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Egypt's textile industry needs bottom-up approach, say experts
Published in Daily News Egypt on 24 - 04 - 2009

CAIRO: Egyptian cotton is world-renowned as one of the finest materials available for use in the manufacture of textiles. Demanded by everyone from large luxury carpet companies to the fashion houses of Europe, this famed material is right up there with the Pyramids in terms of name recognition.
But the local textile industry is about much more than marketing quality Egyptian cotton to international buyers. In fact, the country's textile sector is unique and complex, with different players operating at every level of the supply chain to make the most of the comparative advantage Egypt enjoys in the industry.
One of the country's oldest industries, the textile sector accounts for 27 percent of Egypt's industrial production, making it the second largest industry the country after processed food. The industry contributes 11 percent of manufacturing GDP and approximately 3 percent of total GDP, employing a million workers, approximately 25 percent of the country's total labor force.
The sector is also a significant exporter, with approximately $1.4 billion in annual exports, representing 24 percent of total non-oil export trade. While Egypt's main export partners have traditionally been the United States (40 percent) and the European Union (38 percent), Egypt's international textile trade has diversified greatly in recent years to include more cooperation with other Arab countries, China and Brazil.
According to Abla Abdel Latif, a professor of economics at the American University in Cairo, Egypt's textile industry is distinctive in that all stages of production from cotton cultivation to exporting are present within the country - a situation that can be an asset or a liability depending on how it is managed.
"Having the total supply chain is an asset in the sense that the elements necessary for sustaining the industry are there, so clothing and made-up textiles are at a lower risk of being deprived of needed components should the evolution of the global industry lead to such a situation.
"On the other hand, it can also easily become a liability if different segments of the chain fail to adapt and keep up with changes in world textile manufacturing, trading and tastes of consumers, she wrote in an email to Daily News Egypt.
Experts agree that coordination between the different stages of textile production is key to the development of the industry.
Karima Haggag, head of the textiles division at the National Research Center, emphasized the importance of a "bottom up approach to Egypt's textile sector, starting with cotton cultivation.
"Cotton collection is time consuming and costly, and 30-40 percent of the price is due to the expense incurred as a result of manual collection. Once the cotton is collected, the bulk of it is exported directly, and then foreign companies manufacture textiles and export them back to Egypt, where they are sold at high prices, she said.
Minister of Trade and Industry Rachid Mohamed Rachid expressed similar concerns about the export of raw cotton during a recent roundtable discussion. He emphasized the need to add value to long-staple cotton inside Egypt by forging partnerships with foreign fashion companies and improving the quality and capacity of manufacturing.
Plans are in the works for large-scale cooperation with Italian manufacturers to improve the quality of design and production of clothing inside Egypt.
Despite problems at the bottom of the production chain, Egypt's top textile factories are flourishing both locally and internationally.
Oriental Weavers is the largest machine made rug manufacturer in the world. Based in Egypt, the company produces an array of textile products ranging from towels to wall hangings and all varieties of carpets.
Yasmine Khamis, the company's research and development manager, says that 85 percent of the products at Oriental Weavers are made from long-staple cotton. These products are exported all over the world through the company's network of distributors and showrooms.
The company's massive success, continuing despite international turmoil, is due in part to its being a world trendsetter in weaving technology, an undertaking that has been supported by government programs through the Technology Development Fund.
The TDF is a government-funded program that provides funding support for Egyptian businesses, helping them to hire international experts, attend conferences and purchase technology to build capacity.
The Cairo Cotton Center, a producer of garments for several international brands, has also benefited from the support of the TDF
"Through this program we were able to hire expat professionals to help us develop different aspects of the factory, said the company's chairman, Magdy Tolba.
Tolba believes that Egypt's textile industry has a lot of potential for future growth, and says they haven't been impacted by the financial crisis. His one complaint about the industry echoes that of other players in the field: the cultivation of cotton is not practical or efficient.
Despite the continuing success of companies like Oriental Weavers, the global financial crisis has had a powerful impact on Egypt's textile industry. The year 2008 saw cotton consumption drop 40 percent, and falling prices have put pressure on enterprises at all levels of production.
To help support the industry and maintain growth, the Ministry of Trade and Industry has introduced a LE 350 million, three-year project, aimed at increasing the capacity of yarn and cotton producers and promoting local manufacture of garments through partnerships with international fashion retailers.
While measures such as this may assist the sector in the short run, AUC economics professor Abdel Latif maintains that without major structural changes, the industry is at risk of losing its competitive edge.
"The industry requires more coordination between different involved parties, more regulation of the sector's large informal component, a long-term strategy for growth, and a solution to the problem of public sector inefficiency in addition to financial support for development. If these measures are not taken, the survival of the textile industry is questionable, especially in light of global evolution of the industry, she wrote.
It is clear that the measures taken to develop the industry in coming years will have a decisive impact on the future prospects for Egypt's textile sector. The role that the global financial crisis will play in the fate of the industry, however, remains undefined.
Regardless, Egypt's unique position in the world of textiles is a guarantee of unlimited potential business growth for cotton cultivators, factory owners and exporters forging a new future for the industry.


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