Study on Ready Made Garments Industry

“Improving Labor Productivity in Egypt’s

Ready-Made Garments Sector”

Introduction

Through the implementation of the Qualifying Industrial Zone (QIZ) program1, Egypt has

experienced significant growth in its exports of garments to the US. Apparel and clothing

are the largest category of goods exported under the QIZ, comprising over 90 percent of

all QIZ exports and 24% of Egypt's total exports (excluding oil). The expansion of the

apparel industry through the QIZ program has generally sharpened Egypt's comparative

advantage in the sector. However, despite all the success of the industry under the QIZ

program thus far, export growth of garments to the US is leveling off. In 2006, growth

increased by 41%, while achieving only 12% growth in 20072; a considerable 30% below

the growth of the previous year. This decrease in export growth is disconcerting

considering the golden opportunity that Egypt has through QIZs' provision of duty-free

market access. In the wake of the financial crisis, urgency is needed for Egypt to increase

its competitiveness and productivity to compensate for the expected losses resulting from

the global recession.

On April 5th 2009 the Trade Related Assistance Center (TRAC) at the American

Chamber of Commerce in Egypt hosted a workshop titled “Improving Labor Productivity

in Egypt’s Ready-Made Garments Sector.” The workshop, attended by industrialists,

buyers, government officials and industry experts, aimed to address the concerns

revolving around the leveling off that Egypt is experiencing in its exports of garments to

the US in spite of the implementation of the QIZ program. In order to determine the root

causes for the slow-down in the ready-made garments sector and ensure that Egypt

capitalizes on every opportunity to maintain and expand its export capacity through these

unstable economic times, USAID/TAPR II in cooperation with the QIZ Unit at the

Ministry of Trade and Industry, commissioned a study titled ‘The Overall Assessment of...