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QIZ: Egyptian Jeans Under the Patronage of the Muslim Brotherhood

[Egyptian convoy at the Rafah Border, Egypt. Image originally posted to Flickr by Gigi Ibrahim.] [Egyptian convoy at the Rafah Border, Egypt. Image originally posted to Flickr by Gigi Ibrahim.]

Two weeks ago, an official Egyptian delegation visited Washington to negotiate expanding the Qualifying Industrial Zone (QIZ) agreement with Israel and the US, which sees designated geographic areas in Egypt given duty free status in collaboration with Israel.

They also met to discuss reducing the Israeli component in Egyptian exports to the US, which is part of the QIZ deal.

Meanwhile, Palestinians were finalizing plans to build the first Palestinian village on land that Israel will confiscate to build settlements.

They erected it a and called it Bab Al-Shams, "Gate of the Sun": a new and unique form of resistance during such difficult times.

News of the QIZ meetings, a scoop by Mohamed El-Menshawi, the Washington correspondent of Egyptian daily Shorouk, came as no surprise.

It was preceded by a US visit to Cairo in September.

The agreement has been a key item on the agenda of Hisham Qandil’s government since it was appointed by President Mohamed Morsi.

On 9 September 2012, in an interview with economic news agency Bloomberg, Qandil said that Egypt will meet its commitment to the agreement which opens up the US market for Egyptian products if they have a 10.5 percent Israeli component of added value (which Morsi’s Egypt wants to reduce to eight percent).

Qandil also said that “a lot of people are making good business out of that: We want to make sure we do the right thing for them to flourish.”

The Muslim Brotherhood and QIZ Pre-Revolution

On 9 December 2004, a report that was published on the Muslim Brotherhood's website Ikhwan Online titled: “Muslim Brotherhood MPs: QIZ threatens Egypt’s security," said the Brotherhood parliament bloc warned against the risks of the QIZ agreement that was then due to be signed within days.

The site reported that according to MP questionings and interpellations, "the agreement is a serious threat to national security because it is the first economic and industrial agreement with the Zionist enemy."

At the time, Brotherhood parliamentarian Hamdi Hassan, said in an interpellation that the agreement "achieved all that the enemy has sought for decades: controlling the region economically through interfering in the Egyptian economy after it controlled it politically in the wake of the Camp David agreement." Hassan concluded by saying “you cannot make peace, promises or QIZ with Zionists.”

The Islamist MP ended by strongly rejecting “attempts to normalize relations with “our usurper enemy” and described it as “a mark of shame that will burden future generations.”

But the Brotherhood's rejection of QIZ was not only for political reasons. The Islamist group also refuted the argument put forward by the Mubarak regime and the then minister of trade and Industry Rachid Mohamed Rachid that the agreement would rescue the textile industry and create 150,000 new jobs.

Morsi, who at the time was an MP and spokesman of the Brotherhood bloc in parliament, mocked these justifications in a statement he made inside parliament and demanded that the government clarify how 150,000 jobs will be created. He also rejected Egypt “signing an agreement with a Zionist minister.”

Meanwhile, another Muslim Brotherhood MP Hassanein El-Shura speculated about the pressure put on the government by the business lobby to sign the agreement.

Today, eight years later, Morsi's government wants to expand QIZ while the Freedom and Justice Party (FJP) and its parent organisation the Brotherhood are completely silent. What has changed in their reasoning?

From Ahmed Nazif’s QIZ to Qandil’s QIZ: Who Benefits?

As we know, none of the economic promises of Rachid and the government of former Prime Minister Ahmed Nazif, materialized.

The QIZ did not save Egypt’s textile industry nor did Egypt’s exports witness the anticipated landmark boom. For eight years and three months, since the activation of the agreement in 2005 until the first quarter of 2012, Egypt exported goods worth $5.1 billion to the US as part of the agreement, or $618 million annually.

The top product we export is jeans trousers, which accounted for nearly half of QIZ exports in 2011, mostly to Gap and Levi’s, according to the latest figures of the QIZ division at the Ministry of Trade and Industry. Meanwhile, Egypt imported goods worth $560 million from Israel during that period.

What a meagre harvest in comparison to Egypt’s exports, which reached $29 billion in 2007/2008 and $27 billion in 2011/2012.

