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Impact of Marketing Mix on Exports of The Egyptian Textiles Using
System Dynamics Approach
Ziad Adel
IT Specialist, Motorola Egypt
wza063@ motorola.com
Khaled Wahba
Assistant Professor, Systems and Biomedical Engineering Department
Faculty of Engineering, Cairo University
Tel: +2 02 737 6006, Fax: +2 02 739 1380
Khaled.wahba@riti.org
ABSTRACT
Egypt was always known as a high quality exporter for raw cotton and cottoned textiles. Egyptian
cotton has international known reputation of special features that attract niche market consumers.
Under many environmental conditions the exports of Egyptian raw cotton and cottoned textiles
decreased, which would result in social and economical problems. The current status of Egyptian
textile industry and the coming applications of several global and bilateral trade agreements send
strong danger signals to workers through the textile value chain starting by farmers ending with
exporters. Matching the competitive advantage with opportunities needs deep knowledge of the
industry and the mental model that lays it. Dumping dynamics of virtual system that control the textile
industry is becoming an imperative need to find a way out of industry current status, and prepare it for
future challenges.
This paper is in quest of building a system dynamics model for Egyptian textile industry, which can be
used for testing ideas of change to enhance the status of this industry, prepare it for near expected
local and international environmental changes, and mainly to boost the exports of the industry.
Moreover, elements of strategies to increase Egyptian textile industry exports are tested to get the best
strategy that should be followed to reach the targets.
This paper concluded the high importance of investment in raw cotton development to increase exports
of raw cotton and Egyptian finished textile. It showed that the early investment to increase fine raw
cotton production is more effective in increasing exports than investment in textile manufacturing
development, which would be more important after raw cotton production increase. It showed also that
investment in distribution and promotion helps against competition with results better than quality and
research and development for the Egyptian textile-manufacturing sector. Also, investment in quality of
finished textiles should be sustainable at high levels to give a real positive effect on exports.
Keywords: Textile, Agricultural, Marketing Mix, Developing Countries, System Dynamics.
INTRODUCTION
Textile industry was always the leading industry in Egypt that absorbed many of the Human resources.
Egypt has many competitive advantages in this industry due to its finest production of cotton, huge
manufacturing facilities, and skilled Human resources. Lately, the Egyptian textile industry has many
problems that are accompanied with very difficult intemal economic pressures and threats of external
worlds. Egyptian textile industry has the opportunities to compete domestically and globally, if it can
solve the problems through its value chain.
Egyptian textile industry was and still considered as the most important industry in Egypt because it
absorbs 30% of Egyptian workforce, and it presents 25 % of exports. So, Egyptian economy has no
choice to reengineer this industry to face the changing environmental variables around it. Marketing
Mix, Product, Price, Distribution, and Promotion, should be changed to develop this industry and
prepare it to face current and rear future problems. Egypt needs to take informed actions to leverage
this industry to and increase exports, so that increase work force and hard currency income. System
dynamics tools can help Egypt to change its comparative advantages of its Textile industry to global
competitive advantages.
PROBLEM DEFINITION
Lately, Egyptian textile industry, under privatization program, economic pressures, GATT agreement,
is trying to get large steps to leverage that it had enjoyed before. The industry is mostly anchoring on
the competitiveness of availability of most of value chain steps in Egypt. Starting from row materials,
ending with industrial facilities are mostly available in Egypt with considerable accumulated expertise
in work force, starting from farmers, ending with fashion makers.
THE OBJECTIVES OF THE STUDY
The main objective of this paper is to propose the optimum mix of some factors that affect Egyptian
exports of raw cotton and textiles to leverage those exports, and increase it up to the maximum
capacity, also, to increase Egyptian textiles exports, finished and semi-finished, over the Egyptian raw
cotton export to get maximum retums of the Egyptian textile industry. Using System Dynamics tools
would help to explore the dynamics of the industry and suggest effective policies.
CONCEPTUAL MODEL
As shown in figure 1.1, the marketing variables mix to be controlled is: the distribution, the promotion,
and product (through quality, and research and development). Changing the competition power, and
competition distribution will represent the coming environmental changes that may affect the industry
while the targeted values of marketing mix variables.
