According to the Head of the Chemical and Fertilisers Export Council (CFEC), Khaled Abo Elmakarem, economic reforms affected the exports sector positively and negatively similarly.
In an interview with Daily News Egypt, Abo Elmakarem unveiled the details of the government strategy which aims to boost the sector, and his CFEC plan to a improve performance within coming three years, the transcript for which is below, lightly edited for clarity:
How was the exports sector affected by the economic reforms?
Although the reforms affected all the economic sectors in the domestic market, but all current divisions including exports are reaping the rewards. Even the performance of imports in the three quarters of 2018 prove the improvement of the Egyptian economic climate.
What evidence do you have which proves your perspective?
According to the General Authority for the Control of Exports and Imports (GOEIC), exports performed better from January 2018 to September 2018 in 13 export sectors exceeding $18bn compared to about $16b in the same period in 2017, with a raise average of 11%. This means that the sector is successfully following the growth rates which were set by the ministry of trade and industry that aims to reach an annual growth average of 10%.
Can you elaborate?
New export sectors performed better in this period and achieved growth, such as handicraft industries which recorded a growth rate of 10% compared to the same period in 2017, and ready-made garments with a growth rate of 9.2%, textiles with a higher growth rate by 10.3%, in addition to pharmaceutical industries which achieved a growth rate of 13%.
So, how is the new strategy of boosting exports going to work?
By heading towards promising markets, especially African markets. The exports boosting strategy set 18 African countries to become the new destinations of our exports including Kenya, Sudan, Zambia, Uganda, Nigeria, Tanzania, Angola, Gabon, Senegal, Cameron, Djibouti, Equatorial Guinea, the Democratic republic of the Congo, South Africa, Ethiopia, Ghana, Somalia, and Côte d’Ivoire. These new destinations will be entered by most the exporting competitive sectors including building materials, food, pharmaceutical, engineering, and chemical industries.
And what about other proposed procedures?
The new proposed strategy is to establish a new exports body to maximise the benefits of all potentials that all concerned bodies are experiencing, and to become the only link between exporters, industrial sectors, companies, and the government in a frame of integration to develop exports which is the basic goal of the strategy itself.
The export sector is facing significant challenges, do you agree with that?
Indeed, the exports sector is generally affected by challenges of the Egyptian industry. These include the spread of the informal sector and its negative effect on the competitiveness of the formal sector, as informal entities do not bear any financial expenses such as taxes, duties, and fees. In addition, the government does not offer yet offer any incentives for the sake of integrating this sector to the formal one.
What about the aftermath of the economic reforms?
They caused a big raise in production costs due to raw material and inputs price increases. Moreover, there were increases in service prices related to exports such as stockpiling, shipping, and transportation. Additionally, there were higher prices of energy resources which were raised from July 2014 to date, as natural gas prices increased by 133%, and electricity consumption prices were increased by 40% until now. In addition, there were petroleum resources’ prices hikes, which, ultimately, led to dramatic increases of the final product.
How do you evaluate the government’s performance in dealing with this serious situation?
Unfortunately, the government does not allocate any funds to support export shipping to global markets, including East Europe, Central Asia, Russia, and MERCOSUR regional groups. These ones are considered the only alternative markets Egypt can depend on to compensate markets which exit our export destinations due to political instability. On the other hand, Egyptian exports still lack international quality standards, which require us to reconsider all of our regulations related to product quality censorship.
In your opinion, what should be done now?
The government must take active steps to cope with all challenges I discussed. In addition, economic reforms and their useful achievements over the coming years will guarantee good performance for the sector. Furthermore, the MURCUSOR agreement is going to be applicable soon, and interest rates will be decreased. All these conditions will push the sector to achieve the required 10% growth rate, hence reaching a volume of $25bn.
For the chemical sector, what does your council plan to do to boost its exports within the state’s strategy?
We aim to achieve an annual growth rate of 20%, and to double our chemical exports within the coming three years.
What mechanisms does your strategy include?
Expanding our activities to include small, medium, and micro enterprises, and eliciting new exporters to the sector. In addition, enhancing the transition towards exports of high value-added quality products. Furthermore, heading strongly into the African market, increasing the logistics areas to guarantee the availability of our products. This will be accompanied by offering beneficial training courses for exporters in order to enhance human resources in both the quality of marketing and products.
Back to exports sector in general, how can it overcome its troubles?
The rules of the subsidy payment to exporters who pay in cash should be reconsidered, by offering 50% of the subsidy, while offering 50% by the end of the year by virtue of verifying their financial statements and tax returns, claiming for a concession to hand the worth of these subsidies to exporters through an offset from their property taxes or other tax sources. In addition, we need to set some procedures which help manufactures to reduce imported raw material costs through a new technique of group purchasing through specialised companies and receive the benefits from global tenders.
Are there any other procedures to propose?
To set a new unexpected risk insurance programme to help exporters enter global markets without fearing unexpected risks such as buyers’ bankruptcy or political troubles in case of wars or uprisings in heated countries. Furthermore, compliant financing programmes should be considered to suit the nature of industry characteristics in the Egyptian market, and accrediting the Egyptian trademark promoting Egyptian products in global and regional markets.