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Volume 25, Number 3May/June 1974

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Made In


Written by Joseph Fitchett
Photographed by John Riddle
Additional photographs by Peter Keen and Nik Wheeler

With respect to industry, Egypt, Iraq and Syria have a lot in common: planned economies, great potential, long histories of efforts to industrialize—and persistent problems with statistics.

This is not to suggest that there is any lack of information. Great gobs of statistics often surface at the highest levels. President Anwar Sadat, for example, in a speech celebrating the 20th anniversary of the Egyptian Revolution, reeled off some exciting statistics which are worth repeating. He said the value of Egypt's industrial production rose in two decades from $648.6 million to $5.5 billion, that fixed investment rose in 10 years from $2.3 billion to $7.5 billion and that industry's share of the gross national product is now 22 percent.

Those figures, and others cited in the same talk, drew a clear picture of one of the world's most ancient cultures doggedly striving to modernize one of the world's most ancient economies. Yet because of a lag in figures, efforts to compile complete assessments of Egyptian industrialization achieve only limited success.

Similar conditions prevail in Iraq and Syria. Press releases give random figures suggesting efforts to create, on a crash-program basis, the infrastructure on which industrial advancement hinges. In July 1972, for example, Syria borrowed $700 million from the U.S.S.R., reportedly to finance development. In 1973 Syria announced that it was allocating $129 million to its industrial sector and this February announced plans to purchase $75 million worth of railroad cars. It is also known that Syria, last year, completed its enormous Al-Thawra Dam across the Euphrates, a $600-million-or-more, 2.7 mile earthen dam—reputed to be the world's largest earth dam—which is expected to provide 1,100 megawatts of electricity, irrigate 1,580,246 acres of land and contribute to a six-fold increase in national income ( Aramco World, Jan.-Feb. 1974). But such statistics fluctuate considerably and official compilations lag so far behind such announcements that they are often irrelevant.

Statistics published in Iraq also suggest progress. According to government brochures and semi-official figures in Al-Thawra and the Baghdad Observer, Iraq in 1973 was producing 17.5 million yards of cloth, 6 million tons of cotton and silk, 22.3 million yards of fabric, 2.5 million tons of cement, 35,000 tons of sugar, 120,000 tons of ammonium sulphate. Another source said it was also producing some 30 percent of its pharmaceutical needs. More recently, Iraq negotiated a $l-billion loan from Japan to construct an oil refinery, a liquefied gas plant and a petrochemical complex plus chemical fertilizer, cement and aluminum factories.

It is also known that Iraq is expecting completion of 120 industrial projects by next year. The country is also building a great dam at Kirkuk—and planning others—which, with a network of canals, may solve persistent agricultural problems, always a preliminary to industrialization. It is widely thought that Iraq's potential is big. But there are virtually no statistics to indicate how far Iraq has come in developing it.

Still, industrialization is undeniable—particularly in Egypt, the Arab East's most industrialized country.

Egypt, according to various but sometimes conflicting sources, now has 1.5 million people employed in industry. Most work in small establishments—10 men or less—but close to 3,000 larger factories are reported operating now. The Misr Spinning and Weaving Companies, for example, employ about 75,000 workers; the Egyptian Sugar and Distillation Company—sugar, molasses, paper, alcohol—employs 25,000; the Egyptian Iron and Steel Company, 21,000; Nasr Automotive Manufacturing Company, 10,000; Alexandria Shipyards—freighters and tankers—7,500.

Textiles—an estimated $943 million worth of production in 1973—is the most important industry. Highly developed and sophisticated—it is probably the only industry that is competitive by international standards—the textile industry accounts for one third of Egypt's manufacturing output. Cotton yarn production alone kept 1.8 million spindles turning and exports brought in $83 million in 1971. Cotton cloth made locally—on some 30,000 looms—brought in another $70 million. In addition, advanced production is being achieved in linen and silk, Egyptian-produced nylon and imported wool and polyesters.

In textiles, private industry still plays an important part, but the government-run textile organization unquestionably predominates. In just one air-conditioned plant in the Nile Delta—one of the world's largest—30,000 workers, 250,000 spindles and 5,000 automatic looms produced, in 1972, 33,000 tons of cotton yarn and export sales totalling $39 million.

