Sohail Inayatullah[1], Arun Jacob[2] and Reham Rizk[3]
What are the futures of manufacturing in Egypt in the next five to ten years?
Can Egypt use the COVID-19 crisis to quickly retool and create a revolution in manufacturing unlocking business?
Or will the gap between the rich and poor, the prepared and unprepared, continue to widen?
Indeed, how should Egypt position itself in terms of not just the pandemic (near-shoring, localization), but other disruptions such as changes in technology (robotics and automation, the Internet of everything, digitalized government, 3D printing); greening and sustainability (the shift to a circular economy, eco-friendly products); and peer to peer and a sharing economy (blockchain, the UBER model of business)?
Through a series of Foresight workshops, these and other questions were answered. We did not seek to predict the future, but rather to create alternative and preferred futures so as to mitigate risk and create new opportunities for manufacturing. Leaders from the Ministry of Planning and Economic Development, the United Nations system in Egypt, the Federation of Egyptian Industries, and business bodies helped prepare the scenarios. At a broader level, the exercise also sought to enhance futures literacy in Egypt.
As identified by UNIDO (2020), several types of industrial policy actions can be taken to mitigate the impact of COVID-19 oriented at keeping business afloat during COVID-19, maintain employment and adapting business. The scenario project focused on actions to reorient business for the new post-COVID-19 economic conditions and realities, while looking at a broader set of emerging issues.
Why this Foresight Exercise?
The Government of Egypt realized that COVID-19 has far reaching implications for all sectors of the Economy. The COVID-19 task force constituted by the Government of Egypt (led by Ministry of Planning and Economic Development) and the UN system in Egypt identified a series of response measures with a view to prepare for the ‘new normal’ and accelerate the recovery. In this context, the task force decided to conduct a series of strategic foresight sessions on critical sectors of the economy. Given the critical role of manufacturing sector in the economy and the new pressures and opportunities presented by COVID-19, the task force organized the foresight exercise i this sector. It did this process in collaboration with Sohail Inayatullah. This article summarizes the process and key findings of the exercise and the full report is available here. The exercise builds on the previous collaborations in foresight exercises between the Government of Egypt and the UN system, namely, the Alexandria Dialogues (Karlstetter, 2019). These dialogues focused on Egypt in 2050 in numerous areas including sustainability, education, and deep inclusion.
The Futures Journey
In the introductory online presentation – conducted by Inayatullah – participants answered questions on the future (Inayatullah, 2015). As face to face workshops were impossible, a modified version of the Six Pillars (Inayatullah, 2008) was developed. This entailed working through a series of questions. Three of those questions are presented below. Each question was designed to enhance futures literacy and contextualize the scenario process.
The first question asked What is impossible today, but if possible, changes everything in the manufacturing sector in Egypt? The answers included: building a tesla car plant in Egypt; the creation of a highly skilled and technology literate workforce; and the harnessing of youth so that Egypt could become a global center of high value-added manufacturing. The main sentiment was that Egypt needs to adapt to high valued technology manufacturing but does not yet have the skill set to do so.
The second question focused on the used future – practices that the industry continues but are no longer useful or relevant. The responses included: staying in traditional products such as garments and food; labor intensive and low skilled manufacturing; working in offices instead of remotely; red tape; and one-stop shops. Again, the same sentiment was expressed: to shift Egypt needs to drop traditional institutional practices.
Nasser Nouri. Creative Commons license.
The third question focused on emerging issues – how the world was changing. The chart below maps out the anticipated shifts in the coming decade (Inayatullah, 2020).
Figure 3: Mapping of emerging issues
Source: Stakeholder responses during the strategic foresight exercise
Image: Unitech
Creating the Scenarios
Following this initial session two hour session, participants then met again and articulated scenarios for manufacturing and policy recommendations.
To open this discussion, Tarek Tawfik, Deputy Chairman, Federation of Egyptian Industries analyzed the current context and articulated his preferred future. He argued that the current system was stagnant and silo-based, under “lock and key.” What was needed was a technology-led manufacturing sector. This meant green tape for innovation through a coordinated vision by the respective Ministries. If this was done, the economy could be “unlocked.” If this did not occur then the used future would continue.
