Alaa Arafa, chairman of Egypt’s largest textile and clothing manufacturer and retail stores Arafa Holding, said Egypt’s industrial sector is still suffering and is in a state of crisis. He added that it needs to overcome the obstacles, asserting that the CBE’s gradual reduction of the Egyptian Pound will contribute to encouraging industry more than trade.
“CBE stopped defending the pound’s exchange rate, and that is good and must continue, as it will contribute to decreasing imports and their high cost, and will shift attention to industry,” Arafa said. “Trade in Egypt is revived more than industry because costs of importing are cheaper than those of the production process.”
He said that Egyptian industry’s most prominent crisis is the lack of energy. The government needs to quickly implement projects of investment laws in the energy field, and create an energy mix that contributes to overcoming the current crisis.
He added that the legislative environment governing economic activity and facilitating entering and exiting markets needs a comprehensive review. This would include the activation of the one-stop shop system for investors, and bankruptcy rules modification to ensure a safe exit for investors from the market. It would also ensure speedy disputes settlement to reassure local and global financial and business communities.
Regarding his company, Arafa said there are plans to penetrate several European markets on the expense of local markets in 2015. He added that the local market is beginning to inject new investments into it gradually as the situation improves. The company is looking seriously into penetrating the German, French, Turkish, Portuguese and Spanish-Portuguese markets.
The Economic Summit requires a governmental effort in order to revive confidence in the Egyptian economy as well as restore international markets confidence. This will be done through reassurances regarding the speed of entering and exiting markets and the stability of economic policies, said Arafa. He also pointed out that regaining confidence is a great challenge but the Egyptian administration is able to face it.
“We plan to establish a geographic and operational reach in order to become closer to our target sector of activities, which are luxury, formal and casual clothing,” Arafa said. “We also plan to increase production capacity in market sectors that include textile and construction of clothes and their retail and distribution selling.”
He demanded that the Egyptian administration seek to reassure investors during the Economic Summit to attract investments again to the country.
He said: “We must reassure Egyptian investors before we assure foreign ones, and we must work on creating the right investment climate. The government should shift focus to problems of energy, industry, investments and inflation”.
“I believe that the real economic reforms done by the government are very good but need quicker action, as the lack of energy is a crisis, especially in the light of the lack of foreign resources of tourism, and foreign investments for gas importing, so the government needs to overcome this crisis quickly by increasing production and searching for cheaper energy alternatives,” he said.
“Correcting the economic course will never take place without leaving the Egyptian pound free, able to express its real value in the exchange market even if it reaches EGP 14 to a dollar,” Arafa said. “This will be a sort of punishment for importers and will force them to switch to producers, turning the Egyptian economy from a producing exporter to a consuming importer.”
The monetary policy in Egypt over the past years was a crisis and is the main reason Egypt is an importing country not a producing one. Those responsible for the making of these policies need to review their way of dealing with the currency. They consumed approximately $50bn to keep the pound’s value, a policy that encourages importing and punishes producers.
