Egypt'S Clothing Exports To The EU Are In Good Shape.

Compared with other low cost suppliers with poor performance, Egypt's clothing exports to the EU surged from the first half of 2008, mainly due to lower production costs in Egypt than in Tunisia and Morocco.

However, when sales to the US market is slowing down, the impact of tax exemption is rapidly disappearing, and inflation is also threatening its domestic garment industry.

Although the retail sales in the US and the EU slowed down and almost affected exports in all other regions, exports of clothing in Egypt continued to rise in 2008. The good export performance was mainly due to lower labour costs in Egypt than in other countries in the Mediterranean region.

In the first half of 2008, the European Union's clothing imports from Egypt rose by more than 20%, about 241 million euros.

In contrast, during the period, the total import volume of the European Union dropped by 1.19%, and the market share of Egypt increased significantly.

In addition to a 14% increase in exports from Kampuchea, all other major EU importing suppliers have declined or increased slightly.

According to EU official data, the growth of Egypt's garment exports is mainly due to the surge in demand in Spain.

In the first half of 2007, Egypt's clothing exports to Spain increased by 140%, and its growth in the first half of 2008 was more than 270%.

Although Egypt exported to the European Union in 2005, Spain accounted for only a small fraction, but in the first half of 2008, its market share increased to 11.2%.

In addition, Germany's demand remained strong, with an increase of 42% in the first half of 2008.

On the contrary, the market share of Egypt's exports to the UK dropped from 45% in 2005 to 35% in 2008.

Egypt's success in the European market was mainly woven apparel production, which grew by 38% in Euro terms in August 2008, up 43% over the period from January 2007 to August.

By contrast, the number of Egyptian sales to the US market has dropped sharply.

The growth of its export to the US market in 2006 was due to a preferential agreement with the United States under the rules of origin for the production of Qualified Industrial Zones (QIZs).

A series of garment factories in QIZs are now facing the decline of the American garment market, and the competition from Asia is increasing.

Egypt is mainly exported to the United States for cotton trousers. After January 1, 2009, China may face pressure, because the United States will lift its export quota restrictions on China.

Egypt is also threatened by price.

The inflation rate in Egypt was still very high, which was 20.2% in October, although it declined slightly compared with 21.5% in September. At the same time, the inflation rate of other low cost countries was much lower than that of Egypt, and the inflation rate in Asia decreased more rapidly.

A few weeks ago, the Egyptian government announced an ambitious revitalization plan to support its economic activities.

However, it does not help to limit inflation, so it may lead to a potential crisis in the garment market of Egypt's competitive advantage.