From this context, participants developed scenarios. While there are many scenario building methods available, the “Change progression method” developed by Inayatullah and Milojevic (Government of Malaysia, 2018) was used as this method integrates both how the external world is changing and what actions are taken. In this approach, four assumptions are used to develop futures. In the first, even as the external world changes, the organization/institution in question prefers a no change futures. This could be because the weight of history is too heavy or because the capabilities to change are not present. In the marginal change future, the world continues to change, however, given the reality of politics and change management only a few policies are successfully implemented. In the third future, the external world continues to change, and the organization/institution adapts to the changing world – implementation and adaption policies succeed. In the final radical scenario, the organization leads the future, the rules of the game are reshaped. Thus, the scenario structure moves from no change to marginal change, to adaptive change and then finally to radical or transformative change. In this way, policymakers can easily see the possibilities and choices in front of them. They can decide given the weight of history as well as critical enablers what is the best national strategy: no change, marginal, adaptive, or radical change. With the Government of Malaysia (2018), policy advisors utilized this approach to develop national scenarios on the futures of education. They moved from a no-change bricks and mortar approach to a marginal change future of a jukebox university where students select courses and educational programs to an adaptive change future titled an uber university to a radical change where the university was unrecognizable, with education industry-led through micro and nano-certification (Government of Malaysia, 2018:63).
The Four Futures
In the next phase of the process, participants developed four scenarios. They were: No Change – the Gap Expands; Marginal Change – from 100 million to a billion; Adaptive Change – The Golden Key; and Radical Change – Alibaba Transformation.
1. No Change – The Gap Expands
In this future, the regulatory landscape and business environment remain unchanged, with current challenges lingering. As a result, we can expect accelerated trends in de-industrialization and loss in competitiveness of Egyptian manufacturing and drop in export earnings. The gap between Egypt and other emerging production sectors globally widens. The gap between economic groups within Egypt also expands. With manufacturing in decline, it would be important that other sectors compensate, especially the service sector.
| Metrics | Current status | Scale of transformation |
| Export potential achieved by 2025 | Untapped export potential
$14.5 billion[5] |
The export potential remains untapped and widens. |
| Doing business survey ranking | 114 | Drops > 120 as other countries make progress |
| Manufacturing sector employment | 13% of total employment | Fall to below 10% of employment |
|
Source: World Bank Doing Business Rankings 2020, ITC Export Potential data analysis, CAPMAS Statistical Yearbook 2019 |
||
Illustration by Charmaine Sevil[4].
To mitigate this scenario, participants offered several suggestions as immediate ways forward. These included:
- Develop a national Industrial strategy
- Implement a regulatory reform process that addresses all sectoral and cross-sectoral impediments affecting the ease of doing business.
- Develop a clear plan for power generation/renewable energies/transportation and logistics that supports manufacturing
- Create a vision of technology-led structural change in manufacturing sector to improve productivity.
- Review banking sector regulation to promote specialized and long-term credit for investment in manufacturing sectors – emulating the practices in Brazil, China, Germany and Ethiopia.
2. Marginal Change – 100 Million to a Billion
The marginal change scenario was considered the likely future by many participants. This future has three strands. First, is a renewed focus on local demand. Egypt manufacturing will produce more for the 100 million strong local market demand, which is likely to be high and would be the focus as the world negotiates COVID-19. Second, the export focus will be regional, especially the African market (1 billion population) and Arab nations, but also to some extent Europe (harnessing some of the near-shoring potential emerging as a result of Covid-19). Third, the government works towards removing some of the critical institutional and legislative barriers and partially unlocks the potential of the industrial sector. Thus, the key strategies of this future are: localize, regionalize, and unlock.
| Metrics | Current status | Scale of transformation |
| Untapped Manufacturing Export potential | Untapped export potential
$14.5 billion.[6] |
Export potential to Africa realized: added $2.7 billion
Some of the untapped export potential to Europe and Middle-East realized: $ 1 billion out of $4.1 billion potential [Europe] Export potential to Middle-East partially realized: $2 billion out of $3.9 billion |
| Doing business survey ranking | 114 | Top 75-100 |
| Manufacturing sector employment | 13% of total employment | Maintaining the share of employment or marginal increase 16% |
| Source: World Bank Doing Business Rankings 2020, ITC Export Potential data analysis, CAPMAS Statistical Yearbook 2019. | ||
Illustration by Charmaine Sevil[4].
