OBG talks to Anis Aclimandos, Chairman, American Chamber of Commerce in Egypt

Interview: Anis Aclimandos

How can bilateral trade with the US be increased, and what are Egypt’s competitive advantages?

ANIS ACLIMANDOS: When looking for products with the greatest potential for boosting US-bound exports, it is crucial to identify items that are already imported into the US and to try to make our export prices more competitive. This strategy makes more sense than others, as a market has already been identified for these goods. If you sell them at better prices than what they are already being imported for, you are in business. In order to gain a competitive advantage, we should also explore the different preferential programmes offered by the US.

There are always three barriers to be taken into account when trading between the United States and the Middle East: Customs duties, transportation costs and labour. These are the three areas that Egypt must focus on in order to increase bilateral trade volumes with the US. The more labour intensive the industry, the more it makes sense for Egypt to export to the US, provided that proper training is in place and productivity is sufficiently high. Indeed, productivity is essential if Egypt is to benefit from the more moderate cost of its labour. If the labour component is intelligently utilised, high tariff items are avoided and goods are not too expensive to ship, Egypt will be able to generate export opportunities.

The country also has high potential as a centre for final stage processing. Given its export profile and links in terms of both bilateral and multilateral trade agreements, it offers overseas exporters access to multiple markets. Egypt is also underutilising US programmes – such as the Preferential Trade Agreements and certain agricultural conventions. An awareness programme that seeks to promote such initiatives is strongly needed.

What challenges do foreign investors face?

ACLIMANDOS: The main concern for investors in Egypt is the guaranteed ability to safely repatriate their earnings. This must be absolutely assured for all investors under any circumstances.

They also must be secure in the knowledge that there will be no retroactive action taken that would in any way negatively affect their business plans. Ease of entry and exit are imperative and are as important as security and safety.

Why has unemployment remained high in Egypt, and how can the government address this?

ACLIMANDOS: The unemployment rate remains high primarily due to the negative stigma about manual labour that developed from the 1950s to the 1980s. It became a virtual social requirement to hold a university degree, which has resulted in a mismatch of skills. There are, in other words, more people with higher skills than needed. The country needs to change the mindset that manual labourers are second-class citizens. Fortunately, there is a revival of trades, apprenticeship and training. The private sector certainly has a role to play in this as well. It needs to identify future employment needs and opportunities and train our youth in the right disciplines.

In what way can the government encourage firms to shift to the formal sector?

ACLIMANDOS: The implementation of more reasonable tax brackets could help to encourage the informal sector to become part of the formal economy. Indeed, when Egypt lowered taxes from 42% to 20%, government tax revenues were tripled. However, the current tendency to raise tax rates is not helping. It only further encourages informality. Creating the types of collateral that would allow companies to borrow is also a necessary step that could make growth possible. However, this alone is not enough to create the necessary shift. We must simultaneously raise awareness amongst members of the informal sector that it is in their best interest to operate within the confines of the formal economy.