Cosying up to the Russian bear…and to other titans

10-06-2015 04:39 PM

Fady Labib


It is no secret that the greatest challenge facing Egypt at this point in time is to rebuild its economy which took a harsh bashing in the aftermath of the Arab Spring uprising in January 2011. The year-long presidency of President Sisi which began 8 June 2014 has seen aggressive moves on that front. The launching of the New Suez Canal megaproject in August 2014, new laws and an investment-friendly climate, and the Egypt Economic Conference last March represent significant steps on the path of economic revival. Recent State visits by President Sisi to Russia, Germany, and Hungary have seen valuable trade deals signed with firms in these countries. And last week saw the Tripartite Free Trade Agreement (TFTA) signed between the East African Community, Southern African Development Community and the Common Market for Eastern and Southern Africa (COMESA). After four years of negotiations to establish a framework for tariff preferences and other commitments, the free trade agreement by the three African economic blocs stands as the launch of a potentially game-changing common market spanning the continent, supporters say. The TFTA will create a market of 26 countries with a population of 625 million and gross domestic product of more than USD1 trillion.




In Germany, initial suspicion by German authorities of conditions in Egypt ended in better understanding and, on the practical level, hefty industrial agreements. Germany’s Chancellor Angela Merkel voiced criticism of Egypt’s use of the death penalty and record on religious freedom, but stressed the central role of Egypt in a conflict-torn region and pledged closer economic ties with the country and support in its fight against Islamic extremism.
President Sisi insisted Egypt’s justice system was independent and fair, and that many of the death sentences were still subject to judicial review. “We too love democracy and freedom,” he said, “but we must avoid the chaos seen in Syria, Yemen, Libya and Iraq.” He vowed: “We can never allow this.”
An agreement was signed between Egypt and German engineering titan Siemens to build natural gas and wind power plants, with a capacity of 16.4 gigawatts. At 8 billion Euros, the order is the largest-ever Siemens has signed. The three natural gas-fired combined cycle power plants, the firm’s President and CEO Joe Kaeser said, would be “the largest in the world”, and that it would also build up to 12 wind farms in the Gulf of Suez and West Nile areas, comprising around 600 wind turbines.
In Budapest where President Sisi was awarded an honorary doctorate degree from the National University of Public Service, a joint Egyptian-Hungarian business forum was inaugurated, and several cooperation protocols signed. One aspect that caught public interest was talk about Egypt importing trains from Hungary; Hungarian trains operated in Egypt during the 1970s and long later, and gained a reputation for absolute efficiency. Hungarian investment in Egypt stands at some USD1 billion in 55 companies that operate in the fields of tourism, industry, and services.

Russian Egyptian relations: a new turn
Perhaps the most significant on the trade and industry cooperation front, however, has been the novel turn in Egyptian Russian relations. Recent trade and industry talks (25 – 26 May) in Cairo, sponsored by the Egyptian-Russian Business Council (ERBC) under the title “Trade and Industrial Dialogue ‘Russia-Egypt’”, ended in results which surpassed expectations.
Taking part in the talks was a Russian State delegation led by the Russian Federation’s Minister of Trade and Industry Denis Manturov, and including as members the heads and representatives of more than 200 Russian companies and trade and industry organisations. They held meetings with an Egyptian delegation headed by Prime Minister Ibrahim Mahlab which included Mounir Fakhry Abdel-Nour, Minister of Industry and Trade; Khaled Hanafy, Minister of Supply and Internal Trade; Hani Dahy, Minister of Transport; Ahmed al-Wakil, Head of the General Union of Chambers of Commerce; and a number of Egyptian businessmen and representatives of private sector companies.





Strong comeback

Five agreements were signed between Egyptian and Russian companies and government agencies aiming to promote industrial exports and support small and medium enterprises. An agreement was made with the giant Russian Automobile manufacturer AvtoVAZ [Lada] to establish a car and truck assembly plant in Egypt. Other Russian car manufacturers who are negotiating to establish joint ventures with local car manufacturers include KAMAZ, GAZ and UAZ.
Among the most important results of the forum was an agreement between Egypt, Russia and the United Arab Emirates to establish a common direct investment fund for the long-term financing of industrial and agricultural projects in Egypt.
“Our main mission as State representatives is to ensure favourable conditions for the business sector to invest in these projects,” Mr Manturov said at the forum. “The fund was established in partnership with the Russian Direct Investment Fund (RDIF) and a number of Arab financial institutions in Egypt and the UAE. It will act as financial support to a large number of projects in the fields of industry and agriculture. We have always been business partners with Egypt. The only time when we disappeared from the Egyptian market was during the 1990s in the aftermath of the fall of the Soviet Union. We are now working on a strong comeback to the Egyptian market in various industrial and agricultural fields.”
Mr Manturov also expressed his country’s interest in investing in infrastructure projects in Egypt and its willingness to transfer its expertise in the fields of railway, infrastructure, ports and shipbuilding.