Research and
Quality Promotion Distribution Development
[ 1 rN A k
{
LL ALLL
\
CottonExports / Textile Finished and \
} \ Semi-Finished |
—_- = Textiles
iN
Figure 1.1 Network Variables
Source: Author
RESEARCH METHODOLOGY
The methodology adopted in this study is based on building a system dynamics model for Egyptian
textile industry. Firstly, each step in this model has been analyzed based on data collected for every
step and interviews with sample of experienced professionals that work in the field of this step, and
steps that follow or precede this step. Secondly, System dynamics techniques have been used to build
each step in the model as sub-models then connecting those sub-models to construct the total model for
the whole industry. The total model and some sub models have been tested as per data availability. The
research uses information and data gathered from textbooks, official and non-official publications,
Intemet sites, working papers by professional entities. On the other hand primary sources of
information have been investigated through conducting interviews. The target people were
govemmental officials, businessmen, university professors, and industry professionals in public and
private sectors. Figure 1.2 depicts data collection process.
Statistics Sources List
Interviewees List
. . CAPMAS (Center Association for Public Mounting and
Industry ( Public , Privat sectors ), Statistics) ,Ministry of Planning, Ministry of Industry,
Universities, Ministries, Foundations Ministry of Agriculture, Ministry of Public Sector
,ETMF( Egyptian Textile Manufacturing Foundation)
Internet search, Interviews CAPMAS, Menistries, Interviews
4
| World Textile Industry ; | Egyptian Textile Industry \
'. Overview I. Modern history I
|. Directions l- SwoT I
Causal oop Model!
| tmportance a Stock and flow Model
| 4vanianies and airect relations l | |- What is stock, and what is flow?
! l | Stocks in the model
i]
]
]
= —— — > - Flows in the model
]
|
|
Mathematical relations and
Interviews assumptions.
r How it works
All Interviews and Statistics resources
Figure 1.2 Data Collection in the Research
Source: Author
RESEARCH ASSUMPTION AND LIMITATIONS
Research is done under the following assumptions and limitations,
- Cotton is the major textile natural raw material that can be developed in Egypt for both direct
exports or textiles manufacturing, Flax exports is 2.9 % of cotton exports for year 1998 and
2.2% of cotton exports for year 1999. Also, other natural textile raw materials productions, silk,
Jute and wool, are so negligible to cotton production in Egypt!
- Egypt imports most of its needs of man-made raw textile materials due to its relatively weak
petrochemical industry.
- Raw cotton export price is constant and cannot be controlled by Egypt due to its limited
capacity of cotton production, even under full efficient capacity production.
‘ CAPMAS, 1999: p. 61
Agriculture land rent rate is not dependent on profits that is generated from cotton only but also
on other crops yields. So, it will be considered as constant as it shows stability over last ten
years.
Fear of information disclosure by both officials and non- officials.
Most of Data for years 2000, and 2001 are not disclosed yet.
Time and money constraints.
AN OVERVIEW AND BACKROUND
The Textile Industry
Textile production can be separated to four aggregate stages as shown in figure 2.2. Textile can be
cloth, garments, or clothing.
Fibers -—» Yams >| Fabrics
—
Dyeing
v
Finshing
Figure 2.2 Textile Sequence of Production
Source: Miller, 1979
World Textile Industry Highlight
Final textile product properties depend on the fibers properties that are made off. Natural fibers have
always of higher values than man-made ones. Textile industry depended on natural fibers until man-
made fibers were developed from attempts to make artificial silk. The beauty, scarcity and costliness of
silk made the possibility of man-made substitute attractive and potentially rewarding. The first
filaments” of artificial silk were produced i in the late 1880s, when knowledge of textile chemistry was
rapidly advancing in European countries.’ Despite the advantages of depending on industrial resources,
Quality and quantity control, features, less space, less price fluctuation, and low price, the natural fibers
give the final textile better features and higher added values. Agriculture lands are considered as
limited resource to provide to natural fibers (Cotton, Flax, and Jute) to Textile industry, specially this
conflict with food production. World textile industry passed through many milestones at the 20"
century. Many global agreements govemed the global market; the Short-Term Regarding Intemational
Trade, 1961 (STA, ) Multi-Fiber Agreement, 1973, 1995 (MFA), the General Agreement on Tariffs
and Trade (GATT).* , Agreement on Textile and Clothing, 1995 (ATO)S,
Cotton production is widely spread between 40 degrees north and 40 degrees south of the equator. °
However, as shown in Table 1, the fourteen largest cotton-producing countries accounted for over
81.36% of world output in the 1998/99-crop year. Cotton is harvested from the plant in the form of
? Filament is long fiber. Its’ length is measured in multiple of hundreds of meters.
