Industry Committee
FIELD TRIP
AmCham visits BMW factory
On July 1, a delegation of AmCham members and staff, under the auspices of the Industry Committee, visited the Sixth of October City factory of Bavarian Auto Group, the licensed assembler of BMW automobiles in Egypt. After welcome drinks, the AmCham members were given a tour of the factory and its assembly line. They also had an opportunity to test drive BMW’s 3-series, 5-series and X3.
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The consumer protection law
AmCham’s Industry and Legal Affairs committees held a joint meeting on July 3 at the Four Seasons Nile Plaza Hotel to discuss the pros and cons of the new consumer protection law, which was recently adopted by the People’s Assembly. Guest speakers Saeed Al Alfy, former chairman of the People’s Assembly Economics Committee, Zeinab Awadallah, consumer protection adviser to the minister of trade and industry, and Hassan Gemei, head the of the Department of Civil Law at Cairo University’s Faculty of Law, shared their opinions on the new law.
Al Alfy expressed his support for the consumer protection law, arguing that it will protect not only the consumer, but also the producer and businesspeople. He pointed out that the board of directors of the Consumer Protection Authority will be comprised mostly of NGOs and other civil society representatives whose presence will ensure that average Egyptians have a voice.
He said the media attention that will surround the authority, coupled with its desire to prove its effectiveness when it comes to protecting the rights of the Egyptian consumer, should help raise the public’s awareness of their rights under the law as well as the duties of business owners. He pointed out that the law will mean that the “no return, no exchange of items sold” sign will disappear, which is in favor of the consumer.
Awadallah then took the floor to comment on the advantages and disadvantages of the law. She noted a conflict of interest in the law’s monitoring by a government body, explaining that it will create a difficult situation if at some point the interests of that government body go contrary to those of the consumer.
Gemei, meanwhile, noted that the law stipulates that all product data must be written in Arabic regardless of its origin, and that importers should notify authorities of any product defect within seven days, except where the products pose a health hazard, in which case they must be immediately removed from the market.
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Protection and prohibition of monopolistic practices
AmCham's Industry and Legal Affairs committees hosted Mona Yassine,
chairwoman of the Egyptian Competition Authority (ECA), and ECA
executive director Khaled Attia on March 23 at the Conrad Cairo
Hotel to speak about "Egyptian law on the protection and prohibition
of monopolistic practices." Yassine and Attia explained the structure
and role of the ECA, an independent government body whose duties
include collecting economic analysis, conducting research to detect
acts that obstruct free competition, and issuing orders to take
action in this regard. It is also expected to offer opinions on
draft laws and regulations that govern competition. Attia said that
the new anti-competition law addresses three infringements: - Horizontal
restraints: these include anti-competitive practices such as price
fixing, bid rigging, collusive tendering, geographical market division,
and restricting or limiting the production, distribution or marketing
of any product.
- Vertical restraints: the law stipulates that any agreement between
individuals and their suppliers or clients shall be eliminated if
it restricts competition.
- Abuse of dominant position, which is defined by the law as a party
having a market share exceeding 25 percent and unfairly influencing
the price or volume of the product in the market. It also encompasses
anti-competitive measures of monopolies, such as the refusal to
deal, setting discriminatory pricing or using tie-in agreements.
Attia said the law does not attempt to control mergers or acquisitions,
yet it includes a provision stating that persons or companies are
to notify the ECA after any such operation, though he admits the
legislation does not sanction any punishment for parties that fail
to do so. In addition, public utilities and a list of "essential"
products are exempt from the law.
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A strategy for competitive Egyptian industry
On March 22, AmCham's Industry Committee held a meeting with Helmy
Abouleish, executive director of the Industrial Modernization Center
(IMC), who gave a presentation entitled "Claiming the future: a
strategy for competitive egyptian industry." Abouleish discussed
the strategic targets that the Ministry of Trade & Investment and
the IMC have identified to help Egypt become a leading industrialized
nation.
The government's plans through 2020 include increasing the growth
rate for industrial production from 3.3 percent to 9 percent, raising
nominal investments in the industrial sector from ŁE 12 billion
to ŁE 130 billion, enhancing industry's share in total investments
to 30 percent, increasing manufactured exports from ŁE 18 billion
to ŁE 291 billion, and luring ŁE 27 billion in FDI. Creating jobs,
however, remains the major challenge, he admitted. The government's
strategy focuses on enhancing domestic capabilities, industrial
governance and institutional setup, and establishing links with
global markets. Among the first is HR development through training
programs at the Industrial Training Council and other private and
public training centers, Abouleish said. The National Quality System
is a domestic component that works on harmonizing Egyptian standards
with international ones, to be finished by 2007.
