Egypt's largest car assembler and distributor GB Auto says it is pushing ahead with its expansion plans despite a dollar shortage that disrupted production this year, and urged the government to support manufacturing to avert future crises.
GB Auto was forced to halt production for 20 days in September and October because a shortage of dollars and central bank restrictions meant it was unable to clear shipments of manufacturing components for a period of about six weeks.
Despite the stoppage, strong demand saw the company post a near 90 percent increase in profit in the third quarter, but Chief Executive Officer Raouf Ghabbour said earnings would have been 20 percent higher still if not for the disruptions.
Speaking at his office on the edge of Cairo, Ghabbour said the impact on the bottom line would diminish further in the last quarter after banks supplied $1.8 billion dollars to the market this month to clear the import bottleneck.
But he warned that Egypt needed to rethink wider economic policies and focus on encouraging manufacturing, which can dampen dollar demand and bring in foreign currency, to avert future crises.
"The Egyptian government must decide: are we serious about transforming Egypt into the automotive manufacturing hub of the region or do we forget about supporting manufacturing and go back to all being importers?" said Ghabbour, leaning back in his office chair and pulling out a large cigar.
"If they don't make a decision...I can go back to a small number of employees, open letters of credit worth hundreds of millions of dollars a year and benefit while the country goes into a foreign exchange crunch, rather than bringing in billions of dollars of revenues of hard currency."
Egypt, which depends on imports, has faced economic turmoil since the 2011 uprising that ended Hosni Mubarak's 30-year rule. Foreign investors and tourists, on which the country relies for foreign currency earnings, have stayed away.
The country's foreign currency reserves have fallen from $36 billion before the 2011 revolt to about $16.4 billion in October, leaving the central bank with little firepower to defend the Egyptian pound from mounting pressure.
In February, the outgoing central bank governor imposed restrictions on the amount of dollars companies could deposit in banks. The aim was to crush the dollar black market but it made it difficult for companies to open letters of credit to pay for imports of luxury goods and industrial components.
GB Auto, Egypt's distributor of three-wheeler tuk-tuks and motorbikes made by India's Bajaj, was able to use dollars earned from its exports to partly finance imports.
"I wouldn't say the problem is 100 percent solved but in a big way it is," he told Reuters.
Ghabbour said his company, which operates five plants employing almost 3,000 people, was pushing ahead with major expansion plans for now.
It expects to begin construction on a plant making three-wheelers and motorcycles in the first quarter of 2016 with a view to entering production in early 2017.
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