This chapter examines trade development of the Egyptian manufacturing sector, comparing Egypt with OECD and peer economies. The analysis exploits the OECD Trade in Value Added (TiVA) database and complementary sources, including firm-level data. It examines trends in exports and imports, and the main exported products and destination markets. It also explores the entry and exit of exporting firms and the concentration of total exports in top exporters. The chapter investigates Egypt’s manufacturing sector participation in global value chains (GVCs). The analysis distinguishes the performance of individual industries to identify those already offering an export strength (measured by their revealed comparative advantage) and industries with potential to grow (having developed in terms of export and value added over the past decade). The chapter concludes with recommendations to further develop the Egyptian manufacturing sector and more effectively leverage opportunities in international markets.
Productivity Review of Egypt
3. Fostering industrial and trade development in the Egyptian manufacturing sector
Copy link to 3. Fostering industrial and trade development in the Egyptian manufacturing sectorAbstract
Introduction
Copy link to IntroductionInternational trade is a key driver of productivity growth thanks to its link with economies of scale and specialisation, as well as its impact on competition. Trade openness boosts productivity by encouraging competition in product markets. This competition prompts firms to innovate and improve efficiency to remain competitive, which also lead to the reallocation of resources towards more productive firms (Melitz and Trefler, 2012[1]; Melitz, 2003[2]). Trade also exposes firms to new or better input varieties (Amiti and Konings, 2007[3]; Topalova and Khandelwal, 2011[4]; Halpern, Koren and Szeidl, 2015[5]), which positively contribute to productivity. Exporting to developed markets can improve product quality and facilitate technology transfer to less developed countries, through the learning-by-exporting mechanisms (De Loecker, 2007[6]).1 For further discussions on the drivers of productivity growth, see Chapter 5.
This chapter examines some key aspects of the trade performance of the Egyptian manufacturing sector, including trade development, the dynamics of exporting firms, the relationship between value added and exports, industry competitiveness, greenhouse gas footprint (GHGFP) emissions embodied in manufacturing exports, and integration into global value chains (GVCs). It then identifies opportunities, gaps and scope for improvement that can help unleash productivity growth in the Egyptian manufacturing sector.
The chapter’s first section analyses the composition and trends of the Egyptian trade in manufacturing. The second examines concentration in products and market destination of Egyptian exports. The third section examines the dynamics of exporting firms, as well as their entry and exit and the fourth investigates trade policies implemented by the Egyptian government. The fifth section looks at trade indicators for each manufacturing industry and their contribution to trade and the sixth discusses the integration of manufacturing industries into GVCs. The seventh section examines tariff and non-tariff barriers to trade and the last concludes by proposing policies to foster trade development in the Egyptian manufacturing sector.
Egypt’s manufacturing sector has an untapped export potential
Copy link to Egypt’s manufacturing sector has an untapped export potentialThis section analyses the trade performance of the manufacturing sector, which is a key contributor to Egyptian total exports. The analysis compares Egypt with peer economies (MENA or Association of Southeast Asian Nations [ASEAN] economies) as well as with OECD countries. Unless otherwise specified, MENA is the unweighted average of Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. The analysis mainly relies on data from the OECD Trade in Value added (TiVA) database, which began including Egypt in its 2022 edition.2 When possible, the analysis is complemented using more recent data from other sources (e.g. Database for International Trade Analysis [Base pour l'Analyse du Commerce International, BACI] database, General Organization for Export and Import Control [GOEIC] microdata).3
In line with the recent strategy of MoIND, which aims at diversifying the productivity structure of Egyptian manufacturing sector, analyses in this chapter focus on the non-petroleum manufacturing sector (i.e., excluding the Coke and refined petroleum products industry [ISIC Rev.4 Division 19] from total manufacturing), unless otherwise stated.4
Although Egypt’s non-petroleum manufacturing exports have slowly increased in relevance over time, further expansion is needed to close the gap with MENA and OECD averages
The manufacturing sector – excluding coke and refined petroleum products – is a key contributor to Egypt’s total exports. In 2022, (non-petroleum) manufacturing accounted for 30.2% of total exports, which is however lower than the average in selected MENA economies (46.1%) and OECD countries (46.3%) (Figure 3.1, Panel A). Nonetheless, the share of manufacturing exports in Egypt has gradually increased over time. It rose from 27.5% in 2010 to a peak of 35.5% in 2020, before declining in the last few years. TiVA data reveals that this decline during 2021-22 coincided with an increase in the relevance of Mining and quarrying sector [ISIC Rev.4 Section B].
Although Egypt’s share of non-petroleum manufacturing exports falls below the MENA and OECD averages, it exceeded the United Arab Emirates (15.6%) in the 2010-22 period. However, Egypt stands lower than other selected MENA economies like Tunisia (59.0%), Türkiye (55.0%), Morocco (48.3%) and Jordan (39.9%) (Figure 3.1, Panel B).
Egypt also imports a significant share of manufacturing products from around the world. In 2022, non-petroleum manufacturing industries made up 41.8% of total imports. This value was lower than the OECD and MENA averages of 50.0% and 48.7%, respectively (Annex Figure D.1).
Figure 3.1. Non-petroleum manufacturing accounts for 30% of Egypt’s total exports
Copy link to Figure 3.1. Non-petroleum manufacturing accounts for 30% of Egypt’s total exportsShare of non-petroleum manufacturing exports over total export, 2010-22
Note: The graph shows the share of manufacturing exports to total exports. Panel A shows the share in Egypt, as well as averages of selected MENA economies and OECD countries. MENA is the unweighted average of shares in Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. OECD is the unweighted average of shares in all 38 OECD countries. Panel B shows the average share in the 2010-22 period across selected MENA economies. Manufacturing excludes Coke and refined petroleum products (ISIC Rev.4 Division 19). Total exports include all sectors from ISIC Rev.4 Divisions 1 to 98.
Source: OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
While the share of non-petroleum manufacturing exports has slightly increased over time, Egypt has maintained its market shares in world manufacturing exports
Even if the share of non-petroleum manufacturing exports in total exports in Egypt has slightly increased over time, the country has not gained market shares in world manufacturing exports. Egypt’s share of world non-petroleum manufacturing exports (0.14% in 2022) is higher than that of Jordan (0.05%) and Tunisia (0.10%), but lagged behind Morocco (0.23%) and United Arab Emirates (0.48%) (Figure 3.2). The world share of the Egyptian manufacturing exports declined between 2010 and 2015, then recovered, returning to its 2010 levels by 2018. Since then, Egypt’s share has remained relatively stagnant until 2022. In contrast, Morocco steadily increased its share of global manufacturing exports, rising from 0.15% in 2010 to 0.23% in 2022.
Figure 3.2. Egypt has maintained its market shares in world non-petroleum manufacturing exports
Copy link to Figure 3.2. Egypt has maintained its market shares in world non-petroleum manufacturing exportsShare of non-petroleum manufacturing exports to world exports, 2010-22
Note: The graph shows the share of manufacturing exports to world manufacturing exports in Egypt, Jordan, Morocco, Tunisia and United Arab Emirates. Manufacturing excludes Coke and refined petroleum products (ISIC Rev.4 Division 19).
Source: OECD calculations based on OECD (n.d.[7]), Trade in value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Despite rising in recent period, the growth of Egypt’s non-petroleum manufacturing exports has been moderate compared to other MENA economies
The growth of Egyptian non-petroleum manufacturing exports has been moderate compared to selected MENA economies and OECD countries, on average. Between 2010 and 2014, manufacturing exports in Egypt remained relatively stagnant, but experienced a severe drop afterwards, mainly attributable to the devaluation of the Egyptian currency (Egyptian pound, EGP) against the USD (Figure 3.3, Panel A).5 Gross exports started to increase again in 2017, reaching USD 15.7 billion in 2019 and a growth of 21.4% with respect to 2010.6 There was a temporary drop at the onset of the Coronavirus disease 2019 (COVID-19) pandemic, but Egypt quickly recovered the following year. By 2022, gross exports rose to USD 17.8 billion, reaching a growth of 37.3% with respect to 2010. Meanwhile, selected MENA economies and OECD countries have, on average, experienced higher – and positive – increases in non-petroleum manufacturing exports compared to Egypt in the past decade (Figure 3.3, Panel A). In 2020, the drop in exports was more pronounced in Egypt than on average in OECD countries and MENA economies.
Unlike exports, Egyptian imports from global manufacturing industries substantially increased over time, reaching USD 36.0 billion in 2022 (Figure 3.3, Panel B). The trend of import growth resembles closely that of OECD and other MENA economies. As total non-petroleum manufacturing imports outpace exports, Egypt has been experiencing an overall trade deficit.
High reliance on imports can explain why exports did not grow enough in Egypt after the devaluation of the EGP against the USD (Zaki, Abdallah and Sami, 2019[8]), underscoring the importance of developing local supply chains. Although the devaluation of the EGP improved the price competitiveness of exports, the anticipated growth in export volumes did not fully materialise. A key constraint was the dependence of Egyptian exporters on imported intermediate and capital goods. Egyptian industries rely heavily on imported goods for production, with nearly 75% classified as intermediate or raw materials (Robertson et al., 2023[9]). Thus, the depreciation significantly increased the local currency cost of these imports, raising production costs and thereby limiting firms’ ability to expand export volumes. Evidence for Egypt has also shown that a depreciation of the real exchange rate increased the value of exports but without affecting the quantity of exports, meaning that several producers increased their mark-up instead of increasing the export quantity (Zaki, Abdallah and Sami, 2019[8]).
Figure 3.3. Egypt’s non-petroleum manufacturing exports grew less than those of MENA and OECD on average, while imports grew at a similar pace
Copy link to Figure 3.3. Egypt’s non-petroleum manufacturing exports grew less than those of MENA and OECD on average, while imports grew at a similar paceTrade growth in non-petroleum manufacturing sector, 2010-22 (base year = 2010)
Note: The graph shows the export (Panel A) and import (Panel B) growth rates of the non-petroleum manufacturing sector for Egypt, selected MENA economies and OECD countries, where 2010 is the baseline year. Manufacturing excludes Coke and refined petroleum products (ISIC Rev.4 Division 19). The TiVA dataset is expressed in current USD. MENA is the unweighted average of Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. OECD is the unweighted average of all 38 OECD countries.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Nevertheless, more recent estimates for Egypt show progress. According to the latest estimates from the Central Bank of Egypt (CBE), non-oil merchandise exports grew from USD 20.7 billion in 2021/22 to USD 24.9 billion in 2024/25 (provisional estimates), marking a 20% increase (Figure 3.4, Panel A).7 Conversely, total merchandise exports fell from USD 38.7 billion in 2021/22 to USD 30.5 billion in 2024/25, a 21.1% decline. This drop reflects the contraction in oil exports – containing crude oil; oil products; bunker and jet fuel; and natural gas – which decreased from USD 18.0 billion to USD 5.6 billion over the same period. On the other hand, imports rose modestly, increasing by 7.7% from USD 72.6 billion to USD 78.2 billion between 2021/22 and 2024/25 (Figure 3.4, Panel B). During this period, oil merchandise imports increased only slightly, from USD 13.5 billion to USD 19.5 billion.
Figure 3.4. Provisional estimates for non-oil merchandise trade show signs of improvement in the recent period
Copy link to Figure 3.4. Provisional estimates for non-oil merchandise trade show signs of improvement in the recent periodMain merchandise exports and imports in Egypt, 2021-25
Note: The figure shows total main merchandise (dark blue line) and total non-oil main merchandise (light blue line) in million USD. Data for 2023/24 and 2024/25 are provisional. Total main merchandise includes oil; foodstuff; cereals and milling products; textile materials and articles thereof; chemical products; electrical machinery and equipment and parts thereof; base metals and products; and vehicles, cars and other means of transportation.