The National Quality Institute, meanwhile, will monitor and promote
the quality of industrial products, particularly exports. As for
financing requirements, Abouleish explained that currently, plants
receive only 30 percent of their needs from the banking sector.
Therefore, committees between banks, the IMC and the industrial
sector have been formed to manage this shortage. Abouleish said
the government's strategy also calls for more support to industry
by way of one-stop shops for investors, new industrial parks, creating
internationally recognized trademarks for Egyptian products, encouraging
FDI and supporting export development.
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Briefing on executive regulations
of new antitrust law
The AmCham Industry Core Committee held a special meeting with
Mona Yassine, chairwoman of the newly formed Egyptian Competition
Authority (ECA), and ECA executive director Khaled Attia on March
14. In their first public meeting since the authority's formation,
Yassine and Attia answered questions regarding the proper interpretation
of competition law 3/2005 and its executive regulations, particularly
the terms "monopoly," "subcategory," "market share" and "market
size."
Yassine and Attia assured the core members that no legal actions
would be taken againt any entity or company with a market share
larger than 25 percent - the legal definition of a monopoly - unless
there is an abuse of its dominant market position. Action will only
be taken in cases of organized cartels and anti-competitive practices
such as price fixing, bid rigging and collusive tendering, geographical
market division and restricting or limiting the production, distribution
or marketing of products. There are obviously exceptions, they said,
explaining that public utilities and products deemed essential by
the cabinet and ECA were exempt from the legislation.
Egypt's antitrust law is compatible with European and US laws, they
emphasized, noting that the ECA will employ a wide range of statistics
to ensure the legislation is properly implemented. This will include
statistics on market segments, market sizes and market categories
collected from different government agencies and authorities, private
and international research-based companies and other international
retail audits. The ECA will receive requests for search, inquiry
and fact gathering, and issue orders to take actions in this regard.
It will also carry out studies to detect acts that are harmful to
free competition, then take legal action accordingly. The ECA can
order the violating party to resolve the situation and eliminate
the monopolistic practice within a specific time or refer the case
to a criminal court.
At the end of the meeting, Yassine and Attia
promised to arrange an open meeting with all AmCham members to discuss
the different articles of the law, the various infringements, mergers
and acquisition cases; the current structure of the authority; and
to answer questions and concerns.
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Rachid discusses strategy for industrial sector
AmCham's Industry Core Committee held a special meeting with Minister
of Trade and Industry Rachid Mohamed Rachid on February 7 in which
the minister shared the government's agenda and gave an overview
of the current outlook in the industrial sector. He said an Industrial
Strategy for Egypt has been completed, in the light of which the
ministry is defining its vision for the next 25 years. The budget
allocated to implementing the strategy stands at £E 157 billion.
Rachid highlighted the fact that the ministry has been assigned
the new responsibility of overseeing domestic trade. The current
market lacks efficiency, especially when it comes to transferring
value to the consumer, he said. Internal trade also suffers from
an undue amount of informal trading, a reality that calls for a
serious reform program. New policies must be undertaken, such as
the Consumer Protection Law, currently under discussion in the parliament.
Much of the ministry's current effort goes toward offering incentives
to vendors who are operating outside the formal system. Currently,
an estimated 70 percent of goods sold by street vendors are illegal.
Rachid solicited the help of the Industry Core Committee to solve
this problem. He announced that the ministry is preparing to launch
an agency similar to the US FDA in the second half of 2006. The
objective of the agency will be to control the quality and safety
of food products on the shelf.
AmCham president Taher Helmy, who was present at the meeting, described
the Industry Core Committee as the "most efficient" of
AmCham's 21 committees, many of which are working on issues discussed
by the minister. He noted that the goals of the ministry's agenda
will be incorporated into the work plans of these committees.
Mohamed Samir, chair of the committee, thanked the minister for
the recent spate of reforms. He said that the companies present
at the meeting contribute a total of around $3.2 billion net in
investments in Egypt, with a total export value of $417.6 million
for this year. They also employ a direct labor force of 55,050 and
an indirect labor force of 72,405.
Committee members also spoke during the meeting about key issues
currently under discussion. The minister's support, they said, is
needed to pursue directives in issues such as:
Drawbacks and duty relief: Maintain the simplest form of duties
retrieval system, and allow the industrial sector to contribute
and input to the design of any new model the government will be
adopting in the future.
Industrial regulations and enforcement: Distinguish between intentional
and non-intentional production deviations.
Registration of products: Introduce international directives for
products, especially those intended for export, reduce registration
lead times and facilitate acceptance of product claims.
