Egypt: Looking abroad

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Industrial firms in Egypt are beginning to focus their efforts on expanding further afield, as the domestic economy is still somewhat shaky on the back of local political instability and the faltering international economy. Meanwhile, the government is promoting local industry and goods in foreign markets to draw in more foreign currency to support the national economy.

Political instability has left Egypt’s domestic economy in a precarious position. The country has just $15.21bn left in foreign currency reserves as of early May, and foreign direct investment (FDI) dropped to $440m in the July-September 2011 period compared to $1.6bn the year before. Domestic borrowing rates have increased 15%, largely due to the Egyptian pound’s “flight to safety” to the dollar and Swiss franc.

In light of this,a number of Egyptian firms, such as steel manufacturer DSDFerrometalco (DSDF) and Ghabbour Auto (GB Auto), are proactively targeting foreign markets for growth.

Serge Vermaere, the managing director of DSDF, told OBG that while the company is cutting prices aggressively in an attempt to stay competitive within the local economy, it is also increasingly looking outside Egypt, particularly at tenders in other parts of North Africa and the Gulf. Though 60% of the company’s products are already exported, accounting for 35% of revenue, Vermaere said DSDF is hoping to further strengthen its international presence.

GB Auto is in a similar position. While the company saw profits of LE258m ($43m) in 2010, its 2011 profits reached only LE191m ($32m) in 2011, Raouf Ghabbour, GB Auto’s chairman and CEO, told OBG. However, the auto firm has operations in Iraq and is currently working to expand operations in at least two other countries in North Africa. While two-thirds of GB Auto’s business comes from the Egyptian market and the remaining one-third from operations abroad, Ghabbour told OBG they are hoping to reverse that proportion.

In an attempt to support this type of overseas expansion, the Egyptian government has been promoting the country abroad, both in an attempt to boost FDI and to spread the word about Egyptian industry.

Gouda AbdelKhaleq, the country’s minister of supply and internal trade, has underlined the need to draw up a detailed promotion campaign for products made in Egypt. Likewise, in a mid-May trade conference sponsored by DHL, the global logistics firm, government officials stressed the need for trade agreements between Egypt and the EU, Turkey and other Arab states to be strengthened and increasingly utilised.

Some progress has already been made on promoting Egyptian goods abroad. For example, the country has resumed potato exports to Russia after the Russian government removed a ban on Egyptian imports of the crop. The ban was put in place in 2011 due to fears of “brown rot”, a disease that causes stunted growth in crops. However, an agreement between the two governments now allows Russian Customs officials to inspect produce before shipment.

Reaching abroad may also have more tangible benefits for Egyptians as well. In May 2011, a trade delegation from a Spanish rail-manufacturing firm visited Cairo, expressing interest in collaborating on restructuring the Egyptian national railway.This potential venture would see the Egyptian economy further supported by FDI, but will also provide much-needed improvements to the country’s ailing rail system.

As Egypt awaits a return to solid economic growth, the focus by Egyptian firms and government officials on strengthening international trade ties should help the country in the long run. Once stability allows the Egyptian economy to return to normal, Egyptian firms may become better linked to the global economy than they were prior to the Arab Spring.

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