CAIRO, 23 February 2005 — Ever since the appointment of the new Cabinet last July, the government has been busy crafting new reform plans to retrieve both local and foreign investment in Egypt. Yesterday, Foreign Trade and Industry Ministry gave factories one finial day to apply for inclusion in the controversial Qualified Industrial Zones (QIZ) agreement between Egypt, the United States and Israel.

The Egyptian QIZ deal singed last December, similar to the landmark arrangement forged between the US and Jordan in 1999, is the best hope left for Egypt textiles to remain competitive after the end of the Multifiber Agreement (MFA) which sets quotas on the amount of exports of textiles and clothing coming from developing countries to the markets of the US and Europe. Since last January, garments and textiles imported from developing countries are no longer regulated by a complex import quota system.

Asian manufactures, particularly China, are expected to flood the global market. According to the World Bank 2004 figures, China’s share of global clothing trade will rise from the current 20 percent to 50 percent in 2005. Therefore, the only alternative was left for Egypt’s textiles was the availability of QIZ that grants Egyptian exports free access to the US market.

According to official figures, the seven QIZs currently being established in Egypt, would increase the current $44 million trade volume between Egypt and Israel by some $110 million. “It would create 150, 000 jobs in the country and will also triple Egypt’s textile and garment exports to the United States,” said Egyptian Industry and Foreign Trade Minister Rashid Mohammed Rashid. He added that while Egypt’s direct benefit would top $840 million. But in order to escape the 16 to 32 percent duties upon entering the US markets, Egyptian exporters have to comply with one of most important clauses of the agreement that specifies that 11.7 percent of QIZ product inputs must be of Israeli origin.

“But the 11.7 percent of Israeli input is a little sacrifice to keep an industry that accounts for about 30 percent of Egyptian exports, oil excluded, and employs up to 2.5 million Egyptians,” said Mahmoud Aboud, chairman of Port Said Investors Association (PSIA).

“If Egypt has not signed the QIZ, we would have lost almost 50 percent of our Egyptian textile exports. In 2003 alone our textiles exported to America reached $558.4 million and we cannot just lose this huge amount of money as it will be the end of the textile industry in Egypt.”

Port Said textiles and garments industry alone accounts for 370 million Egyptian pounds of the country’s textile sector and employs up to 24, 000 workers. 100 percent of the city’s production is being exported annually mainly to the US.

By last week, some 400 companies and factories had applied to be included in the QIZs agreement, 115 of which had been already approved by the Egyptian government.

Factory owners who are against the agreement and the warming trend with Israel, or those who will not get approved by the Egyptian government for being located outside the designated zones will hardly be able to compete with the Chinese and other Asian suppliers in American and European markets.

Adel Al-Ezabi, vice chairman of the general division for investors at the Egyptian Federation for Egyptian Industries said regardless of the quality of the Egyptian textile exports that the cost of production will badly affect the Egyptian exports. The labor cost in Egypt that is nearly double that of Asian countries, added to it the transportation costs of raw materials to the country will put Egypt at a competitive disadvantage. “So when we think closely about the whole issue we will find that the total cost of production is estimated to be about 15 percent higher that Asian countries and in any market people look for the quality and the price,” Al-Ezabi told Arab News.

Al-Ezabi cited the QIZ as the main reason for the great boom occurred to Jordanian textiles and garments as their exports to the US have grown from $26 million in pre-QIZ 1998 to $950 million in 2004 and are expected to surpass $1 billion this year. The number of Jordon’s textiles factories have jumped from 3 to 800 factories. He added that Jordan will continue to have a competitive advantage of around 15 percent because garments produced in its QIZ’s enter the US market duty free, while Asian suppliers, meanwhile, will have to pay around 33 percent of duties.

The Jordanian Ministry of Industry and Trade already show signs of worries as Egypt has the advantage in terms of the availability of cheaper raw materials and cheaper labor. “With Egypt... setting up QIZs, we do not know what will happen,” Waleed Rabah, QIZ consultant for the Jordanian Ministry of Industry and Trade told reporters.

Meanwhile, Rachid said the government will assist firms outside the zones as the present seven zones will not be able to include all those who are eager to join the agreement.