° Miller, 1797: p 39
* Goto, 1989: p23
> Kheir-El-Din, 1998: p 3
® Coleman, 1991: pé6
Seed cotton and requires processing (ginning) to separate the seeds from the fiber (lint). In many
African and Asian countries the gins are owned and operated by governments and farmers typically sell
their Seed cotton to government or private agents before ginning. In other cases, for example in North
America, the cotton gins are owned privately or by cooperatives and farmers maintain ownership of
their cotton while paying a fee for ginning services. In this case, farmers are responsible for
merchandising their Lint cotton, through cotton merchants or cooperatives, or directly to textile mills.’
Table 1 - Global Production of C otton, 1999
(Values in 1000 Tons)
(China 3670 [Turkey 838 (Greece 382 Total Large Producers
[USA 3030 Australia) 697 [Syria 335 {16228
India 2787 [Brazil 435 |Sudan 250
Pakistan 1372 [Tazikstan| 500 [Egypt 229 [World
|Uzbekistan} 1002 (Spain 483 (Mexico 218 19945
Source: Swamy, 2001
There are a number of features of cotton demand that make the estimation task different from modeling
the demand for many other agricultural products. There is no theoretical rationale for directly
estimating consumer demand for raw otton. The processors in response demand raw cotton to final
consumer demand for apparel items and other manufactured textile products. This feature of cotton
demand is complicated by the fact that manufactured textile and apparel items are often mixtures of
fibers (e.g., blends of cotton and polyester), and individuals tend to be relatively insensitive to the fiber
composition. Further, it appears that consumers are insensitive to the prices of individual fibers (e.g.,
cotton prices relative to polyester prices) because, in general, the fiber component represents only a
small proportion of the final purchase price and, within a fairly wide range of blends, consumers are
relatively insensitive to different textile mixtures. Therefore, consumer demand can be expected to be
highly inelastic.
Textile and apparel manufacturers who purchase raw cotton tends to be much more sensitive than
consumers to the relative prices of individual fiber types. Most processing plant technology enables
manufactures to substitute fibers quickly but at some cost. Thus, demand by manufacturers tends to be
much more pricing elastic than at the consumer level. As shown in figure 2.3, the world exports of
cotton is almost constant over the last ten years while production change in acyclic way every four
years and consumption is fairly stable. So, increasing shares of exports for any country is really tough
under heavy competition. Differences between production and consumption lead to fluctuations of
stocks of cotton for producing countries, specially developing exporting countries. The increase of
world cotton stocks, as shown in figure 2.4, puts those countries under pressure to decrease price,
especially under the need of hard currency income of cotton exports.
7 Coleman, 1991: p9, Nishimizu, 1999: p. 25
® Coleman, 1991: pil
Thousand 480- Lb. Bale:
2
Ss
=
=
S
0+ T T T T T T T T T T T T 1
89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 O1/02
Years
[—#— Production —8— Consumption —— Exports |
Figure 2.3 World Cotton Production, Consumption, and Exports
Source: USA Department of Agriculture, July 2001, year 2002 is forecasted
£0,000
40,000
& 30,000
k & 20,000
E 10000
89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 OO/01 01/02
Years
—¢+— Beginning Stocks —=— Ending Stocks
Figure 2.4 World Cotton Beginning Stocks and Ending Stocks
Source: USA Department of Agriculture, July 2001, year 2002 is forecasted
Modern History of the Egyptian Textile Industry
Modem Egyptian Textile Industry started at the middle of 19" century. By this time, Egypt was known
as large exporter of lint cotton and hand-made woven textile. Under ruling of Mohamed Ali, and his
successors, Textile industry depended on the agriculture of fine cotton then spinning it. At 1927, the
industry bases tumed to he scientific and the industry was extended to manufacturing of final products
of textiles. Egypt started to be an exporter country in textile products beside cotton exporter at 1949.°
The ownership of the industry passed through many phases during the 20" century. The industry grew
up rapidly under private ownership from 1920s to 1950s. At the beginnings of 1960, most Private
sector companies were nationalized. Egyptian textile exports were rapidly increasing to former Soviet
Union and Eastem block countries, as per strong political relationships and bilateral trade agreements.