Since 2011's January 25 Revolution, the volume of QIZ exports increased, reaching $931.6 million in 2011, in comparison to $858.2 million in 2010. In the first quarter of 2012, Egypt’s imports from Israel were $94 million, $48 million of which were in March alone, which is four times as much as the same quarter in 2011. This is the main goal of QIZ and the gas deal: to increase commerce between Egypt and Israel.

But what happened in terms of job creation and expanding industry, and did it bring in the promised foreign investment to bolster export opportunities?

Out of 536 companies that registered for QIZ, 382 did not export a penny’s worth; only 154 have exported goods over the eight and a quarter years. This means that seven out of every ten businesses that registered did not benefit from the agreement until the first quarter of 2012.

Textiles and ready-made garments account for eighty-nine percent of these exports, followed by plastic goods at two per cent and chemical products at two per cent, which means that the primary beneficiary has been readymade garment exports.

A study issued in April 2010 by leading regional research institution Economic Research Forum headed by Egyptian economist Ahmed Galal, states: “QIZ’s contribution was very small in resolving the structural problems threatening Egypt’s textiles sector.”

The study, written by two researchers, Jeffrey Nugent and Abla Abdel-Latif, added that of the seventeen industrial zones housing QIZ factories, eighty percent of exports come from only six of them and eighty-eighty percent of exports are concentrated in companies with more than 500 workers.

"Among major companies, there is a bias towards bigger and bigger enterprises; half of QIZ exports come from companies with a workforce of more than 2,000," it revealed. This means there are very few benefits for small and medium companies that were promised permanent prosperity.

Egyptian companies still mainly rely on imported fabric from China, India and Israel, "which diminishes the benefits of the agreement” and means that the overall benefits to the spinning and weaving industry are minor.

Meanwhile, QIZ attracted some Turkish investment in the sector but the study found, however, that the anticipated benefit, which was meant to see the strengthening of companies that supply the readymade garment industry, “did not happen."

Political Gains and the US

Then why is Qandil’s government once again boosting this unfruitful agreement?

The answer lies in politics: This agreement was a cornerstone of the relationship between the US and Mubarak regime as it prepared to hand over power to his son.

Even after Mubarak has been ousted, it remains a US prerequisite for supporting the regime in Egypt.

As MP El-Shura pointed out in 2004, there is also the alliance with the small lobby that benefits from QIZ, headed up by Galal El-Zorba, chairman of the Union of Industries before and after the revolution. Speaking to Ikhwan Online website, El-Zorba welcomed the formation of "Ibdaa" (Begin) business society led by Brotherhood businessman Hassan Malek.

Day after day, the economic policies of Brotherhood rule reveal the depth and breadth of a socio-political alliance with Mubarak’s businessmen, even if this contradicts their positions in the past.

While official and non-official calls are being made in the West to boycott products made in Israeli settlements because of Israel’s fierce settlement policies, our government – which was appointed by a Brotherhood president – wants to expand economic and commercial normalization with Israel, in order to defend and support exports of jeans trousers that are essentially manufactured by five businessmen.

On 26 April 2006, more than one year after QIZ was implemented, the Brotherhood website reviewed a book by Ashraf Dwaba (the Freedom and Justice Party (FJP) website regularly publishes his economic articles) titled “QIZ from an economic and Sharia perspective.”

Dwaba refuted "claims that QIZ enabled Egypt’s exports, especially textiles, to avoid fierce competition in the US market." 

His books states: “One cannot ignore the threat of QIZ to efforts to raise the quality of Egypt’s industry, because Egyptian industry would depend on exclusive advantages in the agreement that could be retracted at any time for any reason”.

He adds that “There are many countries – most notably China, Bangladesh, India, Pakistan and others – that managed to increase their exports to the US, especially textiles and ready-made garments, without signing such agreements by relying on increasing production efficiency and quality, and cutting prices.”

Dwaba went further by saying: “There is no truth to claims about the economic benefit in defending the agreement," adding, “exports do not forgive a crime and do not reverse something forbidden into something permissible."

Glory to the messengers of freedom from Palestine, the builders of "Gate of the Sun'" and shame on those who normalize relations with Israel at the expense of the cause and morality, at the expense of righteousness and interests of the people.

[Developed in partnership with Ahram Online.] 

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