THE TEXTILE AND CLOTHING INDUSTRY IN EGYPT

Transcription

1 THE TEXTILE AND CLOTHING INDUSTRY IN EGYPT AUGUST Business Studies & Analysis Center. All rights reserved. Unauthorized reproduction, copying, r ing, storage or Web-site posting is prohibited. All information in this report is verified to the best of the Author s and the Publisher s ability.

2 ACKNOWLEDGMENT The American Chamber of Commerce in Egypt wishes to express deep appreciation to the following experts for their extensive support throughout the preparation of the study: Ahmed Ghoniem (PhD) Advisor to the Minister for Foreign Trade and Industry Ministry of Foreign Trade and Industry Magdy Tolba Chairman & Partner Cairo Cotton Center Mohamed Hassouna Deputy Director Public Enterprise Office (PEO) Mohamed Kassem Chairman World Trading Company Mohamed Rabie Textile Consultant Egyptian Textile Consulting (ETC) Naglaa El-Ahwany (PhD) Professor of Economics Faculty of Economics and Political Sciences Cairo University i AmCham BSAC 2004

3 EXECUTIVE SUMMARY Global trade in Textiles and Clothing (TC) will be undergoing a fundamental change after the ending of the Agreement on Textiles and Clothing (ATC) in 2005, when the sector becomes fully integrated into the WTO and all quotas are phased out. This signifies a new form of global market that is currently characterized by artificial comparative advantages and managed trade. Market forces will become the dominant determinant for TC production and trade. A reallocation of resources will take place, which is expected to have a considerable effect on TC exports from many developing countries. For Egypt, the TC industry has always been of strategic importance to the economy. It is one of the largest manufacturing and exporting processes in the country and a huge employment absorber. Egypt poses a high comparative advantage for a variety of TC products, which it has developed into a competitive advantage in major foreign markets. In 2005, however, Egyptian exports will lose their quasi-guaranteed market access into the EU and US and will have to adapt to the new market situation. The final liberalization of trade in TC will put the local industry (and exports in particular) to the test. It runs the risk of losing out if not well prepared for the expected business and market changes in this business. The local TC industry will be exposed to tougher competition from abroad and exports stand to lose footage in major foreign markets. As such, comprehensive preparation and speedy action is a must to confront lingering risks and secure new and existing markets. This study attempts to identify risks and challenges facing Egypt s TC industry and shed light on opportunities in one comprehensive framework. After reviewing global trends in the TC industry in part I, the local industry is detailed in part II with respect to ownership, production, and cost structures. Part III emphasizes TC trade trends for Egypt with its major trading partners, the EU and US. Part IV analyzes the industry performance, identifying current obstacles and existing policies to create new opportunities. In conclusion, a SWOT analysis and industry outlook are presented to arrive at a target set of recommendations. AmCham BSAC 2004 ii

4 TABLE OF CONTENTS LIST OF TABLES LIST OF TABLES ACRONYMS v vi vii PART I. GLOBAL TRENDS IN TEXTILES & CLOTHING 1. GLOBAL TRADE TRENDS 2. GLOBAL APPAREL RETAIL AND SOURCING 3. THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) 3.1 AGREEMENTS PRIOR TO THE URUGUAY ROUND 3.2 URUGUAY ROUND AND THE AGREEMENT ON TEXTILES AND CLOTHING 3.3 CANCUN CONFERENCE 4. TEXTILE AND CLOTHING OUTLOOK ELIMINATION OF QUOTAS 4.2 NON-TARIFF BARRIERS 4.3 THE CHINA FACTOR 4.4 THE ISTANBUL DECLARATION FOR FAIR TRADE IN TEXTILES AND CLOTHING 5. E-COMMERCE APPLICATIONS IN THE TEXTILE AND CLOTHING INDUSTRY 5.1 B2C MODELS IN THE CLOTHING INDUSTRY 5.2 B2B MODELS IN THE TEXTILE AND CLOTHING INDUSTRY 5.3 E-MED TEX-NET PART II. EGYPTIAN TEXTILE AND CLOTHING INDUSTRY PROFILE 1. ECONOMIC IMPORTANCE 2. PRODUCTION STRUCTURE 3. OWNERSHIP STRUCTURE 3.1 PUBLIC SECTOR ENTERPRISES 3.2 PRIVATIZATION 3.3 PRIVATE SECTOR ENTERPRISES 3.4 US INVESTMENTS IN THE TEXTILES AND CLOTHING INDUSTRY 4. COST STRUCTURE 4.1 LABOR COSTS 4.2 RAW MATERIALS & INVENTORY 4.3 COST OF CAPITAL 5. BUSINESS CLIMATE 5.1 INVESTMENT AND ENVIRONMENT 5.2 INTELLECTUAL PROPERTY RIGHTS 5.3 INDUSTRIAL SAFETY, PUBLIC HEALTH, AND THE ENVIRONMENT iii AmCham BSAC 2004