The introduction of open door policy at 1973 was accompanied by slower growth in the public sector
° BTIC, 1999: p 30
and emergence of small private sector ready-made garment manufacturing companies. Govemment
centralized the management of the public textile industry by transforming control to the newly formed
holding companies, the textile Industries Corporation (TIC), at 1985. Private sector put significant
investment and expanded in spinning capacity, dyeing, and non-cotton cloth.
Egyptian Textile industry structure
The industry is largely dominated by 31 public sector textile manufacturing companies of which 25
processes cotton. These companies are mainly composed of large vertically integrated mills engaged in
spinning, weaving, dyeing, finishing, garment making and even retailing. They operate under Law 203
of 1991 and are distributed among three public holding companies (HCs), which have exclusive or
majority ownership of the share capital of these affiliated companies (ACs). This Law provides HCs
and ACs operate as other private sector companies incorporated under Law 159 of 1981. In addition,
mixed companies, including El-A meriya (owned by Misr bank) and Miratex (owned by several public
sector companies and Iranian government), operate under Investment Law 230 of 1989. These public
and mixed enterprises dominate the textile industry, accounting for all cotton spinning and about 60%
of waving. They are also involved in spinning and weaving wool, jute and other fibers. Cotton is a
predominant component of Egyptian textile industry.
Private sector participation in weaving and ready-made garment production has grown significantly, to
reach 55% of fabric production and, to exceed 85% of total production of garments during the 90s. The
private sector is composed of many traditional small workshops and a smaller number of medium firms
to large firms, many of which are joint ventures under Law 230 of 1989."°
Egyptian Textile Exports Structure
European Union (EU) as the Egypt's largest trading partner, accounting for 40% of Egypt’s foreign
trade. EU imported 51% of Egyptian raw cotton exports at year 1999", and on average 60% of
Egyptian textiles exports. For the same year, the United States imported 16% of Egyptian textiles
exports and 7% of Egyptian raw cotton exports.”
Part of the government of Egypt 's program for expanding exports is to try to realize the trade (and
investment) creation effects of regional economic and trade integration through free trade agreements
or customs unions to take advantage of Egypt's geographically central location in the world to establish
it as both a production and a regional marketing center.
EGYPTIAN TEXTILE INDUSTRY SYSTEM DYNAMICS MODEL
This section discusses the factors that affect Egyptian textile industry and cotton exports. Causal loop
diagram has been developed for of Egyptian textile industry. Then stock and flow representation for the
same model declared deeply to explain the final flight simulator for the same model.
© Kheir-El-Din, 1997: p 2
4 CAPMAS, 1999:p 33
? Abd-Alhamid, 2001: p 12
Causal Loop Diagram
Figure 3.1 shows the causal loop diagram for the network of variables that affect Egyptian cotton and
Egyptian textile industry that is based on cotton as the main raw material. Each link in the figure
denotes the relation between the two variables. But this does not mean that the dependent variable
remains dependent for all its relations with other variables. The variable may be considered as
independent in the relations that it seems as a cause of change, and in the same time it may be
considered as dependent in other relations that it seems as an effect of change. Causal loop diagram
shown at figure 3.1 should be read from the right down comer and move in clockwise direction. At the
right corner, the costs of cotton agriculture and revenue per fedan (acre) are mapped. Then moving to
the left down comer where the local cotton production and cotton imports are represented. The upper
left comer maps the textile-manufacturing sector including all its costs and profits. Finally, the upper
right corner represents the exports and the input variables of the model.
