QIZ success burdened by strikes, underpay

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."