A "made in …" label may tell a consumer where the fashionable item they are about to purchase has been made. However, there is sometimes a different story behind the label. A Chinese clothing company has found Egypt to have even cheaper labour and is an ideal camouflage for the sweatshop association a "Made in China" label has.
PORT SAID: With cheap labor, investment incentives and unrestricted exports, one Chinese textile group has turned to Egypt as an ideal location to produce its ready-made garments, beating stiff competition at home.
The Chinese-owned Nile Textile Group has set up shop in the Port Said free zone, overlooking the north entrance of the Suez Canal, and developed an industrial estate now hiring 600 workers, 20 percent of which are Chinese and the rest Egyptian. Cheap raw materials and favorable export conditions have given the company easy access to foreign markets.
It's a bargain for the Nile Textile Group, which imports 60 percent of its basic products tax free and then sends them outside Egypt, mainly to the United States. Most of their cut-price clothes are now labeled "Made in Egypt" rather than "Made in China."
"Egyptian free zones allow for export all over the world with almost no restrictions," said Mohammed Abdel Samie, the industrial estate's administrative director. Local salaries are low enough to compete with those of Chinese workers, even with a system of bonuses offered to the Egyptian workers at the end of each month.
"In the factories where salaries are fixed, we earn a maximum of LE 700 to 800 (around $130 to 150) a month. In this company, it works out better for us," said factory manager Mansur Al-Said.
In the neon-lit factories, Egyptian workers in headscarves work side by side with Chinese technicians in white blouses to the thumping sounds of the sewing machines. Instructions are posted in Arabic and in Chinese. As for the daily communication between colleagues, a little extra work was required. "They taught me a few words of Chinese and they are learning Arabic," Leila Ali, a seamstress, told AFP.
Around 950 Chinese companies have set up operations in Egyptian free zones, representing a total investment of nearly $300 million. Most of them work in industry (526 companies), 306 companies are in the service industry, 31 in the agricultural sector and eight in tourism, according to Egypt's General Authority for Investment (GAFI) which oversees free zones in the country.
It is hoped the Forum on China Africa Cooperation (FOCAC), which kicked off on Sunday in the Red Sea resort of Sharm El-Sheikh and attended by about 50 states, will speed up the rhythm with the signing of a Chinese-Egyptian agreement to encourage more investment in the country. The meteoric increase in economic cooperation between China and Africa in the last few years will be at the heart of the summit, which will be attended by Chinese Prime Minister Wen Jiabao and Egyptian President Hosni Mubarak.
Direct Chinese investment in Africa leapt from $491 million in 2003 to $7.8 billion in 2008. Trade between the two has increased tenfold since the start of the decade. FOCAC is held every three years and this will be the fourth since it started in 2000.
Ref: Daily NewsEgypt. 8th November 2009
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Background Information:
The textile and clothing industry in Egypt is a vital contributor to the country’s exports and employment. The sector produces a wide range of fibre-based products, including raw cotton, yarns, fabrics, garments and made-up textiles. International brands such as Gap, Guy Laroche, Pierre Cardin and Tommy Hilfiger are made in Egypt under licence for the highly protected domestic market. The industry benefits from low labour costs around US$60 a month.
Ref: Research and Markets
Egypt is a medium-sized textiles and clothing (T&C) producer, with a comparative advantage in high-grade cottons and the potential to compete effectively on international markets. BMI ranks it as number34 in the world in terms of T&C manufacturing value added. In nominal terms, we estimate that to have been worth US$4.06bn in 2008. Medium- to large-scale companies dominate the industry with a strong public sector presence in spinning and weaving. Egyptian exports have faced strong competition from Asian producers, but the creation of Qualifying Industrial Zones (QIZs) under an agreement with the US and Israel since 2005 has given the country duty-free access to the US market. In 2007, exports totalled
US$2.02bn against imports of US$2.04bn. In that year, the country had a US$510mn clothing trade surplus and a US$532mn textiles trade deficit. BMI expects the current global economic downturn to have an adverse effect on the industry, with sales and output set to decline this year and next.
Overall Egyptian T&C value added will fall by 7.6% in 2009 and by 3.1% in 2010, reflecting very difficult international economic conditions. We see a moderate recovery setting in from 2011 with growth of 2.5%. The industry’s trade performance will also reflect the especially difficult international economic situation. We see T&C exports falling by 7.7% in 2009 to US$2.17bn and remaining broadly flat the following year, up by 0.1% to US$2.18bn.
Ref: The reportlinker 09
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