Egyptian garment factories have been compelled to halt their imports from Israel due to the closure of Ouja border crossing and the trading point in Central Sinai that served as a link between the two countries.
The Egyptian garment factories operate within the Qualified Industrial Zones (QIZ) Protocol signed by Egypt and Israel in 2004.
The closure of the trading point has roused concerns amongst the investors, mainly because as per the QIZ protocol, the port is the main point for Israeli imports meant for exports to the US duty-free.
The closed border crossing would not have any major immediate effect on exports because the factories have built up stocks of Israeli material. But if the closure is prolonged, it may become hard for the units having the US business links to continue operating and it may even disturb exports.
Permanent closure of QIZ may affect around 600,000 workers and would lead more than 400 factories operating under the protocol to cease operations.
Although Egyptian producers will have an option of importing Israeli material by means of air transport, it would lead to spiralling of their costs.
QIZ Protocol is much needed by Egypt as 70 percent of its garment exports across the globe and 95 percent of its garment exports to the US are dependent on this protocol.
Last year, the country shipped goods worth US$ 811 million under the QIZ Protocol. The Egyptian firms which are signatories to the QIZ protocol are allowed duty-free access in the US, subject to the condition that the garments produced by these firms have at least 10.5 percent of Israeli components in it.
Fibre2fashion News Desk - India
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