Waleed el Zorba, Chairman of Nile Clothing Company, aims for Egypt to be the primary option for US buyers. He outlines why the US is a main market for Egyptian textiles, the edge of the QIZ program and the potential for growth within the sector.
The Egyptian garment sector plays an important role in Egypt’s economy, making up 25% of the country’s non-oil exports. Today Egypt has nearly 260 ready-made garment manufacturers. What do you feel makes Egypt’s textile sector unique, and how do you see the potential of this sector in terms of growth?
Egypt is unique in terms of its geography. Our lead-time to the US is very impressive. In a business where logistics and lead-time is key for turning your product quickly we can ship to the US in 12 days compared to China, which takes 30-35 days. Today we are also more competitive in cost of labor in addition to being duty free. All of these elements together really make Egypt stand out.
Compared to other countries in the Far East where the cost of labor is much lower, do you see that as a challenge?
Bangladesh is something else; yes, we are more expensive and if that is an issue, then go to Bangladesh. If you compare us to some place like China, where exports are 80 billion, we can compete with that. We are at 1.5 to 1.7 billion in exports, so we have plenty of room to grow and we can compete with China. It’s a big enough pie that we don’t have to compete with Bangladesh.
When we spoke to Mr. Kassim (Chairman of the Egyptian Ready-made Garment Export Council), he said that Egypt’s goal was 10 billion in exports. Do you see that as an attainable goal?
I definitely do! The nature of this industry is that it migrates. For US companies, this industry started in the US, but when the economy improved and the cost of labor went up, they had to find a different home. They went to the plants in Latin America, and the industry boomed. When the economic situation there improved, and they started going into higher value added products, the industry migrated again and went East. They were able to plant some seeds and let the industry grow for apparel sourcing in Asia. Now we are starting to see the next migration. The only remaining continent is going to be Africa. We are miles ahead of just about every other country in Africa. We are already established, we have production facilities, we have fantastic relationships with US importers, our banking systems are set up to be able to finance and cover the industry and they understand it very well. We have ports, and we have strong lead times and trade arrangements, so we are primed to take advantage of that migration. We know that it’s coming because we’ve already gotten word from the major US players that they are ready to take that next step. US companies are able to plan 10, 15, 20 years down the line, so they know it’s coming and they just want to be able to focus in on the right countries, so that 5 fold growth in exports is not an issue.
Through the Ministry of Trade and Industry, the QIZ program was formed in 2004. This program allows Egyptian textiles to be exported into the US, duty free for a number of different reasons. Since the QIZ has been established, what do you feel is the impact on the sector? Has your company benefited from this initiative?
For my company, it was a life-saver. Asia was so cheap, and they had so much capacity that if I didn’t have that competitive edge, I wouldn’t have been on the map. Asia was a one-stop-shop. Someone would travel to China or go to Bangladesh, tour two or three companies and then fly back home. Why would they come all the way to Egypt? Because of our advantages, we really stood out and we offered a lot of value to the importers and retailers because of the savings, so we were a good second option. We want to be a primary option where we are able to go head-to-head with these other companies.
How do you see competition specifically for exporting to the US market?
It’s a tricky question. The dynamic in the US is changing. There is a lot of consolidation between companies. You used to have a hundred different companies who were rather large, but now, you only have a handful of companies because of mergers or going out of business or facing serious financial issues. The volume is still there, but it is very narrow and focused.
How important is the US for your company?
Eighty percent of our exports go to the US, so that’s our predominant market. Our factories are geared towards long runs. Europe is very segmented. England is buying for England; France is buying for France, so the order quantities shrink accordingly. When you sell to Walmart, you are selling to 3-4,000 of the biggest stores in America. Or if you sell to Levi’s, they are selling to all of the department stores across America. We are a long run, large quantity type business.
The industry in 2011 was hit a bit with a 6-7 percent decline due to instability. How do you see the image of the country today in terms of buyer confidence and stability from a business sense?
Mr. El Zorba: I’ll look at that from two different angles. First, our industry has actually been suffering since 2008 because of the financial crisis. Things swung around in 2009 and 2010 and then we had the revolution in 2011. Things were going great as far as the US was concerned. Companies started building inventory again, and business started going back to “business as usual” until 2011. Then we had another issue to deal with and US companies were asking if our company was going to be reliable and would they be able to deliver. I was actually spending almost every other month traveling to NY to let people know that our ports are open, business is running, there would be no stop in flow, and don’t pay attention to everything you are seeing on the news. There is only so much you can say until they actually start to realize that we hadn’t missed a delivery. That took about a year for them to realize. As the Ready-Made Garment Association, we started doing Road Shows in New York in 2012-2013 as 40 factories and took a showroom. We went with our Israeli QIZ suppliers as advocates for the Egyptian manufacturers so that our contacts could see that we were in business and able to supply them as promised. We rebuilt their confidence to come to Egypt and visit our factories.
How is business now with the election of the new President?
It’s good! People have short memories. Once they had fires and buildings collapsing in Bangladesh, they forgot about what was happening in Egypt as long as we kept them supplied on time. As long as we can perform, people want to grow.
How do you feel about the business sentiment toward Egypt right now?
There is a lot of opportunity. The primary focus will be in infrastructure and development, and we’ll get a lot of international attention because the companies who have the knowledge and ability to get these jobs done will be the major players. They will be shown off in the Economic Summit, which also gives a lot of credibility to the projects. We’re starting to have a little money to implement these projects with the help of our Gulf friends, so I think the next 3 years will show a major boom in infrastructure. Tourism will come back once we have our security in place. With the currency fluctuations and what’s happening with the ruble, it makes it difficult for the Russians to come in, and they’ve been a big part of our tourism industry. However, we are going to do what we can as far as Egypt is concerned. As far as apparel, there are huge growth potentials, and we are core in this area. There is plenty that could be done upstream with thread manufacturers and fabric mills. There is so much room for feeders to the industry to come in, and we can offer so many jobs.
What are the steps in making that happen and getting to 10 billion in exports and seeing major growth in this sector?
The business community wants to see stability in the government, and we want to see the government put our industry as a focus. We want to see them put stability into this industry with investment laws, labor laws, and export driven laws. Once they are put in place, you’ll see very quick movement from local investors to grow their operations plus very quick entry from foreign investors.
You’ve spent a good portion of your life in the US, and had the option to choose the US for building your business, but you chose Egypt. Why did you come back and what is it that really resonates with you as a businessman.
First of all, I am Egyptian, but I lived a great life in the US. Everything is so easy and so convenient. Why can’t I take that home with me and offer what I’ve learned and lived and enjoyed and apply it to a market that really needs all of those things without all of the competition. In the US, you have to be really, really smart and offer something really, really innovative to be bigger than these behemoth companies. In Egypt, you can adopt ideas and localize it, but you won’t face that much competition. We don’t have the failure rate that you have in the US. Egypt loves the way of Western living. They appreciate and enjoy it, so I’d like to bring what I’ve lived and experienced here.