Steadfast friendship
A protocol was signed between The Egyptian Junior Business Association (EJB) and the ERBC to promote future cooperation between the two parties and to increase exports between Egypt and Russia.
ERBC chairman Mikhail Orlov expressed his pleasure that Egypt and Russia were opening a new and stronger chapter in mutual relations.
“The current economic relations cannot yet be considered strong; however, the strong relations between presidents Sisi and Putin play a crucial role in promoting and supporting the relations between Egyptian and Russian businessmen and pave the road for many future economic opportunities,” he said.
Egyptian Prime Minister Ibrahim Mahlab said that Egypt could never forget Russia’s historical stances and its constant support of Egypt’s development plans.
“The Aswan High Dam, which was built in the 1960s by the Russians, is a symbol of our steadfast friendship,” Mr Mahlab said. “There is a strong will to nurture relations between our nations. The timing is just perfect as there are currently real opportunities for cooperation in various sectors of the economy. The Egyptian government is determined to eliminate all investment impediments, red tape, and corruption in order to attract foreign investment.”
Minister of Industry and Trade Mounir Fakhry Abdel-Nour praised the large audience that participated in the forum which he said was proof of the strong determination to raise Egyptian-Russian relations from the ashes. He said that the Russians welcomed Egyptian suggestions for cooperation in the fields of industry, petroleum, scientific research, power generation and transport.
“The time has come,” Mr Manturov said, “to achieve a quantum leap in mutual relations and raise the commercial exchange which has already reached USD5.5 billion in 2014 as a result of the increase of Egyptian agricultural exports to Russia.”


Full potential
In his speech at the opening of the forum, Minister of Supply and Internal Trade Khaled Hanafy announced that the return on investment in Egypt had become the highest worldwide, especially after Egypt started to adopt a new philosophy in its economic policy and include the location factor in design plans. The new national projects being constructed have the advantage of benefiting from Egypt’s strategic location on international trade routes. These include the New Suez Canal, the International Logistics Centre for grains and commodities in Damietta and the Shopping and Trade City which will be built around the Suez Canal axis, both of which will be managed by the Supply Ministry, and other transport and power generation projects.
“Egypt’s economy has not yet realised its full potential,” Dr Hanafy said. “More than 90 per cent of the land is unexploited and much of the young labour force is unemployed. If we can make the best use of these resources, the cost of production can be reduced to a minimum which would represent a great opportunity for investors. Another opportunity is Egypt’s 90-million strong population, which constitutes a huge market in addition to its trade agreements with the COMESA countries, the EU and the Gulf States which raise the potential market to 1.6 billion consumers.”
Minister of Transport Hani Dahy said that the Egyptian government had completed all the plans and feasibility studies for the prospective projects on the new Suez Canal axis. The most important of these projects, he said, included the expansion of six ports in the canal area and the construction of new ports in other areas.



Aircraft deals
Other potential investment fields discussed at the forum included medicine, pharmaceuticals and aircraft manufacturing, in addition to gas and petroleum.
The aviation industry came across as a lucrative field for Russian-Egyptian cooperation. According to Mr Manturov, there is great potential for cooperation in civil aviation, particularly in terms of advancing rotorcraft: various modifications of the Mi-17, Mi-38, Ansat, Ka-226 and passenger aircraft SSJ 100 and MS-21 and their further maintenance to the Egyptian aviation market. The Egyptian side, he said, was interested in the passenger aircraft SSJ 100, which was presented at the business forum in two versions: passenger versions with 95 seats, and a VIP version. The talks, he said, touched on the possible supply of 12 aircraft SSJ 100 with the option to sell further 12 aircrafts, and the first delivery to begin in late 2016.
“We offered conditions that should be competitive and profitable for Egyptian airlines,” Denis Manturov said. “And we will use financial instruments and mechanisms to make the deal more attractive.” The SSJ 100 aircraft can be supplied to Egypt using a wide range of financial mechanisms from the involvement of the Russian direct investment fund to attracting Chinese investors.

Watani International
10 June 2015


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