Egypt targets $900 mln of QIZ exports to U.S. in 2018

By Hesham Ibrahim & Sanaa Allam On Jul 23, 2018

Ashraf Al Rabie, head of the QIZ division at Egypt’s trade ministry

Egypt is seeking to raise exports to the United States under the Qualified Industrial Zones (QIZ) protocol to nearly $900 million at the end of this year by adding more products.

In 2017, exports rose 3 percent to reach $750 million.

Signed in late 2004, the QIZ agreement granted Egyptian clothing manufacturers zero-tariff access to the US market as long as their products contained at least 10.5 percent Israeli input.

QIZ agreement was established by the U.S. Congress in 1996 to build economic ties between Israel and its neighbours.

Egypt’s QIZ exports to the U.S. grew 24 percent y-o-y in the first five years of the current year to $370 million.

Egypt plans to expand the reach of the QIZ agreement to include leather and some food products to export, head of QIZ division at Egypt’s trade ministry Ashraf Al Rabie told Amwal Al Ghad on Sunday.

Qualifying Industrial Zones in Egypt are currently located in six regions; Cairo, Alexandria, Suez, Central Delta, Minya, and Beni Suef, Al Rabie said.

Since the agreement took effect in February 2005, it has allowed products jointly manufactured by Egypt and Israel duty-free entry into the U.S. Eligible products must have at least 35 percent of their value added by QIZ factories. Egypt must contribute at least one-third (11.7 percent) of this value add, while Israel must contribute 10.5 percent.

At the beginning of April 2017, Egypt’s government held talks to lower the Israeli input requirement to 8 percent.

As of February 2017, there were 961 registered QIZ companies, out of which the vast majority—765 companies, or 79.6 percent —produce textiles and clothing items. Of these, 196 produce ready-made garments. Because U.S. tariffs on textile and apparel goods are relatively high, production of these goods in QIZs is particularly attractive.

In addition, 70 companies (7.3 percent) operate in the processed agricultural products sector. Alexandria has the highest concentration of companies, hosting 235 companies (24.5 percent), while 10th of Ramadan has the next highest concentration with 166 companies.