Appendix A shows seven input variables, that will be used as controls to reach the policies.
Description of the Causal loop diagram and Feedback Loops
There are many reinforcing and balancing loops in causal loop diagram illustrated at figure 3.1. For
example, B1 is balancing loop that starts at “Agriculture R and D”, then “Agriculture Labor Wages”,
passing by “Seed Cotton Cost Per Fedan (acer)”, and negatively passing by “Seed Cotton Net Profit Per
Fedan”, and finally back to “Agriculture R and D”. So “Agriculture R and D” will have opposite effect
on itself through this loop, so it is named as balancing loop. On the other hand, R1 is reinforcing loop
because “Agriculture R and D” will have stronger effect in the same direction of change through this
loop. There are other balancing loops, B2 - B4, in the causal loop diagram, and reinforcing loops also,
R2 - R6. All these loops are clearly declared in figure 3.1.
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the word in the name. Flow and converter names words are in small letter case, except for R and D
four sectors has stocks and flows that represent the variables related to mainly to that sector but may
understanding to the network of variables and their relations. Variables
Stocks and flows diagram is separated to four interrelated sectors as shown in figure 3.3. Each of the
Stocks and Flows Diagram
letters, which represent research and development respectively. Inflow and outflow names are
expressive, but some of it are the first letters, in a small case, of its’ stocks.
|, EE
Textile Manufacturing
Cotton Imports and
Inventory
Exports
Figure 3.3 Stocks and Flows Diagram Sectors
Source: Author
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Sectors are not isolated from each other's. They are interrelated. After connecting the whole and
complete model, it has been validated, tested and the sensitivity analysis haven performed.
EGYPTIAN TEXTILE INDUSTRY FUTURE STRATEGIES
In this section the interface of the built model will be presented, then usage of this interface to change
the input variables and monitor the changes in output. After building knowledge of model interface, it
will be used for hunting the best sires of values for the input controls to achieve the future targets of
Egyptian textile industry.
Input Variables Analysis
Input variables batches presented to the developed model are designed to cover all changes that the user
may think about. So all the probabilities of different mixes of input variables are covered. This enables
the user to be exposed to all trends in outputs as per changes in inputs. Any input has one value per run,
except competition.
The model exposed to 66 runs, with different input values for each. Those runs can be categorized into
two types of runs. The first category does not include any competition input, this category includes runs
from 1 to 33. Figure 3.4 shows this category. The second one includes a competition effect, it includes
the other 33 runs from 34 to 66. Figure 4.4 shows this category. The competition input is a graphical
input. The chosen graphical input expresses the expected competition trend for the next ten years, it
reflects all the expected environmental changes covered in chapter two. Figure 4.3 shows the designed
competition input. It ramps up gradually until GATT application, then it goes constant for two years,
and finally decrease to a constant level for the rest of the period.
fio : ae r ae : Tnput Output
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4 iZ
— a Data Point: 1
A 000 ata Points:
J (Exports_Of Finished_and Semi_Fininshed_T.. Fat Output
Delete Graph | Cancel | OK ]
Figure 4.3 Competition Effect
Source: Author
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As illustrated in figure 4.4, the changes in input from run to another one started by changing inputs for
agriculture sector, then manufacturing sector, and finally both. Figure 4.5 have the same input changes
but with one single difference which is the application of competition, which is the same for all last 33
runs. The inputs design considers changes in inputs individually and as groups.
Output Variables Analysis
Output variables are ginned cotton exports (raw cotton exports), exports of finished and semi-finished
textiles, and total exports of both. Figure 4.6 and figure 4.7 show those three variables as per inputs
changes. Connecting figure 4.6 with figure 4.4, and figure 4.7 with 4.5, we can get the effect of input
changes to output changes and come up with suitable inputs combinations to achieve the study goals.