Some of the key policy recommendations to accelerate further change identified by participants are as follows:
- Improving the ease of doing business, capitalizing on the successful practices of free trade zones and investment-zones. Study the possibility to continue/ build on the free zones and streamlining supply to local market during COVID19 as well as accelerated production for African markets.
- Explore the emerging market potential by harnessing the African Continental Free Trade Area and boost investments in sectors with high export potential to African and regional markets.
- Support the development of niche products that are normally associated with vulnerable groups and local communities as well as products in which Egypt enjoys a well-known global reputation such as Egyptian Cotton and Agribusiness.
- Address job security and social protection schemes for workers more comprehensively. We are likely to see more social insurance (new social insurance law) especially for the public sector. However, this does not include the informal/semi-formal sector, which represents most of the labor force.
- Encouraging the adoption of sustainability measures; promoting the adoption of market access requirements, quality certificates, resource and energy efficiency practices.
- Upgrade technical education and vocational training to match market requirements.
3. Adaptive Change – The Golden Key
In this adaptive change future, all the vulnerable – the public and the informal sector – are protected and new industries grown. This future is essentially about closing the gap between modernized technology-led manufacturing and traditional labor-intensive manufacturing.
The gap is closed by technical and vocational education. Given COVID-19, online options are especially attractive. There are significant productivity improvements in sectors with application of new technology and skilled workforce.
The gap is also closed by becoming industry 4.0 ready and through technology driven productivity enhancement in all major sectors of manufacturing. This means an investment in not just educational but in internet and backbone soft infrastructure.
To prepare for uncertainty in global supply chains, localizing industries and the use of 3D printer technologies would be next steps.
Increased competitiveness and global market share in selected industries, especially with near shoring potential to Europe, Enhanced sustainable and green production certification along different sectors.
| Metrics | Current status | Scale of transformation by 2025 |
| Untapped Manufacturing Export potential | Untapped export potential
$14.5 billion[7] |
An additional significant near-shoring potential to Europe/MENA/Africa is realized
Existing export potential to Europe of $ 4 billion realized, further tapping into export potential to Europe from near-shoring from China also realized (target 5-10 % of $100 billion market size) Most of $14.5 billion global export potential realized. |
| Doing business survey ranking | 114 | Top 50 -75 |
| Manufacturing sector employment | 13% of total employment | Marked increase in the share of employment to 20 % |
| Source: World Bank Doing Business Rankings 2020, ITC Export Potential data analysis, CAPMAS Statistical Yearbook 2019. | ||
Illustration by Charmaine Sevil[4].
The key recommended policy steps include:
- Develop an Industry 4.0 strategy for Egypt and key sectors.
- Apply a mission-oriented innovation policy approach targeted at creating new markets, diversifying into new products and improving industrial productivity in selected sectors.
- Revamp technical and vocational education to suit industry 4.0 needs and emerging opportunities.
- Accelerated investments in backbone technology infrastructure.
- Incentivize resource efficient and cleaner production practices through a circular economy approach and strategy for the country.
- Adopt targeted investment promotion policies to attract investments to harness targeted nearshoring opportunities to Europe.
- Enhance social protection schemes and skill training programs to support workers in transition from one sector to another.
