Transformative Industries: a Catalyst for Egypt’s Economic Growth

Transformative industries are an important contributor to Egypt’s economy for playing a role in securing local demand and increasing exports. Such industries include furniture manufacturing, wood and paper production, as well as beverage production, with its index hitting record highs in March.

Economic Contribution

The average contribution of transformative industries to the gross domestic product (GDP) during the last two decades reached about 16.9%. The total added value of the transformative industries was distributed between the oil refining industry and other transformative industries, with contribution rates amounting to about 21% and 79%, respectively, during fiscal year (FY) 2021/2022, according to the third release of the “Economic Talk” initiative prepared by the Cabinet’s Information and Decision Support Center (IDSC) published in June.

Heba Salah, an economic expert and public policy analyst at the IDSC, tells Arab Finance: “Transformative industries in Egypt play a crucial role in the country’s economic growth through promoting inclusive industrial development, raising Egyptian exports, and enhancing competitiveness, in addition to accelerating productive-structure diversification, deepening local industrialization, and creating more decent and productive employment opportunities.”

Regarding the real growth rate of the manufacturing sector, it reached about 9.6% during FY 2021/2022, compared to a contraction of 5.9% in FY 2020/2021, which witnessed negative repercussions due to the COVID-19 pandemic, as mentioned in the third edition of the “Economic Talk” initiative.

In March, the manufacturing and extractive industries index, excluding crude oil and petroleum products, rose 1.88% to 108.49, compared to 106.49 in February, while it fell annually by 9.16% from 119.43 in March 2022, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

Moreover, the manufacturing and extractive industries index recorded 99.33 in April, according to the CAPMAS.

Government Programs and Initiatives

In November 2022, the Ministry of Planning and Economic Development published a report outlining 2022/2023 allocations for transformative industries. The report highlighted four programs aimed at increasing production and boosting exports.

The budget allocations were set to be injected into the four programs that promote industrial investments and strengthen local manufacturing through digitalization, in addition to increasing the quality of industrial products by upgrading the quality tests and required standards. The ministry’s programs also set policies that would eliminate obstacles facing exports, better serve exporters, and improve control on imports and exports, in addition to training human capital.

Salah says: “The Egyptian government has placed developing transformative industries at the forefront of its priorities. It has taken consistent and strenuous measures amid the rising challenges that the global industrial sector is currently facing in order to mitigate the repercussions of high global inflation, energy price shocks, and continuous disruptions in supply chains.”

To boost transformative industries, Egypt should consider “scaling up more investments in the transformative industries sector through allocating industrial lands at competitive prices, reducing administrative burdens on granting approvals for industrial facilities and licenses, and catalyzing private sector investments. This is where the country can accelerate industrialization and shift from low-value-added to high-value-added, technology-intensive industrial segments,” according to Salah.

Beverage Industries

In March, the beverage industry production index recorded 354.84, which was the highest index in the month, rising by 26.04% month-on-month (MoM), according to CAPMAS.

Revenue in the Egyptian beverages market is projected to reach $127.50 million in 2023, with a compound annual growth rate (CAGR) of 14.51% for 2023-2027, resulting in a projected market volume of $219.20 million by 2027, according to Statista Market Forecast.

Additionally, Egypt’s exports of spirits, beverages, and vinegar recorded $27.55 million in 2022, as mentioned in the United Nations Commodity Trade (UN COMTRADE) Statistics Database.

Transformative Industries are playing a significant role in Egypt’s economy, and the government is working on boosting these industries to achieve better economic results. Beverage production is among these industries, which reflect high revenues and contribute to Egypt’s exports.

Source : Zawya

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