The Egyptian economic landscape is propelled by a diverse range of industries, with the chemicals sector playing a crucial role in driving exports and fostering economic growth.

The chemical industry encompasses a vast array of sub-sectors, churning out a multitude of products. These products are not only essential for domestic use but also have a significant impact on Egypt's trade balance by reducing import reliance and maintaining its competitive edge in global markets.

Fueling the Egyptian Economy

The chemical sector is an important contributor to Egypt’s manufacturing production. In fiscal year (FY) 2021/2022, the value of manufacturing production in the chemical materials and products industry was around EGP 7.8 billion, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

Nouran ElKhouly, Economic Analyst, tells Arab Finance: “We can use the overall sector’s performance in the Egyptian Exchange (EGX) as a proxy for the domestic demand for chemical products. And indeed, almost all the companies within the sector have been performing positively for the past year. “

“However, due to supply chain restrictions and decreased global demand brought on by geopolitical tensions, the sector's performance has been declining when compared to the previous two years,” she adds.

The chemicals market is expected to generate a value of $1.7 billion in 2024, with a projected compound annual growth rate (CAGR) of 3.27% between 2024 and 2029, according to Statista.

Heba Salah, an economic expert and public policy analyst at the Information and Decision Support Center (IDSC), explains to Arab Finance that the “chemicals industry is one of the leading sectors for Egyptian exports, significantly contributing to employment and gross domestic product (GDP)."

The petrochemical sector, a vital sub-sector of chemical industries, represents about 3% of the state’s GDP and 12% of the industrial sector, according to a report issued by IDSC on the petrochemical industry and transition towards green energy.

The Power of Chemicals: A Breakdown of the Industry

Egypt's chemical sector boasts a diverse range of subsectors that significantly contribute to the economy. The fertilizers sub-sector is crucial, particularly for a nation with a strong agricultural base.

Derived from petroleum and natural gas, the petrochemicals sub-sector produces a wide range of products like plastics, fibers, and solvents, which are essential for various industries.

Additionally, the pharmaceuticals industry is considered as another key sub-sector of chemical industries in Egypt. While not the current largest sub-sector, pharmaceuticals hold significant growth potential. Domestic production can reduce reliance on imports and cater to a growing healthcare sector.

In April, Minister of Public Business Sector Mahmoud Esmat confirmed that the ministry pays great attention to chemical industries due to their promising investment opportunities. This sector also offers opportunities for expanding many manufacturing industries, thereby maximizing returns and profits of current industries.

In terms of investments, Salah says, "The Egyptian government is keen on enhancing the sector’s competitiveness through promoting foreign investments, including joint ventures and technology transfer."

Moreover, Salah explains that these technology transfer projects cover "a wide range of activities, including product and process development, scale-up, commercialization, and ongoing improvement."

Also, developing the manufacturing of tires domestically falls under the umbrella of the chemicals industry.

Esmat previously stated that reviving the car tire industry is a key goal within the chemicals sector. This endeavor aims to meet the local market demands and back exports, in cooperation with international companies specializing in this field.

Competitive Edge and Export Potential

Chemical industries in Egypt benefit from a comparative advantage due to the availability of high-quality raw materials necessary for the industry in large quantities that do not require huge investments to extract them.

This helps Egypt compete in global markets, assisting it to include the investment map prepared in accordance with the state ownership policy document. This map highlights numerous projects and investment opportunities that attract both local and foreign investment, Esmat said in April.

Not to mention that the chemicals sector plays a crucial role in attracting foreign currency. It is the third-largest industrial sector in terms of Egypt’s merchandise exports for the first quarter (Q1) of 2024, data by the Ministry of Trade and Industry showed.

Data showed that Egypt's chemical exports amounted to about $1.445 billion in Q1 2024. Meanwhile, the Chemicals and Fertilizers Export Council expects that the sector’s exports will reach $9 billion by the end of the year, with an average growth rate of 10%.

"Egypt can leverage its position as a growing chemical industry hub to further diversify its exports as a gateway to Africa,” Salah points out.

She also mentions that Egypt benefits from its membership in various agreements, including the Arab and African Free Trade Agreements and the BRICS.

To further bolster the chemical industry's growth and competitiveness, Egypt can implement several strategies. These include reducing energy prices for manufacturers and providing targeted support to exporters to unlock key markets. This is in addition to investing in programs that enhance the capabilities of local factories and small- and medium-sized enterprises (SMEs), Salah adds.

“The government is highly interested in growth and rigorously supports the sector. Further support could include establishing more new factories, partnering with the private sector to incentivize profit-seeking investors, revamping existing plants, and offering tax incentives,” ElKhouly explained.

Egypt's chemical industry has emerged as a powerhouse, driving economic growth. Its diverse subsectors, from fertilizers to pharmaceuticals, cater to both domestic needs and international markets.

The abundance of readily available raw materials provides a competitive edge, attracting foreign investment and fostering technological advancements through partnerships.

By Sarah Samir

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