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Egypt’s Textile Manufacturers invest even in Hard Times © Rainer Sturm/ pixelio.de
19.04.2016

EGYPT’S TEXTILE MANUFACTURERS INVEST EVEN IN HARD TIMES

  • Competition requires Modernization
  • Declining Exports due to Energy Shortage and Lack of foreign Currency

Cairo (gtai) – Egypt’s vertically integrated textile and clothing industry has a strong basis. To remain competitive more modern equipment and innovative products are required. Also the cooperation with local suppliers is upgradeable. The government is planning two new textile industrial zones. The import of textile and leather machinery in the first three quarters of 2015 reached USD 135 million. Of this 17% were Ger man deliveries.

  • Competition requires Modernization
  • Declining Exports due to Energy Shortage and Lack of foreign Currency

Cairo (gtai) – Egypt’s vertically integrated textile and clothing industry has a strong basis. To remain competitive more modern equipment and innovative products are required. Also the cooperation with local suppliers is upgradeable. The government is planning two new textile industrial zones. The import of textile and leather machinery in the first three quarters of 2015 reached USD 135 million. Of this 17% were Ger man deliveries.

The situation of the textile and clothing industry in Egypt provides ample material for both optimists and for doomsayer. Technical modernization of the mills and a focus on products with higher added value offer opportunities. Potential also has a better link between the production stages. These would include installation for spinning, weaving and laundries for denim. As upgradeable product groups like underwear, high quality knitwear and fabrics can be seen. With such the benefits of Egypt could be better accentuated. These include the favorable geographical location, the proximity to major markets and a variety of trade agreements. According to the American Chamber of Commerce Egyptian manufacturers already provide clothing for international brands such as Calvin Klein, Disney, Gap, Timberland and Zara.

The chances however are being opposed by a number of difficulties. Also the textile and clothing sector was hit by the energy crisis and the lack of foreign exchange. Many companies have a limited level of liquidity. Research and development were neglected for years, although there are positive examples of innovative companies also. Many producers were forced to close in recent years. Due to the risks in the sector banks are very reluctant in lending money.

Especially needed would be modern technology and product innovations in the face of the strong competitive pressures from abroad. The comparatively low level of wages in Egypt is higher than at Asian competitors. This lets rise problems in terms of export opportunities, also with regard to the domestic market. Here imported goods cover ground, especially since Egyptian manufacturers have raised their prices in recent years. As intensifier act the high exchange rate of the Egyptian pound and the inflation rate of around permanently 10%.    

The cost pressure makes it difficult for the mills to attract high-skilled workers, which is also reflected in a high fluctuation. Several times since 2008 strikes have paralyzed the production. Industry experts complain about a poor education level and lack of efficiency. As a countermeasure the companies organize courses for their employees.

The local cultivation of cotton does not cover the demand of the textile manufacturers

Despite cotton is grown in Egypt on a large scale, the varieties do not fit the needs of most local spinning mills. The country is famous for its high-quality, soft and durable long-staple cotton, while the factories prefer and demand now short and medium staple cotton qualities. The exports are facing a strong competition from the US Pima cotton quality. The Egyptian textile and garment companies mostly import in contrast their material especially from Greece, the United States, Burkina Faso and Benin. As a result, the high-quality raw cotton is exported and not value adding intensively processed domestically, while scarce foreign exchange flows in the import of foreign cotton.

Unrest in the sector is provided by short-term legislative changes. Thus the import of cotton was prohibited in summer of 2015, however allowed again after one week. Domestic cotton farmers are particularly affected by the reduction of subsidies, which concerns the cultivation itself and the needed fertilizers. Many farmers change to other crops, because cotton does not pay anymore and high inventories have accrued.

Egypt has a vertically integrated textile and clothing industry. It represents about 25% of the industrial production of the country and also provides a quarter of all manufacturing jobs. The largest product group is clothing, also fabrics and filament fiber and yarn play an important role. Approximately 50 to 60% of the spinning, weaving and felt capacities are state owned, while private companies dominate for 90% the garment production. The regional main textile areas are greater Cairo, the Nile Delta and Alexandria. In February 2015 the General Authority for Investment and Free Zones counted 4,594 textile and apparel companies with total investments of nearly USD 6 billion. Of this 4,399 companies where located in normal domestic areas, 196 in special free zones.

Big textile and clothing manufacturers in Egypt (selection)
Name      Internet address
Abo El Sebaa Weaving Company http://abo-elsebaa.com
Al-Arafa Investment and Consulting http://arafaholding.com  
Alexandria Spinning & Weaving Co. (SPINALEX) http://spinalex.com  
Chourbagi Moderne for Clothing and Textiles S.A.E. "Charmaine" http://www.charmaine.com.eg
Egyptian Spinning & Weaving Company (ESW)   http://egyptianspinning.com  
El-Nasr Clothes and Textiles (KABO) http://www.kabo.com.eg
Misr Spinning and Weaving (El Mahala el Kobra)    http://www.misrhelwantextile.com
Oriental Weavers http://www.orientalweavers.com

Quellen: Invest in Egypt, Research of Germany Trade & Invest

Weaker export results for textiles and clothing in 2015

With a volume of at last nearly USD 2.7 billion in 2014, textiles and clothing were the fourth most important export goods of Egypt. Based on the first nine months of 2015 however, weaker annual results than in 2014 are expected. The by far biggest target markets are still the EU and the USA.

Egyptian exports of textiles and clothing (HS 52, 54, 55, 57 and 60-63;
in USD million)
2013 2014 2015
2,843 2,695 1,848

*) January – end of September
Sources: UN Comtrade

Against all odds, the Egyptian textile and clothing companies are about to invest in their facilities. ESW announced in September 2015 to provide eight subsidiaries with approximately USD 19 million for reactivated and new production lines. The Czech Pegas Nonwoven Co. has ordered another manufacturing facility for its Egyptian plant. The imports of textile and leather machines from Germany are more stable than the total imports. After the results of the first three quarters, it is clear that German deliveries in 2015 will be higher than in 2014.

Import of textile and leather machinery to Egypt (HS 8444-49 and 8451-53 HS; in USD million)
Country 2013 2014 2015
Imports total 203.6 151.6 135.0
from Germany 27.2 22.3 22.9

*) January – end of September
Sources: UN Comtrade

The Egyptian government has announced to build two industrial zones for textiles in Borg El Arab and the 6th of October City near Cairo. In August 2015 the Chinese Gondong Group had first talks about a possible investment in Egypt.

Internet addresses

Cotton Research Institute
Internet: http://www.arc.sci.eg
Egyptian Textile Development Association
Internet: http://www.etda-egypt.org
Egy Stitch & Tex (internationale Ausstellung in Kairo)
Internet: http://www.egystitchandtex.com
Industrial Development Authority
Internet: http://www.ida.gov.eg
Industrial Modernisation Centre
Internet: http://www.imc-egypt.org
Industrial Union of Garments - Chamber of Textiles Industries
(im Dachverband Federation of Egyptian Industries)
Internet: http://www.fei.org.eg
Home Textile Export Council
Internet: http://www.egyptianhometextiles.org
National Research Center (mit Textile Industries Division)
Internet: http://www.nrc.sci.eg
Ready Made Garments Export Council
Internet: http://www.rmgec-egypt.com
Textile Export Council
Internet: http://www.textile-egypt.org