5 PART III. TRADE TRENDS IN TEXTILES AND CLOTHING PERFORMANCE OF TC TRADE IN EGYPT 1.1 COMPOSITION OF TC TRADE IN EGYPT 1.2 REVEALED COMPARATIVE ADVANTAGE (RCA) IN TEXTILES AND CLOTHING 1.3 MAJOR MARKETS FOR EGYPTIAN TEXTILES AND CLOTHING 2. TARIFF AND NON-TARIFF BARRIERS TO TRADE IN TEXTILES AND CLOTHING 2.1 EXPORTS 2.2 IMPORTS 3. THE EGYPT-EU ASSOCIATION AGREEMENT 4. EXPORTING TO THE US 4.1 POSITIONING IN THE US MARKET FOR TEXTILES AND CLOTHING 4.2 EGYPT-US TRADE TRENDS IN TEXTILES AND CLOTHING 4.3 US FREE TRADE AGREEMENTS 4.4 QUALIFYING INDUSTRIAL ZONES (QIZS) 4.5 QIZS, JFTA AND JORDAN S TC EXPORTS 4.6 COMPARISON BETWEEN EGYPT AND JORDAN 4.7 THE FTA BETWEEN EGYPT AND THE US AND QIZS PART IV. PROSPECTS AND OPPORTUNITIES 1. OBSTACLES FACING THE TEXTILE AND CLOTHING INDUSTRY IN EGYPT 1.1 NON-TARIFF BARRIERS 1.2 TRANSPORTATION COSTS 1.3 PRICING OF LOCAL COTTON 1.4 LABOR PRODUCTIVITY 1.5 TECHNOLOGY 1.6 MARKETING 2. POLICIES AFFECTING THE TEXTILE AND CLOTHING INDUSTRY 2.1 REGIONAL AND GLOBAL INTEGRATION 2.2 PRIVATIZATION 2.3 MANUFACTURING & EXPORT PROMOTION POLICIES 2.4 THE INDUSTRY MODERNIZATION PROGRAM (IMP) 3. E-COMMERCE IN THE EGYPTIAN TEXTILE AND CLOTHING INDUSTRY 4. CONCLUSION 4.1 SWOT ANALYSIS OF THE TEXTILE AND CLOTHING INDUSTRY IN EGYPT 4.2 INDUSTRY OUTLOOK 4.3 RECOMMENDATIONS APPENDIX 86 AmCham BSAC 2004 iv

6 LIST OF TABLES Table I.1 Selected Top Global Retailers Table I.2 Major European Apparel Markets Table I.3 Factors limiting Online Apparel Sales Table II.1 Textile and Clothing Industry:Summary Profile (2001) Table II.2 Production Trends for Selected TC Products Table II.3 Geographical Distribution of TC Factories in Egypt Table II.4 Indicators of Public Sector Companies in the TC Industry Table II.5 Privatization Achievements in the TC Industry Table II.6 Private Investment in the Textile & Clothing Industry Table II.7 US Investments in the Textile & Clothing Industry Table II.8 Average Annual wages in Selected Leading TC Producing Countries Table II.9 TC Labor Cost in Selected Countries* (2002) Table II.10 Investment Regimes for Establishing a Business in Egypt Table III.1 Egypt Textile & Clothing Exports Table III.2 Egypt Exports of Selected TC Products Table III.3 Egypt Textile & Clothing Imports Table III.4 Potential Export Markets for Selected TC Products Table III.5 Egypt RCA for Selected TC Products Table III.6 EU Quotas on TC Exports for Egypt Table III.7 US Quotas on TC Exports for Egypt Table III.8 Bound Tariff Rates for TC Exports to the US Table III.9 Tariff Schedule for Egypt TC Imports Table III.10 Egypt TC Exports to the US Table III.11 Comparison of Major TC Exports of Egypt and Jordan to the US Table IV.1 Duties and Taxes on Manufacturing Activity in Egypt Table IV.2 Egypt Exports to COMESA Table A.1 Waste Streams Produced and Contaminants of Concern for the Textiles & Clothing Industry Table A.2 Selected Textiles and Clothing Companies with Internet Portals in Egypt v AmCham BSAC 2004

7 LIST OF FIGURES Figure I.1 Major Players in Global TC Trade (2002) Figure I.2 Global Trade in Textiles & Clothing Figure I.3 Phases of the ATC Figure II.1 The TC Value Chain Figure II.2 Wholesale Price Indices for Textiles & Clothing Figure II.3 Public/Private Ownership in the TC Industry Figure II.4A Market Shares of Public TC Enterprises by Output Figure II.4B Market Shares of Public TC Enterprises by Operating Revenue Figure II.5 Stock of Private Investment in the TC Industry Figure II.6 Private Investment Flows in the TC Industry Figure II.7 FDI in the Textiles & Clothing Industry Figure II.8 Cost Structure in the Textile & Clothing Industry Figure III.1 Trends for Major TC Exports Figure III.2 Revealed Comparative Advantage (RCA) in Textiles Figure III.3 Revealed Comparative Advantage (RCA) in Clothing Figure III.4 Destination of Egyptian TC Exports (2002) Figure III.5 Top TC Exports to the EU Figure III.6 Top TC Exports to the US Figure III.7 Egypt Exports to the US Figure III.8 Jordan s TC Exports to the US (2003) Figure IV.1 Supply & Distribution of Egypt's Cotton Crop AmCham BSAC 2004 vi