Egypt to impose import rules to shore up reserves

AP News
|
Posted: Jan 06, 2016 2:08 PM
Egypt to impose import rules to shore up reserves

CAIRO (AP) — Egypt plans to impose new regulations that appear to be aimed at reducing low-quality imports in order to shore up its foreign currency reserves and protect local industries.

The new regulations will require that foreign factories exporting certain items -- mainly consumer goods -- register with Egyptian authorities, providing documentation of their licenses and proof of inspection. The regulations say foreign manufacturers must accept inspections by a "technical team," without providing further details.

Authorities have the right to exempt factories from some or all the registration requirements.

The decision, published in the official gazette last week, would come into effect in late February.

"It's trying to instate more discipline to imports," said Mohamed Abu Basha, an economist at EFG-Hermes. Low quality imports sold at low cost "harms the national industry," he said, adding that "most of the items they chose already have local alternatives."

Years of unrest since the 2011 overthrow of longtime autocrat Hosni Mubarak have taken a heavy toll on foreign investment and Egypt's vital tourism sector, two key sources of foreign currency. Reserves fell 18.1 percent from June to December, shrinking to $16.5 billion, according to central bank data.

"I expect the decision to be an initial step toward nonessential import restrictions, as this step will mainly reduce smuggling and informal import activity," said Hany Farahat, a senior economist at CI Capital in Egypt.

Low cost products made in China have flooded the Egyptian market in recent years, including fabrics, electronics, kitchenware, children's toys and festive lanterns and cookies.

The new regulations cover a wide range of goods, including dairy products, cosmetic items, soft drinks, chocolate, children toys, and furniture.

Farahat estimates the new restrictions will help save about $7 billion annually.