Source: CBE (n.d.[10]), Main Merchandise Balances (Annual) (database), https://www.cbe.org.eg/en/economic-research/time-series/downloadlist?category=F0324992E95741438C789A669E5194F4.
Egypt shows an untapped potential in non-petroleum manufacturing export, as exports represent a lower share of output than OECD and peer economies
Egypt shows an untapped non-petroleum manufacturing export potential, as exports represent a lower share of manufacturing gross output compared to the OECD average and peer countries. The low export-to-gross-output ratio suggests that most production is consumed domestically rather than exported, which may indicate low international competitiveness. However, it may also present an opportunity for export expansion.
In 2022, Egyptian non-petroleum manufacturing exports represented only 14.8% of manufacturing gross output, compared to 32.5% in Jordan, 36.2% in Türkiye, 39.2% in Morocco, 66.8% in Tunisia, and 45.1% in OECD countries (Figure 3.5, Panel A). The export-to-output ratio in Egypt has shown a downward trend from 2010 (16.7%) to 2015 (9.7%), before rising again until 2018 when it peaked at 18.1% (Figure 3.5, Panel B). In more recent years (2020-22), the ratio has increased only marginally, remaining below the 2010 value.
Egypt is also reliant on manufacturing imports from around the world, with a share of imports over gross output in non-petroleum manufacturing of around 30% (Figure 3.5). Over the past decade, the share only marginally decreased from 32.1% in 2010 to 29.9% in 2022. While this ratio is closer to Viet Nam (34.7%) and Türkiye (36.5%), other peer economies record a higher imports reliance: Tunisia (66.6%), Jordan (55.4%), Thailand (45.2%), Philippines (43.9%), South Africa (43.5%) and Morocco (43.2%) (Figure 3.5, Panel A).
Figure 3.5. The export-to-output ratio in manufacturing is lower than in OECD and peer economies and has decreased over time
Copy link to Figure 3.5. The export-to-output ratio in manufacturing is lower than in OECD and peer economies and has decreased over timeTrade-to-gross output ratio in non-petroleum manufacturing
Note: The graphs plot the share of exports and imports in the manufacturing sector over its gross output at basic prices across countries in 2022 (Panel A) and over time for Egypt (Panel B). Manufacturing is the sum of all industries except Coke and refined petroleum products (19). The TiVA dataset is expressed in current USD. OECD is the unweighted average of all 38 OECD countries.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Non-petroleum manufacturing exports are directed towards specific products and destination markets
Copy link to Non-petroleum manufacturing exports are directed towards specific products and destination marketsManufacturing sector’s most exported non-petroleum products are electrical machinery and equipment, fertilisers, plastics and pearls and precious stone articles
Among the most exported manufacturing (non-petroleum) products during the 2021-24 period were Fertilisers (Harmonized System [HS] Code 31), Electrical machinery and equipment (85), Plastics (39), Iron and steel (72), Pearls and precious stones articles (71) and Non-knitted/crocheted apparel (62). In previous periods, Non-knitted/crocheted apparel (62) products appeared among the top most exported products.
The top 5 most exported products (at the HS 2-digit level) accounted for an average of 45% of total (non‑petroleum) manufacturing exports in Egypt during the 2021-24 period (Figure 3.6).8 Product concentration has been increasing over time. The average share of the top 5 products was 36% in 2009‑12, rising to 39% in 2013-16 (Figure 3.6). Some key products are gaining more relevance over time, notably Electrical machinery and equipment (85), Fertilisers (31), Plastics (39) and Iron and steel (72). On the other hand, the weight of other products like Non-knitted/crocheted apparel (62) has decreased over time.
Figure 3.6. Fertilisers are the most exported manufacturing (non‑petroleum) products, followed by electrical machinery and equipment, and plastics
Copy link to Figure 3.6. Fertilisers are the most exported manufacturing (non‑petroleum) products, followed by electrical machinery and equipment, and plasticsMost exported manufacturing (non-petroleum) products (HS 2-digit), average shares in total manufacturing exports in Egypt, 2009-24
Note: The graph shows the average share of the most exported manufacturing products (at the HS 2-digit level) out of Egypt’s total manufacturing exports, excluding coke and petroleum products. Each of the displayed products has been classified among the top five most exported manufacturing products in at least one of the comparison periods.
Source: OECD calculations based on CEPII (n.d.[11]), Base pour l'Analyse du Commerce International (BACI) (database), https://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=37.
The most frequent destination markets for exports are the United States and neighbouring countries
Non-petroleum manufacturing exports also exhibit a degree of concentration in terms of destination countries. The top 5 destinations were recipients of 37% of the manufacturing exported value in the 2021-24 period (Figure 3.7). The United States and Türkiye were the main importers of Egyptian manufacturing products over this period. The United States has occupied a high and stable share in Egyptian exports since 2009, with an average share of 8%. Conversely, Türkiye’s share has grown steadily, rising from an average of 5% in 2009-12 to 8% in 2021-24. The United Arab Emirates has also gained importance as an export destination. Its share nearly tripled from 3% in 2009-12 to 10% in 2017-20, before moderating to 6% in 2021-24. In contrast, Saudi Arabia, which was Egypt’s leading trading partner between 2009 and 2016, exhibited a decline in its average weight from 9% in 2013-16 to 6% in 2021-24.
Figure 3.7. Egypt’s manufacturing export destinations are concentrated in the United States and neighbouring countries
Copy link to Figure 3.7. Egypt’s manufacturing export destinations are concentrated in the United States and neighbouring countriesAverage share of top 5 destination countries in total non-petroleum manufacturing exports in Egypt, 2009-24
Note: The graph shows the average share of main trading partners in Egypt’s manufacturing exports. Each destination country has been classified among the top five destinations of Egypt’s manufacturing exports in at least one of the comparison periods.
Source: OECD calculations based on CEPII (n.d.[11]), Base pour l'Analyse du Commerce International (BACI) (database), https://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=37.
The Egyptian government developed an ambitious strategy to foster non-petroleum manufacturing export growth
Copy link to The Egyptian government developed an ambitious strategy to foster non-petroleum manufacturing export growthThis section examines Egypt’s strategies and specific policies that have been implemented or planned in the recent period to boost manufacturing exports. MoIND is the primary actor, having developed its industrial and trade strategy.
To promote exports in the manufacturing sector, MoIND – formerly known as the MTI – launched its Industry and Trade Development Strategy with the aim of boosting industrial growth and export of the manufacturing sector (see Box 3.1). The MTI strategy (2016-20) identified engineering, chemical, textile and clothing, and building materials industries as “industries required for deepening the industry, rationalising imports and increasing exports”. More recently, a new strategy is underway and is expected to remain closely aligned with the current framework. MoIND is developing a new Industrial Development Strategy (2026-30) (see Box 3.1).
Box 3.1. The MoIND Industry and Trade Development Strategy
Copy link to Box 3.1. The MoIND Industry and Trade Development StrategyNew Industrial Development Strategy (2026-30)
To position Egypt as a regional hub for sustainable and flexible manufacturing and international trade, MoIND is currently developing a new Industrial Development Strategy 2026-2030. The strategy aligns with the strategic shift in the growth model outlined in Egypt’s Narrative for Economic Development, which prioritises high-value, tradable and export-oriented activities (MPED, 2025[12]). It focuses on the efficient use of resources, innovation and industrial technological transformation.
MoIND has identified 28 priority sectors to deepen domestic manufacturing, meet local demand and reduce reliance on imports. These targeted sectors span advanced manufacturing and green technologies, including solar and wind energy components, electric vehicles and parts, industrial software, desalination systems, pharmaceuticals, aluminium, electrical transformers, seamless pipes, water pumps, motors, cosmetics, polyester, soda ash, electric generators, inks, smart electrical components, recyclable materials, HVAC systems, elevators, surveillance systems, robotics, green hydrogen, petrochemicals, textiles, health-focused food products, leather goods, and iron and steel derivatives (SIS, 2025[13]).
By 2030, the strategy targets USD 145 billion in non-petroleum exports of goods and services, a 20% contribution of value added to GDP, 7 million direct and indirect jobs in the industrial sector, and a 5% contribution of green industries to GDP.
The updated strategy has also set short-term ambitions: by fiscal year 2026/27, MoIND aims to increase the share of industrial production in GDP to 20% and achieve annual export growth rates between 18% to 25% (SIS, 2023[14]). A total of 28 investment opportunities were identified, with an investment of EGP 17 billion and an expected workforce of 26 000 workers. The ministry identified new investment incentives to be granted to priority industries, including tax exemptions and the recovery of a percentage of the value of the facilities in the event of completion of the project in half the scheduled time.
Furthermore, MoIND prioritises the automotive sector and outlines its strategies in the National Automotive Industry Strategy (NAIS) and the Automotive Industry Development Program (AIDP). NAIS provides a long-term framework for the period 2024-30, setting broad goals to position Egypt as a regional automotive hub. The AIDP, launched in 2025, serves as the operational programme aligned with NAIS. It focuses on localising vehicle manufacturing, boosting exports and reducing reliance on imported cars and components.
Industry and Trade Development Strategy (2016-20)
To boost the manufacturing sector, MoIND released its five-year strategy for enhancing industrial development and foreign trade in 2017 within the context of the Sustainable Development Strategy: Egypt’s Vision 2030 (MPED, 2023[15]). The Industry and Trade Development Strategy 2016-2020 (MTI, 2017[16]) commits to provide an adequate environment for a sustainable and inclusive economy based on enhanced competitiveness, diversity, knowledge, innovation and generating decent and productive job opportunities.
The main goals of this strategy are to:
Increase the annual industrial growth rate to 8%.
Increase the contribution rate of industrial product to gross domestic product (GDP) from 18% to 21%.
Increase the micro, small and medium enterprises (MSMEs) sector’s contribution to GDP.
Increase the annual growth rate of exports to 10%.
Provide 3 million decent and productive job opportunities.
Realise institutional development.
The strategy focused on diversifying the productivity structure of the economy (in terms of exports, value added and labour) develops: i) key high potential export growth industries, including engineering, textile, chemical, information and communication technology (ICT) and craft and traditional industries; and ii) key high potential value added growth industries, which include the above industries plus agriculture, natural products, iron and steel, furniture and leather industries (Figure 3.8). Additionally, the strategy outlines the governorates’ targeted developmental efforts (Table 3.1).
The strategy was divided into five main integrated and connected pillars, which outline indicators and established models with accountability frameworks. Under the industrial development programme, it announced eight affiliated projects: i) legislative and procedural reform; ii) industrial land development; iii) environmentally friendly industrial clusters; iv) governorates’ industrial investment map; v) enhanced industrial competitiveness; vi) innovation, development and linking industry with scientific research; vii) green economy development; and viii) support for struggling factories.
Originally intended to conclude in 2020, the strategy was later adjusted to accommodate unanticipated economic shocks brought on by the pandemic and ongoing geopolitical crises. The initial strategy did not mention pharmaceuticals as a priority industry, but it was later added among the key sectors.
Under the context of the strategy, during the COVID-19 pandemic, MoIND launched a lump-sum payout initiative in 2020 to provide exporting companies with immediate cash liquidity to help them fulfil their obligations. Under this initiative, 85% of subsidy dues were paid at once to beneficiary companies instead of spreading the payment over multiple years. According to MoIND, the initiative helped maintain the competitiveness of Egyptian products on international markets. As a result, other phases of this export support programme were launched. For instance, in 2022, the ministry disbursed EGP 16.7 billion to beneficiary companies (GOEIC, 2022[17]). Withstanding the large scale of the programme, it is crucial to evaluate the effectiveness of such initiatives on beneficiaries.
Figure 3.8. MoIND targeted key sectors to improve export and value added
Copy link to Figure 3.8. MoIND targeted key sectors to improve export and value addedMinistry of Trade and Industry 2016-20 strategy, priority sectors
Source: MTI (2017[16]), Industry and Trade Development Strategy 2016-2020, http://www.mti.gov.eg/English/MediaCenter/News/PublishingImages/Pages/2017-Strategy/2017%20Strategy.pdf.
