The government has reduced export subsidies by EGP 500m in the budget for the 2014-2015 fiscal year (FY) to EGP 2.5bn, compared to EGP 3.1bn from the 2013-2014 FY, leading to a backlash from exporters.
The decrease has been enforced despite an earlier announcement by the Minister of Foreign Trade, Industry, and Small and Medium Enterprises Mounir Fakhry Abdel Nour that export subsidies would remain the same.
Khaled Ibrahim, chairman of the Engineering Export Council, said the amount dedicated to exports in the previous FY budget was already inadequate and should not have been reduced. He pointed out that this decrease in export subsidies within the budget indicates that “the export is not in the government’s priorities”.
“Export subsidies help reduce the burdens on exports and enable them to compete in foreign markets with big companies,” Ibrahim stated.
He also stated that the rationing of government spending should not come at the expense of government support for exports. The government seeks to increase exports to attract investment and raise employment.
The Ministry of Industry made an early announcement for a new programme to support exports starting in early July. But export councils have not been notified as to what mechanisms and implementations would be taken in order to execute the programme, Ibrahim added.
Hisham Gazar, chairman of the Leather Export Council of Egypt, stated: “We do not know anything about the new programme or when it will commence.”
Gazar said that the amount allocated in the budget for export subsidies is too small, as some exporters have accumulated arrears for the past several months. They have also not received their money as a result of their failure to pay for subsidies regularly.
On the other hand, Ahmed Hagras, a member of the Chemical and Fertilizers Export Council, stated that export subsidies had to be reduced. This would primarily be aimed at putting an end to the support for government and large, profitable companies.
“There are sectors do not deserve these subsidies,” Hagras said, “The priority should go to small factories that need to enter into new markets, while subsidies on the exports of raw materials, such as marble, should be stopped.”
He stated that the objective of giving subsidies is to enable exporters to compete in foreign markets until they “stand on their own two feet” subsidies should not be handed out forever.
Hagras demanded that there be fairness in how the reduction in subsidies is distributed, so that labour-heavy sectors can receive the most subsidies.
2014/2015 | 2013/2014 | 2012/2013 | 2011/2012 | 2010/2011 |
2.6 | 3.1 | 3.06 | 2.59 | 3.212 |
Export subsidies in government budgets through the last 5 fiscal years (*values in EGP billions)
