Turkish textile shift to Egypt shakes apparel sector as trade surplus turns to deficit

Rising production costs have driven Turkish textile investments to Egypt, significantly altering the balance of trade between the two nations in apparel. While Türkiye enjoyed a trade surplus of over $100 million with Egypt before 2022, this shifted to a nearly $200 million trade deficit by 2024.

In January alone, Türkiye’s trade deficit with Egypt reached $27 million, marking a 50% increase compared to the same period in 2024.

Speaking to business-focused ekonomim.com, Seref Fayat, Chairman of the Ready-to-Wear and Apparel Industry Assembly of the Union of Chambers and Commodity Exchanges of Türkiye (TOBB), said that one of the main reasons for Türkiye’s growing apparel trade deficit with Egypt is the demand from Turkish brands.

“Many local brands struggle to place orders in Türkiye because of high costs and price pressure from competitors. Their reliance on imports continues to widen the trade deficit. Given the government’s foreign exchange policies, high interest rates, and inflation, alongside rising operational costs, this trend is likely to persist,” Fayat said.

Currently, more than 200 Turkish textile factories operate in Egypt, while approximately 1,700 Turkish companies have invested over $3 billion in the country, contributing to both local market growth and export capacity. Turkish firms account for nearly one-third of Egypt’s textile and apparel exports.

As a result, Egypt has become Türkiye’s second-largest source of apparel imports, following China. Meanwhile, Türkiye has emerged as Egypt’s second-largest export market after the United States.

Major Turkish apparel manufacturers operating in Egypt include Yesim Group, Tay Group, Eroglu Giyim, Calik Holding, LC Waikiki, and Diktas.

Egypt’s competitive advantage losing ground

Labor costs in Türkiye have exceeded $1,000 per worker, whereas in Egypt, they remain around $200, providing a significant cost advantage for manufacturers producing at high volumes.

A recent report by the Turkish Clothing Manufacturers Association highlights that due to increasing production and financing costs, Türkiye is now 61% more expensive than its Asian competitors and 46% costlier than those in North Africa.

Additionally, Egypt benefits from trade agreements with both the European Union and the United States. The QIZ (Qualified Industrial Zones) agreement with the U.S. allows duty-free textile exports as long as they contain a specified percentage of Israeli input. The Free Trade Agreement with the EU further facilitates access to the European market.

Moreover, Egypt’s strong domestic cotton production enhances its position as a key textile manufacturing hub.

However, as European brands reassess their supply chains, Turkish investments in Egypt are expected to slow down in the latter half of the year, Fayat noted. He pointed out that buyers who had rapidly expanded capacity in Egypt are now realizing the country may struggle to meet such high demand, as many now admit they have “neglected Türkiye” as a sourcing hub.

Despite ongoing pricing pressures, he stressed Turkish manufacturers are working hard to remain competitive.

“If financial costs decrease in the second half of the year and European demand rises, Egypt’s appeal may decline,” he said, suggesting that Türkiye could regain some lost ground.

While a return to a trade surplus is unlikely, Fayat predicted that demand for Egyptian production will enter a cooling phase.