In second place, because little is exported, is the $973-million food-processing industry, a natural in a country that is basically agricultural. Rice mills dot the Delta and sugar refining—done on an industrial scale since the 1860's—is probably the most highly integrated industrial operation in the public sector. Sugar mills are strewn along the upper Nile and every phase of the operation—from harvesting to delivery in paper bags—is carried out with Egyptian machinery and supplies. Sugar refineries also extract alcohol and perfume, leaving a pulpy residue called bagasse which can be used as an ingredient for granulated hardboard and paper.

In the medium range Egypt also makes radios, sewing machines, television receivers, air-conditioning units, bicycles—60,000 a year—cigarettes and beer. In 1973 a $9-million sand-brick factory and a $9.2 million glass bottle plant were opened and plans were announced for the production of compressors and small motors. Cement production—said to be 3.7 million tons a year—is well developed and so is the chemical industry—$263 million in 1971—particularly phosphatic fertilizers. With a billion-ton deposit of phosphates to draw on, Egypt stresses phosphatic fertilizers as an export—100,000 tons annually—and as a vital replacement for the Nile silt which used to irrigate Egyptian agriculture naturally, but is now filtered out by the High Dam at Aswan. There's also insecticides—vital to protect the cotton crop—and, in one of the country's most highly developed operations, Pharmaceuticals. Egypt has seven companies—five government-owned and two private. They import raw materials in bulk and manufacture, under license, a full range of basic, broad-spectrum drugs plus tablets, creams, ointments and birth-control pills, increasingly important as Egypt struggles to slow its enormous population explosion.

In the famous, but troublesome, Helwan industrial complex, Egypt is striving to make its faltering heavy industry pay too. Helwan already makes iron and steel, copper tubing, steel pipe, heavy-duty cable—10,000 tons in 1972—and railway rolling stock. In Helwan, Egypt also assembles Fiat and NSU automobiles.

Vast sums have been poured into Helwan for nearly 15 years and a Russian-financed $l-billion program to expand steel production is scheduled to raise the nation's steel making capacity to 1.5 million tons by 1975. Plans include a railway to bring newly discovered low-silicon, high-grade ore from Baharia oasis and to introduce the oxygen method for the production of high quality steel. When complete the program is supposed to quintuple Egypt's steel production.

Progress in Iraq and Syria is also obvious. Although in heavy industry, neither country's advances are comparable with Egypt's, there are encouraging signs. Production of tractors, for example, has been underway in Iraq since 1971 and France's Renault company has discussed construction of an $11.5-million automobile assembly plant. There is also talk of a steel mill.

And there is certainly growth in the medium range. At the end of 1970, for example, the Iraqi News Agency reported completion of a $25-million chemical fertilizer plant with a capacity of 590 tons a day and announced the signing of a contract with an Italian group to build a $1.6-million asbestos factory. Cement production is also scheduled to triple next year, to 7 million tons.

In Syria, production is up sharply in sugar—close to 100,000 tons a month—leather, vegetable oils, soap, matches, glass, beer, plastics, washing machines and refrigerators. And to promote tourism Syria, in 1972, negotiated a loan from France to build five hotels—with a total of more than 1,000 rooms—in Damascus, Aleppo, Tartus, Horns and Palmyra.

Seen against a backdrop of Western economies such development might not seem impressive. But no complete assessment can exclude the problems caused by some of those economies when the Arab East, and especially Egypt, was taking its first tentative steps toward industrialization.

That was in 1806, just after Mohammed Ali, Egypt's first great modern ruler (Aramco World, November-December 1970) came to power. Deducing from Napoleon's overwhelming victory over Egypt that industrial power was the source of political and military power, Mohammed Ali set up state factories to produce cannon, uniforms, machine tools, pumps, cloth, glass and paper. It was a good start, but most petered out fast. And when Ali's extravagant successors delivered Egypt into the hands of European creditors, Cairo's scores of small workshops, turning out everything from locks to bolts of cloth, gradually closed and were replaced by shops selling finished goods imported from Europe.

After World War I, which stimulated both business and nationalism in Egypt, there was a resurgence. Talaat Harb, a young entrepreneur, and men like him, saw that even Egypt's nominal political independence lacked substance without economic independence, and tried to achieve it. Harb himself created the Misr Bank, which in turn sponsored a string of purely Egyptian businesses: printing in 1922; cotton ginning in 1924; shipping and movies in 1925; sugar farming in 1926; silk weaving and fisheries in 1927; an airline in 1932 and fine cotton textiles in 1948. Misr companies were worth more than $10 million prior to World War II and other Egyptian magnates owned similar empires. By 1950, more than a third of big Egyptian businesses were owned by native-born Egyptian entrepreneurs.

