x Abu Dhabi, UAEThursday 18 January 2018

Toyota among foreign firms in Egypt shutdown

BASF joins other multinationals to halt operations in Egypt citing security reasons following continued military crackdown, as owners and employees of smaller companies seek relocation.

The violence and unrest in Egypt has forced many multinational companies to temporarily suspend their operations in the country. Khaled Elfiqi / EPA
The violence and unrest in Egypt has forced many multinational companies to temporarily suspend their operations in the country. Khaled Elfiqi / EPA

The German chemical manufacturer BASF and the Japanese car maker Toyota are among a growing group of foreign multinationals to shut down operations in Egypt as the violence escalates, further hampering the country's efforts to stimulate economic growth.

They also joined those companies that have put their staff on alert in Egypt, restricting travel.

One of the world's largest chemical companies, BASF halted production on Thursday. It has a factory in Sadat City that makes construction chemicals. Its 100 staff members also work out of offices in Cairo and Alexandria.

"The safety of our employees has top priority," a BASF spokeswoman said, according to Reuters. "All our employees are fine."

Other foreign multinationals to have closed shop in Egypt include General Motors (GM) and Suzuki, the Czech textile company Pegas Nonwovens,and the Swedish companies Ericsson, a mobile network provider, and Electrolux, an appliance maker.

GM said it had "made the decision to close our Cairo office and halt production operations in our plant in 6th of October City on Wednesday. The safety and security of our employees is of paramount importance to us".

The American company employs 1,400 Egyptians, and produces light trucks, cars and minibuses in the country. It has not yet pulled out its foreign staff.

"Light-vehicle production in [Egypt] will drop 7.7 per cent year-on-year to 84,097 in 2013, while sales will decline 3.6 per cent year on year to 205,255 units," said Paul Newton,the associate director of the industry analyst IHS Automotive.

Egypt had been looking toward the automotive sector to drive growth. Last year, GM began assembling the Chevrolet Move Microvan in Egypt. In March, the Egyptian minister for investment and trade said the government was in talks with the Indian car maker Tata Motors about setting up a joint venture plant.

The Chinese car maker Zhejiang Geely Holding is also in talks to start assembling cars in Egypt in partnership with the country's listed company GB Auto.

With manufacturing and business affected following the security crackdown in Egypt, the London-based Capital Economics forecasts worse is yet to come.

"Industrial production, which in Egypt also includes a number of services such as tourism, fell by 2.8 per cent year-on-year in the second quarter," said the economic research consultancy.

GDP might have expanded about 2 per cent in the fiscal year that ended in June, while the budget deficit might have widened to more than 13 per cent of economic output, the Egypt government said this month.

Pegas Nonwovens said it had suspended a trial operation at its Egyptian plant in 6th of October City outside Cairo barely a month after getting it online.

"With respect to the escalating tensions in the country, the transport of workers to the production plant presented an unnecessary level of risk, that we do not wish to undertake," said Frantisek Rezac, the chief executive. "The date for resuming operation of the production line will depend on further developments of the Egyptian crisis." Full operations were expected to start in the last quarter of the year.

The factory employs around 100 employees, including 15 Czech expatriates.

Meanwhile, Electrolux, which has 10 factories near Cairo, stopped its production that includes washing machines and refrigerators. Most of Electrolux's 6,800 employees are Egyptians, according to The Wall Street Journal.

Ericsson, too, has imposed travel restrictions for its 700 staff members in the country, which includes 60 expatriates.

The oil company Royal Dutch Shell closed its offices on Thursday and restricted business travel.

Smaller players are also taking a hit. Employees and owners of some smaller companies are also relocating away from Egypt.

The Dubai-based Advanced Business Solutions moved from Damascus to Dubai as violence engulfed Syria. Seven staff members moved to Egypt, where they worked from home. Now, five of those have left the country, moving to Italy, Germany, Turkey, Russia and the Czech Republic.

The others "are safe right now, they live in a residential complex in Cairo, and if they stay out of the trouble areas, there shouldn't be a problem", said Salah Sabouni, a co-owner and business development manager of Advanced Business Solutions, which distributes software and hardware related to cyber security. "The violence has affected [small and medium enterprises] heavily."