Also, comparing figure 4.6 with figure 4.7 help for assessing competition risks. After applying the
comparison between several runs, some relations were captured as follows:
a Raw cotton exports goes up and down very similarly with manufacturing percentage of cotton
agriculture development. So, agriculture research and development should depend on
manufacturing investment than agriculture investment to increase raw cotton exports. The
agriculture share in agriculture research and development is not effective enough to get the
cotton high productivity and attractiveness for cotton agriculture, while textile manufacturing
share in cotton agriculture research and development. The reason behind that is the low profits
generated by cotton agriculture that weaken the ability of agriculture sector to present
considerable investment for development. The fact that profits generated by manufacturing is
much higher than profits generated by agriculture gives manufacturing sector the ability to
invest part of this profits
a Raw Cotton exports will have the higher values than finished and semi-finished textiles except
under continuous high investments in all input variables, including the manufacturing
participation in financing cotton agriculture research and development, at the same time.
a Investment in cotton agriculture is more rewarding for profit than manufacturing for the next
ten years.
a Investment in quality and manufacturing research and development is more effective to increase
finished and semi-finished textiles exports than investment in promotion and distribution.
a Investment in quality is rewarding if it continues at high levels for long time. Accumulation of
quality investment is important to ramp up the manufactured textiles.
a Increase in distribution and promotion helps against competition with result higher than
research and development, and quality.
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RECOMMENDATIONS AND POLICIES
The exports of raw cotton and manufactured cotton were measured against inputs change of the model
to measure the effects of those changes on it. The results of those runs lead to some recommendations
to agriculture sector, manufacturing sector, and government to develop its exports. Also, strategies for
both sectors are derived from binding results of model runs and facts of environment surrounding the
Egyptian textile industry, stated in the study.
Recommendations to Agriculture Sector
The profitability of cotton agriculture is low, which leads to the small area agricultured by cotton, so
the profitability of cotton should increase by lowering the costs of cotton agriculture. Massive research
and development is needed to increase productivity of land agricultured by cotton to increase the yield
of Fedan (acre) to the double. This will increase the profitability of cotton agriculture. Increasing the
profitability of cotton agriculture will lead to increase the attractiveness to cotton agriculture and
increase in area agricultured by fine Egyptian cotton. Attention should be paid to keep Egyptian cotton
global reputation as the finest cotton, because this reputation is the reason for intemational absorption
of Egyptian long staple cotton, even with maximum yield capacity. Egyptian cotton logo should be
promoted for to distinguish products made 100% out of it, this will increase exports of both raw cotton
and finished textiles made of it. Finest long staple cotton should be agricultured rather than short staple
cotton to increase raw cotton exports due fact that, the quality of Egyptian cotton defeated any
competition and there is no expected competition for Egyptian long staple cotton.
Investments from textile manufacturing sector should be directed to research and development of
cotton agriculture before GATT full application to increase cotton production so that decrease their raw
material high costs. The fact that manufacturing retum of investment is much higher than agriculture
return on investment enables industry to present portion of its profits to agriculture for inducing lower
costs of raw material. This needs creation of sustainable strong link between textiles manufacturer and
cotton farmers that helps both parties to increase their profits by sharing fairly those profits.
Recommendations to Manufacturing Sector
Manufacturing sector has to develop its facilities of production to have more control over cost. So it
should direct a big part of its profit to research and development to lower raw material cost. Also
research and development is intensively needed to modemize the factories. Both market penetration
and products development are needed to increase exports of finished and semi-finished textiles, by
using Egyptian cotton with sustainable investment in quality. Investments should be directed to quality
development to face wild competition. Investment in quality will not be profitable on the short run but
it helps a lot against coming competition as barrier for change, especially that niche market was, and
will be, the target segment. Promotion of Egyptian cottoned textiles should be continuous to keep
current niche markets to extend the uniqueness of Egyptian cotton to finished and semi-finished
Egyptian textiles. Exports distribution channels should be established immediately with long run
agreements to build strong barriers against expected competition on the long run. Also, decreasing the
length of distribution channels guarantees better profits and better access to the target niche market.
