OBG talks to Mounir Fakhry Abdel Nour, Minister of Trade and Industry

Interview: Mounir Fakhry Abdel Nour

What is the biggest obstacle to further development that the industrial sector faces in Egypt?

MOUNIR FAKHRY ABDEL NOUR: The severe energy crunch, which started in 2009, is the major challenge for industrial development. Unfortunately, we are paying the price today. This is precisely why it is a top priority for Egypt to increase production of oil and gas, as well as develop renewable energy. To mitigate this situation, we are using short-term solutions such as relying on imports, but the government’s plan is to increase production in the next two to three years by enhancing investment in the sector. In the long term, we have to develop renewable energies, mainly solar and wind.

How can trade in the Common Market for Eastern and Southern Africa (COMESA) be increased?

ABDEL NOUR: African markets are important for Egypt, despite the problems we are facing. The challenge is that some COMESA countries are not abiding by the agreement. Egypt is currently in negotiations to solve this situation. More broadly, we intend to establish logistics centres in either Kenya or Zambia for the distribution of Egyptian products in the surrounding countries. In West Africa we intend to leverage connections and infrastructure that Egyptian companies already have in the region to spearhead sales and exports.

What can be done to encourage more lending to small and medium-sized enterprises (SMEs)?

ABDEL NOUR: We have the lending infrastructure to develop funding for SMEs. We have the Social Fund for Development (SFD), which is extremely active. Also, major public and private sector banks have created channels for financing SMEs. We are currently trying to regroup all institutions involved in this segment, including the SFD, banks, international lenders, the Industrial Modernisation Centre and Industrial Training Centre, in order to develop a common strategy and to raise awareness among SMEs about the financing that is available to them and offering training initiatives.

What measures would help spur the emergence of clusters in high-revenue sectors?

ABDEL NOUR: We plan to have specialised clusters for SMEs in each of the 35 industrial zones. The idea is to develop links between SMEs and large industries throughout the value chain. The ministry is getting strong support from the Federation of Egyptian Industries in establishing these clusters. In fact, the first cluster will be opened in Alexandria and will specialise in plastic production. It is located close to the petrochemicals complex in Alexandria, allowing for easy access to raw materials. This process can be improved by technical support, access to financing, and links between SMEs and larger industrial players.

How large is the informal sector and to what extent does it impact manufacturing output? What is the government doing to encourage formalisation?

ABDEL NOUR: There are no official figures, but we are fully aware that it is very large. The impact is not always very positive, as informal production facilities are uncontrolled, giving Egyptian industries a bad reputation. There are two measures being implemented to reduce informal activity. The first is the introduction of value-added tax, which will push informal firms to incorporate into the formal economy. The second is to provide incentives for joining the formal economy through facilitation of licensing procedures, access to credit, technical support, tax credits and other measures.

How long do you expect Egypt’s competitive advantage in labour costs to last?

ABDEL NOUR: Given the current circumstances, Egypt will remain a competitive labour market for at least another five years. However, there are several challenges that need to be addressed in order to remain competitive in the long run. The first and most important is to further improve the skills and productivity of the workforce through training and technical education, and then to link wages to levels of productivity.