Table 3.1. The MTI strategy targeted different developmental efforts at the local level
Copy link to Table 3.1. The MTI strategy targeted different developmental efforts at the local levelMTI 2016-20 strategy, governorates and their targeted developmental efforts
|
Governorates characterised by economic diversity |
Governorates characterised by economic complexity |
Governorates requiring comprehensive development |
|
|
Targeted developmental efforts |
Enhancing industry and promoting value added industry |
Diversifying the industry based on the governorate’s enablers; increasing production diversity; encouraging new economic sector development |
Activating economy by developing infrastructure, human capital, business, focusing on industries conforming to governorates’ nature and potentials |
|
Governorates |
Alexandria, Al-Sharqia, Cairo, Qalyubia, Damietta and Giza |
Beni Suef, Dakahlia, Ismailia and Menoufiya |
Aswan, Asyut, Beheira, Fayoum, Kafr ElSheikh, Luxor, Matrouh, Minya, New Valley, North and South Sinai, Qena, Red Sea and Sohag |
Source: Based on MTI (2017[16]), Industry and Trade Development Strategy 2016-2020, http://www.mti.gov.eg/English/MediaCenter/News/PublishingImages/Pages/2017-Strategy/2017%20Strategy.pdf.
Sources: MTI (2017[16]), Industry and Trade Development Strategy 2016-2020, http://www.mti.gov.eg/English/MediaCenter/News/PublishingImages/Pages/2017-Strategy/2017%20Strategy.pdf; SIS (2023[14]), “Egypt adopts new strategy to increase industry’s contribution to domestic product by 20%”, https://www.sis.gov.eg/Story/187156/Egypt-adopts-new-strategy-to-increase-industry%E2%80%99s-contribution-to-domestic-product-by-20%25?lang=en-us; SIS (2025[13]), “Egypt identifies 28 priority sectors to boost local manufacturing, cut imports”, https://sis.gov.eg/en/media-center/news/egypt-identifies-28-priority-sectors-to-boost-local-manufacturing-cut-imports/; GOEIC (2022[17]), “Minister of Trade and Industry reviews the achievements of Egypt’s foreign trade during 2022”, https://www.goeic.gov.eg/en/news/default/view/id/914.
Additionally, the Egyptian government also implemented complementary initiatives to support policies focused on promoting exports. For instance, Egypt resurrected an export council to identify the institutional reforms required to improve exports, determine new export markets and supervise the existing export support programme (ILO, 2022[18]).9
The Export Development Authority is an export hub that includes all export-related entities, which aims at increasing and promoting Egyptian exports and implementing strategies of the MoIND and the Ministry of Investment and Foreign Trade. The hub provides export‑related services to exporters, raises export awareness and builds exporters’ capabilities. It also provides information about international exhibitions, trade missions and business-to-business meetings, and provides specialised training and technical support.10
Moreover, the Export Development Fund helps producers increase their export capabilities by conducting technical and marketing research, as well as establishing testing laboratories, technical specification certification centres and marketing research institutes (ILO, 2022[18]). It also reduces the finance burdens on exporters.11
Some manufacturing industries present promising opportunities: some are already strong exporters, while others have seen strong growth
Copy link to Some manufacturing industries present promising opportunities: some are already strong exporters, while others have seen strong growthThe general export performance of the (non-petroleum) manufacturing sector masks substantial variation across manufacturing sub-industries. To further delve into the differences, the following analyses identify industries with established export strength and competitiveness, and industries that are emerging as promising opportunities for export growth.
Chemical products, textiles, food, beverages and tobacco products and basic metals account for the largest shares of non-petroleum manufacturing exports
The industries that represent the highest share of exports in Egypt’s manufacturing – apart from Coke and refined petroleum – are Chemical and chemical products (USD 5.42 billion, accounting for 25.9% in 2022), Textiles, apparel, leather and related products (USD 2.63 billion, 12.6%), Food products, beverages and tobacco products (USD 2.38 billion, 11.4%) and Basic metals (USD 2.02 billion, 9.7%) (Figure 3.9 and Annex Figure D.3, Panel A). These four industries collectively comprise nearly 60% of Egypt’s total manufacturing exports.12 The same industries represent 50.4% and 35.8% of total manufacturing exports on average across selected MENA economies and OECD countries respectively. The top industries in selected MENA economies were similar to that of Egypt’s: Chemicals and chemical products (15.8%), Textiles, wearing apparel, leather and related products (14.7%), Food products, beverages and tobacco products (12.8%) and Transport equipment (10.6%). In contrast, the top industries in OECD countries were, on average, Food products, beverages and tobacco products (13.9%), Transport equipment (12.7%), Basic metals (9.8%) and Chemical and chemical products (9.3%).
Between 2010 and 2022, Basic metals (24) reduced its share in Egypt’s manufacturing exports. In contrast, Chemical and chemical products (20) significantly increased its contribution to total manufacturing exports (Annex Figure D.3, Panel C). Notably, it expanded its share from 13.4% in 2010 to 25.9%. Over the same period, its exports grew by 156.8% (Annex Figure D.3, Panel B).
Figure 3.9. Chemicals, textiles, food products, and basic metals industries are the largest contributors to manufacturing exports in Egypt
Copy link to Figure 3.9. Chemicals, textiles, food products, and basic metals industries are the largest contributors to manufacturing exports in EgyptShare of industry exports over total manufacturing exports, 2022
Note: The graph plots the share of exports in industry over total manufacturing exports in 2022. To visualise the contribution of Coke and refined petroleum products (ISIC Rev.4 Division 19), the industry is exceptionally included in this figure. MENA is the unweighted average of Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. OECD is the unweighted average of all 38 OECD countries. For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Some Egyptian manufacturing industries are already strong exporters
Some Egyptian manufacturing industries already have an established export strength, measured by revealed comparative advantage (RCA). The RCA index indicates if a country has a comparative advantage in exporting specific products relative to the world, which helps reveal where the strengths of an economy lie (see Box 3.2 for details on the RCA index). It is measured as the share of a country’s exports in a specific industry compared to the share of global exports in the same industry. Industries are said to have an export strength when the RCA exceeds unity.
Among Egyptian manufacturing industries, Egypt has a comparative advantage in Other non-metallic mineral products (23), Textile, apparel, leather and related products (13-15), Chemical and chemical products (20), Basic metals (24) and Food products, beverages and tobacco (10-12) (Figure 3.10).13,14
Figure 3.10. Other non-metallic mineral products, basic metals, textiles, chemical and food industries already have an export strength
Copy link to Figure 3.10. Other non-metallic mineral products, basic metals, textiles, chemical and food industries already have an export strengthAverage RCA by manufacturing (non-petroleum) industry in Egypt, 2010-22
Note: The figure shows the average RCA of manufacturing industries in Egypt from 2010 to 2022. RCA is calculated with respect to the total economy. An RCA above 1 indicates a comparative advantage in the industry (horizontal line). The figure excludes Coke and refined petroleum products (19). For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes. RCA is calculated following the formula in Box 3.2.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Box 3.2. Revealed comparative advantage
Copy link to Box 3.2. Revealed comparative advantageUnderstanding a country’s competitiveness involves looking at its exports relative to international competitors. The RCA index provides an indication of the relative specialisation of a given country in selected products. The notion of RCA was first introduced by Liesner (1958[19]) and operationalised by Balassa (1965[20]).
Country is said to have an RCA in industry when its ratio of exports of industry to its total exports exceeds the same ratio for the entire world. It can be expressed as:
where represents exports of economy in industry , represents exports of the world in industry , represents the total exports in country , and represents world total exports. A higher value of RCA indicates a higher export strength. Consequently, analysing RCA reveals where a country’s strength lies compared to other countries.
Sources: Liesner, H. (1958[19]), “The European Common Market and British industry”, https://doi.org/10.2307/2227597; Balassa, B. (1965[20]), “Trade liberalisation and “revealed” comparative advantage”, https://doi.org/10.1111/j.1467-9957.1965.tb00050.x.
Despite some export strengths, there is still room for improvement in Egyptian manufacturing industries in comparison to MENA economies
Comparing Egypt’s export performance with the average of selected MENA economies reveals where Egypt’s competitiveness lies compared to its regional peers. In this regard, even industries with a comparative advantage (RCA greater than 1; see Figure 3.10) do not demonstrate a superior performance in terms of exports (relative to total manufacturing gross output), when compared with the MENA average in 2010, 2019 and 2022 (Figure 3.11). All manufacturing industries remain below the MENA average. Nevertheless, industries like Computer, electronic and optical products (26) and Basic pharmaceutical products and pharmaceutical preparations (21) have shown slight improvement over the years.
A back-of-the-envelope calculation shows that when excluding the United Arab Emirates from the MENA average, Egypt demonstrates a superior performance than the average of Jordan, Morocco, Tunisia and Türkiye in Basic metals (24) and Other non-metallic mineral products (23) in 2010 and 2019, but not in 2022.
Figure 3.11. Egypt is showing relatively lower performance than other MENA economies in RCA across all manufacturing industries
Copy link to Figure 3.11. Egypt is showing relatively lower performance than other MENA economies in RCA across all manufacturing industriesDifference of Egypt’s export over gross output compared to selected MENA economies by manufacturing industries, 2010, 2019 and 2022
Note: The graphs plot an indicator of Egyptian export performance measured by where is exports in industry at time , is gross output of manufacturing (excluding coke and refined petroleum) in industry at time , where t=2010,2020. The indicator is the geometric average across the countries included in each MENA economy. MENA includes Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. Panel A shows industries where Egypt has a comparative advantage (RCA > 1), while Panel B shows industries with no comparative advantage (RCA < 1). For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Although Egypt shows export strength in basic metals and other non-metallic mineral products, these industries are highly carbon-intensive
Basic metals and other non-metallic mineral products are competitive industries in the global market as indicated by the RCA (Figure 3.10), but they are also highly carbon-intensive industries. Within manufacturing, basic metals (29.7% in 2020) is the largest contributors to GHGFP emissions embodied in Egypt’s manufacturing exports, followed by other non-metallic mineral products (16.7% in 2020) (Figure 3.12). The shares of each industry’s contribution remained relatively stable over time, with raw materials leaving heavy carbon footprints (back-of-the-envelope calculations using the GHGFP dataset). Additionally, the emission intensity (calculated as tonnes of carbon dioxide [CO2] emissions per unit of export in USD) of the Other non-metallic mineral products (23) industry is significantly higher than OECD countries, and slightly above the MENA average. In fact, the industry was responsible for 3 486 tonnes of emissions per USD exports in 2020, notably higher than MENA (3 014) and OECD (1 274) averages (Figure 3.13). While the gap is narrower for basic metals, it emits a non-negligible amount of greenhouse gas when engaging in trade, notably 1 473 tonnes of emissions per USD exports in 2020, slightly higher than MENA (1 276) and OECD (1 080) averages (Figure 3.13). Considering that Basic metals (24) is one of the top exporting industries in Egypt, the relatively high emission intensity poses a significant challenge. In response, a Prime Ministerial Decree was issued in September 2024 to develop and monitor a national action plan for decarbonisation and green transformation in the manufacturing sector.
Figure 3.12. Basic metals and other non-metallic mineral products are the largest contributors to GHGFP emissions embodied in Egypt’s manufacturing exports
Copy link to Figure 3.12. Basic metals and other non-metallic mineral products are the largest contributors to GHGFP emissions embodied in Egypt’s manufacturing exportsEgypt’s share of greenhouse gas footprint emissions in export in manufacturing industries, 2020
Note: The figure shoes the share of GHGFP emissions embodied in exports by industry within the manufacturing sector in Egypt in 2020. The figure excludes Coke and refined petroleum products (19). The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD (n.d.[21]) Greenhouse Gas Footprints (GHGFP) (database), https://www.oecd.org/en/data/datasets/greenhouse-gas-footprint-indicators.html.