4. Radical Change – Alibaba Transformation
In this radical change scenario, the latent business potential of informal sector, smaller formal sector firms and youth bulge – are unleashed through the linking of two areas: the informal sector (including micro-small formal enterprises) and digital platform technologies. The informal and education sector lead in the transformation of manufacturing. The informal sector, youth, and digitalization harness vision, creativity and technology to create breakthrough after breakthrough. Current smaller-formal and informal businesses transition into medium size firms that compete on global level, whereby strengthening the ‘missing middle’ of Egypt’s manufacturing. These highly productive medium sized firms connected to global value chains play an important role in this future. Regulations that are barriers for the informal sector are removed. Harness platform technologies to connect and integrate informal sector to domestic and global demand.
| Metrics | Current status | Scale of transformation |
| Untapped Manufacturing Export potential | Untapped export potential in manufacturing
$14.5 billion[8] |
Export potential tapped and new export potential created due to the overhaul of the production systems. |
| Doing business survey ranking | 114 | Top 50 by 2025 |
| Manufacturing sector employment | 13% of total employment | Significant boost in manufacturing share of employment to over 26% |
| Source: World Bank Doing Business Rankings 2020, ITC Export Potential data analysis, CAPMAS Statistical Yearbook 2019. | ||
Illustration by Charmaine Sevil[4].
To create this scenario the following critical shifts and strategies are necessary:
- A new legal framework that creates a safe regulatory space in which the informal sector would operate and grow with a high degree of trust in secure transactions and protection of property.
- A virtual platform that helps connect informal and small enterprise collectives with value chains of larger enterprises and international markets.
- A comprehensive review of ‘doing business environment’ to ensure that informal sector manufacturing firms are encouraged to formalize and enhance their scale of operation to become productive medium sized firms. The first phase would be digitally register those in the informal sector and then promote the transition to formalization building on support efforts during Covid-19 response measures.
- The education system is transformed to integrate digital literacy, skills to use emerging technologies and entrepreneurship training targeting the youth.
- Create digital friendly regulation that would incentivize the informal and MSME sector to modernize and adapt cutting-edge technologies.
- Put in place a regulatory environment that enables financing markets to offer finance product schemes to support the informal and micro-small and medium enterprises sector in digitizing and adopting eCommerce and e-payment.
- Establish targeted incentives and hybrid financing schemes including grants, matching investment schemes, subsidies and procurement policies supporting investments in research and development, technological upgrading and production capacity expansion in MSMEs, following the best practices in countries such as China, Japan, Malaysia and the United States.
The Preferred Future
From an exploration of alternative futures, participants then developed their preferred future for manufacturing. The key components are as follows:
- A circular economy model is realized in Egypt’s manufacturing sector limiting the impact on the environment and natural resources. The model integrates to its core the informal sector and micro-smaller firms, connecting them amongst each other and to the rest of the economy.
- The potential of industrial clusters will be explored that promotes greater interaction between small, medium, and larger enterprises across the value chains and promote more circular linkages.
- The focus will be on productivity enhancement and graduating a large proportion of smaller firms into medium-sized highly productive firms well integrated into the global value chains.
- An accelerated transition is made to industry 4.0 in high potential sectors, especially harnessing a skilled young work force for improving productivity and tapping into export potential.
- Some selected products with enhanced production potential for domestic and regional markets, especially harnessing the African Continental Free Trade Area, are identified and promoted to serve these markets. This results in accelerated harnessing of the low hanging fruits in terms of export potential of $3.9 billion to the Middle-East and $2.7 billion to Africa.
- An enhanced social protection scheme is developed that provides safety nets for unemployed workers and workers undergoing skill training and retraining to match the industry needs.
- The existing untapped global export potential of $14.5 billion is fully utilized. New export potential of Egypt to Europe is harnessed considering emerging near-shoring opportunities from global supply chain reconfiguration from China capturing a considerable share of the $100 billion export market opportunity.
- The economy is unlocked, and the business environment sees significant improvement with respect to doing business rankings. Egypt climbs to the top 50 globally.
Illustration by Charmaine Sevil[4].
Key Recommendations To Transition To The Preferred Future
In creating the ‘preferred future’ participants identified recommendations in four key domains. National Industrial strategy, Ease of Doing Business, Industry 4.0 and Innovation Ecosystems, and the Circular Economy.
1. National Industrial Strategy
- Urgently develop a cohesive forward looking national industrial strategy, which sets the overall vision of industrial development and clarifies the role of Government in the industrial sector.
- Establish a national futures council attached to the Prime-Minister’s office to implement and monitor the national industrial strategy and integrate emerging issues to the strategy from time to time.
