Chinese textile city a test for Egyptian industry

Producers and experts in the textile industry said the establishment of a Chinese textile city in Egypt will severely harm the debt-ridden local clothing manufacturing industry, which operates with dated equipment and machinery.

Mankai Textile Industrial Park will contain 592 factories, making it one of the largest specialised industrial zones in the country.

To expedite formal procedures and speed the project’s implementation, its oversight was transferred from the Industrial Development Authority to the New Urban Communities.

“The beginning of May will see the start of the pilot operations of the Chinese industrial city’s first-phase factories,” said Egyptian Minister of Commerce and Industry Amr Nassar said.

He added that Sadat City, 90km north of Cairo, was chosen as the site of the Chinese industrial park, which will cover 3.1 million sq. metres. It is expected that all phases of the project will be completed within four years.

The Egyptian Army Engineering Corps has completed the first half of the initial phase of the project, covering about 600,000 sq. metres, for 150 factories. It will employ state-of-the-art spinning and weaving technology.

Former Minister of Industry Tariq Qabeel, who last year signed the agreement establishing the Industrial Park, said the value of the total production of the project, once it is operating at full capacity, will be approximately $9 billion per year.

Chinese government-owned Ningxia Mankai Investment Company, which will oversee the project, signed preliminary sales contracts with 48 Chinese factories for the first phase and is negotiating with more than 60 Chinese investors to sign contracts selling more factories for the same phase.

The company is having promotional and marketing trade shows for the project in several Chinese provinces. About 25 Chinese delegations recently visited the park.

Mufrih el-Beltagy, president of Misr Ameriya Spinning & Weaving Company, said new textile and clothing city spells the end of the Egyptian textile industry, especially because the project’s output is meant for the local market instead of for exportation.

“The new factories and the textile will be using modern machines and equipment that reduce production costs and this will complicate matters for Egyptian factories and could drive them out of the market,” Beltagy added.

The Egyptian Ministry of Business Sector allocated approximately $1.5 billion to update state-owned spinning and weaving companies whose production lines have aged but financial indicators show the process has been difficult.

Of the 32 companies of the state-run Cotton & Textile Industries Holding Company, 22 are operating at losses totalling nearly $152 million.

The local textile industry is suffering from economic reform measures, especially the lifting of energy subsidies, implemented by the government more than two years ago. The industry had grown since its inception in the cradle of governmental support and protection.

Factories import Indian yarn at about $3 per kilogram, while local yarn costs about $3.40 per kilogram, of which $1.70 goes towards workers’ wages.

Furthermore, the new Chinese factories will rely on digital automation, which will greatly reduce labour costs and make matters more complicated for local manufacturers. In Egyptian textile factories, and especially the state-owned ones, about 74% of revenues go to wages, compared to 13% in international companies.

Mohamed el-Morshedi, head of the Textile Industries Chamber of the Federation of Egyptian Industries, said the Chinese Textile Industrial Park would not contribute to solving the problems of the spinning and weaving sector but would adversely affect it if production is directed to the local market.

Morshedi stressed the necessity to have the new park focus on foreign markets. “This is a step that we are expecting,” he said, “but things have not been clear so far.”

The government has begun a plan to develop the spinning and weaving sector and imported gins exceeding current production capacity. The sector’s problem, therefore, does not reside in the number of factories available but rather in low production capacity.

The Ningxia Mankai Investment Company is establishing a school to bring workers up to speed with the spinning and weaving industry’s latest technology to guarantee skilled labour to handle new production techniques in the textile park.

Source: The Arab Weekly