Figure 3.13. Emission intensity in other non-metallic mineral product exports is remarkably high, compared to the OECD average
Copy link to Figure 3.13. Emission intensity in other non-metallic mineral product exports is remarkably high, compared to the OECD averageEmission intensity (tonnes of CO2-equivalent per exports in USD) in manufacturing exports by industry, Egypt, MENA and OECD, 2020
Note: The figure shows emissions in tonnes of CO2-equivalent per exports in USD by manufacturing industry in Egypt in 2020. MENA is the unweighted average of Jordan, Morocco, Tunisia and Türkiye. OECD is the unweighted average of all 38 OECD countries. The figure excludes Coke and refined petroleum products (19). The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD (n.d.[21]) Greenhouse Gas Footprints (GHGFP) (database), https://www.oecd.org/en/data/datasets/greenhouse-gas-footprint-indicators.html.
The high carbon intensity of Egypt’s basic metals and non-metallic mineral industries may lead to trade restrictions, particularly with the European Union (EU). The introduction of EU’s Carbon Border Adjustment Mechanism (CBAM), set to take effect in 2026, will impose a fair price on imported carbon-intensive goods to tackle the risk of carbon leakage in emission-intensive trade-exposed (EITE) sectors (see Box 3.3). Some basic metal and non-metallic mineral products – such as iron and steel products, cement, fertilisers, aluminium, electricity and hydrogen – are thus expected to be highly affected by the CBAM.
According to the World Bank’s CBAM Aggregate Trade Exposure Index, Egypt will face higher embodied carbon payments than the average EU producer, particularly in fertilisers and iron and steel. This high exposure signals a significant risk of lower competitiveness and market share in the EU (Chepeliev et al., 2025[22]; World Bank, 2025[23]). However, CBAM will be coupled with a gradual phase-out of free allowances under the EU Emission Trading System (EU-ETS), which will increase the cost of domestic production for European producers in CBAM-covered industries. A recent OECD analysis (Dechezleprêtre et al., 2025[24]) simulated the impact of the introduction of CBAM and the reduction in free allowances on Egypt’s CBAM-covered industries. In the short term, the study finds that Egypt could benefit from this implementation, resulting in a 0.25% increase in value added for CBAM sectors (see Box 3.3).
Crucially, the impact of the CBAM in the medium term will be determined by Egypt’s ability to reduce emission intensities, as well as its ability to redirect trade to other countries. In the long run, the ability to reduce emission intensities will depend on the adoption of new production technologies to improve the production of current EITE goods and enhance the competitiveness of Egypt’s industrial sector in the upcoming decade.
In this respect, Egypt issued a Prime Ministerial Decree in September 2024 to establish and monitor a national action plan for decarbonisation and green transformation in the manufacturing sector. In 2025, Egypt endorsed a national action plan to address CBAM-related requirements, structured around 13 pivots. Ten pivots focus on Scope 1: decarbonisation within firms in collaboration with the Ministry of Environment. Two pivots address Scope 2: decarbonisation of energy sources with the Ministry of Electricity and Renewable Energy and the Ministry of Petroleum and Mineral Resources. The remaining pivot covers Scope 3 in partnership with the Ministry of Transport and the Ministry of Civil Aviation. It is worth noting that scope 1 priorities include i) access to information, ii) identification of priority sectors, iii) accreditation and certification, iv) access to finance, v) market access, vi) customs-related issues, vii) carbon credit systems, viii) international cooperation, ix) legislative measures and x) political and strategic considerations.
Box 3.3. The EU Carbon Border Adjustment Mechanism (CBAM)
Copy link to Box 3.3. The EU Carbon Border Adjustment Mechanism (CBAM)In 2020, the European Union decided to take a significant leap forward in the fight against climate change by increasing its climate targets to at least 55% net reductions of GHG emissions by 2030 compared to 1990 emissions, and committed to reach carbon neutrality by 2050 (EC, 2020[25]). While numerous countries have also adopted similar long-term decarbonisation commitments and climate mitigation policies, the stringency of climate policies varies considerably among nations. This divergence increases the risk of carbon leakage, wherein the production of EITE goods could relocate to countries with less stringent regulations and be exported to more ambitious regions. To tackle the risk of carbon leakage in EITE sectors, the European Union has introduced a new policy, the CBAM.
The EU CBAM will require importers of iron and steel, cement, fertilisers, aluminium, electricity and hydrogen to pay a levy on embedded emissions equal to the price of EU Emissions Trading System (EU ETS) allowances (EC, 2023[26]). If a carbon price has been paid in the country of origin, the importers can claim a reduction equal to the carbon price already paid. The objective of the CBAM is to mitigate carbon leakage by establishing a level playing field between the carbon price faced by EU producers and the one in third countries. The CBAM will also provide an incentive to third countries to decrease their emission intensities. The policy starts with a three-year transitionary period, with reporting obligations from 2023 to 2025 only, and will be gradually implemented from 2026 to 2034. At the same time, free allowances to CBAM-covered EITE industries in the European Union will be phased out.
Recent OECD research (Dechezleprêtre et al., 2025[24]) examines the impact of the CBAM and the reduction of free allowances on economic outcomes and carbon emissions in EU and non-EU countries. The paper’s micro-based approach enables the simulation of the current CBAM version within a detailed input-output partial equilibrium model covering 67 countries and 45 industries. The study reveals that the current CBAM accounts for only a small portion of total emissions and trade. The targeted products represent 0.37% of the value of global trade in goods and services and 0.31% of global GHG emissions, based on 2022 trade flows. However, CBAM coverage varies significantly across non-EU countries.
If the CBAM had been operational in 2019, CBAM-covered trade flows from Egypt to EU countries would have predominantly comprised (in terms of trade value) fertilisers (47.2%) and aluminium (35.5%), with iron and steel accounting for 16.6% (Figure 3.14, Panel A). This represents USD 1.1 billion of trade originating from Egypt, or 10% of Egypt’s total export of goods to the rest of the world. However, the CBAM is not levied on the value of trade but on the quantity of embedded emissions associated with imported products into the European Union. In absolute terms, Egypt would have had a small part of its emissions covered by the CBAM (0.57 million tonnes of CO2 equivalent), which is just 0.2% of Egypt’s total emissions in 2019. This limited impact is due to the type of exports Egypt sends to the European Union under the CBAM. Fertilisers, the most exported products covered, have much lower emission intensity compared to cement or covered metals products, so they make up only a very small part of CBAM-covered emissions (2.43%) despite making up a larger share of the trade value covered (Figure 3.14, Panel B).
Additionally, OECD simulations show that most non-EU economies benefit from the implementation of the Fit for 55 package (reduction in free allowances in the European Union and the introduction of the CBAM). Indeed, countries with low emission intensity and high carbon pricing are favoured, since part of EU production shifts to non-EU countries (Dechezleprêtre et al., 2025[24]). Figure 3.15 shows the simulated impact of the Fit for 55 package in non-EU countries’ value added across CBAM-covered industries. On average, the changes in value added are economically small, spanning -0.25% to +0.50% for most countries. Whether a country experiences a gain or a decline in value added is correlated with the emission intensity of their production processes, the carbon price paid within the origin country and the degree of exposure to EU trade (refer to Figure 13 of Dechezleprêtre et al. (2025[24]) for the full illustration). In the short term, results show that the Egyptian economy could benefit from the implementation of the Fit for 55 package, resulting in a 0.25% increase in value added for Egypt CBAM sectors. Crucially, the impact of the CBAM in the medium term will be determined by Egypt’s ability to reduce emission intensities as well as to redirect trade to other countries. In the long run, the ability to reduce emission intensities will depend on the adoption of new production technologies to improve the production of current EITE goods.
Figure 3.14. CBAM-covered trade flows would have predominantly comprised fertilisers, aluminium and iron and steel.
Copy link to Figure 3.14. CBAM-covered trade flows would have predominantly comprised fertilisers, aluminium and iron and steel.Value and embedded emissions of exports from Egypt to the European Union covered by the CBAM, 2019
Note: This plot represents the composition of the trade covered by the CBAM (Panel A) and the associated direct (scope 1) embedded emissions (Panel B) had the CBAM been in place in 2019. Trade coverage is obtained by summing the covered HS 6-digit goods export from Egypt to the European Union. These HS6 products are subsequently categorised into OECD Inter-Country Input-Output (ICIO) sectors, and the embedded emissions are calculated based on the average emission intensity for each ICIO sector, adjusted to account for the higher emission intensity specific to CBAM-covered goods. This figure is not equivalent to the composition of the cost of the CBAM, which also depends on the cost of carbon in the EU ETS and existing carbon pricing mechanisms in exporting countries.
Source: OECD calculations based on OECD (n.d.[21]) Greenhouse Gas Footprints (GHGFP) (database), https://www.oecd.org/en/data/datasets/greenhouse-gas-footprint-indicators.html; OECD (n.d.[27]), Inter-Country Input-Output tables (ICIO) (database), https://www.oecd.org/en/data/datasets/inter-country-input-output-tables.html; and United Nations (n.d.[28]), Comtrade (database), https://comtradeplus.un.org/.
Figure 3.15. The EU Fit for 55 package (including the CBAM) is predicted to positively affect Egypt’s value added
Copy link to Figure 3.15. The EU Fit for 55 package (including the CBAM) is predicted to positively affect Egypt’s value addedValue added change in CBAM industries due to the introduction of the CBAM and the removal of free allowances
Note: This figure plots the correlation between the simulated change in value added modelling CBAM and the reduction in free allowances compared to a baseline scenario (increase of price of EU ETS to EUR 80 per tonne of CO2) across CBAM industries in non-EU countries, and that country’s production emission intensity. Belarus, Russia and Ukraine have been dropped from this analysis.
Sources (box): EC (2020[25]), Stepping Up Europe’s 2030 Climate Ambition: Investing in a Climate-neutral Future for the Benefit of Our People, http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0562; EC (2023[26]), Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 Establishing a Carbon Border Adjustment Mechanism, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R0956; Dechezleprêtre, A. et al. (2025[24]), “Carbon Border Adjustments: The potential effects of the EU CBAM along the supply chain”, https://doi.org/10.1787/e8c3d060-en.
Some Egyptian manufacturing industries have yet to establish export strength, but they have demonstrated simultaneous high growth in exports and value added over time
Some manufacturing industries represent key opportunities for growth. The analysis below examines if industries have expanded their exports over time (in the 2010-22 period), and whether or not the export growth was also accompanied by an increase in value added (domestic production).15 An increase in domestic production can potentially lead to an increase in exports, if firms do not have capacity constraints (Gül, 2021[29]).16 Thus, simultaneously examining value added and export growth can help in identifying the complementarity or substitutability of these indicators and observe how this differs across industries.
Further, the analysis takes into account whether the industry has an established competitiveness in the export market (measured by RCA). In Figure 3.16, industries are classified as having high export or value added growth if their growth exceeds the median level across Egypt’s manufacturing industries. It is worth noticing that all manufacturing industries experienced a growth in value added over the 2010-22 period, while some industries experienced a decrease in exports, suggesting bottlenecks in translating an increase in domestic production into export growth. This may generally be due to the industries’ low competitiveness, lack of global demand for importing such products, or the production and regulatory constraints faced by firms.
Interestingly, some industries that have not yet developed a competitive edge (RCA<1, dark blue bubbles in Figure 3.16) have demonstrated strong growth in both export and value added over the 2010-22 period. These industries appear in the top-right quadrant of Figure 3.16 and represent promising opportunities to build comparative advantage in the global market and expand exports further. Industries recording relatively high growth in both export and value added over the 2010-22 period include Computers, electronic and optical products (26), which posted the highest export growth, as well as Pharmaceuticals, medicinal chemical and botanical products (21), Rubber and plastic products (22) and Machinery and equipment n.e.c. (28).
