Hanging by a Thread

photo credit: Première Vision (website)

Liberalization unravels one of Egypt’s prized local industries

(Business Today Egypt, April 2010)

The showroom of El-Hosseiny textiles in the Delta town of Salmone El-Omash is one large open space.

The walls are lined with sun-bleached mannequins, their features covered in a thick layer of dust. The room is packed with overflowing boxes of brightly colored garments, leftovers from last season.

And there isn’t a customer in sight, despite the fact that it’s past noon and El-Hosseiny is one of the few stores open in Salmone, long-renowned as the country’s premier locale to buy wool clothes.

“The place never used to be like this. It used to be packed with people all the time, and we used to make LE 3,000–4,000 in profit per day,” says Ahmed El-Hosseiny, who runs the store and a textile factory in neighboring Mansoura.

“But every year it gets worse. One day we make LE 50, and another day we make nothing.”

At this time of year El-Hosseiny, like many of Salmone’s other 40,000 residents, should be brainstorming new ideas for the coming season. But with last year’s clothes gathering dust, producing a new line is more than futile — it’s a guaranteed loss.

In 2008, Salmone’s factory owners sold roughly 50% of their manufacturing quota. In 2009, that number dropped to 25%.

Salmone El-Omash was once a major hub of textile production and clothes making. Part of its name, El-Omash, literally translates to textiles. But in recent years the town’s roughly 1,500 workshops and 25 stores have seen business collapse. A lethal combination of the financial crisis, deregulation and an influx of inexpensive imports, especially from China, have leveled the local economy. And just as Hosseiny exemplifies what is happening in his village, Salmone is a microcosm of broader changes taking place throughout the country.

Homespun Industry

Villages usually evoke visions of a simple agrarian life. But Salmone turned that image on its head. For nearly 70 years, residents have been making textiles. Homespun wool workshops predated electricity in the region, and as technology was introduced, manufacturing kept pace. What began in homes evolved into workshops and factories; what sustained a region then supplied a nation.

The residents of what was once known as “Mini Japan” established an industrious reputation. In 1986, President Hosni Mubarak highlighted their contribution to the national economy with a visit to the town.

But today, the spirit is gone. “We don’t wake up before 5pm each day. We all just stay up trying to do anything that would make the night pass, then sleep all day,” says workshop owner Hassan Shafie.

Historically, production season in Salmone spanned 10 months — these days it’s lucky to last four. The inability to turn profits predictably led to decreased wages and large scale layoffs. In a local economy based around a single industry, failure also has social ramifications. Workers have abandoned the village, and desperation has fueled a rising tide of criminal activity and increased tension among neighbors.

“The thefts that are occurring now come from the village residents stealing things from each other,” says El-Hosseiny.

Free Fall

Through much of the 1990S, textile imports were banned by the Egyptian government, which allowed local manufacturers to thrive.

But in search of growth, Egypt joined the World Trade Organization in 1995, setting it on a path of market liberalization.

A series of cuts in tariffs during the last decade leveled the playing field for foreign manufacturers, and by 2007 imports were surging.

At the head of the pack were Chinese manufacturers, who “showered the market with their cheap products,” says Mostafa El-Samouly, the owner of a textile factory in Mahalla and a member of a key industry association.

Even when Salmone manufacturers switched to inexpensive fabrics like acrylic, they could not match the prices of imports.

“In China, they have subsidized fabrics, factories and everything they need to be very productive,” says Mo’awad El-Shafihe, who owns a Salmone plant. “Everything for us is overpriced; taxes are high and we have to pay a lot for water and electricity. I started selling the pieces that were worth LE 26 for only LE 13, and people are still not happy with the prices.”

Factory owners also face high import and port tariffs on foreign-made fabrics.

The combination of those factors has industry players worried that they will never be able to make up the gap with foreign manufacturers.

“Today everything in our life is Chinese and they will keep expanding everywhere until one day […] there won’t be anyone else to compete against them,” says Ahmed Sakr, a Salmone native who has a business in Cairo.

While Salmone and other industrial regions were reeling from a market saturated by international competition, the economic crisis may have put the final nail in the coffin. According to Dr. Amirah El-Haddad, an economics professor at Cairo University, textile production has dropped 25% since fall 2008.

Losing the domestic sales battle in the short term does not always spell the end of an industry. The export market, where Egypt had found success in the past, offered the potential to compensate for losses.

But the lowering of international trade barriers in the middle part of this decade put the country in direct competition with textile powerhouses like China, India, Pakistan, Bangladesh and Indonesia. (In early 2005, just after one major trade barrier was dropped, exports from China and the US doubled.)

Developed countries with highly efficient production facilities made gains in the international marketplace, leaving many Egyptian firms out in the cold.

