The Chemical and Fertilizers Export Council reported that the Egyptian chemicals industry recorded exports of US$10bn in H1-08, representing growth of 47.5%, as per a report by companiesandmarkets.com. This exceeded the target of 25% growth that was set by the Ministry of Trade and Industry in 2007. A key driver of growth has been pesticides, which increased by 77%, and plastic and rubber products, which increased by 58%. One of the reasons for the spike in exports has been the impact of government incentives. In 2006, Egypt began introducing subsides to support the export sector. However, since the end of H1-08 the global economy has tumbled into steep decline and the EU (Egypt's main export market for chemicals) has fallen into recession. With demand dropping, Egyptian chemical exports are expected to have fallen sharply in H2-2008 and in the early months of 2009. Meanwhile, in 2008, the government removed tax benefits from petrochemicals firms, impacting competitiveness.
Egypt introduced a 20% tax on profits on foreign petrochemical companies in H2-08. They also have to pay almost twice the amount for their gas supplies as domestic firms. The legislation included the imposition of duty and a rise in prices for natural gas in Egypt's free trade zone. This marks a radical shift in policy direction and could undermine foreign direct investment (FDI) inflows at a time when investors are reviewing their investments in the context of the global economic downturn and financial crisis.
In August 2008, Canada's Agrium, a major retail supplier of agricultural products and services, sold its Egyptian project EAgrium to Egypt's MISR Oil Processing Company (MOPCO). The approval of the EAgrium project, which was already under construction, has been revoked by the Egyptian Government owing to protests about its location near the NileDelta. Agrium held a 60% stake in the project, while Egyptian PetroChemicals Holding and EgyptGas held a combined 24% stake, Egypt Natural Gas held 9% and Arab Petroleum Investments held 7%.
Egypt's trade and industry minister, Rachid Mohamed Rachid, has said that exports could fall by 10% in the 2008/2009 fiscal year as a result of weakening demand in key trading partners. Falling prices and volumes were particularly impacting sales of petrochemicals and fertilisers, he said. Indeed, prices in the industry have fallen by more than 50% according to Rachid, while demand has slumped by 20%. The majority of Egyptian chemical exports go to the EU, which is suffering a severe recession. In 2005, output of chemical products in Egypt was EGP23.28bn (US$4.06bn). It is forecast to reach EGP26.91bn (US$4.68bn) by 2009.