A research study suggests steps to help boost Egypt's industrial sector, reports Ahmed Kotb
A recent study published by Partners in Development for Research, Consulting and Training called for a more consistent industrial policy that would lead to sustainable industrial development regardless of political instabilities.
"The industry can play a vital role in pushing the Egyptian economy forward, and it has the ability to turn Egypt into an industrial leader in the Middle East and North Africa region and a foreign investment attraction," said Abla Abdel-Latif, a professor of economics at the American University in Cairo and head of the team which prepared the study.
Abdel-Latif pointed out that industrial growth in Egypt fell drastically to 0.7 per cent in the fiscal year 2011-2012, compared to 5.3 per cent in 2009-2010. The industry's share in GDP, she added, decreased to 16.2 per cent, down from 16.8 per cent during the same period.
She also stated that "for the industry in Egypt to grow, it should move up in the value chain from traditional industries to activities high in added value, and work on creating new competitive advantages in the feeder industries".
The economics professor also said that the industrial development strategy that was designed in 2006 should be the basis to build on for the near future. That strategy stipulated that Egypt's industry should reach, by 2025, a growth rate of nine per cent in industrial output, and a 22.6 per cent share in GDP.
Abdel-Latif said that issues such as political and security instability, part of the fallout from the revolution, led to an increase in the number of factories that either shut down or are near closure as a result of an inability to cope with operational costs, and the insufficiency of resources needed to provide facilities to industrial zones.
The research paper identified several steps to salvage the industrial sector, including a legal framework that supports the industry and ends all conflicts in related policies; depending on public-private partnership in executing various industrial projects; and developing a system for financing projects that would include modern mechanisms such as Capital Venture and Lease Financing.
The paper stressed the need to solve current difficulties faced by existing industries to improve their performance which in turn will eventually help Egypt tackle the current economic crisis. That could happen, says the research paper, through creating small industrial clusters for garments inside residential areas, reviving the construction industry through supporting private sector activities, endorsing the machinery industry by linking small, medium and large establishments in value chain, and developing existing industrial clusters of marble, granite and furniture.
The Ministry of Industry and Foreign Trade, according to the report, should design and execute industrial policy in a decentralised manner to gradually achieve provincial development and lower poverty rates. "Executing the policy should be done according to permanent mechanisms that are not associated with successive ministers," says the research paper.
Abdel-Latif said the current picture is not so gloomy. She explained that a number of problems had been resolved recently. These include finding solutions for institutional problems in the garments and spinning sectors, preparing a new draft law for the federation of Egyptian industries, and taking serious steps in forming a new strategy for developing Egypt's exports from 2014-2018.
© Al Ahram Weekly 2013
