Report by Al-Masry Al-Youm English Edition:
It was supposed to be the next best thing for Egypt’s economy, which had become stagnant by the end of 2004, so when the country agreed to the establishment of the Qualifying Industrial Zones (QIZ) in 2005, there was much praise to go around. Although the economic zones have been successful in terms of business, the realities on the ground have shown there is still much to be desired.
In 2005, following the example of fellow Arab nation Jordan, Cairo jumped on the opportunity to use Israel as a middle-man to the American market.
U.S.-based companies were quick to launch their assault on the new market, establishing factories in the country.
Well-established American brands, including Levi’s, Gap, Calvin Klein and Wal-Mart, have taken advantage of the QIZ to use cheaper labor to manufacture products without the extra costs of duties upon returning the United States. All that is needed in order to be granted the duty-free status is at least 10.5 percent of every Egyptian product has Israeli components.
There are four geographic regions designated as QIZs in the country. These areas encompass Egypt’s largest industrial centers, including eight public free zones. Greater Cairo and Alexandria are the country’s most important textile and clothing manufacturers, the American Chamber of Commerce in Egypt said on its website.
“US-Egyptian trade is at an all-time high. Since 2004, annual bilateral trade has increased 77 percent to U.S. $7.7 billion. That reflects a 77 percent increase in trade in both directions,” former American Ambassador to Egypt Francis J. Ricciardone told reporters in March 2008 at the American Chamber of Commerce in Cairo.
The statistics are staggering, proving the new outsourcing is successful.
The export of textiles and ready-made garments to the United States jumped to around U.S. $875 million in 2007, up from U.S. $580 million in 2004, the year of the QIZ’s inception. Egyptian ministry of trade figures say that a major reason for this rise is a 33 percent increase in the ready-made industry and lines, which rose 163 percent in 2007 to U.S. $25 million.
American companies and officials are pleased with the economic expansion.
“A unique part of Egyptian-US trade relations is the QIZ program,” Riccardone said. “The QIZ is maturing into a solid component of Egypt’s trade relations with the United States. Last year alone, QIZ exports increased 10 percent to U.S. $689 million, mostly in textiles.”
Sounds appealing. However, not all is well in the industrial zones. A string of ongoing strikes and protests have nearly paralyzed a number of the QIZ companies in the Nile Delta region. Workers argue that they have been unable to get paid, work in poor conditions and have been forced to sign their resignation letters without a date so employers can simply let them go when they demand their rights.
Despite reports of appalling conditions in the companies factories, which a number of activists and bloggers have referred to as “mega-sweatshops,” the office of the Four Seasons Ready-Made Garments, said the working conditions are “above the average Egyptian standard.”
The official working in the public relations office, refused to give his name, but added that “the QIZ zones are up to the working standards of any foreign company and it is the policy to ensure everyone is able to have their rights dealt with in a normal and timely manner.”
Tell that to 24-year-old Alaa Gameel, who spoke recently with Al-Masry Al-Youm on the situation. He joined the Abul Sebae Textile factory, one of the QIZ-affiliated companies in the Nile Delta town of Mahalla, as a 14-year-old minor, was never given a contract and works 12 hour days for a wage of around LE11, or $2 US.
According to him, he was forced to sign his resignation without a date on the paper when he was hired. Adding to this, he is without health insurance, has no retirement benefits and as of early August, has not been paid the past three months.
“This is something common in Mahalla,” said Gameel. “They can fire any worker at anytime, and not give him compensations or retirement pay.”
But, Washington and Tel Aviv don’t appear worried. American businessmen have entered an almost untouched market of cheap labor, and although strikes have begun to erupt across the QIZ zones, for the most part, the workers have taken the hits and kept moving.
An American businessman, who previously oversaw production at one of the factories – from a distance, argued that the “Egyptian government doesn’t seem to have a problem with what is going on, so why should we bother to change our ways.”
John Brian, who refused to give the company he worked at, but did say it was an American corporation, says that the QIZ are the only part of the Egyptian economy that is able to supply proper export quality materials to the rest of the world.
“They [Egypt] would be lost without these factories, so it gives them the opportunity to get foreign companies to work here. It’s good for the economy,” Brian continued.
“The cost of running a factory in Egypt is much less than in the States and with the QIZ we are still able to sell the products at close to the same price because the duties have not been risen.”
It may be good for the companies, even the Egyptian government, but is it really good for the workers such as Gameel, who must fight for every piaster, literally?