CAIRO — Egypt’s apparel and fabric makers are counting on close trading ties with the European Union, as well as the comparative cost advantage that has resulted from a devaluation of the local currency last year, to keep their industry pushing ahead after quotas are dropped worldwide on Jan. 1.
Alaa R. Hashim, chief operating officer and member of the board at Misr American Carpets, a textile firm known as MAC, said the devaluation of the Egyptian pound will “help make a contribution to our exports.”
Since the Egyptian government let its currency float freely in January 2003, the Egyptian pound has lost 25.2 percent of its value compared with the U.S. dollar and 36.1 percent compared with the euro. On Monday, $1 was worth 6.22 pounds. The devaluation has boosted the competitiveness of products ranging from raw cotton to garments, carpets, mats, rugs and leather goods.
For the year ended May 31, Egyptian firms shipped $519.3 million worth of textiles and apparel to the U.S., an increase of less than 1 percent from the prior year, which made Egypt the U.S.’ 30th-ranked supplier of the twin categories.
Like many industries around the world, the Egyptian producers are concerned how their competitive position will change after the 147 nations of the World Trade Organization drop their quotas on textiles and apparel next year. That event is expected to be a major boost to nations such as China and India, which have large workforces and relatively low wages.
Nogui T. El-Fayoumi, executive director of the Egyptian Exporters Association, said, “We face the same difficulties, but competition is healthy, and industry rejects people who cannot compete.”
Hashim said Egyptian products are as competitive as those produced by Chinese labor, but added, “The advantage we have is that we have very skilled and adaptable workers.”
He noted the odds also favor Egypt in that the world is looking to a stronger Chinese currency down the road, while there are no signs that the Egyptian pound will strengthen anytime soon.
Adel El Ezaby, chairman of Suez International Apparel Co., said he was concerned about the threat posed by the elimination of quotas.
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“Even the manufacturers and importers of America are very concerned,” he said.
He said one of Egypt’s advantages is its close proximity to the European Union.
Another big plus, he said, is that Egyptians have “a wide and deep experience” in all fields of manufacturing, ranging from silk to superior cotton and blended wool, and have expertise in men’s, women’s and children’s apparel.
The bulk of manufacturers are equipped with the latest machinery and equipment, and have ability in all phases of production.
Ezaby also asserted that Egypt can compete with China in the U.S. and EU markets. The average wage in the sector in Egypt, including social insurance, is about $100 per month. But Ezaby said that while Egypt can compete on the manufacturing side, it is weaker in the fashion world due to a lack of designers and design centers.
He said the best way for Egyptian firms to compete is through licensing agreements and manufacturing for European brands in the areas of women’s and men’s casual sportswear and suits for the country’s population of 72 million, and also to export, especially to other countries in the Middle East.
“We can sell items at a cheaper price in Europe, as we have lower manufacturing costs and no duties into the EU market,” he said.
According to estimates by the EEA, the country’s apparel industry comprises about 2,275 medium and large manufacturers, and about 4,450 small enterprises, with an annual output of about $3.2 billion.
U.S. importers of Egyptian apparel include Calvin Klein, Chaps, DKNY, Federated Department Stores, Gap, Jones New York and Kmart.
In 2002, Egyptian clothing and fabric exports to the European Union totaled $498 million, of which $254 million was in apparel and $244 million was in textiles. Italy, Germany, the U.K., France, Spain and Switzerland were its principal markets.
The enlarged European Union offers new market opportunities, according to Egyptian producers, since the nation’s exports have duty- and quota-free access to the EU market. However, the benefits apply only to garments made of Egyptian fabric, and not to products made of third-country fabrics.