Local industries continue to suffer the repercussions of the international financial crisis, Mona El-Fiqi reports Egypt's industries have apparently not yet recovered from the negative impacts of the financial crisis and are facing problems in both local and international markets. Official figures indicate that the growth rate of the industry sector dropped from eight per cent in fiscal year 2007/2008 to 3.7 per cent in 2008/2009. A slowdown is also clear in the flow of investments in this sector, dropping from LE42 billion in 2007/2008 to LE30 billion in 2008/2009, according to the Ministry of Economic Development. The result was a 4.7 per cent reduction in the value of non-oil exports that now stand at $14 billion. Non-oil exports had, in previous years, made huge leaps forward, increasing by 25 per cent in 2007/2008 and by 45 per in 2006/2007. Businessmen are expecting that the slowdown in industrial performance will persist during 2010 as investments in industry continue to drop to reach LE5.2 billion during the first quarter of the current fiscal year 2009/2010 compared to LE7.4 billion during the same period in 2008/2009. The major issue, according to investors, is that supply in the industrial sector exceeds demand in international markets, particularly the US and the EU. "These markets are very important markets for Egyptian exports since 75 per cent of our exports are directed to the US and the EU," said Mohamed Qassem, chairman of the World Trading Company. Qassem explained that following the crisis consumption in the US was reduced by 25 per cent, so competition among exporters became strong. Qassem said that Egyptian exporters worked hard to retain their share in American markets in such tough circumstances. To help businessmen, the government should continue to support exports through the Export Development Fund, according to Qassem. If the government cannot increase the value of this fund, at least it should keep it in its current levels, he said. The total value of non-oil exports that enjoyed financial support from the Export Development Fund, according to figures of the ministry, was $1.6 billion during the first quarter of fiscal year 2009/2010 while the financial support provided to these exports in 1458 companies was LE1.2 billion. The current support provided to Egyptian exports is between four to eight per cent of the value of total exports while in other countries such as China export support reaches 14 per cent. Qassem admitted: "Definitely, we could not continue to export without the government's support." The situation is becoming steadily worse for other businessmen, some of whom say they are thinking of closing their businesses. Ihab El-Messeri, chairman of the Customs Committee at the Federation of Egyptian Industries, and a garments exporter said: "For the first time I am thinking of closing my business, although I have been working in this sector for 58 years. Nobody can force me to continue while losing money." According to El-Messeri, Egypt is in fierce competition with countries such as China, India and Bangladesh, where labour is cheaper. El-Messeri agrees that the government should support the industrial sector, particularly textiles, to save two million workers' jobs in the sector. Experts support the business sector in its claims, arguing that the government has an important role to play in protecting local industries during difficult times. Hamdi Abdel-Azim, professor of economics at Al-Sadat Academy for Administrative Sciences, said that World Trade Organisation (WTO) rules prohibit governments from providing support to national industries to protect competition in international markets, though many countries do. "Unless the Egyptian government continues to provide different kinds of support to local industries, a lot of factories will announce their bankruptcy," Abdel-Azim said. Abdel-Azim added that the government should go on subsidising energy for factories, providing financial support to exports and providing easy- term loans through industrial banks. According to Abdel-Azim, there should be rules to regulate subsidies provided to industries, such as linking subsidies to providing new job opportunities or achieving a certain quantity of production or exports volume. Following the international financial crisis, the government took some action to help the industrial sector face the international slowdown, such as raising export financial support to reach LE3.7 billion, allocated in the government's budget for the year 2009/2010. The procedures included fixing electricity and gas prices for all factories until the end of September 2009, and pricing energy for glass, ceramic and chemical industries as intensive labour industries. The government allowed industries a grace period on payments of the 2009 instalment of the industrial lands tax and imposed some protective measures on some industries such as textiles. To improve worker productivity, the government is also expanding industrial training services. According to figures of the Ministry of Trade and Industry, there are 78,000 workers who passed training programmes in different sectors such as textiles, engineering and food industries in 2009. The government also encouraged the establishment of 12 technological centers of which three were established in 2009, one for traditional industry technology, another for improving quality and production, and the third for textiles and marketing. Reducing the fees for participation in international fairs by 50 per cent was also a step to help companies in marketing their products.