The Egyptian textile manufacturers that depend on presenting low quality textile made of short staple
cotton, man-made fibers, or mix of it will face killing problems after GATT applications because of
large stock of cotton in Asia that will make the raw material more cheaper but will make the finished
and semi-finished textiles much cheaper, even after transportation costs. So dependence on Egyptian
competitive advantage, long stable cotton, and changing target segment to niche market would be the
solution. To adapt this solution, Investment should be directed intensively to quality, and
manufacturing research and development, and continuously with lower volume to distribution and
promotion.
Recommendations to Government
For long years government controlled both cotton agriculture and cottoned textiles manufacturing. So
there was no problem in controlling the value chain of Egyptian cottoned textiles except for exporting
finished cottoned textiles. Now, the privatization of public sector textiles sector has been started , and it
is believed the governmental control on cotton agriculture will be lost in the short-run, So the
govemment should organize a fair alley between cotton farmers and textile manufacturers. Otherwise
both of them will ask for getting higher portion of profit, farmers by exporting raw cotton and
manufacturer by using cheap raw materials directing the production to the local market, and this will
lead loosing profits for both because this will decrease the chances of investments to increase cotton
yield, and decrease barriers of global competition. The proposed alley should be under free market
conditions. Also it should be rapidly developed before GATT application and textile industry
privatization.
Agriculture research center should be more available and have the suitable financial resources.
Government should help exporter to build up strong distribution channels under free trade agreements
already signed, especially for European Union, and Arab world.
CONCLUSION
As a conclusion, the Egyptian textile industry aims at developing a local strong textile industry that
would be competitive on an international scale. In doing so, Egypt will be highly anchoring on both, its
finest cotton production and huge textile manufacturing facilities, that must be developed rapidly and
strongly to achieve the required high objectives under tough environmental changes and critical time
limitations. There should be strong collaboration between cotton farmers and textile manufacturers to
increase profits generated from both steps in textile value chain and protect the Egyptian textile
industry from sudden undesirable collapse under coming expected global agreements conditions.
Egyptian textile manufacturers should base their products development on the competitive advantage of
Egypt of finest cotton production to increase value added to final product and establish barriers for
competition. They should adopt strategy to enhance their products quality, to establish short
distribution channels with importers that have direct access to niche market segment. Furthermore,
branding textiles of Egyptian cotton origin would boost raw cotton exports firstly, then finished
textiles. Fast bulk investments should be pumped to cotton agriculture to increase the production of raw
cotton without decreasing quality. Also, sustainable research and development are badly needed for
manufacturing facilities.
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APPENDIX A
CLD- Variables Relations
Variable Unit Variables Directly A ffect this Variable
\A griculture Labor Wages Said ae (Acre) A griculture R and D (+)
Agriculture Machinery LE / Fedan lA griculture R and D (+)
. Seed Cotton Net Profit Per Fedan (+), Manufacturing Net
A guiculture R andl D LE,/ Feden Profit (+), Area A gricultured by Cotton (-)
i jgacultnr R and D percentage of net Percentage Input
(Area A gricultured by Cotton Fedan Seed Cotton Net Profit Per Fedan (+)
|Area increase per Fedan Profit Fedan*Fedan/LE Constant
(Competition Percentage mput
(Cotton Imports LE Ginned Cotton Inventory (-)
(Cotton Revenue Per Fedan LE / Fedan Seed Cotton Price(+), Seed Cotton Y ield Per Fedan(+)
(Cotton Straw Price LE/MQs® Constant
(Cotton Straw Yield MQS/ Fedan Seed Cotton Yield Per Fedan(+)
[Distribution LE Manufacturing Net Profit(+)
Distribution Percent Percentage Input
[Dyeing and Finishing Costs LE Raw Material (+), Manufacturing R and D (-)
[Exports Of Finished and Semi Finished LE Ratio of Manufactured Exported Cotton (+), Total Finished|
Textiles
Cotton Fabrics Sales (+), Competition (-)
13 MQS= Metric Qentar of seed cotton= 157.5 K. Gram
Ginned Cotton Available to Local TextileyMQG"*
Ginned Cotton Production (+), Ginned Cotton Exports
Percentage (-)
|Ginned Cotton Export Attractiveness Ratio
Export ginned Cotton Price (+), Local Cotton Price (-)
(Ginned Cotton Export Price LE/MQG Constant (Assumption)
\Ginned Cotton Exports LE Ginned Cotton Exports Quantity (+)
\Ginned Cotton Exports Percentage Percentage Memmed Cotton a ce (-), Ginned Cotton Export
MOG Ginned Cotton Production (+), Ginned
\Ginned Cotton Exports Quantity Cotton Exports Percentage (+)
Ginned Cotton Price (+), Ginned Cotton
Ginned Cotton Inventory LE lAvailable to Local Textiles (+)
IGinned Cotton Price LE/MQG De Polen) Ginned to Seed
Ginnea Coton Producten MOG Area A gricultured by Cotton (+), Seed
Cotton Y ield Per Fedan (+)
\Ginned Cotton Sales to Local Market LE
Cotton Imports (+), Ginned Cotton Price (+), Ginned
Cotton Available to Local Textiles (+), Inventory
Percentage (-)
|Ginned to Seed Cotton Productivity MQG/MQS Constant
Inventory Percentage Percentage Constant.