Dusty Workrooms

The textile sector, which employs about 25% of Egyptian workers, has suffered the brunt of liberalization. But it is not the only domestic industry reeling from Cairo’s embrace of the free market. Former stalwarts like cotton, marble, and auto production have also experienced difficulty adjusting to global competition.

“Unemployment is a huge disaster now in Egypt that should be solved immediately, before it gets even worse,” says El-Samouly. With the government focusing on other aspects of economic recovery — the vast majority of its stimulus dollars have gone towards infrastructure — the textile industry, and the people of Salmone, will likely have to weather the storm on their own.

While business is bad, El-Haddad says a sector-wide recovery is possible

“After the crisis recedes, things are expected to get better,” she says. “If [manufacturers] hang in there for a year or two, they may be able to revive their business.”

Despite the challenges, some Salmone residents remain optimistic.

“We are capable of doing anything that the market requires,” says El-Shafie, the factory owner. “We just need chances. We need fair prices for the fabrics we are using. We need export markets to open. [Then] we will be able to revive the industry.”

Inside the small workshop he shares with brothers Abdo and Mohamed, El-Shafie stares at the floor. Colored threads, half unspooled, spill into a corner and mix with spider webs. Cloth has been left on the machines, and the dust is thick enough to taste. No one has entered the space for at least a month.

“The village is dying and no one cares,” says Mo’awad El-Shafihe. bt

Class Struggles

Academics discuss whether poverty-stricken residents could rise up in the future with a revolution of their own. By Lamia Hassan

(Business Today Egypt, March 2011)


In the days that marked the birth of a revolution, Egyptians of all social classes could be seen standing side-by-side in Tahrir Square in unprecedented numbers to demand reform. Similar reports came from Alexandria and other governorates where protests took place.

But what drove these protesters to the streets, particularly those living under the poverty line? Were they there to lend their support for political reasons or were there other factors unique to these communities at play? Furthermore, what drove some to loot and break the law? Academics are analyzing these questions and more as they reflect on the revolution and the people driving change in Egypt.

At least 20% of the population are living below the poverty line, according to a government report released in January. For years the government has struggled to improve the quality of life for those below the poverty line and even those who live in pauperization (with an income of less than LE 205 per month), but the fact remains that the gap between the rich and  poor continues to grow.

After January 28, reports flowed in from around Egypt that groups were taking advantage of the lack of police and looting. There were also reports of road blockages, vandalism and large numbers of people leaving slum areas. Some witnesses claim the looters were mostly thugs hired by the government to cause trouble, but others say poverty-stricken citizens were descending on vulnerable areas to make a quick buck.

Egyptian film director Khaled Youssef went on Al-Arabiya the night of January 28 saying people from the slums were looting banks, museums and several public buildings. Youssef called it the “revolution of hunger,” a topic he explored in two movies, Heena Maysara (When Things Get Better) and Dokkan Shehata (Shehata’s Shop).

Although Business Today could not substaniate his claims, the idea of hunger revolution, where poor people are the main drivers of a revolt to demand better lives, is not a new idea in Egypt.

“We always thought that the revolution would be sparked by people in the slum areas, but when we say ‘upper to middle class people started it,’ we thought that the hunger revolution that we always were warned of was not yet here,” says Madiha El Safty, a sociology professor at the American University in Cairo (AUC).

Academics say that although middle and upper-middle class Egyptians were the spark, once others saw the government start making concessions, they realized that they too could affect change and began joining the protests.

“The nature of the people in Tahrir changed as the protests continued. Even if it started with a higher class, toward the middle or the end of the revolution many people there were jobless, who thought instead of just sitting at home […] they could join the people in Tahrir and finally get a chance to open their mouths and express themselves,” says Amirah El-Haddad, an economics professor at Cairo University. “But this was only the case during the revolution.”

She says the lawless nature of the first few days of the revolution left an opening that many without means saw as a once-in-alifetime opportunity to profit.

“From the moment, it was announced that the police had disappeared from all the streets, it gave the initiative for many poor people who were suffering [at the hands of] the government and from poverty for a long time to seize this opportunity, and say in the absence of the police, ‘I can do whatever I want’ and ‘This is my chance to get away with anything,’” says El-Haddad. “There is no doubt that the revolution made poor people become much stronger.”

Uphill battle

But the looting and rampaging didn’t end with Mubarak’s ousting. Empowered, people from poverty-stricken neighborhoods broke into one the Ahram City project’s gated-communities built by Orascom Developments on Al-Wahat Road near Sixth of October City. Their goal was simple: break into the compound and take the homes for themselves.

“All the different categories of people, the marginalized, those who graduated 10 years ago and still haven’t found a job and even those whose salaries are not enough to support their families, all found hope in this revolution and this was the way they rebelled,” says El-Haddad.

