Egypt’s industry still needs support, much work to be done by new minister

Shaimaa Al-Aees
15 Min Read

Former MP Ahmed Saleh was appointed as the new Minister of Industry and Trade — succeeding Nevine Gamea — on Saturday, with many believing that he has his work cut out for him, given that the state’s current strategy relies heavily on industrialisation.

While chairing the Industry Committee of the House of Representatives in 2015, Saleh contributed to formulating amendments to the automotive industry’s strategy, as well as working on the issuance of Industrial Development Authority Law No. 85/2018, which is the most prominent law regulating the work of the most important bodies operating in the sector.

Egyptian manufacturers and importers congratulated the former MP on taking over the ministry, wishing him success and hope in solving problems related to industry and export.

Consequently, Daily News Egypt (DNE) spoke to a number of stakeholders in manufacturing and import to learn more about the challenges and potentials of this vital sector, along with communicating their demands and suggestions to reconsider some of the measures that hinder industrialisation.

The shareholders assured that despite the problems and challenges that no factory is free from, the reality is that Egypt has an industrial fortress that cannot be underestimated, possessing knowledge, experience, and capabilities despite their simplicity in many cases. It is also able to compete and provide products of the highest quality if the necessary environment for investment in Egypt is provided.

However, the increase in exchange rate and lack of economic stability makes it difficult for Egyptian companies and factories to produce on a regular basis and to abide by their export contracts, which threatens their ability to compete in the foreign market.

The Trade Ministry’s decision to approve ACID numbers

Amr Al-Samdouni — Secretary of the International Transportation and Logistics Services Division at the Cairo Chamber of Commerce — revealed that the new minister is required to reconsider and study four important files — namely, increasing exports, providing industrial lands, issuing Advanced Cargo Identification (ACID) numbers from the ministry before registration on the Egyptian customs platform NAFEZA, and the publication of customs clauses approved by the government to accommodate the country’s import needs of raw materials and production requirements.

Al-Samdouni explained that the most important file that the new minister should look into is export, given its importance as a source of foreign exchange for the Egyptian economy. He also said that the ACID system should be reconsidered due to the delays it causes to the import process.

Similarly, Matta Beshay — the Head of the Internal Trade Committee of the Importers Division of the Federation of Egyptian Chambers of Commerce (FEDCOC) — agreed with Al-Samdouni on reconsidering the new decision of the Ministry of Trade and Industry to not generating an ACID before getting the ministry’s approval to import any goods.

Beshay commented that this decision will put more delays and pressure on the import process and hinder the businesses of importers, which in turn will lead to increases in the prices of some products in the local market due to their scarcity.

He further noted that healthy economies should depend on fair competition between merchants in providing goods and products in affordable prices that suit all segments of clients.

Reopening documentary credits for factories

The Central Bank of Egypt (CBE) suspended documentary credits last March to stop dealing with documentary collections in import operations. Documentary credits were the result of transactions between importers and exporters’ banks, provided that the banks in both parties’ countries were the link to complete the entire import process.

Beshay said that importers in the Egyptian market are currently suffering and that their stock is nearly exhausted.

He also said that the president’s decision to exclude production requirements and raw materials from procedures were recently applied to the import process, which contributed to the spread of local goods and saving the local industry.

However, there is a quick need for stopping the work of documentary credits and returning documentary collections in importing raw materials and production requirements for the agricultural and industrial sectors, according to Al-Samdouni.

“I would also like to highlight that there is a need to support productive sectors in light of the lack of production requirements to prevent high inflation rates as a result of the imbalance between supply and demand with the inability of the owners of companies and factories to continue to pay dues and meet their financial obligations. This causes non-compliance with supply contracts and, consequently, it affects export earnings and loss of export markets, thereby decreasing foreign exchange earnings,” he said.

Providing hard currency for importers, subsidising customs

Beshay explained that the customs USD rose to EGP 19.19, causing significant increases in varying proportions on the prices of imported goods, noting that the customs USD expresses the price of the USD against the EGP that customs authorities use to determine the value of imported goods in order to calculate owed duties.

He elaborated that after increasing the customs USD, customs have increased by 30% since March.

Beshay called for subsidising the customs USD exchange rate instead of its current value at EGP 19.19 to EGP 16 or EGP 17 to ease the financial pressure on businesses.

He further suggested that hard currency be accepted from importers with official receipts from exchanges, while at the same time controlling the exchange market to prevent black market USD from being traded in order to quickly open documentary credits for imports and to quickly release goods in ports.

Likewise, Chairperson of the Engineering Export Council of Egypt (EEC) Sherif Al-Sayyad stated that providing raw materials, reducing imports, and saving hard currency are the most significant challenges facing engineering industries.

