(MENAFN - Daily News Egypt) Pirelli Egypt will conclude studies on expansion plans for its Alexandria factory by the end of 2015, while construction work on the project will take approximately two years from launch.
"The mother company in Italy signed a memorandum of understanding [MoU] with the Egyptian government stating that Pirelli intends to pump new investments to the Egyptian market," said Younis Al-Alawi, Pirelli Egypt's managing director.
He mentioned that the expected size of Pirelli's new Egyptian investments amounts to approximately $100m to increase the factory's production capacity, to over 1m tires for cars, trucks and buses. The size of Pirelli's tire production in Egypt is currently 800,000 pieces, of which slightly over half is allocated for export, while the rest is sold on the local market, Al-Alawi added.
He noted that the company's MoU with the Egyptian government included Pirelli's intentions to establish new business in Egypt. This would occur on the condition that the Egyptian government facilitates the company's access to foreign currency, so it can receive production supplies from abroad.
"The agreement expresses the company's theoretical expansion plans more than actual plans, and this expansion will be within the company's factory in Amrya, Alexandria," Al-Alawi said.
He confirmed that the finalisation date for the expansion plan studies depends on the political and economic situation in the upcoming period.
Funds for the new expansion plans in Pirelli can be obtained through bank loans or investment capital. With regards to trade, the company opened new sales locations throughout the country in the last three years, which account for 30%.
Al-Alawi refused to disclose the actual number of Pirelli's sales in Egypt during 2014, for reasons of competitiveness.
He described the competition in the tires market as strong for several reasons, the most important of which is the entrance of Chinese products. Some of them enter the market legally, whilst the rest comes in through smuggling, he said, adding that the Chinese are more strongly competitive than the Egyptian market.
External tire companies are said to be giving their clients pricing incentives, leading local companies to lower their prices. This has, in turn, impacted major companies, which have been overspending on production inputs such as energy and employees' salaries.
Al-Alawi said the company's studies assure Pirelli's reputation as a pioneer in the truck tires industry, and is considered one of the top global companies in car tire production and distribution.
Similarly, Al-Alawi said the Egyptian economy is on its way towards improvement, and that when a foreign investor decides to enter the market, he takes into account several considerations. These include: the economic promise; population growth; and the level of political and economic stability.
The foreign investor also looks at other factors, according to Al-Alawi, including: his ability to generate revenue; the legal system's ability to resolve conflicts with other parties; and the framework that the investor will work in.
"It is inconceivable that the workers of a factory go into strike and the factory stops for five months as a result," Al-Alawi said.
Regarding the upcoming Economic Summit in March, Al-Alawi said it is an important step to attract more foreign investments, especially since the government has commenced with serious steps towards economic reforms.
The Economic Summit should however not be relied upon to solve all Egypt's current problems, he said, adding: "It is not possible for one conference to solve all the problems in a country, but the continuous carrying out of reform steps is important."