How Will the Government Reduce the Import Bill and Maximize the Export Bill?
The government signaled its focus on growing local manufacturing to limit Egypt’s imports. On the export side of the equation, Egypt is aiming to increase exports to USD 100 bn a year by 2025 as part of the government’s plan to increase the private sector’s role in the economy. Out of >6.8k import categories, the ministry shortlisted 4.8k industrial categories that are viable for local manufacturing.
These industrial categories cost us USD 60 bn in 2019 — or 85% of the year’s total import bill (USD 72 bn). The government is targeting 9 industries
The Chemicals Industry
Chemicals industry imports accounted for US$ 10.3 billion in 2021, but they were also the largest contributors to Egyptian exports at US$ 6.8 billion. The government identified 6 end-products to manufacture fully in Egypt (including epoxy, paints, and varnishes), alongside 25 intermediary products that can be used as inputs for other industries such as rubber transmission belts and tires for supporting the automotive industry. The chemicals industry could also boost the manufacturing of electric vehicles by providing lithium batteries, increasing the value added to production in Egypt. Hence, the target strategy is to bolster the production of end and intermediary products to grow the chemicals industry itself and increase its competitiveness while supporting dependent industries.
The Engineering Industry
With the aim to manufacture 10 complete products (mobiles, tablets, and broilers are all on the suggestions list), Egypt also has the capacity to locally produce 10 intermediary components (including door hinges and solar cell chips); some of which could benefit other industries, such as manufacturing electric motors. In 2021, engineering imports were the largest contributors to imports at US$ 22 billion, which led to only US$ 3.4 billion in exports. Egypt could also expand into manufacturing less-complex semiconductors that support the manufacturing of household appliances, which require less fixed capital investment.
Building Materials and Metallurgical Industry
This sector necessitates large capital greenfield investments but will enable the manufacturing of a variety of products including steel columns and plates, rebars, and stainless-steel sheets. Imports for this sector reached US$ 11.4 billion in 2021, while exports added up to US$ 6.6 billion, accounting for the second-largest contributor of exports during the year.
Pharmaceuticals and Medical Equipment Industry
The target is to manufacture diagnostics equipment, raw constituents for medicines, and oncology treatment chemicals and devices. This will help the government meet its goal of “100 Million Healthy Lives” by providing all required medicinal drugs whenever needed and free of import customs. This will also help treat the public budget deficit by reducing the import subsidies for medicines with no local alternatives. The difference between pharmaceutical and medical exports and imports was significant last year, with exports recording US$ 692 million compared to US$ 5.12 billion in imports.
Food and Agriculture Industry
the government is targeting introducing facilities to increase agricultural products such as dates, dried fruits, and dried onions while expanding their production of medicinal and aromatic oils, as well as dairy products. The food industry sector accounts for 14% of Egypt’s total exports and contributes 24.5% of the GDP.
Wood & Furniture Industry
The government has made attempts to promote local alternatives for manufacturers and others, notably by setting up the Higher Committee for Wood (HCW) in 2021. Also, the government is currently looking to exit the wood products and furniture industry as it aims to transform the sector into a more lucrative investment avenue for foreign investors. Wood manufacturing will see increased MDF and plywood production.
Printing and Packaging Industry
The government still needs to play an active role in supporting manufacturers in the printing & packaging industry by developing more export markets and helping older companies modernize their industrial processes. Despite the challenges facing the industry, import substitution might become an unanticipated source of growth, considering the rising cost of imported paper.
Textiles Industry
Egypt’s textile manufacturing industry is the second-largest industry in the country. Textiles and ready-made garments (RMGs) contributed 11% to the country’s non-oil exports in 2021. The state shall play a greater role in producing synthetic fibers, as 55% of these are currently imported.
