Egypt: Leading textile executive pushes for low-interest loans to save industry

A textile industry executive says Egypt’s government should provide low-interest loans to domestic apparel and textile businesses.

Textile manufacturing is Egypt’s second-largest industry but it was severely impacted by the COVID-19 pandemic and now the country’s economic downturn. Textile production accounts for 34% of Egypt’s industrial output and 11% of its exports. The sector employs around 1.5 million people.

But since March 2022, the Egyptian pound halved in value against the dollar, leaving many textile businesses unable to afford the raw materials needed to make clothes.

Aziz Elsalmawy, managing partner of garment trader New Trend Egypt, told Al-Monitor that textile factories in the North African country were scaling back operations or even closing due to the devaluation of the pound.

Elsalmawy called the devaluation “a double-edged sword. On one side, it is good to export more and more since your currency is low, but on the other side, this makes the imports more expensive. And it reduces the purchasing power of the consumers [in Egypt].”

He said that the country’s high inflation and interest rates are forcing more textile businesses to scale back operations or even close their doors as operating costs increase.

Elsalmawy said that the government could adopt measures to help the sector.

“First of all, they should make some low-interest loans, grants for the businesses, which could help the textile industry cover their operating costs and invest in new equipment and technology,” he said.

“Second, they should make some policies to grow the local production and increase exports, like reducing taxes, tariffs on a certain locally produced textile and also give some incentives to the exporter to increase exports and get more hard currency to the Egyptian market.”

Although the Egyptian government offers financial incentives for textile exporters, it is late in paying them, the executive said.

“If they make a mechanism to pay on time and to pay a certain amount, this could lead to a very good advantage for the exports for Egypt,” Elsalmawy said.

The US has typically been the main buyer of textiles from Egypt but now that the country is going through a recession and seeing sky-high inflation, orders have dropped, Elsalmawy said. European buyers have also been less active as the continent struggles from the economic fallout of the Ukraine war.

Instead, Elsalmawy believes the Gulf and Africa represent two major growth markets in the coming years.

“Where I can see the promising markets are the markets that have the more purchasing power or the markets that have big populations. And in my point of view, the Gulf, mainly Saudi Arabia and the UAE, plus Africa will be the promising regions in terms of purchasing power,” he said.

He added that China had also been instrumental in investing in Egypt’s textile sector, especially in developing polyester products, which the North African country tends to import rather than produce domestically. Elsalmawy said that China had used the Port Said economic free zone overlooking the north entrance of the Suez Canal to produce textiles for Egypt and elsewhere.