The slide in the value of the Egyptian pound since December is good news for the textile industry, but its impact is blunted by the deterioration in economic and business conditions since the 2011 revolution, exporters say.
Manufacturers have been arguing for years that the currency is overvalued, damaging competitiveness and business. Though they now welcome the devaluation of the pound, they are deeply anxious about the upheavals in the exchange market and the more general deterioration in the business climate (...)
The textile industry is one of the biggest employers in Egypt providing a quarter of all industrial jobs and accounting for 27 per cent of non-oil exports, including 60 per cent of exports to the US. In the first nine months of 2012, Egypt exported $2.2bn worth of textiles which is 10 per cent less than the same period the year before.
The cheaper pound, exporters say, should make their products more attractive, but it is a mixed picture because the garment industry also relies heavily on imports such as yarn, fabrics and accessories.Egyptis known for the high quality of its cotton, but the local crop, most of it long-staple varieties, is mainly exported because it is too fine and too expensive to use for denim and T-shirts, the main items manufactured for western markets.
“The impact of the devaluation is not as positive as it could have been, because the problem here is that we have not deepened the industry so we still need to import a lot,” says Magdi Tolba, chief executive of the Cairo Cotton Center, an Egyptian manufacturer which supplies retailers in the US and Europe such as Macy’s, Nike and Marks and Spencer.
“All fabric for exported garments comes from abroad. Even the yarn for T-shirts comes from southeast Asia.” (..)
Other issues plaguing the industry include high interest rates which top 15 per cent and onerous charges levied by banks to roll back the debts of companies in trouble, Mr Tolba says.