Private sector to help Egypt boost manufacturing
William Wallis from Cairo
The Egyptian government has teamed up with the private sector in an initiative to boost manufacturing growth and stimulate job creation.
The so-called National Suppliers Development (NSD) Programme aims to improve the quality and cost of Egyptian made goods and tailor them to the demands of multinationals and leading local export companies competing in global markets.
Rachid Mohamed Rachid, Egypt's trade and industry minister and a former Unilever executive, said he hoped the scheme would contribute to a doubling in annual manufacturing growth to 10 per cent.
Low labour costs and Egypt's position at the cross-roads of Europe, Africa and the Middle East should give the country of 78m people a strategic advantage as an exporter.
The export of goods and services has helped power the recent recovery in the economy, forecast to grow at more than 5.0 per cent this year. In the process some Egyptian companies, such as construction giant Orascom and Oriental Weavers, have achieved international prominence.
But as its economy has shifted uneasily over the past three decades from a socialist to a capitalist model, many Egyptian industries have struggled to be competitive. Domestic banks, meanwhile, are wary of lending to small and medium enterprises.
Accelerated market reforms since the appointment of a new cabinet in 2004, a slew of free trade agreements, new hygiene regulations for food products entering the EU, and competition from Asian imports have now made conforming to global standards a matter of survival.
Growth of the industrial sector may also prove critical for Egypt's stability. Unofficial estimates put unemployment at more than double the government's figure of 9.3 per cent. President Hosni Mubarak won a fifth term in office last month promising 4.5m new jobs over the next six years.
Under the NSD Programme, 100 multinational and leading local exporters in Egypt are being asked to select up to 10 local suppliers.
Each of these will be provided with technical assistance from international consultants to identify efficiency and quality shortfalls, before accessing bank loans with the aim of improving. In return exporters who benefit from the programme have agreed to expose their Egyptian suppliers to global supply chains.
General Motors (GM), which has Egypt's largest vehicle assembly business, has helped pioneer the project. Don Butler, GM's chairman in Cairo, said he saw Egypt as a natural base for regional exports. But the company had struggled to keep up with 160 per cent growth in sales in the Egyptian market over the past year, he said.
Mohamed Fathi, one of the architects of the scheme, said it was hoped it would also make Egypt more attractive to foreign direct investment. This climbed in the 2004/2005 financial year to $1.0bn (euro 830m, £550m) from $407m a year earlier.
Mr Fathi said a leading London-based private equity firm was considering investing in Egyptian suppliers benefiting from the programme.