Meanwhile, all manufacturing industries that already hold a competitive edge (with RCA>1, light blue bubbles in Figure 3.16) are found in the left quadrant of the figure, indicating low value added growth and varying export growth. Food products, beverages and tobacco (10-12), Textile, apparel, leather and related products (13-15) and Other non-metallic mineral products (23) are highly competitive and have just marginally increased their exports over time. Conversely, Chemicals and chemical products (20) recorded high export growth but relatively low value added growth. For Basic metals (24), exports have slightly decreased over time, but it is still among the industries with a relatively high value added growth.
Figure 3.16 also shows that some industries have grown extensively in the domestic market (high value added growth) but have not translated this growth into export growth. These industries include Fabricated metal products (25), Electrical equipment (27) and Furniture; other manufacturing; repair and installation of machinery and equipment (31-33), which show low competitiveness, as reflected by low levels of RCA (less than 1). This suggests that the country has a relative disadvantage in exporting such products, which may be an indication of some firms’ constrained capacity in translating an increase in domestic production to an increase in exports or industry-specific export barriers (Gül, 2021[29]).
Figure 3.17 shows that industries where Egypt is growing in terms of exports are also the industries where global demand is high (measured by the share of industry’s world imports over total manufacturing world imports). This is particularly true for Computer, electronic and optical products (26) and Chemicals and chemical products (20), for which the share of world imports over total imports are 16.1% and 10.3%, respectively on average over 2018-22 period. This suggests that these two industries may represent promising opportunities to further expand their exports in the coming years. Final section of this chapter discusses some policy recommendations based on this categorisation of key industries (see section on opportunities for further development).
Figure 3.16. Some manufacturing industries have not yet developed a comparative advantage but showed high export and value added growth
Copy link to Figure 3.16. Some manufacturing industries have not yet developed a comparative advantage but showed high export and value added growthGrowth of gross exports and value added by (non-petroleum) manufacturing industry, Egypt, 2010-22
Note: The graph plots the log difference of exports (y-axis) and value added (x-axis) between 2010 and 2022. The size of the bubbles corresponds to the industry share of value added in manufacturing in Egypt in 2022. Both export and value added are at basic prices and expressed in nominal USD. The light blue bubbles are industries with RCA above 1, while the dark blue bubbles are industries with RCA below 1. The horizontal line is the median value of changes in exports, while the vertical line is the median value of changes in value added. The figure excludes Coke and refined petroleum products (19). The numbers listed in this figure correspond to: 10-12. Food products, beverages and tobacco; 13-15. Textiles, wearing apparel, leather and selected products; 16. Wood and products of wood and cork, except furniture; articles of straw and plaiting materials; 17-18. Paper and paper products; printing and reproduction of recorded media; 20. Chemicals and chemical products; 21. Basic pharmaceutical products and pharmaceutical preparations; 22. Rubber and plastic products; 23. Other non-metallic mineral products; 24. Basic metals; 25. Fabricated metal products, except machinery and equipment; 26. Computer, electronic and optical products; 27. Electrical equipment; 28. Machinery and equipment n.e.c.; 29-30 Transport equipment; 31-33. Furniture; other manufacturing; repair and installation of machinery and equipment.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Figure 3.17. Egyptian industries experiencing growth in exports are also industries where there is global demand
Copy link to Figure 3.17. Egyptian industries experiencing growth in exports are also industries where there is global demandExport growth (2010-22) and global demand (share of world imports in 2018-22) by manufacturing industry, Egypt
Note: The graph plots Egypt’s export growth over 2010-22 by manufacturing industries (y-axis) and the global demand for exported products in each industry in the more recent years (x-axis). The y-axis shows the log difference in exports between 2010 and 2022 by industry. The x-axis calculates global demand as the average share of world imports in each industry over world manufacturing imports between 2018 and 2022 (excluding Coke and refined petroleum products (19)). The figure excludes Coke and refined petroleum products (19). For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Egypt’s manufacturing sector needs stronger GVC integration
Copy link to Egypt’s manufacturing sector needs stronger GVC integrationThis section examines the participation of the Egyptian (non-petroleum) manufacturing sector in GVCs. Over the last two decades, trade and production have been organised around what is called global value chains (GVCs) (Ignatenko, Raei and Mircheva, 2019[30]). A single finished product is, indeed, often a result of manufacturing and assembly in multiple countries. GVC participation is measured as intermediate imports embodied in exports (backward linkages) and domestic value added in partners’ exports and final demand (forward linkages). 17 Examining GVC integration is important as about 70% of international trade involves GVCs, as services, raw materials, parts and components cross borders, often numerous times.18
Participation in GVCs can stimulate productivity growth via several channels. Firms can specialise in their core activities and outsource their least productive tasks, gain access to a larger variety of cheaper, higher quality or technologically advanced imported inputs, and benefit from knowledge spillovers by interacting with multinational firms through domestic supply chains (Criscuolo and Timmis, 2017[31]).
GVCs can thus lead to knowledge flow across countries, which contributes to increasing productivity, job creation and living standards. Evidence from developing economies shows that GVC-dominated trade is said to contribute more to growth and poverty reduction than conventional trade (i.e. gross trade), where a 1% increase in GVC participation is estimated to boost per capita income by more than 1% or about twice as much as traditional trade (IFC, 2020[32]; World Bank, 2019[33]). In this regard, evidence from countries such as Bangladesh, the People’s Republic of China (hereafter “China”), Indonesia, Malaysia, Thailand and Viet Nam shows that productivity, income and jobs (including jobs held by women) all have a positive relationship with GVC-based trade (IFC, 2020[32]).19
GVC integration can also foster real wages and increase demand for skilled labour. Recent evidence from Egypt, Jordan and Tunisia shows that individuals working in firms that participate in GVCs – those importing intermediate goods and exporting – earn higher real wages on average than those in non-participating firms (Eissa, 2024[34]). The same study found that GVC-participating firms employ more skilled workers on average than non-participating counterparts.
Both backward and forward GVC linkages in Egypt’s non-petroleum manufacturing sector are significantly lower than in its peer countries
Egypt’s non-petroleum manufacturing sector showed limited integration into GVCs. In 2022, foreign value added in gross exports (backward linkages) accounted for 17.7% in Egypt, lower than other MENA economies like United Arab Emirates (52.3%), Morocco (40.5%), Tunisia (39.0%), Jordan (38.4%) and Türkiye (32.1%) (Figure 3.18, Panel A). Similarly, Egypt’s share of domestic value added embodied in foreign final demand (forward linkages) remained modest at 20.4%, significantly lower than Tunisia (71.7%), United Arab Emirates (56.9%), Morocco (52.3%), Türkiye (45.1%) and Jordan (41.2%) (Figure 3.18, Panel B). Over the past decade, Egypt’s participation in both backward and forward linkages has consistently trailed behind these countries (Figure 3.18). Moreover, the distances between Egypt and other MENA economies have been diverging over time.
Figure 3.18. GVC integration of Egypt’s manufacturing sector is lower than its peers
Copy link to Figure 3.18. GVC integration of Egypt’s manufacturing sector is lower than its peersBackward and forward GVC participation in (non-petroleum) manufacturing sector, Egypt and peer economies, 2010-22
Note: The graphs show backward and forward participation in GVCs over time. Backward participation in GVCs is measured as the foreign value added share of gross exports. Forward participation in GVCs is measured by the share of domestic value added embodied in foreign final demand. Manufacturing excludes Coke and refined petroleum products (19).
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Computer, electrical equipment and transport equipment industries exhibit higher backward GVC linkages
GVC participation of the Egyptian manufacturing sector reveals non-trivial variation across industries (Figure 3.19). In 2022, the industry that exhibited the highest backward GVC linkages was Computer, electronic and optical equipment (26), where the share of foreign value added embodied in gross exports was 29.5%. This indicates a relatively high reliance on imported intermediate goods and services for export production. Yet, Egypt shows lower integration when compared to peers: it lags the MENA average of 42.6%. Among comparison countries, Morocco (46.2% in 2022) registered the highest backward GVC linkages in the industry, followed by the United Arab Emirates (44.2%), Tunisia (43.3%), Jordan (41.0%) and Türkiye (38.3%) (Annex Figure D.5). This suggests that Egypt’s Computer, electronic and optical equipment (26) industry, while somewhat connected to GVCs, remains less embedded than regional competitors, potentially limiting its access to global production networks, technology diffusion and productivity gains associated with deeper GVC integration.
Electrical equipment (27), Transport equipment (29-30) and Basic metals (24) also showed relatively high levels of backward participation in 2022. These three industries had shares of foreign value added embodied in gross exports equal to 28.0%, 27.0% and 26.4% respectively. Again, they are notably lower than MENA averages of 45.6%, 46.2%, and 52.6% for the same industries respectively (Figure 3.19). Furthermore, the electrical equipment industry has significantly reduced its reliance on imports to produce their export over the past decade, while basic metals and transport equipment industries have maintained relatively constant levels of backward participation (see Annex Figure D.5).
Figure 3.19. Backward GVC linkages are lower than the MENA average across all industries
Copy link to Figure 3.19. Backward GVC linkages are lower than the MENA average across all industriesBackward GVC participation: foreign value added share of gross exports by industry, 2022
Note: Backward participation in GVCs is measured by the share of foreign value added share in gross exports. MENA is the unweighted average of Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. The figure excludes Coke and refined petroleum products (ISIC Rev.4 Division 19). For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Chemical, computer and textile industries are recording higher forward GVC linkages
The industries that are leading in terms of forward GVC participation in Egypt are Chemical and chemical products (20), Computer, electronic and optical equipment (26) and Textiles, apparel, leather and related products (13-15), indicating that significant shares of domestic value added of such industries are embodied in foreign final demand (Figure 3.20). In 2022, these industries recorded forward GVC participation of 54.8%, 42.9%, and 29.5% respectively. The top 3 industries were closely followed by Rubber and plastic products (22) with a forward participation of 29.2%.
Among the industries with a high level of forward GVC linkages, the Computer, electronic and optical equipment (26) industry stands out. The share of its value added embodied in foreign final demand more than doubled from 18.4% in 2010 to 42.9% in 2022 (Annex Figure D.6). This suggests growing integration into global supply chains as a supplier of inputs to downstream production abroad. Combined with its relatively high backward GVC linkages (29.5% in 2022), the industry exhibits a strong dual role in GVCs, acting both as an importer of foreign intermediates and a supplier of value added to global production networks. Between 2010 and 2022, Chemical and chemical products (20) substantially increased their forward GVC participation from 39.6% to 54.8%, while Textiles, apparel, leather and related products (13-15) significantly reduced from 37.2% to 29.5% (Annex Figure D.6).
Nevertheless, across all industries, Egypt showed lower forward GVC participation compared to the MENA average (Figure 3.20). Even in industries where Egypt shows high forward GVC participation, some peer countries exhibited higher integration into the GVC. For instance, in 2022, Jordan, Morocco and Tunisia participated more than twice as much in forward linkages than Egypt in textiles (Annex Figure D.6).
Figure 3.20. Forward GVC linkages are lower than the MENA average across all industries
Copy link to Figure 3.20. Forward GVC linkages are lower than the MENA average across all industriesShare of domestic value added embodied in foreign final demand by industry, 2022
Note: Forward participation in GVCs is measured by the share of domestic value added embodied in foreign final demand. MENA is the unweighted average of Jordan, Morocco, Tunisia, Türkiye and United Arab Emirates. The figure excludes Coke and refined petroleum products (ISIC Rev.4 Division 19). For a better visualisation, industry names have been shortened. The corresponding full names of industries may be found using ISIC Rev.4 division codes.
Source: OECD calculations based on OECD (n.d.[7]), Trade in Value added (TiVA) 2025 Edition (database), https://www.oecd.org/en/topics/sub-issues/trade-in-value added.html.
