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05/27/2015

Investment Opportunities? Consider Egypt's Qualified Industrial Zones

In 2005, Egypt, Israel, and the United States developed Qualified Industrial Zones (QIZs) in Egypt in which products using Israeli components would be produced and shipped to the U.S. market duty-free and quota-free. Today, these QIZs are an important part of the future for Egypt, but they also provide significant opportunities for those in the apparel industry looking to grow in the region.

Since the development of QIZs in Egypt, Egyptian exports to the U.S. using Israeli components reached $823.6 million in 2013 from $288.6 million in 2005, a 285 percent increase in 8 years. There are now 25 QIZs in Egypt, and brand names such as Levi's, VF, GAP, Calvin Klein, and Ralph Lauren are buying products from Egyptian QIZs and sending them to the U.S.. In fact, we see signs that these companies may be looking to expand their operations from these zones.

In February, Egyptian exporters and Israeli suppliers came together in Las Vegas to celebrate the 10th anniversary of the signing of the protocol of Qualified Industrial Zones during the MAGIC Trade Show. Ten years after the development of these QIZs, Egypt is once again prepared for another significant step forward.

The apparel industry, in particular, has made gains through the production of Ready-Made Garments (RMGs) and textiles. In 2013, RMGs and textiles accounted for 99.6 percent of all exports from QIZs, and the factories in these QIZs produce all manner of apparel including: jackets, pants, shirts, tops, T-shirts, shorts, twin-sets and pullovers. Companies looking for an attractive investment opportunity should consider this sector.

Egypt, in general, is showing more positive signs of growth and sustainability. The World Bank expects that real GDP growth will increase from 2.9 percent in 2014 to 3.6 percent in 2015, and the IMF expects economic growth to be 4.3 percent in fiscal year 2015-2016. In terms of investment, 2014 saw $4.1 billion in foreign direct investment in Egypt, a 7 percent increase from 2013, but even more investment is on the horizon. The Egypt Economic Development Conference in Sharm El Sheikh netted Egypt $36.2 billion in investments, an additional $18.6 billion in infrastructure contracts, and $5.2 billion in loans from international financial institutions by the end of the conference. In addition, Moody's Investors Service recently upgraded issuer and senior unsecured bond ratings to B3 from Caa1, with a stable outlook. This is an unprecedented time for Egypt, and there are significant opportunities for those willing to invest. 

Egypt has shown that it is recovering well from recent economic instability, and for those looking to source in the region, Egypt is positioned to play a major role in exporting RMGs and textiles to the U.S.


Mohamed Kassem is chairman of Egyptian Ready Made Garment Export Council.