Rescue measures are taken to lend a hand to a staggering industrial sector, Sherine Nasr reports Just as the government was preparing to shake off the burden of heavy energy subsidies to industries, news of a faltering economy has made the notion a far-fetched dream, at least until the end of this year. Last week, Prime Minister Ahmed Nazif amended a decree issued in 2008, to gradually eliminate energy subsidies to energy-intensive industries. The amendment will help typical industries enjoy a lower rate on their energy consumption. Natural gas will be sold for $1.7 per British thermal unit (Btu) from $3 per Btu. Electricity for energy-intensive industries will be reduced to LE0.175 per kilo watt from LE0.245 while medium-energy intensity industries will buy electricity at a reduced rate of LE0.23 per kilo watt instead of LE0.33. The measure expires on 31 December 2009. The move was described by Rachid Mohamed Rachid, minister of trade and industry, as part of temporary measures designed to provide support to the industrial sector during the current economic crisis by reducing the cost of production. This latest decree represents a sharp reverse of the government's earlier attitude to shift industries into paying full market prices for energy. A rise of 61 per cent on electricity prices and 110 per cent on natural gas was planned to be imposed over a three-year period after which intense-energy industries would come to pay the actual market price for their energy consumption. These include iron, cement, aluminum and fertiliser industries which made gigantic profits by making use of the subsidies on energy. But industries will be needing all the help they can get. In fact the industrial sector in Egypt has started to feel the impact of the global recession as never before. Exports have fallen dramatically since last June. An Industrial Modernisation Centre (IMC) target to increase non-oil exports by 34 per cent in 2009 is proving unrealistic. An ambitious plan for 2009 laid out by the IMC had to be modified to accommodate the realities of the present. The IMC had made those targets based on realistic achievements by 12,000 of its client companies in 2008. According to IMC Chairman Adham Nadeem, industrial exports have been registering their lowest monthly growth in three years. "Exports are going further down, reflecting what is happening in the world," underlined Nadeem as he spoke to members of the American Chamber of Commerce in Cairo (AmCham) last week. He emphasised that at a recent furniture fair held in Birmingham, UK, exhibitors outnumbered visitors. "Some 700 furniture retailers in the UK have shut down and we are losing our market share in the furniture sector very rapidly," said Nadeem, who added that the IMC is now offering services to re- package, re-market and re-brand products to target local markets and promote local trade. More alarming still is the fact that the IMC will not be able to create, as expected, the same number of new jobs estimated at 100,000 as was the case during the previous year. "If the private sector maintains its workforce base as it is now and not one single employee is laid off, we would still be losing some 270,000 new jobs by next year. This is a scary number," warned Nadeem. As it has grown more difficult to achieve set plans, the IMC has launched a stimulus package to help these companies attain their objectives. "It is imperative to remain resilient, quick to respond and more adaptable to changes if we are to face these growing pressures," said Nadeem, who added that the IMC is offering a 50 per cent discount on its services to encourage companies to seek more services at a lower rate. "We want companies to pay half less and take double the services," he added. The IMC has also endorsed a number of measures to streamline business and simplify contracting procedures. For example, reimbursement of funds is now done in 24 hours and direct awarding is granted in five days. In line with this new attitude, a new leaflet to streamline procedures has lately been issued to inform different industries what type of service they should expect and in what time-span. "The leaflet will help industries understand what services they should receive and they can raise hell if these services are not delivered at the quality levels and in the time frame expected," said Nadeem. Greater focus has also been placed on developing small and medium-sized enterprises. "One way of benefiting this sector is to help merge them in bigger entities while working to ensure better access to finance," said Nadeem, adding that SMEs are being encouraged to get registered in the Nilex (Nile Stock exchange), the first mid and small cap market in the Middle East and North Africa region, launched in 2008. In the meantime, LE250,000 worth of private equity funds have been launched to benefit a number of SME projects with capitals ranging from LE15,000 to LE120,000. Thirty per cent of IMC clients represent 60 per cent of Egypt's total non-petroleum exports and 64 per cent of industrial workforce in Egypt. Eighteen per cent of the companies serviced by IMC are small businesses with 50 employees, 800 other companies are classified as medium-sized, while the rest are big entities with more than 200 employees.
