sourcing opportunities in post revolution egypt

Sourcing Opportunities in Post–Revolution Egypt

Mohamed Kassem

Chairman of Egypt’s Ready Made Garment Export Council (RMGEC)

USA-ITA Annual Conference, New York, January 9th , 2013

The Question

Have sourcing opportunities

improved

in Post-revolution Egypt?

Land of the pyramids…

Home to the Nile River…

There is a lot more to Egypt than just the Nile and the Sphinx

……as beautiful as they are

Egypt Fact Sheet

Occupying the northeast corner of the African continent

Egypt Fact Sheet

• Total area : 1 million KM2

• Population: 84 million

• GDP in billion $: 235.7

• GDP/capita: $ 6,600

• Age Structure:

• 0-14 years: 32.7%

• 15-64 years: 62.8%

• 65 years and over: 4.5%

• Sex Ratio: 1 : 1 male/female

• Population Growth Rate: 1.922%

Egypt Fact Sheet

Labor Force: 27.74million

Labor average salary: $135 / month

Unemployment rate: 12.2%

Population below poverty line: 20%

Inflation Rate: 13.3%

http://www.theodora.com/wfb/wfb2000/definitions.html

http://www.theodora.com/wfb/wfb2000/definitions.html

http://www.molon.de/galleries/Egypt/NatMuseum/

9

Gross Domestic Product - GDP Value in Billions USD

Source: CIA – World Factbook

Egypt’s GDP has

increased by almost

58% from

(2005 – 2011)

Egypt comes 4th after

India, Indonesia &

Turkey exceeding

several countries in

the comparison sample

Egypt at a Glance…

10

Egypt GDP- Composition by Sector

Source: CIA – World Factbook

Textiles & RMG sector plays an extremely important role in the Egyptian Economy:

• Second producing sector after agro-industry

• First sector in terms of labor force

• Accounts to 3% of GDP & almost 27% of industrial output


Egyptian Garment & Textile Industry

More than 1,500 manufacturers

Total industry’s production output:

US$ 3.2 billion per year

Representing 3.5% of Egypt’s GDP

Employing 1,500,000 workers

Pre-revolution Egypt

Post-revolution Egypt

From Pre-revolution to post-revolution

Egypt’s attractiveness as an import source for Clothing



• Product diversity

•Supportive infrastructure

•Established competitive advantage

•Successful QIZ implementation



15

Product diversity

Egyptian

Knitted

Products

• All kinds of single Jersey fabrics in all weights, starting from 90 grams x sqm until 260 grams (100% cotton or cotton blends):

• Single Jersey w/Lycra

• Pique

• Pique w/Lycra

• All kinds of Rib: 1x1; 2x2; 2x1

• Yarn dyed stripes

• Fleece

• Fleece Lycra

Egyptian

Woven

Products

• All kinds of products (100% Cotton):

• Twill

• Canvas

• Denim

• Non-Denim

RMG Sector Performance…

Supportive infrastructure

Source: Egyptian Maritime Data Bank (year 2008)


Main Egyptian Ports Capacity

(million ton/year)

Alexandria 38

El-Dekheila 25

Damietta 16

East Port Said 13

Port Said 10

Suez 9

El-Sokhna 8

Adabiya 7

Total 126

Advanced testing labs & technology

centers

Egypt’s Air Cargo Airport, located in

Cairo, currently has 5 cargo terminals

15 commercial river/sea ports

A well-established network of railways

& roads

Contract to Ship Date – Lead time

• Fabric from Far East

• 120 days

• Fabric from Turkey

• 90 days

• Fabric from Egypt

• 75 days

20

Trade Agreements Worldwide

US + Israel

(QIZ) EU 27

EFTA

COMESA

PAFTA

Turkey

Arab Bilaterals

Lebanon – Syria – Iraq – Tunisia – Morocco - Libya

Agadir

MERCOSUR

Russian Federation

Doing Business with Egypt…

50% of Egypt’s clothing exports go to

the US

• Polo Ralph Lauren • Levi’s • PVH • The GAP • Timberland • Liz Claiborne • DKNY • Calvin Klein • VF • Warnaco • Jones Of New York

• Macy’s • JC Penney • Sears • Target • Fruit of the Loom • Wal-Mart • K-Mart

Port Said, 23.3%

Alexandria 16.4%

South Giza, 14.5%

10th of Ramadan, 12.5%

Ismailia, 8.4%

15th May, 5.4%

3.8%

3.3%

3.1%

2.7% 2.1%

2.0%

Port SaidAlexandriaSouth Giza10th of RamadanIsmailia15th MayShoubra El KheimaNasr CityGesr SuezGharbeyya Govr.Other Cairo AreaKalioub6th of OctoberMonofeya Govr.El ObourBadr CitySuez

