The Political Economy of A Sector in Crisis: Industrial Policy and Political Connections in the Egyptian Automotive Industry

Amirah El-Haddad (), Jeremy Hodge and Nizar Manek

No 1112, Working Papers from Economic Research Forum

Abstract: The Egyptian automotive industry developed under the country’s policy of import substitution industrialization (ISI). It mainly catered to Egypt’s small domestic market. The Open-Door Policy of the seventies opened up the sector to joint ventures and imports with further liberalization with the Economic Reform and Structural Adjustment Program (ERSAP) in the nineties. Despite some liberalization, the main features of the seventies’ import substitution policies remained in place. Both assembly and feeder industries were protected through relatively high effective rates of tariff protection and local content requirements. The sector has faced a series of setbacks since the January 2011 revolution and then again in 2015, the latter including maximum caps on dollar withdrawals and deposits imposed by the Central Bank of Egypt (CBE). The sector’s influential businessmen have developed a draft law for a series of non-tariff trade barriers to protect their assembly and manufacturing roles in the industry. Unable to compete in the global environment, if not protected these firms would turn into importers and distributors. This study documents the evolution of the sector since the Nasser era. It also discusses the interconnected network of politically connected firms and its influence over the policy making process in Egypt. The first part of the paper examines the protective environment within which the automotive sector has grown and the way it has shaped industry structure and market players. The second analyzes state-business relations and the interlinked network of power within the industry.

Pages: 49 pages
Date: 2017-22-06, Revised 2017
New Economics Papers: this item is included in nep-ara
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