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A Look at Sourcing Apparel From Egypt and Investing in its Textile Industry

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Egypt may be best known for its impressive pyramids and colorful history, but it is also known as the most attractive African country for investment and one of the most developed in the Middle East/Africa, with a gross domestic product of $298 billion in 2018.

Like many larger countries, the economy is dominated by the service sector (54 percent) and agricultural sector (12 percent), but it is also known for its industrial sector (34 percent) that provides significant employment.

The apparel sector in Egypt

The apparel sector plays an extremely important role in the Egyptian economy and it has seen a rebound and a new spurt of growth in recent years.

Egypt has more than 1,500 apparel factories with average production capacity of 500 million pieces per day, and it is considered to be the first sector in terms of labor force, which recorded 1.5 million workers, 50 percent of which are women.

The apparel sector is the country’s most important industrial sector; it represents 6.5 percent of total non-petroleum.

Apparel exports reached $1.604 billion for 2018 compared to $1.459 billion in 2017, achieving a rise of 10 percent of which 50 percent of the apparel production was exported to the U.S. and 30 percent to Europe.

Egyptian apparel sector enjoying many advantages

  • International Trade Agreements: The U.S. is the main export destination for the Egyptian apparel industry. Apparel created within the Egyptian Qualified Industrial (QIZ) Zone are duty free to the U.S. Under the protocol, goods made in Egyptian QIZs can use fabric imported from third countries and remain eligible for duty-free entry into the U.S. market, provided 35 percent of their value is added in Egypt, including a minimum of 10.5 percent of Israeli content. Costs incurred in the U.S. also count towards the 35 percent threshold. Egypt also enjoys duty-free market access to the EU with a double transformation rule of origin. With its fabric base and sourcing proximity to Turkey (Turkish fabrics classify as local under regional cumulation of rules of origin), exports to the EU are likely to increase.
  • Vertical integration and a developed infrastructure: Egypt’s textiles and clothing sector is the most integrated on the African continent. The country offers a well-developed infrastructure and is investing more than $15 billion in roads, electricity networks and irrigation projects, including 15 marine ports. Egypt is also the largest producer of Extra-long- staple cotton in Africa.
  • Proximity: Egypt offers shorter routes to the U.S. than Asian ports (12 days compared to over a month). Egypt also provides easy access to markets in Europe and Africa. Egypt is an intercontinental country, with multiple ports and facilities giving it a strategic advantage for exports to the U.S. and the EU.
  • Egyptian Apparel Factories: Egypt is a sourcing hub for a large variety of apparel products. The region offers ethical, socially compliant factories with export experience. The supply chain is vertically integrated. Many companies are certified by Wrap, ISO and OEKO-TEX.
  • Competitive factor costsEgypt offers a large, cost-effective, skilled labour force. Labor costs are low in Egypt, with minimum labor wages of $115, compared to competitors like China, Cambodia, India, or Vietnam. Electricity costs around 7 cents a kilowatt-hour compared to three to four times that amount in China.

Moreover, the Egyptian T&C sector will benefit from a three-year technical assistance project to further increase its international competitiveness. The initial phase of the program runs until December 2021 and is open to all Egyptian-owned and managed enterprises. The project is co-funded by the Government of Switzerland under the Global Textiles and Clothing (GTEX) program as well as the Government of Sweden under the MENATEX program. It is implemented by the International Trade Centre (ITC). Formed in 1964, ITC is the focal point within the United Nations system for trade related technical assistance.

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