After hopes of things looking up, 2023 didn’t bring much relief for industry: At the outset of 2023, industry players were hopeful that the challenges of the previous year — including FX shortages, rising raw material prices, and record high inflation — were in the rearview mirror, giving them a chance at a more forgiving 2023. Meanwhile, there was also hope that the state ownership policy document — the long-term strategy rolled out last year that plans to see the government making full and partial exits from more than 79 industries, helping to double the private sector’s share of the economy to 65% within three years — would help give business a shot in the arm. However, many of the challenges of last year rolled over into this year, making it another relatively difficult year for industry.

There were plenty of government initiatives backing up an optimistic outlook: In addition to the state ownership policy document and the government’s identification of nine priority sectors to get a hand from its EGP 200 bn import substitution program, the Madbouly Cabinet also rolled out new regulations at the end of 2022 to boost investments. These included facilitating the process for companies to obtain a golden license, as well as making automotive-linked engineering industries eligible for several incentives provided under the Investment Act. Cabinet also followed up by introducing new tiers of licenses — specifically silver and diamond licenses — to help capture interest among industry players.

More incentives: The Supreme Investment Council also enacted a package of 22 decisions geared towards encouraging private sector investors, aiming to address the demands and complaints of Egypt’s industrial investors and level all challenges and hindrances facing players in the industry sector. These decisions were all met with optimism and a positive sentiment, but business figures Enterprise spoke with at the time stressed the importance of implementation.

And signs of an improving business environment: The removal of the requirement at theend of 2022 for businesses to use letters of credit (L/Cs) to finance imports was a huge source of optimism, as the FX shortage made it difficult for importers to access L/Cs and left them unable to bring goods and raw materials into the country.

But macroeconomic conditions overshadowed many positives: Although importers were able to turn the page on L/Cs as we kicked off 2023, the FX shortage in the country has yet to be resolved. In addition to companies facing difficulties securing the FX needed to finance imports of goods and raw materials required for manufacturing, other controls on foreign currency transactions have also made it more challenging for companies to finance critical infrastructure. The Central Bank of Egypt (CBE) introduced limits on FX transactions on debit and credit cards at home and abroad in October, posing a massive challenge for companies to pay for tech infrastructure services.

The silver lining: Some businesses are looking at ramping up exports: Faced with an increasingly challenging FX environment, many manufacturers are either thinking seriously about pivoting towards exports, or doubling down on existing export capacity. Some manufacturers we spoke with this year, such as TCI Sanmar, have increased the share of their production output earmarked for exports, while others that have been export-oriented for years — including Oriental Weavers, Insutech, and Pyramid Glass — are focused on remaining competitive on a global scale as exports continue to gain growing importance for their business.

And there remained a handful of legacy hurdles and questions: Industry players continued to complain of problems with industrial land allocation, with some saying that a shortage of land availability amid skyrocketing demand created a parallel market for industry-geared plots rife with inflated prices. Although the government rolled out a new online system through which industrial land developers can purchase, develop, and resell land to industry, the system addressed the under-supply issue but drove up costs as private industrial developers were made responsible for building the necessary infrastructure.

Meanwhile, the country’s automotive industry is still struggling to get on its feet, despite intermittent signs of government backing to encourage automotive assembly and manufacturing. The Supreme Council for Vehicle Manufacturing — which is responsible for drafting policies, strategies, regulation and legislation governing the wider automotive industry, including EVs — held its first meeting early in the year. We also saw some movement on the EV front, with signs our first locally manufactured EVs — a low-range, low-speed commuter for urban areas — could roll off production lines soon. However, the government has yet to launch its long-awaited automotive strategy, the Automotive Industry Development Program, which is expected to provide incentives to carmakers in a bid to increase local assembly and component manufacturing here, up the sector’s competitiveness to become a regional manufacturing hub, and bolster export volumes.

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