Then came Gamal Abdul Nasser and the revolution which would shake Egypt's economy to its foundations.

Nasser made few changes at first, but after the 1956 Suez War, numerous industrialists—Greek, Lebanese, Italian, British and French—left Egypt and their businesses, some of them important manufacturing and exporting firms. With Egypt's foreign assets frozen, and the country forced to rely on local manufacturing, the Nasser government sequestered the firms and handed them over to an "economic organization," the first—and crucial—turn toward public ownership and a planned economy. The trend gained momentum, and by 1960 the government had assumed control over at least three-quarters of Egypt's capital investment. In 1961 the "second revolution" occurred: Egypt nationalized all heavy and basic industries, all utilities and all banks and insurance companies.

At first, all went well. According to a well-placed foreign expert, Egypt achieved a growth rate of nearly 6 percent during this period—amounting to a net gain of 3 percent after deducting population growth—a signal achievement for a developing country. Egypt opened its first automotive plant, a television plant and a steel pipe factory—all examples of deliberate diversification—ran the Suez Canal and made impressive statistical gains. Production, capital investment, labor force, wages all rose—suggesting that Egypt was more capable than many observers had expected. Syria's experience with the West was similar. After the First World War, the Allies, in dividing the Ottoman Empire, gave a mandate over Syria to France which, when Syria objected, occupied Damascus and more or less ruled the country for the next 20 years. Undoubtedly, there was progress in this period, particularly with respect to roads and schools. But French colonial policy rarely encouraged industrial development.

Like Egypt, Syria in the 1950's decided that government intervention was essential to industrialization, and subsequent advancement seems undeniable. Cement production, for example, went up from 3,800 tons a year in 1951 to 680,000 tons in 1966 and is considerably higher now. Major efforts also went into two new harbors, four new railroad lines, an international airport and two land reclamation projects.

Iraq's first moves to industrialize were between 1890 and 1913, when production of wool, dates and grain were mechanized. But except for the construction of some railroads and the introduction of electricity in the 1920's progress was slow. By 1945, Iraq had less than 100 industrial plants, most in textiles, cotton ginning, cigarettes and cement. Later, as oil revenue increased, Iraq, through a new industrial bank and a development board, began to pay more attention to industry and by 1954 could count close to 23,000 small industrial establishments, most private, most owned by Iraqis.

In line with the trend in Egypt and Syria, Iraq began to turn increasingly toward state planning in the late 1950's. Like Egypt, Iraq had experienced British occupation—in the 1920's—and had grown increasingly disenchanted. With Egypt's example as a spur, Iraq began to enlarge the role of the state in the economy. This was an erratic course at first—largely because of the swift turnover in government and government policies—but its impact on the infrastructure continued. By 1969 Iraq had nearly 13,000 miles of roads, half of them paved or improved, more than 1,000 miles of railroad tracks, and two international airports. Between 1953 and 1968 the consumption of electricity went up seven times. By the 1970's, state planning was also having a measurable effect on actual production.

Such experiences explain a lot about the commitment to central planning that Egypt, Iraq and Syria have adopted as their road to industrialization. Disillusioned by their early experiences with the West, and angered by the West's support of Israel, they gradually turned to the Eastern bloc, achieved some success and concluded that ideology got better results than dividends.

Actually the results have been debatable. In Egypt ideology has unquestionably provided the momentum for broader and more intensive industrialization. And without central planning it is doubtful that the country would have decided on the same priorities. But some errors were made too. In the name of national pride, for example, Egypt decided early on to establish an automobile plant, and, in conjunction with India, to design and produce aircraft. Like steel plants, automobile and aircraft factories are the most prestigious of industries and, from a political point of view, the most attractive. But also like steel they devour capital and demand an exceptionally broad and highly developed technology, both of which were noticeably scarce at the time. Not surprisingly, therefore, both projects ran into trouble.

Central planning is certainly not responsible for the basic problems. The country's population growth continually wipes out gains. Fear of war spurs huge outlays for defense spending that siphons off amounts probably in the billions. Occupation of the Sinai Desert in 1967 cut Egypt off from oil that was then needed, and coal that could be used in place of costly imported coke.

War has had its effects too. Having failed to deliver military victories, Egypt began to produce durable consumer goods like sewing machines, television receivers and air-conditioning units which require long assembly lines and efficient production to be economical and which divert scarce investment capital from the basic industries.