Tariff and non-tariff barriers hinder manufacturing export development
Copy link to Tariff and non-tariff barriers hinder manufacturing export developmentThis section examines the presence of tariff and non-tariff barriers to trade (such as administrative and technical barriers). Existing barriers may explain the subdued export performance and low GVC integration in Egypt’s manufacturing sector. This section also reviews Egypt’s trade agreements and their effectiveness in reducing barriers to trade. Finally, the section discusses how trade liberalisation has the potential to reduce informality in Egypt.
Tariffs have been reduced substantially for manufacturing products, but they remain high compared to most peer economies
The manufacturing sector has undergone significant liberalisation over time. Notably, Egypt’s average trade-weighted tariffs on imported manufactured products have reduced substantially, from 12.13% in 2004 to 6.07% in 2019 (most recent comparable data) (Figure 3.21, Panel A).
Despite this progress, tariffs on manufactured goods remain considerably higher than those of regional peers, including Morocco, South Africa and Türkiye, though they are lower than Brazil’s (Figure 3.21). In contrast, average trade-weighted tariffs on all products increased between 2016 and 2019, rising from 6.6% to 10.5% over this period (Figure 3.21, Panel A). Tariffs remain high for agricultural products, imported alcoholic beverages and textiles (OECD, 2024[35]).
High tariffs on imports can hinder export growth, especially when imposed on intermediate goods that are used in the production process to export. Imported intermediate inputs play a crucial role in manufacturing, and evidence suggests that a reduction of tariffs imposed on these goods could have a positive effect on Egyptian firms’ productivity (Martínez Zarzoso, Said and Zaki, 2021[36]).
Figure 3.21. Tariffs on manufactured products are high in Egypt despite a reduction over time
Copy link to Figure 3.21. Tariffs on manufactured products are high in Egypt despite a reduction over time
Note: Panel A shows the weighted mean applied tariffs for manufactured products and for all products in Egypt from 2004 to 2019 (latest available year). Tariffs are weighted by the product import shares corresponding to each partner country, giving more emphasis to more important imports. Panel B shows the tariffs for manufactured products only, comparing Egypt with peer economies. Manufactured products are commodities classified in Standard International Trade Classification (SITC) Rev.3 Sections 5-8, excluding Division 68.
Source: OECD elaboration based on World Bank (n.d.[37]), World Development Indicators (database), https://databank.worldbank.org/source/world-development-indicators.
Non-tariff barriers to trade, including administrative and technical barriers, slow export growth
Non-tariff barriers to trade, such as administrative and technical barriers, can slow export growth. Efforts to streamline procedures and enhance trade facilitation remain particularly relevant for Egypt because Egypt has a high level of non-tariff measures, as indicated by the frequency index (share of products subject to non-tariff measures) and coverage ratio (share of imports subject to one or more non-tariff measures) among developing countries (see Youssef and Zaki (2019[38])). These measures include stringent registration and documentation requirements, along with the need to obtain an import licence (OECD, 2024[35]). Certain products, like household goods and beauty products, must be pre‑registered with the Egyptian General Organization for Export and Import Control (GOEIC).
Non-tariff barriers to trade can primarily take two forms: i) administrative barriers, such as lengthy import and export procedures; and ii) technical barriers, such as restrictions and standards imposed by trade partner countries.20
In terms of administrative barriers to trade, the time to export and import is significantly higher in Egypt than peer economies (Figure 3.22). The time (in hours) required for exporting, particularly for documentary and border compliance, surpasses that of Jordan, Morocco, Tunisia and Türkiye (Figure 3.22). Specifically, the time needed for documentary compliance (obtaining, preparing, processing and submitting export documents) is 88 hours in Egypt, compared to 25 in Morocco, 6 in Jordan, 4 in Türkiye and 3 in Tunisia. These figures refer to 2019, the most recent year for which comparable data are available. Similarly, Egypt has the longest import processing times among its peers, both for border and documentary compliance (Figure 3.22), exceeding the averages for all world regions (Hendy and Zaki, 2021[39]).
In terms of technical barriers to trade, Egypt experiences significant challenges, particularly in processed rice, vegetable oil and fats, fish, dairy products and beverages products (Zaki, 2022[40]). These barriers arise from mandatory regulations and procedures – such as testing, certification and conformity assessments – that ensure imported products meet the quality and safety standards of the destination country. Since technical barriers increase the fixed costs of exporting, they have discouraged Egyptian firms from entering international markets and exporting. Smaller firms have been especially affected (Kamal and Zaki, 2018[41]). Improving the quality of exported products can help Egyptian firms meet the standards of key importing countries, especially the European Union and Arab countries (Zaki, 2022[40]).
To simplify administrative procedures for trade, the Egyptian Customs Authority launched the multilingual digital platform Nafeza (meaning window in Arabic) system as the National Single Window for Foreign Trade Facilitation (ILO, 2022[18]; World Trade Organization, 2021[42]).21 This one-stop platform allows businesses to submit all necessary documentation needed for import, export and transit of goods through a single digital portal. The system aims to modernise customs administration, automate processes and reduce clearance time (ILO, 2022[18]).
Finally, trade logistics – often considered as a non-tariff barrier to trade – have improved in Egypt in recent years. The Logistics Performance Index (LPI), which measures trade efficiency – including customs clearance process, quality of trade and transport-related infrastructure – rose from 2.82 in 2018 to 3.10 2023 in Egypt, surpassing the MENA average of 2.7 (back-of-the-envelope calculations using the World Bank’s Logistics Performance Index (LPI)).22 While Egypt’s LPI declined from 3.18 in 2016 to 2.82 in 2018, the recent recovery suggests progress in trade facilitation.
Figure 3.22. Time to export and import is higher in Egypt than neighbouring economies
Copy link to Figure 3.22. Time to export and import is higher in Egypt than neighbouring economiesTime to export and import, 2019
Note: The time for border compliance to export records the time associated with compliance with the economy’s customs regulations and with regulations relating to other inspections that are mandatory in order for the export shipment to cross the economy’s border, as well as the time and cost for handling that takes place at its port or border. The time for documentary compliance to export records the time associated with compliance with the export documentary requirements of all government agencies of the origin economy, the destination economy and any transit economies. It is calculated in hours. It includes the time for obtaining, preparing, processing, presenting and submitting documents. Peer economies include Jordan, Morocco, Tunisia and Türkiye.
Source: World Bank (n.d.[43]), Doing Business (database), https://databank.worldbank.org/source/doing-business.
Trade agreements have helped reduce or eliminate tariffs but have been less effective in addressing non-tariff measures
Several trade liberalisation policies have been implemented in Egypt, including the signing of several trade agreements (see Box 3.4 for details on agreements signed after 2016). Egypt’s trade liberalisation efforts commenced with its accession to the World Trade Organization in June 1995. This was followed by a series of multilateral and bilateral trade agreements, along with unilateral tariff reductions in 2005, which contributed to an increase in export performance (ILO, 2022[18]; World Trade Organization, 2025[44]). These agreements have not only granted Egypt access to key export markets such as the European Union, European Free Trade Association countries and the United States, but have also allowed Egyptian firms to have access to better inputs.
While most of these agreements have contributed to reduce or eliminate tariffs, the majority do not address non-tariff barriers (e.g. harmonising standards and regulations). A notable exception is the African Continental Free Trade Area, signed in 2019, which also aims to reduce non-tariffs barriers to trade among African economies (see Box 3.4). Moving forward, trade negotiations should prioritise deeper and more comprehensive trade agreements that go beyond tariff reductions to address non‐tariff measures, standard harmonisation and the inclusion of services and investment provisions (Youssef and Zaki, 2019[38]).
Box 3.4. Egypt’s trade agreements after 2016
Copy link to Box 3.4. Egypt’s trade agreements after 2016With the aim to reduce trade barriers and facilitate trade, Egypt adopted several trade agreements after 2016, including:
A free trade agreement (FTA) with the Southern Common Market (MERCOSUR). Initially signed in 2010 and entering into force in 2017, the FTA aims at cutting tariffs by more than 90% between Egypt and MERCOSUR economies. It strives to cancel customs duties on agricultural goods as well as find solutions to the issues of rules of origin and preferential guarantees. The agreement also promotes co‑operation in the fields of investment, services and others (GAFI, n.d.[45]).
The African Continental Free Trade Area (AfCFTA), ratified by Egypt in 2019. As of June 2021, 54 African economies signed the AfCFTA and 35 economies deposited their instruments of ratification. Upon full implementation, the AfCFTA will be the largest single market for goods and services, measured by the number of members. The agreement aims to remove tariffs on 97% of goods imported from member economies within 5 to 15 years from its entry into force. Besides trade facilitation, the AfCFTA targets the reduction of non-tariff barriers, the harmonisation of standards and the enhancement of customs co‑operation (OECD et al., 2021[46]).
The UK-Egypt agreement, signed in 2020 and entering into force in 2021. The agreement aims to preserve existing links and co‑operation between the United Kingdom and Egypt after Brexit.
The Pan Euro-Mediterranean regional convention for Rules of origin in 2025. The system allows for the application of diagonal cumulation between the EU, EFTA States, Türkiye, the countries which signed the Barcelona Declaration, the Western Balkans, the Faroe Islands and Georgia, the Republic of Moldova and Ukraine (European Commission, 2025[47]).
Sources: GAFI (n.d.[45]), Trade Agreements, https://www.gafi.gov.eg/English/Sectors/Pages/Trade-Agreements.aspx; European Commission (2025[47]), The Pan-Euro-Mediterranean cumulation and the PEM Convention, https://taxation-customs.ec.europa.eu/customs/international-affairs/pan-euro-mediterranean-cumulation-and-pem-convention_en; OECD et al. (2021[46]), Production Transformation Policy Review of Egypt: Embracing Change, Achieving Prosperity, https://doi.org/10.1787/302fec4b-en.
Trade liberalisation can help reduce informality
Trade liberalisation has the potential to reduce informality, either directly, by driving structural transformation in the economy, or indirectly, by enhancing overall productivity (see Box 3.5 for more details). Trade liberalisation can also induce a reallocation of resources towards more productive formal firms (Dix-Carneiro et al., 2024[48]).
In Egypt, tariff reductions have contributed to lowering job informality in the manufacturing sector, particularly in 1998 and 2006 (Selwaness and Zaki, 2015[49]). Evidence suggests that this positive link stems from trade reforms inducing the least productive, informal firms to exit the industry, while more efficient, formal firms expand and gain access to international markets. Consequently, this leads to an increase in the demand for formal workers – who are typically more skilled – and to a decline in informal (and irregular) employment (Ben Salem and Zaki, 2017[50]). This pattern aligns with findings from other MENA economies and Brazil (see Box 3.5).
Further trade liberalisation could strengthen these effects, supporting the government agenda to reduce informality and integrate more workers into the formal economy.
Box 3.5. The positive impact of trade on informality: Evidence from other countries
Copy link to Box 3.5. The positive impact of trade on informality: Evidence from other countriesThe relationship between trade and informality is a-priori ambiguous (Ernst and Leung, 2023[51]): trade can reduce informality indirectly by enhancing overall productivity or directly by promoting structural transformation to the economy. Alternatively, trade can lead to an increase in informality due to high import competition and penetration. The latter is due to the fact that higher competition from trade openness may incentivise domestic firms to hire more informal workers to lower their production costs (Cisneros-Acevedo, 2022[52]). The overall effect of informality at the country level depends on whether this effect is stronger than the productivity-enhancing force, causing low-productive informal firms to exit the market with trade liberalisation.
Trade can influence informality indirectly via its impact on productivity and growth. Higher openness to trade is generally associated with higher GDP and productivity, while high degree of informality is correlated with lower productivity (Ernst and Leung, 2023[51]). The latter evidence is confirmed for the manufacturing sector in Egypt by Figure 2.16, showing a positive relationship between the industry formality intensity and its productivity level.
