Egyptian Ready-Made Garment Industry's "Road Show" Hits Manhattan

— January 29, 2014

Earlier this month, 28 Egyptian ready-made apparel companies presented the case for investing in garment production in Egypt at an event in New York City's Marriott Marquis Hotel. Seven "Qualifying Industrial Zones" (QIZs) created in Egypt since 2008 allow garments manufactured in Egypt to be exported to the U.S., a market with high tariffs on apparel imports, duty free.

Advantages in quality, design, relatively low-cost labor, warehousing and vertical manufacturing have won Egypt's 260 ready-made garment manufacturers orders from such well-known international brand names as: Aeropostale, Calvin Klein, Disney, Gap, Hanes brands, J.C. Penney, Macy's, Nautica, Timberland and Zara.

The industry has weathered a 6 percent decline in production since the outbreak of unrest in 2011. However, this contraction came on the heels of previous year-on-year growth in sales to the U.S. of 7.8 percent. With the recent depreciation of the Egyptian currency, the country's improved price advantage helped garment exports rebound by 16 percent in the first half of 2013, as the country started returning to stability and a new constitutional order.

This may have been helped by the fact that production is mostly located outside of Egypt's major urban centers. While Egypt is not in the top ranks of apparel exporters to the U.S. such as China, Vietnam and Bangladesh, it is one of the largest producers in Africa exporting more than 340 million pieces annually without any of the acute occupational health, safety and human rights liabilities encountered in the prime exporting nations. Egypt's comparative advantages lie in its geographic position, superior capabilities to deal with complex designs, and relatively low labor costs.

The garment sector is important to the Egyptian economy; it accounts for a quarter of non-oil exports, one fifth of total manufacturing exports, and half a million jobs – roughly 25 percent of manufacturing employment. In addition to its natural competitive advantages and strong government support for the growth of a sector whose production is 75 percent privately owned, a number of potential efficiency improvements represent low-hanging fruit for potential strategic investors.

Opportunities exist to capture more of the value chain by better integrating domestic cotton production, fabric production and dyeing with the garment manufacturing. Efficiency and concomitant profit improvements ranging from 20 percent to 80 percent are also possible for experienced operators capable of rationalizing production processes.

Egyptian Ready-Made Garments Export Council chair Mohamed Kassem said he was pleased with the level of interest attracted by his members' U.S. visit, noting, "Despite it all, Egypt works.

"Despite it all — the unrest and insecurity of the past few years — the Egyptian business community continues to lead the way by doing its part to create jobs and attract foreign direct investment," he continued, pointing out that in 2013 the Council helped to fuel a remarkable 11 percent increase in non-petroleum exports in Egypt.

"Egypt's revolution and transition to democracy, like others throughout history, is a 
work-in-progress and will take time," continued Kassem. "We urge our partners around the world to recognize that Egyptians need to work through this transition themselves and we ask for patience and support for the Egyptian people."

"Working with business leaders like the American Chamber of Commerce in Egypt, the Ready-Made Garments Export Council will diligently work to foster sound economic policies that encourage foreign direct investment and job growth," Kassem concluded. "We believe that economic opportunities must go hand-in-hand with efforts to restore political stability and the rule-of-law."

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