But early planning did contribute to current problems. Had Egypt, for example, concentrated earlier on simpler mass-produced goods—bicycles and motorcycles, as post-war Italy did—it might have strengthened its industrial base and developed the efficiency of workers.

Similarly, had Egypt focused first on industrial training instead of high-level theoretical engineering it might have eased the lack of skilled supervisory help—foremen, section heads, chief mechanics—on the factory floor.

Excessive centralization also fostered a spirit of caution, encouraged feather-bedding, and tended to overlook the failure of productivity to match investment. This, simplified, means that in many industries Egypt put more money in than it got out. Given Egypt's chronic lack of foreign exchange this could have meant, in the long run, complete dependence on outside capital.

Iraq and Syria have had similar problems. Iraq's plunge into industrialization, for example, was initially at the expense of agriculture, an error according to most economists. At a time when domestic capital was scarce, Iraq's planners spent domestic capital instead of foreign capital and then had to divert long-term investment money into short-term projects. In addition, planners overlooked the need to develop the cadre of skilled labor—foremen and the like—which is essential to industrial efficiency and quality. Iraq was also unable to correlate targets and achievements largely because its early organizational and administrative structure simply couldn't cope. As one writer put it, "The gap between planning and execution was wide."

The same problems plagued Syria. It produced the usual five year plans, but could rarely implement them because of a shortage of funds and a lack of technicians.

But again the signs of progress are unmistakable. Despite setbacks and seemingly intractable problems, Egypt is certainly much better off today than it was in 1952. Per capita income increased a whopping 67 percent between 1960 and 1970, according to the Arab Economic Review, and this probably does not include the social benefits—education, medical care, housing—built into many industrial programs. And although productivity stays low, foreign exchange is scarce and debts are soaring, investment capital is by no means lacking. This January, Japan, Libya and Kuwait agreed to provide $1.5 billion for development. In February the Chase Manhattan Bank began discussing terms for an $80-million loan to help finance the proposed Suez to the Mediterranean oil pipeline.

In the most recent developments, the British Leyland Motor Company is reported to be negotiating construction of a $66-million assembly plant to turn out Morris Mini's. More importantly, reopening the Suez Canal, worth an estimated $600 million a year in revenues, now seems a distinct possibility.

Such moves give needed substance to the newest plan, the Ten Year National Action Program, announced by President Sadat in 1971. A sweeping reform, the program stresses intermediate and heavy industry—120-percent increase in output in 10 years—upgrading of middle level managerial and administrative skills, technological research, and basic education of the Egyptian populace. As a supplement Egypt also announced a 10-year, $15.2-billion development plan that gives a high priority to industry.

When the programs will be realized may be uncertain, but there are straws in the wind. In the last two years, Egypt has definitely begun to implement a 1971 "liberalization" policy, by giving guarantees against nationalization to both foreign investors and Egypt's own private industries, which, though small in size, are often ingenious and energetic and which have quietly continued to contribute to production and handle a surprising proportion of sub-contracting for state-owned factories.

Perhaps more significantly, the Sadat government last year unveiled an "open economic" policy that reduced government control over day-to-day management and export/import policies in government-owned factories. It also introduced some heretofore heretical ideas. One is wage incentives for higher productivity. Another, announced by Sharif Lotfy, Under-Secretary of Finance and Economy, is to "allow market forces to play a larger role in the price system."

A similar trend is apparent in Iraq. In an interview last fall, Taher Shaikhly, director general of the private sector of Iraq's Minister of Industry, reported that under the existing five-year plan, private industry is handling 870 projects. He also said the Council of Revolution cut the interest rate on loans from 6.5 percent to 4 percent, eased duties on the import of equipment, donated tax-free land and spread tax payments out over a 10-year period. To support private industry the government, according to Adnan Kindi of the Ministry of Industry, is also looking at every project as the concern of the country, not just the concern of the contractor. "If we hear that a privately-run project has stopped because a crane is broken we ourselves send an expert, because it's a people's project, not a contractor's project."

In a move to solve the persistent lack of technicians, the government last June also signed an agreement with the United Nations Development Program to establish an industrial institute. In an even more surprising turn toward the West, Iraq, last August, began easing restrictions on European imports and reportedly agreed to buy five Boeings from the United States for Iraqi Airways.

Syria is talking in the same vein. Since President Assad assumed power in 1970, the government has been mentioning a "corrective movement" and is quietly stimulating private enterprise in several sectors.