% Distribution of Qualified Industrial Zones

24

Focus on Qualified Industrial Zones


Value in Million USD

Source: QIZ Unit – Ministry of Trade & Industry

Egyptian textiles & RMG exports to USA market

through QIZ increased by almost 220% from

(2005 – 2011)

The 25th of January

Revolution 2011

…And a new Egypt Emerging

U.S. Secretary of State Hillary Clinton took a short tour in Tahrir Square

Famous quotes on Egyptian Revolution

• Barack Obama: We must educate our children to become like young Egyptians

• Britain's Prime Minister Cameroun: We must consider teaching the Egyptian revolution in schools

• CNN: For the first time, we see people make a revolution and then clean the streets afterwards

• Stoltenberg, Prime Minister of Norway: Today we are all Egyptians

• Austrian President Heinz Fischer: The people of Egypt, are the greatest people on earth; and they deserve the Nobel Prize for Peace




•QIZ expansions

•Clear sector strategy until 2025

•Plans for expansion by main suppliers in the next 5 years

•Increased investments upstream

•Corporate social responsibility

•A prouder Egyptian worker

•Revolution dust settling down





•QIZ expansions

•Clear sector strategy until 2020 and beyond







QIZ expansions

• Request for expanding QIZs north of Cairo

where the concentration of factories and labor

lie

• Expansion of QIZs to Upper Egypt (South of

Cairo)




•QIZ expansions








Clear sector strategy until 2020 and

beyond

• Preparation of a comprehensive strategy to upgrade textile industry was initiated in 2008

• The outcome was ‘Vision 2020’ detailed action plan for expanding garment production, and gradually increasing value chain integration

• Upon its recommendation government established ‘the Textile Industry Council’ to handle all textile issues and solve its problems

• The strategy is currently being updated with an expanded vision reaching 2025




•QIZ expansions








Plans for expansion by main suppliers in

the next 5 years

The main suppliers of

different product groups in Egypt have prepared in 2012 plans for expansion of supplies in the next five years to be able to meet demands by US and European buyers in a stable and sustainable manner




•QIZ expansions








Increased investments upstream &

downstream

Upstream

• yarn

• Fabrics

• Dying and finishing

Downstream

• garments

• Home textiles

• Accessories




•QIZ expansions








Corporate social responsibility

• RMGEC initiative of ‘ your job close to your home’ to benefit

employees in delta governorates especially women

• Contribution to the development of Upper Egypt through

introduction of garment production lines in small villages

• Offering of job opportunities in advance for employees willing to

join the governmental training programs

• Adoption of ‘big brother approach’ to support SMEs especially

in the area of exports




•QIZ expansions








A prouder Egyptian worker

• "The people of Egypt have spoken,"

President Barack Obama said at the White House. "Their voices have been heard, and Egypt will never be the same."

•

• ".. we saw a new generation emerge — a generation that uses their own creativity and talent and technology to call for a government that represented their hopes and not their fears; a government that is responsive to their boundless aspirations. One Egyptian put it simply: Most people have discovered in the last few days…that they are worth something, and this cannot be taken away from them anymore, ever.

• This is the power of human dignity, and it can never be denied. "




•QIZ expansions








Revolution dust settling down

•Several steps have been taken on the road of political

transition from autocracy to democracy

and without violence

•The process is continuing as Egyptians insist on reaching

democracy fully and not settle with partial success

•Meanwhile the business climate is still good,

& businesses are producing, and exporting

•Existing foreign investments are operating

as usual and new investments are attracted

•The government is encouraging

foreign investment and paying

special attention to textile industry

especially garments

44

Annual Real Growth Rate

Source: World Bank - World Development Indicators - WDI

%

Even though Egypt’s growth rate has

decreased as a result of the unstable

circumstances after the 25th Revolution, it is

still high when compared to other markets


The Question

Have sourcing opportunities

improved

in Post-revolution Egypt?

YES………………Because

• QIZ expansions

• Clear sector strategy until 2025

• Plans for expansion by

main suppliers in the next five years

• Increased investments upstream

• Corporate social responsibility

• A prouder Egyptian worker

• Revolution dust settling down

Egypt is a

better source for importing

textile products

Thank You

sourcing opportunities in post revolution egypt

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