Rachid says Egypt may see 6 pct growth, warns of difficult year

Annelle Sheline
6 Min Read

CAIRO: Although Minister of Trade and Industry Rachid Mohamed Rachid is “hoping that by the end of [2010] we’ll have the momentum for 6 percent growth in Egypt – partially driven by a targeted 10 percent increase in exports – he warns that this will be a difficult year, as “all the factors that came clear at the end of last year will persist.

Namely, demand from Egypt’s traditional trading partners, the US and EU, remains low, as unemployment hovers for both at 10 percent. Efforts to liberalize the export of services to the EU and expand the export of agricultural products are currently under negotiation. The upcoming implementation of reduced tariffs will counterbalance decreased European trade, and likely boost demand for Egyptian car components and assembly.

He stated that Egypt is considering a request from Israel and the US for additional Qualified Industrial Zones (QIZ) in Upper Egypt, as well as expansion in the range of products manufactured to include food, chemicals and electronics.

Rachid highlighted alternative trading partners, citing upcoming meetings with the GCC to negotiate a customs union, a potential agreement to expand the COMESA agreement to include countries in southern Africa, and strengthened ties with South America. He also stated that negotiations for a trade agreement with Singapore “should be concluded before the end of the year.

Asked about the possibility of China replacing Egypt’s former trade partners, Rachid pointed out that China remains an importer, and that considerable time will elapse before Egyptian exports to China reach economically significant levels.

Internal trade, therefore, remains a priority. Rachid stated, “local market activity is quite positive, especially in the area of construction.[that has an] impact on consumption, employment and manufacturing.

Still, Egypt’s reliance on income from abroad, whether Suez Canal revenues, export, remittances or foreign investment, prevents it from fully enjoying relative financial stability and high internal demand.

Although Investment Minister Mohieldin has set the goal for foreign direct investment (FDI) at $10 billion, given 2010’s relatively pessimistic outlook for all sectors and foreign investment in particular, Rachid acknowledged possible additional stimulus measures.

However, he clarified that all funds will be included in the state budget, not added afterwards. Therefore, the summer’s new budget may allocate higher than average spending for infrastructure and industry, but it would not likely come in the form of a “stimulus package per se.

One avenue of governmental support for industry will target cement manufacture, with either eight or 12 licenses granted for new factories. Rachid gave the cement output target as 16 to 18 million tons, therefore the number of licenses issued will depend on the capacity of the factories proposed; “we would like to see what the companies prefer, he said.

Rachid acknowledged that four of the 14 cement factory licenses issued in 2007 were revoked due to lack of progress on construction and that the issuance of these new licenses comes two years ahead of schedule due to higher than the expected 8 to 10 percent increase in demand. However, he did call 2009’s unexpected 15 percent growth in Egypt’s construction sector “exceptional, and does not expect 2010 to be quite as strong.

Addressing allegations that Turkish steel manufacturers are behaving “contrary to the spirit of free trade by dumping cheap steel in the market, Rachid stressed Egypt’s right to investigate the situation in order to ascertain that fair trade persists. Acknowledging that the price of steel has fallen from LE 8,000 to less than LE 3,000 per ton, he called such price contests “good, adding, “But we want fair competition.

Agricultural manufacture, such as canning and food processing, is also on the industrial agenda. “The project is ready, Rachid affirmed, “but delayed by the allocation of land. Plans to allocate 500 to 5,000 feddan plots of irrigated land to foreign companies to lease for agricultural manufacture await specifics on the exact locations.

“Our intention is not to create a process that will increase prices of land, [that would cause Egypt to] lose competitiveness, Rachid intoned.

The minister also addressed his comments on CO2 taxes, raised at the recent WTO conference in Davos.

“I did not criticize the tax. My biggest worry is that the border agreements with customs and taxes. could be tools for protectionism. He explained that Egypt has made CO2 reduction a priority, aiming to reduce emissions by 25 percent by 2020.

He is concerned however, that the developed nations responsible for the bulk of emissions will take “unilateral decisions imposing taxes on ‘dirty’ products, unfairly burdening developing economies who lack eco-friendly technologies and the resources needed to procure them.

“Give us more time and share the technologies, is the message Rachid sends to the developed countries who “have been polluting for 200 years.

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