What these trends mean is a still a matter of conjecture, but on the basis of the accomplishments already on record it is certain that for Egypt, Iraq and Syria the future has never been more promising.

Joseph Fitchett broadcasts from the Middle East for ABC Radio and writes for Time, Britain's Observer and other publications.

Cairo's Can-Do Contractor
Written by Nancy B. Turck

It is now definite that Osman Ahmad Osman did not build the pyramids. Had he been around at the time, however, he probably would have.

Big construction jobs are Osman Ahmad Osman's specialty. As head of the Arab Contracting Company, the dynamic Osman built the High Dam at Aswan and in his new post as Minister of Reconstruction he will take charge of the $7-billion reopening, expansion and development of the Suez Canal and neighboring regions. And his firm has also built the Cairo and Dhahran international airports and a string of highways, factories, bridges, shipyards, dams, hospitals, harbors, schools, canals and hotels throughout the Arab East and Africa.

In an Egyptian version of Horatio Alger, Osman as a boy reportedly assembled a bicycle from spare parts so he could ride to school. As an ambitious young contractor his first job was a garage that netted him $1 5. By 1970 he was the head of an organization that grossed $70 million, employed 20,000 workers and reported net revenues of $4 million.

Osman's reputation as Egypt's can-do contractor persuaded President Nasser in 1961 to let him have a try at building what still stands as the Arab East's biggest construction project: the mighty High Dam at Aswan. It was, admittedly, as much a Russian project as Egyptian, but it was Osman's firm that built it.

When Arab Contractors took over the Aswan project, Osman says, there was nothing on the site. "Rocks, mountains, the Nile and nothing else."

It was also 14 months behind schedule. To catch up Osman boosted the work force to 30,000 workers, inaugurated a 24-hour work day and to keep his men happy upped wages, provided housing and built a mosque, a swimming pool and a sports center. He also sought and found scarce foreign exchange to pay for modern machinery and to replace broken Russian equipment with British and Swedish models. For a time it was touch and go, but in July 1970 the dam was finished and in January 1971, inaugurated as scheduled.

After Aswan, it was obvious that if and when the. Suez Canal was ever reopened, Osman would at least have a voice in the project. As it has turned out his voice will be one of the loudest. As the new Minister of Reconstruction he will be almost wholly responsible for not only reopening the canal but also rebuilding the heavily shelled wreckage of Port Said and Ismailia, revitalizing their economies and "urbanizing" parts of the Sinai Desert, assuming Israeli troops withdraw.

In so doing Osman will bring to those projects an approach perfected during the nine years at Aswan and described during an interview last year in his 13-story Osman House headquarters. There, in a paneled office splashed with photographs of family, football players, Egyptian leaders and race horses, he pulled on a treasured Havana cigar and with the calm, benign manner that is his trademark summed up that approach with commendable brevity: "If I look after my people, they will look after the job."

Translated into action the Osman philosophy blends social responsibility with capitalistic incentives. In line with the goals of Arab socialism, he provides free family medical care, insurance, recreational facilities and housing. But he also provides bonuses, a form of profit-sharing and on-the-job raises for superior work. He also visits job sites personally and at least in the early days knew many of his people by name. "You can rent people," he says, "but you can't rent loyalty."

As added insurance, however, Osman also stresses know-how. Although he now maintains a permanent cadre of 700 engineers, mostly Egyptian, in his early days he immediately brought in foreign companies for jobs his people couldn't handle. But he also insisted that those companies give his men on-the-job training. On a bridge project, for example, Yugoslav engineers taught the Egyptians how to use a pressurized chamber for underwater casing construction. Shortly after, Osman's men used the technique themselves on the $27-million Ramses Bridge in Cairo.

In the company's own workyard in Cairo's Shubra district, Osman also runs a maintenance training school for teenagers which stresses preventive maintenance, a rare concept in the Arab East. As a result the central shops now can overhaul a five-ton truck in 36 hours, provide spare parts for emergencies and do most electrical repairs on equipment. And recently in that workshop three teams of engineers and mechanics were seen studying a cement mixer mounted on a platform like a sculptor's model.

As an effective executive accustomed to making his own decisions Osman seemed to face a dilemma when his firm was nationalized in the 1960's, but in fact, neither his efficiency nor his independence were greatly affected and are today still at the service of Egypt.

This article appeared on pages 20-29 of the May/June 1974 print edition of Saudi Aramco World.


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