Market Access Series 2021-22: The Arab Republic of Egypt

This study by the Pakistan Business Council (PBC) titled “The Arab Republic of Egypt” is part of the PBC’s Market Access Series 2021 – 22. The PBC’s Market Access Series aims to promote Pakistan’s trade with non-traditional partners by identifying key products that could potentially lead to an increase in bilateral trade.

Egypt is the third-largest country in the African continent in terms of population. Egypt, promotes itself as a “hub” for the African & Middle Eastern markets. As part of this vision, it has introduced Free Zones within Egypt and signed a number of trade agreements with regional blocs and western countries. These trade agreements and concessions allow companies based in Egypt to enjoy preferential market access. Egypt’s Suez Canal is considered to be the world’s largest and busiest canal without any locks, this facilitates seaborne trade between Europe and Asia. In 2020, revenues from the Suez Canal were at their highest in the canal’s history and amounted to US$ 5.8 billion. This was a 2 percent increase over 2019.

Bilateral Trade between Pakistan and Egypt has been in favor of Egypt for the last 5 years.

Major Findings of the Study:

• Exports of Pakistan to Egypt in 2020 were worth $71.3 million with the major commodities in the export basket being ‘Cotton’ ($42.8), ‘Plastics’ ($3.0 million), ‘Other Vegetable textile fibres’ ($2.9 million), ‘Optical Instruments’ ($2.9 million), ‘Rubber’ ($2.6 million), ‘Pharmaceutical products’ ($2.6 million), ‘Man-made staple fibres’ ($2.4 million), ‘Iron and Steel’ ($1.3 million), ‘Articles of Apparel’ ($1.1 million) and ‘Articles of leather’ ($1.1 million).
• With an import value of $273.6 million, Pakistan’s imports from Egypt were dominated by ‘Natural gas, Liquified’ (HS-271111) with imports worth $128.8 million in 2020 and contributing 47.0 percent to total Pakistani imports from Egypt.
• For Pakistan, there exists an export potential of around $1.1 billion in Egypt mainly driven by the agricultural sector ($105.7 million), textile sector ($226.5 million), pharmaceutical and surgical sector ($258.0 million), and the plastic and rubber sector ($62.3 million).
• “Maize…” (HS-100590), “T-shirts, singlets and other vests…” (HS-610990), “Medicaments…” (HS-300439) and “Polycarbonates…” (HS-390740) provide both product and market diversification opportunities for Pakistan.
• The Egyptian government has established 3 to 4 regulatory authorities in the past few years to closely monitor imports. This has increased non-tariff barriers for all of Egypt’s trading partners including Pakistan. Some measures include requirement of import licenses, technical standards on some 860 products, labelling and packaging requirements, and veterinary quarantine regulation.
• Rice is one of the staple foods in Egypt and in recent years Egypt has increased its imports from the world. In 2020 the total value of rice imports was $46.7 million, Egypt imported 66.0 percent of its rice from India whereas only 0.8 percent came from Pakistan.
• Pakistan’s demand for natural gas has been increasing at a rate of 11.7 percent annually whereas domestic gas supply has been increasing at an annual rate of 2.4 percent. This imbalance in demand and supply indicates that Pakistan will heavily rely on imports of natural gas from the world in the coming years.

Major Recommendations for Increasing Exports to Egypt:

• Negotiating for a Revision in Egypt’s Tariffs for Pakistan’s High Potential Exports
  Pakistan’s top exports to Egypt are subject to high tariffs which range between 0 and 40 percent. However, Egypt is given access to the Pakistani market at relatively lower tariffs of between zero and 20 percent. It is recommended to initiate negotiations with Egypt to seek tariff parity to enhance Pakistan’s exports to Egypt.
• Online Visa Policy Needs to be Initiated
  Both countries need to make their visa regimes more friendly, especially for business travelers.
• Public – Private Partnership to Promote Pakistani brands
  The government of Pakistan needs to work in a PPP mode to help promote the creation of global Pakistani brands. Egypt can be a test case for this.
• Natural Gas Import Diversification Strategy Needs be Implemented
  Pakistan is working on a strategy to reduce dependence on single or a limited number of sources for its energy needs. Signing a long-term deal with Egypt for imports of LNG could be a part of this strategy.
• Duty Drawback Schemes Within Pakistan Need to be Improved
  Duty drawback schemes announced by the Government of Pakistan should be made accessible to indirect exporters as well as for importers of raw material who produce finished goods for exports. In addition, a 5-year duty drawback scheme be provided to exporters of finished goods that use indigenous raw materials.
• Export Subsidies Should be Time Bound and Performance Specific
  Time and performance-based subsidies should be allowed to businessmen who venture into non-traditional markets such as Egypt. Schemes need to be closely monitored and should be transparent, easily understood and simple to follow, especially for the SME sector.
• Improve Export Competitiveness by Empowering SMEs and Providing training
  Export Competitiveness can be improved by empowering SMEs through access to finance, easily available subsidized credit, low interest rates on loans and skills training / development programs. Exporters need to be educated and trained on the regulations and standards that have to be met for exporting to Egypt.
• Pricing Could be the Key for Cracking the Egyptian Market
  Egyptian consumers are price conscious and due to openness of the Egyptian economy, competition is fierce. Pakistani exporters need to work on their costings if they are going to succeed in the Egyptian market.
• Simplifying Export Regulations – Pakistan Single Window
  The Pakistan Single Window System needs to be improved with inputs from the SME sector. Collection and dissemination of information about foreign markets and export requirements also needs to be improved.
• Direct Logistics Linkages
  Currently, there is no direct airlink between Pakistan and Egypt, this increases travel time and restricts the exports of perishable and high-value goods. There is a need for starting a direct airlink between the two countries.

Given the export potential, it is recommended that negotiations for a Preferential Trade Agreement (PTA) between Pakistan and Egypt be initiated.

The PBC is a private sector not-for-profit advocacy platform set up in 2005 by 14 (now 86) of Pakistan’s largest businesses including multinational. PBC’s research-based advocacy supports measures which improve the Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives, and activities can be found on its website: www.pbc.org.pk