On November 3, 2023, the Marketing Department of China National Textile and Apparel Council (CNTAC), and the Sub-Council of Textile Industry, China Council for the Promotion of International Trade (CCPIT TEX) jointly released the Outbound Investment and Cooperation Guide by Country for the Textile Industry (2023) at the 6th Belt and Road Textile Conference. This report introduces and analyzes the investment environment of 20 countries worldwide. It provides information and guidance for textile enterprises to engage in “Belt and Road” cooperation.

Geography:

The Arab Republic of Egypt (Egypt) is located at the junction of three continents, Asia, Africa and Europe, at the strategic juncture of the “21st Century Maritime Silk Road”, spanning the two continents of Asia and Africa, with most of its territory located in northeastern Africa, bordering Libya, Sudan and other countries, and with the Red Sea in the east and the Mediterranean Sea in the north, and with a coastline of 2,900 kilometers. Egypt has a land area of 1 million square kilometers, with a tropical desert climate in most areas and a Mediterranean climate in the delta of the Nile River and the northern coastal regions, with hot, dry summers and mild, rainy winters.

Natural Resources:

Egypt is rich in mineral resources, with proven oil and natural gas reserves ranking fifth and fourth, respectively, among African countries. Large gas fields have been discovered in the Mediterranean Sea. However, water resources in Egypt are relatively scarce, with per capita water consumption falling short of United Nations water standards, making it a “water-scarce country”.

Infrastructure:

Egypt has a relatively complete infrastructure and a comprehensive road transport network, but its railway system requires upgrading. Regarding water transport, the Nile River is fully navigable within its territory, and there are abundant sea routes, with 62 ports (15 commercial ports). With the gradual construction of ports in recent years, the throughput capacity has been increasing yearly. There are 11 international airports throughout Egypt. Egypt ranks first in Africa regarding power generation capacity, with 99.3% of the country's electricity grid covered, ranking 28th globally.

Macroeconomy:

Egypt’s political situation is stable, and its economic development prospects are good. In the fiscal year 2021/2022, Egypt’s gross domestic product (GDP) amounted to US$385.58 billion, with a per capita GDP of US$3,780. Egypt is an open market economy with a relatively complete system of industry, agriculture, and services, with light industries such as textile and food processing accounting for about 36% of GDP. The World Bank’s Doing Business 2020 report indicated Egypt ranked 114th (114/190), up six places from 120th in 2018. The United Nations’ World Investment Report 2023 shows that Egypt attracted foreign investment flows of US$ 11.4 billion in 2022 as cross-border mergers and acquisitions increased, with an investment stock of US$ 148.89 billion.

Status of Textile Industry:

The textile industry is an essential traditional pillar industry in Egypt and one of the critical industries developed by the Egyptian government. The output value of the textile industry accounts for about 3% of the GDP and 27% of the manufacturing industry. Egypt is the only country in the Middle East and North Africa with a fully vertically integrated textile industry, abundant textile raw materials, a relatively complete industrial chain, and a wide range of markets. European countries and the United States are the main export markets for Egyptian textiles and apparel.

As for the output, cotton is an important cash crop and the main export product in Egypt. Egypt boasts Africa’s largest cotton and textile industry cluster, with almost every textile industry sector. Central Agency for Public Mobilization and Statistics (CAPMAS) showed that in 2021, Egypt’s cotton production totaled about 117,000 tons, of which 86,000 tons were for export; due to the increase in exports, Egypt’s domestic cotton consumption decreased by 31%. Egypt’s apparel processing capacity is relatively strong. GAP, Pierre Cardin, Marks & Spencer, and other international brands have processing bases in Egypt. Still, the upstream weaving, printing, and dyeing sector is relatively weak, and the fabrics and auxiliary materials required for apparel production are highly reliant on imports. Egypt currently has over 7,000 textile enterprises, 90% of which are small and medium-sized enterprises (SMEs), providing employment opportunities to about 1.5 million people. The Egypt Oriental Weavers Carpet Company is the world’s largest producer of machine-woven carpets, with an annual production capacity of 110 million cubic meters.
Since the beginning of 2019, Egypt has been promoting reforms to modernize the textile industry by merging 23 state-owned textile companies into eight and injecting EGP 23 billion into two state-owned enterprises, Egyptian Cotton and Textile Industry Holding Company, for equipment, plant renewal, and staff recruitment. Egypt’s Ministry of Public Enterprises said that from the end of 2022 to 2024, the reorganized textile factories will be put into operation. The existing production capacity will be increased by eliminating old machines and acquisition by foreign companies.

