VZCZCXYZ0000
PP RUEHWEB

DE RUEHEG #0443/01 0750836
ZNR UUUUU ZZH
P 160836Z MAR 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 1901
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 000443 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ELA 
TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB PGOV EINV EG
SUBJECT: DOWN IN THE DELTA: ANECDOTES ON EGYPT'S SLOWING 
ECONOMY 
 
REF: A. CAIRO 428 
     ¶B. 08 CAIRO 783 
 
¶1. (U) KEY POINTS 
 
--     Companies in the Egyptian Delta are beginning to feel 
the effects of the global economic slowdown, though the full 
extent of the impact is not yet known. 
 
--     In the Gharbia and Dakahlia governorates, we have yet 
to see evidence of large-scale layoffs or business closures. 
 
--     Export-led industries are being severely impacted, and 
many business owners complain that the strength of the 
Egyptian Pound is making them less competitive in a shrinking 
market. 
 
------- 
COMMENT 
------- 
 
¶2. (SBU) The managers of the factories we visited were 
uneasy) about the future prospects of the near-term Egyptian 
economy.  Though there was some hope that a continued strong 
domestic economy would serve as a bit of a buffer from global 
economic turmoil, exports are clearly dropping and will 
continue to slide.  For now, businesses appear to be 
resisting layoffs, but these too may be inevitable if growth 
continues to slow. The relative strength of the Egyptian 
Pound against both the Euro and the various currencies of 
Egypt's trade competitors continues to cause trouble for 
exporters. 
 
---------- 
BACKGROUND 
---------- 
 
¶3. (U)  In a recent visit to two Egyptian Delta governorates, 
Gharbia and Dakahlia, we visited three factories in the 
textile and food industries.  In each of the factories, we 
were told that business was down, and that exports were 
dropping even more substantially.  This marks a distinct 
change in attitude among Egyptian businessmen, who until now 
had insisted that the global economic slowdown had yet to 
reach Egypt. 
 
¶4. (SBU) Though we were prevented from touring the factory 
(reftel A), the Chairman of Misr Spinning and Weaving, Fouad 
Abd el Alim Hassaan, told us that the domestic market now 
accounts for 70% of the company's sales, down from 50% last 
year, implying that, at a minimum, exports had dropped nearly 
in half.  Hassaan, also complained that business was being 
negatively impacted by increased competition from Pakistan 
and India. The recent depreciation of the currencies in both 
countries were making them much more competitive in global 
textile market.  Founded in the 1920's, Misr Spinning and 
Weaving is the oldest and largest state-owned textile factory 
and employs more than 24,000 workers.  It was also the site 
of large scale labor protests in 2008 (reftel B).  Hassaan 
assured us that there would be no layoffs from the company, 
but that some labor lost to attrition would not be replaced. 
 
¶5. (SBU Beshir El-Sharoud, the General Manager of the Nile 
Agricultural Industry Company (AGA), a large producer of 
juices, jellies, and frozen vegetables, told us that business 
remains strong, though he complained that competition from 
India and China is increasing. AGA, he told us, exports 75% 
of its products with about half going to Saudi Arabia and the 
Gulf, slightly less going to Europe and Africa, and only 
about 5% going to the U.S.  El-Sharoud told us that, despite 
the fact that his production was largely seasonal, he was 
able to use cold-storage and warehouse space to manage excess 
inventories. He also complained that the fall in the Euro 
(which has depreciated by more than 15% against the Egyptian 
Pound over the last 12 months) was negatively impacting 
exports. 
 
¶6. (SBU) Companies exporting to Europe and the U.S. appear to 
be faring the worst. Hany Sultan of the Garment and Terry 
Towel Industrial Co. (GATT), told us that 95% of GATT's 
production is for export, with 80-85% of exports destined for 
the U.S.  He told us that the company, which has an 
all-Egyptian workforce of 1200 workers, exports to the U.S. 
under the Qualifying Industrial Zone (QIZ) program. 
According to Sultan, the factory is running at 30-40% of 
capacity --approximately half as much as last year.  Despite 
this, Sultan claimed that they were not planning to reduce 
 
their workforce. 
 
¶7. (U) Gharbia and Dakahlia governorates are both important 
centers of agricultural and industrial production in Egypt. 
Though it was clear from our visits that the impact of the 
slowdown in the global economy were being felt in the 
Egyptian Delta, there were plenty of signs of strong domestic 
consumption evidenced by substantial commercial activity and 
construction. 
SCOBEY