Trade can also influence informality more directly: if supplemented with appropriate policies and regulatory framework, trade may promote structural transformation in the economy, for example, through export-led growth shifting the economy from low- to high-productivity sectors (Ghose, Majid and Ernst, 2008[53]), and through promoting the transition of segments from informal employment to formal employment (Ernst and Leung, 2023[51]). Empirical evidence suggest that trade led China, India and other East Asian economies to such structural transformations and growth, but not Africa and Latin America, where export was mainly concentrated in low labour-intensive activities (e.g. extraction of natural resources) (McMillan and Rodrik, 2011[54]). This suggests that export diversification matters for a country to reap the positive impact of trade on formality.
Available evidence confirms that trade liberalisation can substantially contribute to improving allocative efficiency in the manufacturing sector. Evidence from Brazil shows that, in a context with high informality, gains from trade liberalisation operate mainly through a reallocation of resources to more efficient uses, which is the result of less productive firms in the informal sector facing heightened competition from foreign firms, leading to market shares being reallocated to productive and formal firms, in turn leading to a general reduction in informality and an increase in aggregate total factor productivity (Dix-Carneiro et al., 2024[48]). Moreover, for MENA economies, Karam and Zaki (2023[55]) found that lower trade restrictions are associated with a higher probability that workers, especially blue‑collar, become formal in the period after the COVID-19 pandemic.
Export diversification plays a crucial role in transitioning an economy from low productivity and high informality to high productivity and low informality. While diversification does not guarantee automatic increases in formality, evidence from Botswana and Mauritius indicates that this transition occurred in both countries (Moyo, 2016[56]). The key to success for these two countries was government’s large support in both export development and enabling factors. The support was shown by significantly investing in infrastructure, trade logistics and human resource development through a variety of skills development programmes and creating an environment that facilitates FDI.
Sources: Ernst and Leung (2023[51]), “Trade and informality: Transition to formality and decent work”, in Volume 1 – Has Trade Led to Better Jobs? – Findings Based on the ILO’s Decent Work Indicators, International Labour Organization; Cisneros-Acevedo, C. (2022[52]), “Unfolding trade effect in two margins of informality: The Peruvian case”, https://doi.org/10.1093/wber/lhab023; Ghose, A., N. Majid and C. Ernst (2008[53]), The Global Employment Challenge, https://www.ilo.org/publications/global-employment-challenge; McMillan, M. and D. Rodrik (2011[54]), “Globalization, structural change and productivity growth”, in Bacchetta, M. and M. Jansen (eds.), Making Globalization Socially Sustainable, International Labour Organization and World Trade Organization; Karam, F. and C. Zaki (2023[55]), “On trade policy and workers’ transition between the formal and informal sectors: An application to the MENA region in the time of COVID-19”, https://doi.org/10.1080/09638199.2023.2222422; Moyo, T. (2016[56]), “Promoting industrialisation in Mauritius, South Africa and Botswana”, Africa Development, Vol. 41/3, pp. 139-163.
Opportunities for further development: Policies for increasing export competitiveness in the manufacturing sector
Copy link to Opportunities for further development: Policies for increasing export competitiveness in the manufacturing sectorThis section explores opportunities to further develop manufacturing exports in Egypt. It is structured into four sub-sections, each corresponding to a specific policy recommendation:
Improve sectoral strategies to boost industrial export.
Reduce tariff and non-tariff barriers to trade.
Support SME trade activity and help new businesses enter the international market.
Co‑ordinate trade and industrial policies.
Improve sectoral strategies to boost industrial export
Evidence presented in this chapter reveals that the Egyptian manufacturing sector has an untapped export potential. To help unleash it, this section summarises the main evidence presented above and contextualises it with evidence from Chapter 2 on productivity. Consequently, the section provides policy insights that can help the Egyptian government draw tailored policies to boost the competitiveness of the manufacturing sector. These recommendations aim to capitalise on new areas with high growth opportunities, while building on Egypt’s existing strengths. The policy recommendations are articulated around the three main categories of sectoral strategies:
Promote access to global markets for industries with potential for export growth: Egypt should prioritise industries with potential for export growth. These industries include Pharmaceuticals, medicinal chemical and botanical products (21); Rubber and plastic products (22); Computers, electronic and optical products (26) and Machinery and equipment n.e.c. (28). Over the period 2010-22, they demonstrated simultaneous high growth in both exports and value added. However, these industries represent a low share of Egyptian manufacturing exports and do not show a comparative advantage compared to other countries (Figure 3.16). The Computers, electronic and optical products (26) industry has experienced the strongest export growth over the past decade and is also characterised by high global demand. Global demand in the recent period (2018-22) is also high for Machinery and equipment n.e.c. (28) (Figure 3.17). The four aforementioned industries should be top priority industries to develop further in term of exports performance in the short and medium terms. It should be noted that some of these industries – the pharmaceutical industry in particular – are highly capital-intensive, thus export growth may not necessarily translate into employment growth. Computers, electronic and optical products (26), Pharmaceuticals, medicinal chemical and botanical products (21) and Machinery and equipment n.e.c. (28) industries also displayed high levels of labour productivity in 2017/18 and a high share of formal establishments (see Chapter 2).
Design industrial policies to encourage productivity growth in industries with established competitiveness to increase exports: Egypt should design industrial policies to encourage productivity growth in industries with established competitiveness in order to increase exports. These industries include Food products, beverages and tobacco (10-12), Textiles, textile products, leather and footwear (13-15), Chemicals and chemical products (20) and Other non-metallic mineral products (23), which represent a large share of value added and exports in Egypt’s manufacturing sector. They exhibited modest export growth between 2010 and 2022 and relatively low value added growth. These industries have an RCA compared to other countries. Industries in this category will be important in the short term as a source of foreign currency and to increase Egypt’s exports at the intensive margin. Well-designed industrial policies will be also important to foster value added growth in those industries. The Textiles, textile products, leather and footwear (13-15) industry is also highly labour-intensive, and its export development could contribute to fostering employment growth. Textile is another key industry in which Egypt is showing higher forward GVC linkages and in which GVCs have driven export growth in a number of fast-growing developing countries (IFC, 2020[32]).
Decarbonise production process in key industries to enhance export competitiveness: Egypt should aim to decarbonise the production process in key industries to enhance export competitiveness. Other non-metallic mineral products (23) and Basic metals (24) not only represent a large share of Egyptian manufacturing exports and value added, but also demonstrate strong competitiveness in global markets (RCA>1). They are, however, highly carbon-intensive (Figure 3.12). Within manufacturing, basic metals (29.7% in 2020) is the largest contributor to GHG emissions embodied in Egypt’s manufacturing exports, followed by other non-metallic mineral products (16.7% in 2020). Consequently, the high carbon intensity of these industries can affect their trade potential, particularly with the EU, as they will be significantly affected by the CBAM, a recent EU policy aimed at tackling the risk of carbon leakage in EITE sectors. In the long run, the ability to reduce the emission intensities of Egypt will depend on the adoption of new production technologies to improve the production of current EITE goods. Decarbonisation of Basic metals (24) and Other non-metallic mineral products (23) industries is thus pivotal in enhancing the competitiveness of Egypt’s industrial sector in the upcoming decade.
Reduce tariff and non-tariff barriers to trade
Both tariff and non-tariff trade barriers remain significantly high in Egypt compared to peer economies. On one side, non-tariff barriers – including stringent registration and documentation rules, alongside lengthy process times to obtain an import licence and specific products requirements – are largely hampering access to better inputs, and therefore Egyptian firms’ export performance. Time to import and export is higher than peer economies (Figure 3.22). The latter calls for interventions in reducing non-tariff barriers, including administrative and technical barriers to trade. The signature of deeper trade agreements that address the distorting non-tariff measures is also important to untap the full trade benefit of the signed agreements. Recent development within the National Structural Reform Program states that Egypt’s Ministry of Trade seeks to streamline import licensing and prior-approval procedures for imports to enhance transparency and investor predictability (MPED, 2024[57]).
Egypt can improve the transparency of non-tariff measures and actively inform SMEs on how to comply with them. Egypt should consider addressing administrative barriers to trade, by streamlining registration and documentation rules, as well as requirements to obtain an import licence.
On the other hand, tariff barriers remain significantly high in Egypt compared to peer economies, despite a reduction over time in tariffs on manufacturing products (see Figure 3.21). This suggests scope to further reduce tariffs, particularly on imported intermediate goods needed to export, which can have positive effects on productivity (Martínez Zarzoso, Said and Zaki, 2021[36]). Lowering these tariffs would also help avoid incentives for firms to import final goods instead of producing them domestically in Egypt.
Tariffs should also avoid going against the green transition. Indeed, the current tariff structure presents challenges to the manufacturing sector to domestically produce green equipment that is crucial for the green transition. For example, the tariff imposed on raw materials required to produce solar water heaters in Egypt is higher than tariffs imposed on final goods (UNIDO, 2020[58]).23 Consequently, the difference in tariffs incentivises firms to import the final good, rather than build the domestic capacity to produce equipment that would help in the green transition (e.g. solar heating). Another distortion is that the current tariff schedule contributes towards plastic pollution, as tariffs for traditional plastic are lower than its greener alternatives. Tariffs for plastic materials and products are concentrated below 10%, while product substitutes range between 5% to 25% (UNCTAD, 2023[59]). This is an obstacle to manufacturers adopting more sustainable alternatives as inputs.
Support SME trade activity and help new businesses enter the international market
While initiatives to increase exports in Egypt exist, they have mostly favoured larger and already established firms. That is the case of the Export Rebate Program, which has been Egypt’s long-standing policy, offering a cash transfer to exporting firms (see Box 3.6). This programme has however implicitly favoured larger exporting businesses (Alhelewa, 2020[60]) as the cash transfer is based on the volume of a firm’s sales. Moreover, most of the industries targeted are rather capital- intensive, which could affect the ability of this programme to generate more jobs (ILO, 2022[18]).
Egypt could provide support to boost exports, specifically targeting smaller firms (SMEs) and incentivising new firms to enter the export market. In this context, MSMEDA has recently established a new export department within its structure to strengthen SME competitiveness and support their exporting activities. This unit can be instrumental in helping SMEs boost their exports.24 Trade-related policies should thus aim to target an increase in the intensive margin (higher export for firms already engaged in exporting activities) as well as the extensive margin. These measures would foster a competitive export market, where a larger number of firms could enter and compete with equal opportunities among market players.
To this aim, Egypt could combine volume-based and SME-specific support policies. Other countries have been implementing export policies specifically targeted at small businesses (e.g. SME Export Promotion Grants in Türkiye (OECD et al., 2016[61]) and PROGER in Brazil (OECD, 2020[62])). Moreover, ensuring good export promotion policies may be effective in helping smaller (and new) firms alleviate their information-related impediments and deal with the complexities in finding partners and exporting (Martincus and Carballo, 2010[63]; Srhoj, Vitezić and Wagner, 2023[64]). Export vouchers can support SME export growth. For example, Korea introduced an export voucher programme to provide financial assistance to export-oriented SMEs.25 Enabling policies such as lowering tariff and non-tariff barriers (as discussed before) is also instrumental in encouraging SMEs to expand their exports and in facilitating the entry of new exporting businesses.
The government could also ensure that the support provided to exports are dynamically linked to the changes in the exchange rate (FEI, 2020[65]). This is important to ensure SMEs are successfully targeted, especially if measures are volumed-based.
