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Is Egypt’s Unrest Ruining its Textile Industry?

Amidst crashing turmoil and politically charged violence, Egypt’s garment industry beats on, apparently undeterred. Defying all reasonable expectation, Egypt’s clothing manufacturers, according to most accounts, continue to remain open and to satisfy orders on time.

Bassem Sultan, CEO of Dyetex, a manufacturer based in Alexandria, said, “The situation is not so bad. What you see on TV is not the full picture. The good thing is that factories and businesses are still running, while ports and banks are open, so we are not badly affected.”

In fact, textile exports have been on the rise for the first five months of the year, up 16.5%, according the Egyptian Textile Export Council. Still, the year’s overall 2013 numbers, in comparison with 2012, are generally expected to be down.

At the very least, communication from Egyptian authorities has been intransigently sunny. Mohamed Kassem, chairman of Egypt’s Ready-Made Garments Export Council, contends that, despite domestic chaos, “production has never stopped and deliveries will be met.”

But not all the news has been so uplifting. Egypt’s textile sector has languished since the 2011 revolution. According to Mohamed al-Murshedi, president of the Textile Industry Division and vice president of the Federation of Investors, approximately 40 percent of Egypt’s textile factories have shuttered their doors due to national economic malaise.

Mohamed al-Qalyubi, president of the the Investors Organization of Mahala, said that at least forty textile factories have permanently shut down, including major ones operated by Abu al-Sabaa and Fajar al-Mahala.

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Fatahi al-Sayyed, president of the Investors Organization of Buhaira, claims that as many as 100 manufacturing companies of various sizes have closed down as a result of Egypt’s economic downturn.

And foreign companies, worried about an unpredictable business environment in constant flux, have all but halted investment. For example, a growing number of Turkish textile companies are closing their operations until the return of some measure of normalcy, whenever that might occur. Vahap Kucuk, the chairman of LCWaikiki, said, “We have started retailing operations in Egypt in the last two years. We have six stores, three in Cairo, two in Alexandria and one in Hurghada. We have stopped sale in our stores in Cairo and Alexandria in order not to take risks against life safety of our staff and clients. However, our store in Hurghada is still open and ordinary operations are continuing.”

One decisive factor is the proximity of stores to Cairo, the crucible of Egypt’s tumult. Kucuk explained, “We weren’t affected by the incidents because their production center is located in Alexandria, far from Cairo and central places. But we suspended the production on Aug. 14 because of curfew.”

The curfew has been widely cited as an obstacle to business. Sultan complained, “There is currently a curfew, which goes from 7pm-6am, so this of course affects local retail sales because shops are closed, and is affecting transportation to a degree.” He paints a picture markedly less rosy than the one most Egyptian authorities espouse: “There are no new investments, and no plans for expansion, everyone is in wait and see mode, and trying to manage the current operations. The main problem the industry faces is lack of finance, as the banking sector is primarily financing the government.”

Both EU and US data tell a story of a hurting industry. According to EU statistics, both general political instability and rampant workers strikes have significantly slowed Egyptian exports. In 2012, Egypt was ranked the seventeenth largest textile and clothing exporter to the EU. It has dipped, in 2013, by 12.6%.

Apparel exports to the US have likewise become sluggish, dropping 3.5% this year to $871.5 billion from $902.8.

Egypt’s exports received a short-lived boost last December from the devaluation of its currency. However, businesses have struggled to capture these gains since the general economic condition continues to deteriorate and the garment industry is so dependent upon its own imports of yarn, fabric, and various accessories.

Egyptian cotton is renowned for its high quality but is mainly exported since it is generally too expensive to be used to manufacture denim and t-shirts, the main cotton products desired by Western retailers.

One of Egypt’s biggest employers, the textile industry provides nearly a quarter of all its industrial jobs and accounts for twenty-seven percent of of all non-oil exports. Egypt exported $2.2 billion worth of textiles in the first nine months of 2012, a hefty ten percent drop off from the previous year. In 2013, so far, that decline persists unabated.