Productivity growth in the manufacturing sector can drive overall economic growth and improve living standards. After a period of growth between 2010 and 2014, aggregate labour productivity in Egypt’s manufacturing sector declined, widening the gap with OECD countries. In 2010, Egypt’s productivity stood at 90% of the OECD average; by 2023, it had fallen to 66%. Recognising the sector’s strategic importance, the Egyptian government prioritised manufacturing in its National Structural Reform Programme. Consequently, the Egyptian government and the Ministry of Industry (MoIND) launched a series of industrial development strategies (2016-20 and 2026-30) to boost its competitiveness, export and value added potential. This report aims to support these ongoing initiatives by providing key facts and actionable policy recommendations.
The performance of the Egyptian manufacturing sector varies across industries. This report leverages the inclusion of Egypt in the OECD MultiProd database using the Egyptian Economic Census 2022/2023 to assess the sector’s productivity performance in comparison with a benchmark of OECD countries using firm-level data. The analysis shows that industries with higher average firm-level productivity contribute less to total employment and value added than in the OECD benchmark. These more productive industries also have a higher share of formal businesses. Moreover, while laggards (firms at the bottom of the productivity distribution) face productivity gaps compared to OECD laggards across all manufacturing industries, some Egyptian industries reflect a need to establish leaders (firms at the top of the productivity distribution), such as Textile and leather, Wood and papers, Rubber and plastic products, Basic metals and Furniture and other manufacturing. Leaders are concentrated in the Greater Cairo region and are more likely to be older, employ a larger share of managers and hire more educated workers.
Facilitating the diffusion of productivity gains from leaders to the rest of the economy could strengthen performance in high-productive industries and increase productivity in less-productive industries. Diffusion can be fostered by ensuring an adequate supply of skills (i.e. continuing to invest in strengthening the vocational education and training system) and improving financing conditions for small and medium-sized enterprises (SMEs), by reviewing the definition of SMEs to account for employment, and by better target existing and future initiatives from the Central Bank of Egypt and other actors. To stimulate productivity in industries with low productivity, Egypt can strengthen existing efforts to reduce the share of informal businesses, favour the emergence of leading firms and better leverage connections with foreign firms to benefit from knowledge spillovers.
Higher trade participation could stimulate manufacturing sector productivity. Based on Trade in Value Added (TiVA) data, Egypt’s (non-petroleum) manufacturing exports rose from being 27.5% of the country’s total exports in 2010 to 30.2% in 2022 (latest available data). Still, this share remained below the averages in selected MENA economies (46.1%) and OECD countries (46.3%). Export intensity is relatively low: in 2022, exports accounted for only 14.8% of gross output, compared to 45.1% in OECD countries, signalling untapped export potential. Some industries – Food products, beverages and tobacco, Textile, apparel, leather and related products, Chemical and chemical products, Other non-metallic mineral products and Basic metals – demonstrated strong export performance, as measured by their comparative advantage relative to the world average. Meanwhile, other industries are not yet as competitive, but have shown significant growth in exports and value added between 2010 and 2022, representing promising opportunities for future development. These include Pharmaceuticals, medicinal chemical and botanical products, Rubber and plastic products, Computers, electronic and optical products and Machinery and equipment n.e.c.
A comprehensive policy mix could boost manufacturing exports. MoIND has announced a list of 28 priority sectors and is preparing to launch the Industrial Development Strategy 2030 and the Industry Decarbonization Action Plan to capitalise on new areas with high growth opportunities while building on existing strengths. Egypt should also support decarbonisation of high carbon-intensive export-oriented industries. In 2020, basic metals (29.7%) and other non-metallic mineral products (16.7%) were the largest contributors to greenhouse gas emissions embodied in Egypt’s manufacturing exports. Additionally, policies can prioritise further reducing tariffs and non-tariff barriers to trade (such as administrative barriers) and facilitate SME access to international markets (such as introducing SME-specific export policies).
Promoting firms’ innovation could stimulate productivity growth. R&D spending in Egypt increased to 1% of GDP in 2023. While this remains below the OECD average (3% in 2022), it is higher than some peer economies (such as Tunisia 0.7%, South Africa 0.6% and Viet Nam 0.4%). Conversely, intellectual property rights (patents, trademarks and designs) remain relatively low compared to peer economies over the past decades. Egypt should further increase firms’ R&D expenditures, for example, by expanding the use of tax credits and/or R&D subsidies and incentivising collaborative R&D projects with universities. An adequate supply of R&D researchers can further advance this objective. Furthermore, Egypt may devote further attention to facilitating business entry, ensuring a level-playing field and supporting a greater number of young innovative firms. Both the Ministerial Group for Entrepreneurship and the Ministerial Group for industrial Development, established in 2024, provide dedicated platforms to advance these goals.
Stronger monitoring and evaluation of pro-productivity policies could enhance data quality and policy effectiveness. Existing initiatives, such as the “Egypt Impact Lab” and “Information and Decision Support Center”, provide a foundation for monitoring and evaluation of policies. The “Egypt Digital Industrial Platform”, launched in 2024, could host productivity data and the productivity dashboard. Egypt could further co-ordinate productivity research in a dedicated institution. Following best practices from OECD countries, such an institution could monitor productivity trends, evaluate government programmes and provide evidence-based policy advice. Moreover, MoIND and other entities responsible for productivity policies can regularly monitor progress indicators and raise firm awareness about available incentives. Simultaneously, high-quality micro-data is essential for monitoring and evaluation. In the short term, Egypt could enhance the Egyptian Economic Census (i.e. by providing a unique longitudinal establishment identifier across waves for linking firms across years) and increase the number of micro datasets available for analysis. In the medium term, Egypt could create a statistical business register within the National Statistical Office (CAPMAS) to better monitor productivity and business statistics and enhance data linkages.