events.
Echoing Sheta's grave predictions, Ehab El- Messiri, secretary-general of the Egyptian Garments Exporters Association, told the Weekly that any dream of raising export figures vanished with the advent of the war in Afghanistan. He said that the export of garments, which reached LE1.2 billion in 2000, will probably drop by as much as 50 per cent.
El-Messiri explained that importers are loath to negotiate new contracts and some are nervous about coming to Egypt to conclude deals. Many importers are simply worried that they will not receive their goods on time due to unforeseen circumstances. The result is that exporters of ready- made clothes who mainly deal with the US are afraid that they will be out of work once their current contracts are up. El-Messiri says that soon after the attacks he was asked to decrease the price of a recent deal with a US importer by 10 per cent. "Even though this will mean a loss for me, I preferred to keep the client's business and the factory working," said El- Messiri.
Nagi El-Fayoumi, executive director of the Egyptian Exporters Association (Expolink), said that exporters have to find new markets and to decrease their prices. Even if they lose money, he reasoned, it is better than losing buyers. El-Fayoumi said that the government would also have to provide some financial assistance to ease the burden on exporters and enable them to compete in the international market.
Exporters complain that their goods have become expensive, meaning they are fighting a losing battle in the international market. One of the key problems is that prices have jumped an almost 50 per cent rise in insurance premiums on ships destined for countries classified by international maritime reinsurance companies as "war zones." Egypt is among the Arab countries that fall into this category, but El- Fayoumi is quick to point out that Israel is not: "It is not fair that Egyptian exporters pay 10 times what Israeli exporters are paying for their shipments."
In response to exporters' requests to find a solution to this problem, Na'ela Allouba, chairman of the exporters committee at the Egyptian Businessmen's Association, said that the government is currently negotiating with the reinsurance companies in London to reduce the fees. But Alouba is clearly disheartened: "We succeeded in opening new markets for our agricultural exports in Europe and US, but all was lost in a split-second because of the attack and its consequences." Alouba ad ded that the problem will become even more threatening unless the war is soon brought to an end and international markets begin to open up once more.
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