That being said, these cases hardly constitute a true hunger revolution. Nor have any of the problems the poor face been solved by deposing Mubarak, so could there be an uprising from this segment in the future?

According to Said Sadek, professor of sociology at AUC, things will have to get much worse before that happens. But this is a distinct possibility should the new government fail to come through with promises of greater freedoms for Egyptians.

“Until this moment, we still have reserves of food and raw materials to survive on, but if the government does not really respond quickly to people’s demands, we will start running out of our resources and in six months we will actually witness a hunger revolution that no one will be able to control,” says Sadek.

Professor El-Haddad says people are now divided into two camps: one that is willing to give the new government time to enforce new rules and policies and another that will settle for nothing less than immediate action.

Should these groups come to blows, Egypt’s political stability could be on the line, leaving the door open for chaos and the beginnings of a hunger revolution.

The only way to prevent this is for the government to make quick decisions that benefit Egyptians via expert advice from numerous sections of the population.

“Instead of slowing down the wheel of production, different groups should start thinking what they want to develop and what should be changed to make things better for everyone,” she says. “Another important question we have to ask now, generally in the coming period, is are we going to be a communist country and nationalize things […] or will we be a capitalist country?”

The movie Heena Maysara on Cairo Slums

Four stages of denial

Sadek says that any revolution goes through four stages: The first is the revolution itself; the second is the counterrevolution; the third is the formation of a new political system and the fourth is the consolidation of the system. At the moment, Egypt is still in between the second and the third stage. Many are taking advantage of the instability by airing their grievances via strikes, particularly in the government.

After Mubarak stepped down, several governmental departments went on strike, demanding their own reforms. Media reports show there were 163 strikes comprised of various public and private-sector workers across the country after Mubarak stepped down.

Sadek said that if you observe the strikes that began after the fall of the regime, they were mainly instigated by workers and employees of the government’s various sectors.

“These employees always had economic and administrative grievances because of the regime, and even corruption complaints were never heard. Today the revolution […] gave them a chance to talk,” says Sadek. “Many of these employees were working under temporary contracts for years and no one ever responded to their requests to have fixed contracts, and they thought this is the time for it.”

He says that when people called for a revolution, they were demanding the downfall of the regime, but after the revolution they realized that although Mubarak is gone, much of his legacy remains.

“This is really provoking people, and now they should change the Cabinet and start purging people who were working under Mubarak to be able to calm people down,” he says.

Sadek says that if you really want change, you have to make a dramatic change within the Cabinet.

“We will remain in this civil disobedience until a major change happens from the government,” he adds.bt

Getting Back to Business

Downtown shops and restaurants managed their businesses in coping with the post-revolution state of affairs. By Lamia Hassan

(Business Today Egypt, April 2011)

On weekday mornings, Cairo’s streets are bustling with people going about their business, shopping or just hanging out. Cars are everywhere, and so are pedestrians crisscrossing the streets and ambling along sidewalks. Likeusual, the downtown area is buzzing with people just two months after the revolution that saw former President Hosni Mubarak step down. Although the streets might make one think things are back to normal after weeks of protests in Tahrir Square, it’s not business as usual for shops in the area and the square’s surrounding streets. Many outlets in Tahrir are still closed after being looted, burned, vandalized and taken over by protesters for almost a month, while others simply shut their doors because of the protests themselves. Several shops along streets nearby such as Mohamed Mahmoud, Bab El-Louq and Talaat Harb have also closed their doors — some for good.

But there are a few exceptions to the rule who stuck the revolution out and even benefited from remaining open during the turbulent times. With things still up in the air for some businesses, residents and shop owners wonder whether the downtown core will bounce back better than ever or fall into disrepair. Experts, however, say that businesses can help jump-start the process by taking advantage of the new sense of pride Egyptians are experiencing.

State your business

Walking on Bustan Street, right next to Talaat Harb Street, it’s hard to miss the huge pink building with the sign ‘Al Bustan.’ Some know the building as home to the famous electronics and computer mall. It is also one of the biggest garages in the area. It has nine levels of parking and has become a spot that residents, workers and shoppers park in every day, although it is also one of the most expensive lots in the area at LE 4 per hour.

Just months after Mubarak left, the parking lots were filled with vehicles, although some were covered, indicating that they may have been parked there for a long time. But the busy influx of vehicles constantly heading in and out of the garageshow business in the area seems to be returning to normal. That can’t be said for the computer mall itself, which is emptier than usual.

“We actually never closed down Bustan from ‘day one’ during the revolution and up until today,” says Hanan Ahmed, a security department employee in the mall’s administrative offices. “The parking [garage] was open, but we were given orders not to let people in the mall for security reasons, but anyway, there were almost no cars at all coming in the mall because the area around was closed and was not safe.”

