Deepening local manufacturing collides with weak feeder industries: As the government plans to localize many industries while increasing the ratio of local components, weak local feeder industries and lack of competitiveness with imported inputs remain obstacles, a number of industry players told EnterpriseAM. But its potential isn’t unnoticed by the government, which is currently focused on providing local feeder industries with wider resources for growth in order to meet increasing industrial demand, reduce industrial imports, and create industrial integration within the local market.

(Tap or click the headline above to read this story with all of the links to external sources.)

Remember: In a bid to double the local components in manufactured goods annually over the next four to five years, the government wants to roll out a system to give more export support and rebates to manufacturers who ramp up local components, according to a cabinet statement released in May. The government aims to boost the industrial sector's GDP contribution from 14% to 20–30% and growing exports to USD 140–145 bn by 2030.

Automotive feeder industries need revitalization: Once a robust sector supporting locally assembled vehicles, automotive feeder industries have been in decline since 2012 due to political and economic challenges, Egyptian Auto Feeders Association Chairman Ali Tawfiq told EnterpriseAM. Local car assembly once accounted for 40% of the market, with 120k vehicles produced annually. However, setbacks like the 2016 currency float and the 2019 "Let It Rust" campaign have reduced capacity, leaving most factories operating at just 25%. Industry leaders are calling for strong state support, emphasizing that the localization of global car brands in Egypt presents an opportunity for growth. Government incentives for automakers include financial support of up to EGP 300k per vehicle in the national localization program.

Where things stand: Current contributions include 28% from feeder industries and 18% from production lines. Expanding local production of components like electrical harnesses, tires, and glass is also key to reducing reliance on imports.

Industry stakeholders see significant potential in producing car bodies locally. Tawfiq proposed a collaboration between the Arab Organization for Industrialization and the Industrial Development Authority that would involve importing molds to manufacture car bodies in Egypt. This initiative, estimated to cost USD 6 mn over 4–5 years, could raise local content in vehicles by 18%, pushing overall local input to nearly 60%.

Broader challenges in engineering and feeder industries: The engineering sector faces hurdles including high input costs, limited access to raw materials, and insufficient domestic production capacity, Federation of Egyptian Industries Chairman Mohamed El Mohandes told EnterpriseAM. Some imported components, like screws and molds for household appliances, could be replaced with local alternatives, but gaps remain in essential raw materials.

Calls are growing for integrating the informal economy, investing in local production, and supporting small manufacturers to enhance self-sufficiency and reduce imports. The private sector cannot bear further increases in input costs, especially for materials sourced from East Asia, where shipping costs and Chinese labor rates are rising, Chamber of Engineering Industries member Bassim Youssef told EnterpriseAM, adding that foreign manufacturers are required to leverage Egypt's potential, with the localization of feeder industries being the key to driving production, reducing costs, and boosting exports.

The pharma sector is exploring partnerships to address raw material shortages: The pharma industry relies heavily on imported active ingredients, with China and India dominating global production, Chairman of the Pharmaceuticals Chamber Ali Auf told EnterpriseAM. Local production of these materials is considered costly, but partnerships with Indian firms are being pursued to establish manufacturing facilities in Egypt, exporting surplus to Africa. The industry has also made progress in manufacturing high-cost medications, with Egypt’s first locally made oncology drug expected to launch in December, reducing costs by at least 60%. The government’s new vaccine manufacturing strategy aims to boost exports to African markets and secure long-term supply agreements, supported by tax exemptions and other incentives.

Government support and private sector collaboration are essential for success: To overcome existing challenges, the government is offering tax breaks, customs incentives, and streamlined procedures to support industrial growth. Flexibility in industrial land acquisition, such as reduced upfront payments and annual usufruct fees, is designed to ease financial burdens on investors. However, industry leaders emphasize the need for more robust financing tools, renewable energy projects to offset rising electricity costs, and expanded support for feeder industries to ensure competitiveness in global supply chains.

Future prospects depend on strategic investments: Experts highlight the importance of scaling up renewable energy projects, reassessing industrial land pricing, and encouraging technology-driven investments in manufacturing. By addressing raw material shortages, fostering local production, and enhancing integration with global supply chains, Egypt can strengthen its industrial base and reduce dependency on imports while expanding export potential across key sectors.

Tags: