 |
 |
 |
 |
| Search |  |
 |
 |
monster mall counts on wto compliance as saudi-financed monster mall citystars heliopolis prepares to open its doors, stiff trade barriers are causing many international retailers to shy away from opening up shop in the complex. spanning 115,000 square meters of land between the cairo suburbs of heliopolis and nasr city, the $265 million citystars is the largest mixed-use urban development in the middle east, and larger than any in europe. the project’s retail arm, dubbed the “stars center,” contains spaces for 470 stores. phil mcarthur, the president and chief operating officer at golden pyramids plaza (citystars’ developer), said the retail area was intended to attract international brand names. “the original vision was to have a world class shopping center,” mcarthur said. at the start of last year, when the government lifted a ban on apparel imports in order to comply with the general agreement on tariffs & trade (gatt), “the timing seemed perfect” for international retailers to enter the egyptian retail scene. “cairo lacks international-caliber shopping and there is a huge market opportunity,” he said. mcarthur’s flight of fancy was cut short within days by a government about-face – a cabinet decree that imposed stiff new fixed tariffs on all garments entering egypt. the tariffs were intended to safeguard the local textile industry against inflows of cheaper goods from southeast asia. but the new restrictions “made it cost-prohibitive for international retailers to open and sell at a marketable price,” mcarthur said. imported clothing is now subject to customs duties set at fixed amounts, which vary according to the type of garment. duties can reach 400 percent of manufacturing costs, mcarthur said, which would put most items out of reach of local shoppers. after the change in regulations, international retail chains that were considering leasing store space – including popular brands zara and mango – had to rethink the investment. “hundreds of international retailers were lined up for citystars, but they all pulled out as a result of the penal tariff imposed on clothing,” said robert bloomer, a london-based representative of retail leasing agency cushman wakefiled/healey baker, which used to be in charge of leasing out citystars’ retail spots. “we are no longer involved [with citystars] because our business is to lease international retailers, not local ones,” bloomer added, noting that egypt is losing valuable business to eastern europe and asia. “egypt is a huge untapped market with considerable disposable income,” he continued, “but it is being overlooked by investors as a result of government-led protectionism.” those whose main line of business is not clothing, however, have stuck with the project. “hypermarket” store monoprix and department store bhv – both owned by french giant gallery lafayette – are still planning to be there when citystars heliopolis opens in june. according to mcarthur, citystars is also in negotiations with other international names, including a music megastore chain – possibly virgin records. “monoprix and bhv will function as anchors for
the other retail outlets,” he said. phase ii has already been built, but it is not scheduled to open until after 2005, by which time members of the world trade organization (wto) are supposed to implement liberalized trade rules. “once the wto rules become effective, citystars will end up having international retailers in phase ii,” mcarthur said. yet the government fears doing away with tariffs on imports as the wto demands. doing so means taking away heavy protection for local industries – particularly the labor-intensive textiles industry. the wto has been the target of ongoing criticism from developing countries, which argue that the organization is run by – and serves the interests of – rich nations. critics say the organization threatens national sovereignty and could force countries to reform their protectionist laws prematurely. egypt has been a member of the wto since the organization’s inception in 1995. following the uruguay round negotiations, the gatt – established in 1948 with 23 member countries – became the wto, a 144-member organization that promotes duty-free movement of goods and services. according to a january 2000 article from the us center for economic & policy research, developing countries in the middle east should approach organizations like the wto, the world bank and the international monetary fund cautiously. released one month after the breakdown of wto trade talks in seattle amid massive anti-globalization protests, the article advises middle eastern countries to be wary of privatization, deregulation and structural adjustment programs aimed at export-led development. citystars officials, however, say their project will not be held back by uncertainties surrounding the retail section. citystars also intends to lure the public with an entertainment complex, including a 16-screen movie theatre, theme park, bowling alley and food court. to draw in other clients, there will be three office towers, exhibition halls and a residential corner with 266 luxury apartments. also on the site are three major hotels: inter-continental, le meridien and holiday inn. according to a retail international newsletter published last year, the success of mixed-use developments depends on a combination of retail and non-retail factors. “the residential and office component have the effect of generating regular footfall from a virtually ‘tied’ audience,” it said. citystars hopes to target tourists, given its close proximity to the airport, mcarthur said. “we want to take that business away from heliopolis hotels.” thomas hilberath, general manager of the inter-continental and holiday inn at citystars, said the on-site hotels would be convenient for visiting business travelers. “we are looking forward to a great deal of corporate tourism for conferences, seminars and business meetings,” hilberath said. for business tenants, the “stars capital” section offers 70,000 square meters of office space. only 20 percent of offices have been leased so far, but golden pyramids plaza has hired third-party agencies to assist in the leasing process. the residential segment, “stars living,” meanwhile, offers apartments of up to 1,000 square meters, starting at $1,500 per square meter, with housekeeping, room-service amenities, and maid and driver quarters included. golden pyramids plaza has opened sales offices in the gulf to sell the luxury apartments. even by regional standards, egypt’s retail development is in its infancy. however, the country’s large pool of consumers has attracted arab investors, such as majid al futtaim group. the dubai-based developer, working in tandem with french hypermarket chain carrefour, has recently opened two suburban malls in egypt (see story, page 22). citystars and golden pyramids plaza are jointly owned by egyptian businessman abdel rahman sharbatly and saudi entrepreneur fahd shobokshi. mcarthur said that heightened brand awareness, especially among affluent youth in egypt, should attract other western investors. according to tim fellows, a writer for us-arab tradeline, egypt has all the ingredients for a strong and competitive retail market, but it will have to liberalize its economy to attract western investment. putting an end to trade restrictions will be just as important as modernizing the country’s retail infrastructure, he said. mcarthur, however, remains confident that retailers standing on the sidelines will take a chance on the egyptian market. once the government loosens the tight import rules in compliance with the wto, he said, citystars “will be the finest shopping center in egypt.” carina kamel |
|||||||||||||||||||||||||||||||||||||||||||
|
Site Developed and Maintained by the Business Information Center of AmCham Egypt Copyright©2008 American Chamber of Commerce in Egypt |
|||
 |
|||