Box 3.6. Export subsidies in Egypt
Copy link to Box 3.6. Export subsidies in EgyptThe Export Rebate Program (ERP) provides export subsidies to selected industries
The ERP, managed by the Export Development Fund, has been in place since 2002 to boost exports and expand Egypt’s international market presence.26 Over the years, the programme has undergone several modifications to address low export performance and broaden its coverage beyond the agricultural sector:
In 2019, the government reformed the ERP, expanding the cash back mechanism and introducing new measures to support exporters. The programme provided: i) direct cash transfers to exporters; ii) tax relief allowing exporting firms to offset arrears owed to the Ministry of Finance; and iii) technical and financial support to improve export infrastructure (e.g. capacity building, technology transfer and trade fairs (Alhelewa, 2020[60])). To receive the subsidy, firms had to submit a set of documents, including commercial, industrial and exporter registrations, along with export transaction records. Eligible industries included engineering, chemicals and fertilisers, books and artefacts, leather and leather products, handicrafts products, food industries, furniture, medical and pharma, agricultural crops, building, construction materials, real estate investment, and spinning and textiles.
In 2021, a new ERP was adopted, extending benefits to additional sectors. Industries covered included food, textiles, construction, agriculture, leather, engineering industries, packaging and furniture, along with, for the first time, pharmaceuticals, cosmetics and the automotive sector. The programme remained sales-volume-based, offering cash transfers based on export volumes (ILO, 2022[18]).
Recently, a new ERP has been announced for the future, significantly increasing government export subsidy allocations. The budget rose from EGP 5 billion in 2022/23 to EGP 28.1 billion in 2023/24 (Figure 3.23). Moreover, Egypt’s economic strategy for 2024-30 has set ambitious export targets, including growing the pharmaceutical industry’s exports to USD 5 billion annually by 2030 (Table 3.2).
In 2025, Egypt launched a new export subsidy programme worth EGP 45 billion for 2025/26 (SIS, 2025[66]). The modified scheme introduces a two-tier eligibility structure. Export volume and economic value remain as key considerations. The programme also considers broader developmental aspects, such as participation in international trade shows, entry into strategic markets, brand enhancement, improvements in logistics and transportation, geographic expansion, compliance with international environmental standards and efficient energy use.
Figure 3.23. Allocated expenditure on export subsidies increased substantially in 2023/24
Copy link to Figure 3.23. Allocated expenditure on export subsidies increased substantially in 2023/24
Note: The graph plots export subsidies in million EGP (bars) and as % of GDP (line). Dotted lines (bars) represent allocated expenditures for coming years (not actual).
Source: Ministry of Finance (n.d.[67]), Financial Statement of Public Budget, https://mof.gov.eg/en/.
Table 3.2. Key export objectives for 2030
Copy link to Table 3.2. Key export objectives for 2030|
Category |
Objective |
|
Agriculture |
Increasing vegetables and fruits exports to USD 14 billion by 2030 |
|
Industry |
Raising the annual growth rate of industrial exports to 20% |
|
Increasing electronics exports by 20% |
|
|
Elevating annual pharmaceutical exports to USD 5 billion |
|
|
Telecommunication and information technology |
Increasing exports of outsourced services to USD 13 billion |
|
Oil and mineral resources |
Doubling oil and gas exports to reach USD 36 billion |
|
Electricity and renewable energy |
Elevating electricity exports to 1.5 gigawatts per day |
Source: Based on Egypt’s Economic Strategy 2024-2030, announced by the SIS (2024[68]), “Factbox: Egypt’s economic strategy for 2024‑2030”, https://www.sis.gov.eg/Story/191030/Factbox-Egypt%27s-economic-strategy-for-2024-2030?lang=en-us.
Sources (box): Lynx (2019[69]), “Egypt’s new Export Rebates Program”: https://lynxegypt.com/uploads/publication/pdf/Business-Bulletin-July2019.pdf; Lynx (2019[70]), The Export Rebates Program - July 1, 2020 – June 30, 2023 - Simplified, https://lynxegypt.com/uploads/publication/pdf/LYNX-Business-Rebates-Program.pdf; Alhelewa, A. (2020[60]), “Government export support programme in Egypt: Challenges and influencing factors”, Master’s thesis, American University in Cairo, https://fount.aucegypt.edu/etds/1774; ILO (2022[18]), The Impact of Trade and Investment Policies on Productive and Decent Work: Country Report for Egypt, https://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_854753.pdf; SIS (2025[66]), Egypt Expands Export Rebate Program with LE 45 Billion Boost, https://www.sis.gov.eg/Story/209075/Egypt-Expands-Export-Rebate-Program-with-LE-45-Billion-Boost-for-2025%E2%80%932026?lang=en-us.
Co‑ordinate trade and industrial policies
The overall success of Egyptian trade policies will depend not only on effective trade policies but also on a comprehensive policy mix covering a wide range of enabling factors for firms’ exporting activity, such as infrastructure investment, support to FDI and skills development programmes. Trade policies can be an effective tool to boost industrial development, if trade and industrial policies are co‑ordinated (Zaki, 2021[71]). Improving co‑ordination between industrial and trade policies is crucial for the success of both policies. Additionally, building a clear vision for Egyptian industrial policy along with the elimination of institutional deficiencies will help attract investments to the targeted sectors (Zaki, 2021[71]). With the recent ministerial changes and restructuring of the MTI, trade policies now fall under the Ministry of Investment and Foreign Trade, while industrial policies are under MoIND. It is therefore critical to ensure close co‑ordination between the two institutions and their respective policies. In this regard, it is beneficial to build on the momentum acquired by the weekly meetings held by the Ministerial Group for Industrial Development, headed by the Vice Prime Minister and comprising nearly twelve ministers alongside private-sector representatives, as an institutionalised platform for such coordination. One way to institutionalise such co‑ordination is by developing a whole-of-government industrial – and potentially export – strategy, which can align objectives, streamline interventions and ensure consistency across policy areas. Industrial and trade policies should be defined based on objective and measurable indicators. This will not only allow the government to better define target sectors in formulating strategies but also track sectoral and regional performance over time.
References
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Notes
Copy link to Notes← 1. Learning by exporting relates to the fact that firms engaging in export activities tend to learn and improve their processes via knowledge transfer from foreign buyers.
← 2. For more information on the TiVA database, see https://www.oecd.org/sti/ind/measuring-trade-in-value-added.htm.
← 3. The whole analysis below has also been replicated using Bilateral Trade Data (BTD). While TiVA and BTD are not directly comparable, the same qualitative results can be appreciated, but with different magnitude and peaks. In fact, TiVA is valued at basic prices while BTD is valued at purchasers’ prices. The distribution margin rates, which account for the difference, are different across industries. These differences could be substantial at around 10-40%. Moreover, in the OECD Inter-Country Input-Output (ICIO), which is the main building block for TiVA indicators, adjustments are made for re-exports by removing them from the values of exports and imports, while BTD does not make these adjustments. A re‑export, for example, occurs when a country imports goods and then exports them again without significant processing or value addition. Finally, TiVA follows the ISIC industry classification, while BTD is recorded at the product level.
← 4. The Coke and refined petroleum products industry (19) represented 21.1% of manufacturing exports in Egypt in 2010 and this share was down to 15.0% in 2022.
← 5. Furthermore, the world trade scene experienced a general drop in 2015 and 2016 due to several factors, including an economic slowdown in the People’s Republic of China, a severe recession in Brazil, falling prices for oil and other commodities and exchange rate volatility (WTO, 2016[72]).
← 6. Decreases in trade displayed in Figure 3.3 for the year 2015 is attributable to the devaluation of the EGP against the USD. When TiVA data are converted in local currency, EGP at constant 2015 prices, Annex Figure D.2 shows that the drop is less pronounced, but the dent in 2015 remains.
← 7. Note that these data are not directly comparable with the TiVA dataset because they do not correspond to the same industry classification. Also note that the figures for 2023/24 and 2024/25 are provisional.
← 8. Data were extracted from BACI at the HS 6-digit level. Crosswalks from HS to ISIC Rev.4 were employed, using the Bilateral Trade Database by Industry and End-Use (BTDIxE) conversion key, to focus only on the manufacturing chapter (excluding Coke and refined petroleum products, ISIC Rev.4 Division 19).
← 9. The council includes the president, the prime minister, the Central Bank of Egypt governor and several cabinet ministers.
← 10. See http://www.mti.gov.eg/English/aboutus/Sectorsandentities/Entities1/ExportDevelopmentAuthority/Pages/default.aspx.
← 11. For instance, during the pandemic, the Export Development Fund allocated EGP 4.6 billion to pay unpaiddues to exporting companies. Several initiatives were implemented to provide exporting firms with cash liquidity to enable them to fulfil their obligations towards their clients and retain employment (ILO, 2022[18]).
← 12. In this iteration, the Coke and refined petroleum (19) industry was included in the total of manufacturing.
← 13. The Other non-metallic mineral products (23) industry includes Manufacture of glass and glass products (2310), Manufacture of refractory products (2391), Manufacture of clay building materials (2392), Manufacture of other porcelain and ceramic products (2393), Manufacture of cement, lime and plaster (2394), Manufacture of articles of concrete, cement and plaster (2395), Cutting, shaping and finishing of stone (2396) and Manufacture of other non-metallic mineral products n.e.c. (2399). Meanwhile, the Basic metals (24) industry includes Manufacture of basic iron and steel (2410), Manufacture of basic precious and other non-ferrous metals (2420), Casting of iron and steel (2431), and Casting of non-ferrous metals (2432).
← 14. As a robustness check, following Johnson (2014[73]), results show that computing RCA using domestic value added embodied in foreign final demand (instead of gross exports) give similar results. Similarly, Other non-metallic mineral products (23), Chemicals and chemical products (20), Basic metals (24) Textiles, wearing apparel, leather and related products (13-15) and Food products, beverages and tobacco (10-12) are persistently the industries with RCA above unity (Annex Figure D.4).
← 15. Panel B of Annex Figure D.3 shows export growth over the 2010-22 and 2020-22 periods.
← 16. If firms have a capacity constraint, which is expected in the short term, they can decrease their exports to satisfy an additional domestic demand. The idea is that firms adjust their sales among domestic and international markets, and if domestic demand is low, they can sell more on international markets. Additionally, sales and exports can be substituted if firms are constrained to production.
← 17. See OECD Trade in Value-added website: https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
← 18. See OECD Global Value and Supply Chains website: https://www.oecd.org/en/topics/global-value-and-supply-chains.html.
← 19. GVC-based trade exerts constant pressure on firms to upgrade their productivity drivers, such as technology, skills and management practices to remain competent in their specific positions of specific components in the GVCs. This then contributes to higher overall productivity and economic growth in countries participating in GVCs. As a result, higher economic growth leads to reduced poverty (IFC, 2020[32]).
← 20. Technical barriers to trade refer to technical regulations and standards that do not fall within the scope of sanitary of phytosanitary measure that relate to human or animal protection (Kamal and Zaki, 2018[41]).
← 21. For more information on Nafeza, see https://www.nafeza.gov.eg/en/about-nafeza.
← 22. According to the World Bank, Logistics Performance Index (LPI) overall score reflects perceptions of a country’s logistics based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time. The index ranges from 1 to 5, with a higher score representing better performance”.
← 23. Local solar water heater (SWH) factories buy their raw materials and input components at relatively high costs including custom duties, as these inputs cannot be easily identified as SWH or renewable energy manufacturing inputs to benefit from any customs benefit or release. This makes importing the whole SWH system more attractive and easier than importing certain components and locally manufacturing others (UNIDO, 2020[58]).
← 24. The new department within the MSMEDA should continuously co‑ordinate with the Ministry of Investment and Foreign Trade to ensure that SMEs are receiving effective incentives in engaging in trade. As part of the co‑ordination, relevant stakeholders (e.g. Ministry of Investment and Foreign Trade, MSMEDA, UNIDO) can regularly monitor progress and conduct impact evaluation using quantitative measures to keep track of what works and what does not (see Recommendation 11).
← 25. See https://www.mss.go.kr/site/eng/03/20301120000002019110758.jsp for more information.
← 26. In 2002, Export Promotion Law No. 155 was endorsed to define the roles of export promotion organisations in Egypt. Under Article 2, the law established the Export Development Fund as an entity affiliated with the Minister of Trade and Industry.