Egypt: Achieving higher exports
The Egyptian political leadership recognises that boosting the country’s export potential and expanding to new horizons is one of the main drivers of the Egyptian economy, and for this reason it has set a target of $100 billion in exports. Despite the difficulty of achieving this goal, it can be realised through the collective and collaborative efforts of the government, its relevant agencies and ministries, and the private sector, in particular industrial producers and investors.
The Egyptian government took numerous effective measures during 2020 to support investors, producers, and the business community in order to mitigate the repercussions of the Covid-19 pandemic, including launching export-subsidy settlement initiatives for overdue payments to exporters, waiving penalties for delayed tax payments, and rescheduling unpaid natural gas bills for manufacturers. These all contributed to ensuring that liquidity would be available for businesses, allowing them to further invest their resources as well as to protect their workers and employees.
Several main pillars are required to achieve the goal of increasing exports to the desired level. The first is increasing local value-added and industrial development. Within this framework, the most important industrial sectors to focus on are those with a competitive advantage, including, for example, the food, chemicals, and engineering industries. These industries have witnessed a development boom during the past ten years by attracting national and foreign investments and improving their supply and value-chain efficiency.
In addition, energy prices and government services provided to factories should be reviewed in order to increase their competitiveness through the effective implementation or activation of Law 15/2017 on facilitating the procedures for obtaining industrial licences to simplify the granting of licenses or their renewal and unifying transactions under one authority to cut down on bureaucracy.
It is also important to enhance the quality of Egyptian industrial products and to provide technical-support programmes for manufacturers in order to enable them to obtain international quality certificates that will significantly improve their products’ competitiveness.
The second pillar is facilitating the payment of export-subsidy arrears. In the light of the recent presidential export-subsidy initiative to help Egyptian exporters settle their dues, around LE13 billion was paid out during 2020 under the first phase of the initiative, in addition to the around LE15 billion allocated to the second phase, which is currently underway. Under both these phases, companies have waived 15 per cent of their dues in exchange for immediate cash repayment. However, it should be noted that the procedures related to submitting the relevant documents to the Export Development Fund should still be reviewed in order to expedite such procedures for exporters and avoid setting requirements that may represent an additional obstacle.
Moreover, the completion of the new programme should be accelerated, provided it has directly contributed to export promotion, especially since previously the export infrastructure component did not achieve the desired results. While the current system allows for the settlement of any tax or customs dues against the arrears, it should be expanded also to include settlements against electricity, water, and gas bills.
The third pillar is market access. Efforts must be exerted in order to enhance trade exchanges between Egypt and its partner signatories to trade agreements, most notably the African countries, since Africa represents a promising market for Egyptian exports. Consequently, it is also important to strive towards concluding the negotiations pertaining to the African Continental Free Trade Agreement (AfCFTA). It is necessary to utilise the available benefits from regional institutions such as the African Development Bank, the African Export-Import Bank, and the Common Market for Eastern and Southern Africa (COMESA) Regional Investment Agency.
Plans to establish logistical centres in several key African countries, which represent gateways to neighbouring countries, should also be revived. A national council consisting of experts from relevant government bodies and the private sector should be established to oversee the policy-making process and the development of effective programmes aiming to enhance the Egyptian presence in Africa.
The fourth pillar is logistics. Concerted efforts must be made to support the logistical areas and ports of the Suez Canal Economic Zone (SCZone). Government investments must be provided to upgrade the infrastructure for the ports in efforts to make the SCZone a global logistical centre that attracts trade and investments and promotes exports. In this context, several studies should be prepared on the sectors with the highest potential for attracting investments as per global market requirements. In addition, major investing companies in competing countries should be approached to indicate the facilities and services that they seek in directing their investments to the SCZone and their views should be incorporated in the studies.
The effective implementation and activation of trade-facilitation measures within the framework of international agreements should also be expedited in a way similar to the implementation of the Bali Agreement of 2013 on lowering global trade barriers. The automation of customs procedures should be sped up, release times reduced, and complete control and governance of the system achieved. In addition, investments should be directed to establishing regular shipping lines that can provide market access to targeted countries worldwide for Egyptian exports at competitive prices.
The fifth pillar is promoting digital and high-technology exports. Numerous countries worldwide have invested in their youth’s capabilities pertaining to the development of digital applications, and this has contributed to increasing their digital exports and helped them to achieve unprecedented values of nearly $700 million. The idea here is to increase exports using constructive and unconventional means.
Finally, the sixth pillar is that an expanded export-promotion programme is a must. An effective programme with an appropriate budget to promote Egyptian exports should be established within the targeted countries through cooperation and coordination with commercial representation offices and Egyptian embassies abroad. The role of the Export Development Authority should be emphasised, and innovative techniques should be used for export promotion.
*The writer is general manager of N Gage Consulting.