Why Wiklileaks isn’t quite reliable about Egypt’s garment industry

Wikileaks has published two apparently contradictory accounts of Egypt's garment export industry.

Speaking to US diplomats in early 2010, Magdy Tolba, Chairman, Cairo Cotton Center and formerly head of Egypt's Ready-Made Garment Exports Council till he quit in frustration at the country's politicians, said the industry "will face a severe downturn in the next 3-5 years, and may not recover." But speaking to other diplomats six months earlier, Kesavi Murali, the Senior Compliance Specialist in the Middle East for Jones Apparel Group is reported to have said that "there were no signs that Egyptian QIZs had any major labor issues"

Actually both are ill-informed. In 2009, Egypt lost share of US garment exports to Bangladesh: rather than collapsing in 2010 as Tolba predicted, Egypt's garment exports to the US grew nearly 5% in volume. Murali, presumably, is describing Jones' experience – and seems, like many country managers, to be promoting "his" patch. Tolba, though, reflects one widely held worry: the poor productivity of Egyptian workers, which provoked similar, though less hysterical, concern from the American Chamber of Commerce in Egypt at about the same time as the leaked cable, and spawned a number of detailed research programmes.

Both offered a number of other interesting insights into the industry

And both are, in their way, right. Murali is probably not talking about inefficient labour: his big concern is with human rights abuses – which are relatively rare in Egypt's garment industry, as the Wikileaks cables confirm. Even the criticism of wages made by workers at the country's old-line textile plants do not apply as much at QIZ garment factories. Tolba's criticisms are widely shared in Egypt – though possibly less by foreign buyers, who simply move countries if prices get too high. Poor productivity, for most buyers, is the factory's problem, not theirs.

Ultimately, productivity will sort itself out if unions are allowed to develop. The new Egyptian Federation for Independent Trade Unions (EFITU) has a first priority of driving wages up – and it is impossible to see how any new Egyptian government can resist these calls, since minimum wages have been inchanged for decades.

Higher wages, almost automatically, drive productivity up. But only eventually. In the meantime, Turkish investors are predicting wage increases of up to 40%, and current anti-dismissal regulations are likely to take longer to dismantle. We suspect that, over the next few years, there is a real possibility Egypt will become less competitive.