Contract manufacturing: Consider eliminating legal and administrative
obstacles to contract manufacturing.
Executive regulations of the antitrust law: Industrial sector to
have the opportunity to advise the Antitrust Regulatory Body on
"market" definitions and demarcations.
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Overview of services offered by the IMC
On December 22, 2005, Helmy Abouleish, executive director of the
Industrial Modernization Center (IMC), which operates under the
authority of the Ministry of Foreign Trade & Industry, spoke to
AmCham's Industry Committee about the center's activities. The IMC
aims to place Egypt as "a leading industrialized nation in the Middle
East and North African region in terms of performance as well as
a main export hub for medium-technology manufactured products,"
he said.
Abouleish said that by 2020, the IMC seeks to boost Egypt's annual
real growth rate of industrial production to 9 percent, to reach
ŁE 130 billion in nominal investments in the industrial sector,
to bring foreign direct investment in industry to ŁE 27 billion,
and to bring investments in industry up to 30 percent of total investments.
The IMC further hopes to bring the annual value of Egypt's industrial
exports up from today's figure of ŁE 18 billion to ŁE 291 billion
by 2020. This, Abouleish hopes, will create jobs. To date, the IMC
has created over 100,000 jobs, with the aim of reaching 1.9 million
jobs by 2020.
The IMC seeks to move into medium-tech industries, especially niche
sectors such as mining machinery, consumer electronics, automotive
components and biotech products. As such, Abouleish said, the IMC
is investing in technology and expertise with an eye towards building
domestic capacities, linking to global markets, and reforming the
institutional framework that governs industry. Abouleish said IMC's
mission is to support all industrial enterprises, individually or
by sector, according to their development needs, through comprehensive
and customized business-competitiveness programs focusing on: exports,
quality, finance, human-resource development, innovation and technology,
research and development, and information. Nearly 10,300 enterprises
stand to benefit from the IMC's programs over the next three years,
Abouleish said.
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Core group sets five-pronged
priority plan
AmCham's Industry Core Committee held its first meeting on September
13, adopting a vision of "proactively" improving the competitiveness
of Egyptian industry and exports through continuous improvement
of the investment, business and trade climate. The group reviewed
a proposed plan covering more than 20 different areas, agreeing
to concentrate on five key areas: reinstating and fully stabilizing
the drawback system, reducing the importation cycle to seven days,
encouraging the implementation of an Egypt-US FTA, harmonizing Egyptian
industrial regulations in line with international standards and
discussing the executive regulations of antitrust legislation.
Drawback system: Following a government decree, all imported inputs
shipped to Egypt before February 28, 2005 can be cleared using the
usual drawback system - which requires full customs duties to be
paid on semi-finished inputs though lets exports reclaim this amount
when they export products containing the finished product. Re-exported
inputs shipped after February 28 are not eligible for drawbacks,
but can be cleared under a modified system termed the "Immediate
Refund of Duties." The core group deemed this system adequate
for industries using a limited number of imported inputs, but less
suitable for industries requiring a large number of imported components.
(Group leaders: Mohamed Samir and Rami Zaki, Procter & Gamble
Egypt).
Import cycle: The current import cycle slows down trade and causes
the unnecessary build-up of inventory. Last year's tariff reductions
were a step in the right direction, but further efforts to restructure
tariffs are needed. The core group will push to have the importation
cycle reduced to seven days. (Group leader: Alaa Hashim, MAC Carpet).
FTA: While regional and bilateral trade agreements have been important
to promoting Egyptian exports and improving the competitiveness
of Egyptian-made products, there are potential opportunities in
an FTA with the US. The core group will push to accelerate the conclusion
of an Egypt-US FTA, which would be a great asset to the country's
economic development. (Group leader: Omar El Derini, FAOM Consult/Red
Wing)
Standards: The implementation of international and Egyptian standards
is essential to the competitiveness of Egyptian products in global
markets. The core group will work to simplify local standards relating
to product safety, health and environment - and harmonize them with
international ones. (Group leaders: Mohamed Fahmi, SC Johnson Egypt
and Sherif Hafez, 3M Egypt Trading Ltd.).
Antitrust The Executive regulations of the Competition and Anti Monopoly Law: Industry is concerned with the proposed new Competition
and Antitrust Law, specifically the threshold of 35 percent market
share, and the capabilities needed in the governing body that will
control any monopolistic activity. The group will continue to monitor
and provide feedback for the executive regulations of the legislation.
(Group leaders: Sherif Hafez, 3M Egypt Trading Ltd. and Rami Zaki,
Procter & Gamble Egypt).
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