International Trade

According to the United Nations Statistics Division, Egyptian textile and apparel exports totaled US$ 4.28 billion in 2022, with US$ 1.84 billion in textile exports and US$ 2.44 billion in apparel exports. Products are mainly exported to the United States and European Union markets, with the rest going to countries such as Turkey, the UAE, Saudi Arabia and China. The main export products include apparel (56%), cotton and cotton yarn (15%), carpets (7%) and others. Egypt’s textile and apparel imports amounted to US$ 3.36 billion during the same period. China was the largest source of Egypt’s textile and garment imports, accounting for 58.7% of Egypt’s total textile and garment imports. The main imported products are chemical filament (accounting for 34%), cotton, cotton yarn, and cotton woven fabrics (accounting for 19%), and chemical staples (accounting for 18%).

Trade and Investment Policy
In recent years, Egypt has actively participated in a variety of bilateral and multilateral trade cooperation and has joined regional trade agreements, including (1) EU-Egypt Strategic and Comprehensive Partnership Agreement, under which Egyptian industrial products enjoy zero tariffs when entering the European Union market; (2) Israel Qualified Industrial Zones (QIZ) Initiative, under which products are exported from QIZs to the United States are exempt from all import duties if they meet the condition that 10.5% or more of the value of the product is made in Israel (at present, the main exports from QIZs are textiles and garments);  (3) Egyptian-Turkey Free Trade Area Agreement,  under which Egyptian industrial goods enjoy zero tariffs when entering Turkey, while Egyptian goods enter the countries that have signed free trade agreements with Turkey (including Israel, Jordan, Syria, Tunisia, Morocco and several European countries) will also enjoy certain preferential treatment; (4) Egyptian-European Free Trade Association (EFTA) Free Trade Agreement, under which Egypt and the four EFTA countries (Iceland, Liechtenstein, Norway and Switzerland) reciprocally exempt each other from import tariffs on industrial goods and basic agricultural products.

In addition to the FTAs mentioned above, Egypt has joined several African and Arab regional organizations, such as the Greater Arab Free Trade Area (GAFTA), the African Free Trade Area Agreement (AFTA) and the Common Market for Eastern and Southern Africa (COMESA). In addition, Egypt is a beneficiary of the Universal Preferential Tariff System (UPTS) in Australia, Canada, Japan, Kazakhstan, New Zealand, Russia and the United States of America, where it enjoys preferential or exemptions from tariffs on imports of agreed products.

Summary and Suggestion for Investment

(1) Egypt boasts the best business environment in Africa due to its favorable geographical location, relatively sound infrastructure, and generally stable political situation. Egyptian textile and garment exports are mainly oriented toward the European and American markets, and signed trade agreements with several countries/regions, enjoying preferential tariff arrangements.

(2) Egypt has cotton resources, a certain industrial base, and many skilled workers. Relatively completed industrial parks support enterprises to move directly into; the industrial agglomeration effect is obvious. The Egyptian government introduced a textile industry development vision, with greater efforts to attract and encourage overseas investment in preferential policies.

(3) The Egyptian government attaches importance to the development of cotton planting and textile industry chain. Improving the cotton textile industry chain and increasing the export of high-value-added textile products to Europe and the United States are the directions the Egyptian government promoting. At this stage, Egyptian fabrics are still mainly dependent on imports. However, due to the relative scarcity of water resources in Egypt, when considering investment in dyeing and finishing projects, it is necessary to fully understand the conditions of local water resources and plan in advance for the design of technical routes and the construction of water management systems and water treatment facilities in factories.

(4) Egypt has a large consumer market with demand for high, medium, and low-grade textile and garment products. However, the local textile production capacity and product categories are relatively limited, not yet fully meeting the needs of the domestic consumer market. Therefore, there is still potential for trade cooperation in textiles and apparel with Egypt.

Source: CHINA TEXTILE LEADER Express