While the parking lot wasn’t affected by looting or vandalism and was able to open its doors quickly, the owners of the computer shops were still worried about their businesses and many ended up staying closed long after the revolution ended on February 11.

“Two days after the revolution started, most of the owners came and moved all their goods away from the area, and those  who were unable to transfer their stuff early, decided to just come and sit here every day to guard their [businesses],” says Ahmed.

Other than malls and parking areas, almost every street around Tahrir Square dozens of clinical practice, from optometristsand dentists to surgeons. Most doctors here say they were unable to open their clinics to work for weeks, if not months, because even if they could get to their clinics during the revolution and subsequent protests, their patientswere unwilling to take the risk. Dr. Akram Azzam, an orthopedic doctor and professor at Qasr El-Aini Medical School, closed his clinic for almost a month. Azzam’s clinic is located on Bab El-Louq Street, walking distance from both Tahrir Square and the Ministry of Interior, both of which saw a great deal of activity during and after the revolution and subsequent protests.

“It was impossible for me to resume work for a really long time, as I actually work there at night and with the curfew neither would I be able to do this, nor would people be able to be there at night or even make it there with all the streets are closed,” says Azzam. “And even until now, months after […] the revolution, it is still not the same.”

And he is not alone. Many doctors agree, especially those with clinics on streets closest to Tahrir.

In charge of changing times

Decades ago, Downtown Cairo was one of the most popular and trendy areas in the city. People would visit to get the best that Cairo had to offer, from clothes to restaurants and much more. In recent years, although the area is still busy with people, most stores now cater to lower-income shoppers who flock to the area in droves for its cheap goods.

This has changed in the wake of the revolution. The shops are stringing banners and signs announcing discounts up to 70%, with others touting slogans like: “The people want to breakdown and destroy all prices.” Nonetheless, consumers have remained wary of spending in the wake of the revolution, leaving these stores virtually empty.

On Talaat Harb Street, the Nour El-Ain clothing shop is deserted and has only one employee working. A few of the stores next door are closed, others are deserted as well.

“Things never got back to normal for me or for any of the shops around the area, even if you see that the streets are busy outside,” says Sobhy Farouk, Nour El-Ain’s manager. “As you can see, we all have sales and still people are not really back and shopping.”

Groppi, one of the country’s oldest cafés and bakeries, used to be a favorite hangout for Cairenes and remains a symbol of Downtown Cairo’s glamorous past. Now, only two tables are occupied, a trend that the restaurant is seeing all too much.

“We closed down for more than 28 days, but we didn’t get customers back again,” says Gamal Azmy, the manager. “As you can see, there is almost no one here and I don’t think that things will be in better shape around the area anytime soon.”

From Al-Sharq Al-Awsat Newspaper

Businesses believe in booms

While the majority of businesses in the area closed down during the revolution, there were also some that enjoyed a boom, especially food stalls selling Egyptian classics like koshary and falafel. One of the most successful was the popular sandwich restaurant Felfela. The small shop always has a line of people in front of its Talaat Harb Street takeaway, waiting patiently for their sandwiches. The falafel and fuul sandwiches only sell for between LE 1–2, but with thousands and sometimes more than one million people in Tahrir, Felfela raked in the cash.

“Our takeaway outlet was doing a reat job,” says Madgy Farag, a Felfela employee. “You could see people lined in front of [our shop] to get their sandwiches during the revolution, while on the other hand, our restaurant, which is located on the neighboring Huda Shaarawi Street, was closed for a really long time, as we usually depend heavily on tourists.”

According to Tarek Selim, associate professor of economics at the American University in Cairo and faculty affiliate to Harvard Business School, the lower volume of sales most businesses near Tahrir are experiencing is normal after turmoil.

He predicts the situation will get better as the country becomes more stable.

“In every business, you have to study the short run versus the long run,” he says. “In the short run, which is about six months until the elections are over, there will be instability, uncertainty and losses as people are still concerned about the security [measures] there, especially with strikes. But in economics, we call this the ‘funk condition.’ This funk condition means that the future has to be brighter.”

Selim says businesses should start planning for the future and do their best to attract business back using Egypt’s newly rediscovered patriotism as a starting point.

“Clothes shops should focus more on [selling] pure Egyptian products, […] products related to the revolution and things that could be interesting for both the locals and the tourists,” says Selim. “And for restaurants, they should change their Western designs and add a local flavor. Maybe put up photos from the revolution as well as having more commercial Egyptian food.”

Thinking long term, could political stability ensure a new beginning for Downtown businesses?

“I would say that there will be a very high demand in these businesses in a year, and it will be a touristic area,” says Selim”When the revolution collects its fruits, things will definitely change in Downtown, and it will become popular again.”

But until then, businesses in the vicinity of Tahrir Square will just have to patiently wait, a difficult choice considering they must continue to pay salaries and rent. bt