The Textile And Clothing Industry in Egypt - August 2004
A comprehensive study of the latest developments in the textiles and clothing industry in Egypt in the context of fundamental global changes.
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Global trade in Textiles and Clothing (TC) will be undergoing a fundamental change after the ending of the Agreement on Textiles and Clothing (ATC) in 2005, when the sector becomes fully integrated into the WTO and all quotas are phased out. This signifies a new form of global market that is currently characterized by artificial comparative advantages and managed trade. Market forces will become the dominant determinant for TC production and trade. A reallocation of resources will take place, which is expected to have a considerable effect on TC exports from many developing countries.

For Egypt, the TC industry has always been of strategic importance to the economy. It is one of the largest manufacturing and exporting processes in the country and a huge employment absorber. Egypt poses a high comparative advantage for a variety of TC products, which it has developed into a competitive advantage in major foreign markets.

In 2005, however, Egyptian exports will lose their quasi-guaranteed market access into the EU and US and will have to adapt to the new market situation. The final liberalization of trade in TC will put the local industry (and exports in particular) to the test. It runs the risk of losing out if not well prepared for the expected business and market changes in this business. The local TC industry will be exposed to tougher competition from abroad and exports stand to lose footage in major foreign markets. As such, comprehensive preparation and speedy action is a must to confront lingering risks and secure new and existing markets.

This study attempts to identify risks and challenges facing Egypt’s TC industry and shed light on opportunities in one comprehensive framework. After reviewing global trends in the TC industry in part I, the local industry is detailed in part II with respect to ownership, production, and cost structures. Part III emphasizes TC trade trends for Egypt with its major trading partners, the EU and US. Part IV analyzes the industry performance, identifying current obstacles and existing policies to create new opportunities. In conclusion, a SWOT analysis and industry outlook are presented to arrive at a target set of recommendations.

INDUSTRY HIGHLIGHTS:

• The TC industry contributes with one quarter of Egypt’s non-oil export proceeds.
• The public sector accounts for 90% of cotton spinning, 60% of fabric production and 30% of apparel production in Egypt.
• Misr Fine Spinning and Weaving is the largest enterprise of its kind in Africa and the Middle East.
• The private sector apparel industry is one of the most dynamic manufacturing processes in Egypt.
• The US owns 50% of total foreign capital in the TC industry.
• Egyptian wage levels in the TC industry are among the lowest in the world, not exceeding one Dollar per hour.
• Cotton textiles comprise the bulk of Egypt’s TC export basket
• Egypt has the highest RCA for textiles in the Mediterranean/Middle East region, especially for cotton-made home textiles.
• 98% of Egypt’s apparel exports and 83% of textile exports go to quota markets.
• Egypt is the second largest MENA exporter of TC products to the US, with woven apparel as the largest category.
• MFN treatment grants Egypt the lowest entry rates as mandated by US commitment to the WTO.