- Create a regulatory impact assessment unit at the highest level of the Government to ensure that any new proposed decrees, laws and regulations are in line with the overall industrial strategy, promote ease of doing business, and coherent with existing legislations.
2. Ease of Doing Business
- Urgently review customs procedures and regulations to simplify the processes for customs clearance and cross-border trade. In this regard, explore the potential to privatize parts of the customs clearance process to enhance efficiency.
- Rationalize and unify investment regimes. A new and unified investment regime (linked to the new industrial strategy) is needed to streamline the investment process. This will enhance the performance of investment zones and stimulate investments (especially given the 40% drop in FDI forecasted by UNCTAD due to COVID-19) (UNCTAD, 2020).
- Take urgent measures to increase transparency, coherence and predictability of tax codes and licensing.
3. Industry 4.0 and innovation ecosystem
- Map out the current activities, initiatives and regulations on industry 4.0 including renewable energy, smart cities, power grid and others.
- Develop an industry 4.0 strategy and articulate its role in the overall national industrial strategy.
- Simplify the intellectual property regime so that firms can easily register new products in Egypt and get rewarded for innovation.
- Ease regulations, procedures, and customs processes to allow Egypt to benefit from R&D outcomes and innovation processes.
- Enhance linkages between industry-academia-research centers and the entire innovation ecosystem to help manufacturing sector to climb up the value chain.
4. Circular Economy
- Create a circular economy vision and strategy for the country, clearly articulating the role of industry and other sectors. This will help to reduce the environmental impact of the production and consumption process and generate new revenue generation opportunities. This would also be critical in integrating the potential of informal sector into the economy.
- Design an integrated policy framework to adopt circular and green manufacturing practices across all segments of value.
CONCLUSION: Creating a Futures Council
From comments received by participants, they found the futures approach novel and of significant utility in creating national alternative economic and social strategies. Numerous participants suggested that a high-level futures council needs to be established that could provide advice to the Cabinet not just on manufacturing futures but other sectors as well.
In conclusion, while the recommendations developed through the exercise has the potential to transform its manufacturing industry, the process itself enhanced the ability of leaders and citizens to become futures literate, to see and use the future as a dynamic asset.
Disclaimer: The findings, interpretations and conclusions expressed herein are those of the authors and do not necessarily reflect the views or official positions of the United Nations or Member States.
References
CAPMAS (2019). Statistical Yearbook. Retrieved on August 2, 2020 from https://arabdevelopmentportal.com/publication/egypt-statistical-yearbook-2020-population.
Inayatullah, S. (2008). Six Pillars: Futures thinking for Transformation. Foresight. 10(1): 4-21.
Inayatullah, S. (2015). What Works: Case Studies in the Practice of Foresight. Tamsui: Tamkang University.
Malaysia, Government of (2018). Framing Malaysian Higher Education 4.0: Future- Proof Talents. Putrajaya: Ministry of Higher Education.
UNCTAD (2020). Retrieved on August 2, 2020 from
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2400.
UNIDO (2020). Retrieved on August 2, 2020 from https://iap.unido.org/articles/managing-covid-19-how-industrial-policy-can-mitigate-impact-pandemic.
World Bank (2020). Doing Business 2020: Comparing Business Regulation in 190 Economies. Retrieved on August 2 from http://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf.
Notes
- Sohail Inayatullah, Inaugural UNESCO Chair in Futures Studies. Professor, Tamkang University. Instructor, www.metafutureschool.org. sinayatullah@gmail.com ↑
- Arun Jacob, United Nations Resident Coordinator’s Office in Egypt. Jacoba@un.org ↑
- Associate Professor, Universities of Canada in Egypt (UCE) and Ministry of Planning and Economic Development (MOPED), Egypt. Reham.Rizk@mped.gov.eg ↑
- Charmaine Sevil is a futurist and designer. Charmaine@sevilco.com ↑
- Calculated using ITC export potential map dataset ↑
- Calculated using ITC export potential map dataset ↑
- Calculated using ITC export potential map dataset ↑
- Calculated using ITC export potential map dataset ↑
