August 23, 2017 / 2:17 PM / in 6 months

Egypt pins export hopes on new leather production city

CAIRO (Reuters) - Just beyond the outskirts of Cairo on a desert road to the Suez Canal, a sprawling industrial zone is coming to life as Egypt’s leather industry leaves behind its ancient tanning quarters for modern workshops of Robiki Leather City.

The new complex is part of a major expansion drive of a sector Egypt considers as one of its most competitive and the trade ministry has set an official target for leather exports to reach over $1 billion a year in 2020, from about $200 million a year currently.

By mid-2018, Robiki should house the entire supply chain, from animal slaughtering to finished leather production, allowing global manufacturers to source materials and export final goods in a single location, said Mohamed El Gohary, chairman of a state firm marketing the site.

“The value-added of our exports will increase five times when we reach the stage where we’re exporting final products like shoes and bags,” Gohary said.

Foreign investors can begin purchasing space in Robiki in 2018 and the zone has received strong interest from Italian companies, Gohary said.

Egyptian exports were given a boost when Egypt floated its pound currency last year as part of an International Monetary Fund loan programme.

Different types of leather are seen hanging at a factory in El Robbiki Leather City in Badr City, east of Cairo, Egypt, August 14, 2017. Picture taken August 14, 2017. REUTERS/Amr Abdallah Dalsh

With projects like Robiki, Egypt hopes to pull back capital that fled after its 2011 political uprising. In the fiscal year ending in June it netted $8.7 billion in foreign direct investment and is targeting above $10 billion this year.

Around 220 tanneries are being relocated to Robiki, said Mohamed Harby, head of a leather tanning industry group.

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They are moving under the orders of the government, which is paying for the transfer of machinery, constructing subsidized housing for workers and facilitating low interest loans for businesses looking to expand.

The tanners’ centuries-old home of Magra Al-Ayoon in Old Islamic Cairo, which runs along the city’s ancient aqueduct, will likely be developed into a tourist site, though plans have yet to be finalised, said Omar Khorshid, a trade ministry adviser to the Robiki project.

There workers dye animal hides in small, ramshackle buildings without infrastructure for absorbing hazardous waste byproducts.

“Egypt a long time ago was a leader in leather tanning, and for a period of time everyone wanted to expand but there was just no space to,” managing director of Al-Rowad Tannery Ahmed Al-Gabbas said at his factory floor in Robiki.

Al-Rowad, one of the country’s three largest tanneries, will complete its relocation over the next month. Gabbas said the company is using the space to scale up and triple exports over the next year.

($1 = 17.7200 Egyptian pounds)

Reporting by Eric Knecht and Mohamed Zaki; Editing by Raissa Kasolowsky

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