Expensive letters of credit (L/Cs) are amongst a slew of higher costs Egypt's textile manufacturers are coping with as they strive to stay competitive in the post-Mubarak era.

Since 2011, there have been six credit rating cuts at Moody's Investors Service and five at Standard & Poor's, prompting banks to increase the costs of doing business with Egypt.

Costly imports

Poorer credit ratings for Egypt and Egyptian banks are reflected in L/C costs according to one Egyptian garment manufacturer, who says that this is making the import of raw materials expensive.

Chief investment officer at Al Arafa Investments & Consulting, Mohamed Talaat Khalifa, told the Bloomberg news agency that these costs offset any export advantages provided by the 6.6 per cent decrease in the Egyptian pound this year.

Advantages outweighed

For textile companies to benefit from the weak Egyptian currency, the percentage of imported raw materials must not exceed 40 per cent of factor costs, according to the Cairo Cotton Centre.

It says that the imported content usually accounts for as much as 70 per cent of factor costs.

Egyptian businesses are also facing increased costs of insurance and fuel, the latter of which is sometimes hard to find at any price.

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