Q: Would you give us an overview of the spinning and weaving industry?
Abdel-Ghany: The state owned business sector is currently part of the Ministry of Investment. Its main entity is the Holding Company for Spinning and Weaving which manages 32 companies, 23 of which operate in the field of spinning and weaving and represent 90% of the spinning business. The remaining nine companies operate in cotton trade, ginning and export.

The total export revenue in FY2009/10 is estimated at LE 572 million of which El-Mahalla Spinning and Weaving Company generated 67%. Total capital of the 32 companies is estimated at LE 1.65 billion.

The main problem facing the sector is corrupt management; most of the companies’ managers are very old and not at all in touch with modern day industry and most have been there for so long that they handle the companies as if they were private property.

Q: What are the signs of corruption in terms of figures?
Abdel-Ghany: In FY2009/10, spinning and weaving companies’ cumulative losses were estimated at LE 898 million. This figure represents almost 90% of the previous year’s losses. FY2008/09 losses were LE 1 billion.

However, I can tell you that these official figures are questionable since the total revenue of FY2009/10 was LE 33.6 billion while that of FY2008/09 was LE 60.6 billion.

Q: You talked about corruption. Why is corruption so widespread in the industry?
Abdel-Ghany: Successive governments since 1991, when the business sector was formed as a prelude to privatization, have stopped allocating funds and directing investment into the sector. I believe inefficient management has been deliberately appointed to cater to those governments whose policies fall in line with a global strategy to edge out Egypt from the world’s spinning and weaving industry.

It is a disaster to have nine companies monopolizing the trade, ginning and export of cotton and making losses at the same time. Only one company […] could have made average profits of LE 500 million to LE 600 million per annum.

Q: How do these companies survive after losing so much?
Abdel-Ghany: Most of the 23 spinning companies cannot pay wages for workers even though the number of workers in the sector has decreased to 75,000 today from 300,000 almost 15 years ago. The holding company pays LE 15 million in wages per month.

But I think things are meant to be left like this, and I think the head of the holding company is intentionally maintaining the status quo to leave the door open for certain players in the market, who have interest, in buying products from India and China.

Q: Is it only a management issue or does the sector need further funding and investment?
Abdel-Ghany: I totally disagree. This is a doorway for commissions and further corruption. I believe that we first have to make use of what we already have and then think of upgrading it; we already have machinery, workers and expertise that are not fully utilized.

The ready-made garment industry imports fabric from China at a lower cost and with better quality. The fabric imported from China at LE 2 per meter is produced in Egypt and sold at LE 7 per meter. It’s only sold in the local market and to state institutions, which brings us back to the question of management.

We definitely need economists with expertise in management and in spinning and weaving to run the companies and save them from further damage. The current managers used to be qualified 20 years ago but now they are totally incapable of running the companies. The head of the holding company has been in office for 25 years — I don’t think that he can introduce any smart rescue plan.

Q: From your point of view and your knowledge of the problems the sector is facing, what would you ask from the new managers?
Abdel-Ghany: There are a number of studies that have been prepared by experienced workers and such studies have been presented to various managers who ignored them. The studies included proposals regarding shifting to other kinds of products more suitable for the factories, by introducing new products, changing the kind of dyes — a whole comprehensive strategy that has not been considered at all. Bt