He added that most engineering industries do not depend on 100% local components, but part of their manufacture requires products and raw materials from abroad, which leads to a reduction in exports due to the shortage in raw materials.

“We urgently need to give the green light to banks to acquire raw materials and provide them to exporting factories to fulfil their obligations with international companies and factories and preserve markets, because opening new markets is difficult under these circumstances. It is important to deepen the strategic local product through cooperation with foreign counterparts in opening factories to supply the local market with its needs,” Al-Sayyad said.

“There are challenges still facing companies and exporters, and this has led to a reduction in investments and employment, and the greater fear that some companies will be forced to halt their businesses and investments in Egypt.”

Providing industrial lands connected with services

Moving on, Al-Samdouni said that the industrial land file has witnessed some improvements over the past period, namely efforts in resolving entanglements between concerned authorities, but it was not completed to the extent that allows solving the problem of land shortages for manufacturers.

Fawzi Abdel Galil — Deputy Head of the Small Industries Development Committee in the Chamber of Engineering Industries at the Federation of Industries — said that Egypt has many industrial capabilities, including geographical location and available human resources.

Abdel Galil also said that the presidential directives to deepen local industry, especially in providing industrial lands and overcoming obstacles in front of the investor, would bear fruit soon.

He stressed that SMEs are the engine of growth for any economy, as they absorb a large number of manpower, as well as feed large industries and provide them with production inputs.

Allow storing imported cargos and not diverting them to cast-offs

Ahmed Al-Malwani — Head of the Foreign Trade Committee of the General Division of Importers — demanded that imported cargos that have not been opened for credit be allowed to be stored in warehouses and foreign deposits in order to reduce expenses and fines on importers.

He explained that importers bear heavy financial burdens as a result of the delay in releasing the goods for long periods of time due to failure in acquiring documentary credits, as well as allowing the extension of the periods of time stipulated in the Customs Law to transfer abandoned goods to cast-offs.

He further suggested addressing the CBE to appoint representatives to respond to inquiries and clarify the vision for importers so that the matter would not be left to personal judgments.

A comprehensive industry strategy is required

Mohamed Hanno — Chairperson of the Alexandria Businessmen Association — said that industry development measures need some time to bear fruit, but as for solving the problems it faces, we are still waiting for various authorities to implement the president’s directives to facilitate all procedures.

He called for a comprehensive industry strategy that identifies priorities and target areas based on strengths and competitive advantage.

A strategy is required to re-engineer working methods of regulatory bodies and the bodies issuing licenses and approvals to achieve transparency, speed, and ease of procedures while setting standards to measure the performance of these bodies.

“There is some improvement in the import of raw materials and spare parts, but the rate is still less than required,” he commented.

Unifying legislation and procedures for the registration of nutritional supplements

Mohamed Anwar — Chairperson of supplements maker Organix and Member of the Chamber of Food Industries at Federation of Egyptian Industries — said that there is a boom in the food and nutritional supplement industry.

He added that the industry has especially flourished after the outbreak of the coronavirus pandemic.

A large part of this industry is promoted in Egypt and is well regulated, but there are challenges facing it nonetheless, the most important of which are it inputs, which are mostly imported from outside of Egypt.

There is another challenge, which is related to the process of registering nutritional supplements, and some of them need a year to be registered, which must be greatly shortened to two or three months, according to Anwar.

For this sector, President Al-Sisi’s directives were a bit different, especially with regard to facilitating the process of importing raw materials and excluding them from the clause of transferring documentary credits. However, some machines and equipment are not considered by the CBE as production requirements. This poses an obstacle to the industry because it does not constitute a priority for the CBE, which halts production.

He called for unifying legislation and procedures for the registration of nutritional supplements, as well as opening the doors for export.

Providing investors in medical industries advantages like others

Head of the Federation of Egyptian Industries’ Private Healthcare Providers Division Alaa Abdel Meguid pointed out that there are a number of difficulties facing investment in the sector, the first of which is the inability of investors to dispose of medical projects by selling or acquiring them as a result of the Minister of Health and Population’s decision to suspend these transactions until ministerial approval is given, which has not happened in a year and a half.

Moreover, there is difficulty in obtaining licenses for health institutions as a result of the multiplicity of approval authorities — namely the ministry, the Egyptian Medical Syndicate, and the Research and Building Centre.

Consequently, a one-stop shop system must be implemented, and the time period for obtaining the license should be limited, Abdel Meguid added.

He highlighted that investors in medical industries do not any of the advantages their counterparts in other industries do, such as acquiring land at a reduced price, temporary tax exemption, and lower interest rates on loans.

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