[Land Rent LE / Fedan Constant
“1 \Total Finished Cotton Fabrics Sales (+), Ratio of
Mounforires Cotton Available to Local LE Manufactured Exported Cotton (-), Manufactured Cotton
|A vailable to Local Market(-)
[Manufacturing and Trade Taxes LE Manufacturing Net Profit (+)
[Manufacturing Machinery Cost LE Raw Material (+), Manufacturing R and D (+)
[Textiles Manufacturing Cost (+), Exports Of Finished and
\Manufacturing Net Profit LE Semi Finished Textiles (+), Manufacturing payments for
development percent (-)
Manufacturing Percentage for Cotton Agriculture
(Manufacturing payments for development Percentage Development (+), Distribution Percent (+), Manufacturing
percent
IR and D Percentage (+), Quality percentage(+), Promotion
Percent (+)
14 MQG= Metric Qentar of Ginned Cotton =50 K. Gram
(Manufacturing Percentage for Cotton
(Agriculture Development Percentage input
Manufacturing R and D LE Manufacturing Net Profit (+), Manufacturing R and D
Percentage (+)
[Manufacturing R and D Percentage Percentage Input
(Manufacturing Wages LE Raw Material (+), Manufacturing R and D (-)
Other A griculture Expenses LE / Fedan IA griculture R and D (+)
\Other Raw Material LE Ginned Cotton Sales to Local Market (+)
[Promotion LE Manufacturing Net Profit (+), Promotion Percent(+)
[Promotion Percent Percentage Input
Quality Percentage Percentage Input
IR and D to Seed Cotton Yield MQS/LE Constant (Assumption)
4 ‘ Distribution Percent (+), Promotion Percent(+) , Quality
Ratio of Manufactured Exported Cotton Ratio percentage (+), Ratio of Manufactured Exported Cotton (+)|
P Ginned Cotton Sales to Local Market (+), Other Raw
[Raw Material LE Material (+)
Sales Taxes LE [Total Finished Cotton Fabrics Sales (+)
|A griculture Labor Wages (+), Agriculture Machinery (+),
Seed Cotton Cost Ren Kedan TE Eeden, Other A griculture Expenses(+), Land Rent (+)
Seed Cotton Net Profit Per Fedan LE/Fedan ain Revenue Per Fedan (+), Seed Cotton Cost Per Fedan!
Seed Cotton Price LE/MQS Constant
Seed Cotton Yield Per Fedan MQS/ Fedan A griculture R and D (+), R and D to Seed Cotton Y ield (+)
2 F Dyeing and Finishing Costs (+), Manufacturing Machinery
Textiles Manufacturing Cost rE Cost (+), Raw Material (+), Manufacturing Wages (+)
Ginned Cotton Exports (+), Exports Of Finished and Semi
Total Exports cE Finished Textiles (+)
‘Total Finished Cotton Fabrics Sales LE pennfecoing Net Profit (+), Textiles Manufacturing Cost|
[Total Manufacturing Taxes LE Manufacturing and Trade Taxes(+), Sales Taxes (+)
Source: Author
LE: Egyptian Pound (US$=4.65 LE,2002)
