Egypt after the Multi-Fiber Arrangement: Global Apparel and Textile Supply Chains as a Route for Industrial Upgrading

Dan Magder is a financial analyst in mergers and acquisitions at Capital One. He spent several years advising public- and private-sector companies on business strategy and development. He worked with Fortune 500 firms at Vertex Partners, a boutique strategy consulting firm, and was a consultant to Palestinian, Jordanian, and Israeli companies as part of Michael Porter's Middle East Competitiveness Project. He was a project consultant for the International Finance Corporation and several private equity firms; an associate at Rothschild's mergers and acquisitions group; and a research assistant at the Institute for International Economics from 1995 to 1996. Abstract Exporting through international supply chains was a successful way for East Asian countries to develop their textile and apparel industries in the 1970s and 1980s, but it is a less clear route for countries like Egypt trying to compete today. The challenge is particularly acute given the strength of competitors like China, and even more so in the post-MFA era. Some analysts suggest that "lean retailing" increases the importance of geography in exporting in the world of rapidly changing apparel fashion, in a way that could benefit a country like Egypt with its proximity to European end markets. Using a supply chain model, this paper suggests that shortening lead times can indeed have an impact on profits, but that the effect is not tremendous, being in the range of a 0.3 percent to 0.9 percent increase in profits for every week of improvement in lead times. The study also finds that the business environment in Egypt lags key comparator countries in several areas that help the firms compete in global apparel chains, although recent reforms by the Egyptian government are working to address several of these aspects. It concludes by exploring to what extent geography, trade preferences, and local production factors may help Egypt's textile and apparel industry carve out a role for itself in global supply chains, and provide an engine to drive industrial upgrading throughout the country.