Will Erdogan's Policies Endanger Turkish Investments in Egypt?

Turkish businessmen working in Egypt fear that their government’s policies in support of deposed President Mohammed Morsi could jeopardize their investments.

al-monitor Turkish Prime Minister Recep Tayyip Erdogan (L) speaks at the Egyptian-Turkish Economic Forum in Cairo, during the last day of his two-day trip to Egypt, Nov. 18, 2012.  Photo by REUTERS/Asmaa Waguih.

Topics covered

turkish foreign policy, turkish-egyptian relations, turkey, tourism, mohamed morsi, military, erdogan, egypt

Jul 10, 2013

Turkish businessmen, who have invested $2 billion in Egypt, are seriously worried by the AKP-led government’s policy of supporting deposed President Mohammed Morsi and not recognizing the new government that came in with the coup.

We spoke with many businessmen to find out how the uprising and the coup in Egypt is affecting the Turkish business world. Most of the investors are known to be close to the ruling AKP government. We found them in shock, but much more cool-headed than the politicians.

When we asked them about the fate of their investments in Egypt,  it became clear that they didn’t yet have adequate information. One of them said, “We don’t yet have a complete damage report. We are all trying to understanding the situation in our workplaces. We will have a joint meeting next week and try to consolidate our views.”

Turkish bosses, who have about 60,000 Egyptians working for them, oppose the coup. But they don’t want the relations between the two countries to reach a point of irreparability, as happened with Syria. They have concerns about Prime Minister Recep Tayyip Erdogan’s unparalleled tough position against the Egyptian military administration, and hope he will change it. We understand that they don’t want to take this up directly with Erdogan. None of the businessmen we spoke with agreed to the use of their names for this article.

One businessman said, “The prime minister will change. In the end, this is a global game. Turkey will act according to its own interests. What is important now is to transfer power to civilians in Egypt as soon as possible.”

‘What is important is Turkey’s interests’

Another businessman, speaking about the possibility of tough statements by Erdogan damaging relations with Egypt as happened with Syria, said, “You should not expect Mr. Erdogan to modify his position now. He will do it when the time comes. What is important now is to be pragmatic and protect Turkey’s interests.”

We asked the businessmen how they see Egypt’s future, Morsi’s situation, and Turkey’s investments there. One said, “It is impossible to accept the coup, but the Morsi government also made important mistakes. Democracy is not only [about winning at the] ballot box. It is also important to appeal to the feelings and hopes of the people after winning at the ballot box.”

‘There will be no civil war in Egypt’

The same businessman said that the gravest threat facing Egypt is the transformation of the resistance of Morsi supporters into a civil war. He said, “The most proper way is to transfer the power back to a civilian government as soon as possible. This means the Brotherhood’s resistance should not be prolonged. I don’t expect a civil war in Egypt. Although there is a deep rift, now those who know Egypt don’t expect a civil war.”

A businessman who is working in textiles in Egypt said, “What is important for us is to avoid a civil war. Most [Turkish] investments in the country are factories that export and earn foreign currency for Egypt. That is why I don’t think the new administration will adopt a negative attitude toward Turkish businessmen.”

Anatolian capital at risk in Egypt

Erdogan's policies to shape a Sunni bloc in the Middle East and North Africa were strongly supported by the Turkish business world. This provided the Anatolian capital an important source of income. Many businessmen succeeded in turning their increasingly friendly relations into trade and money. Friendly relations with countries of the former Ottoman [Empire] — which are rich in energy resources, but way behind Turkey in production and consumption — offered economic opportunities.

Turkey’s success story in former Ottoman lands is reflected in the numbers. For example, exports to the MENA region boomed by fourfold in the last seven years. Exports to these lands, which were $12.7 billion in 2005, climbed to $52 billion in 2012. Meanwhile, growth in exports to EU countries slowed and the EU’s share in Turkish exports decreased from 56% to 38%.

Counter winds

Similar numbers also apply to tourism. The number of tourists coming to Turkey in the period from 2005-2012 increased by 68% from 20.5 million to 31.6 million. In that period, tourists from Europe increased by 30.3%, but tourists from the MENA region doubled to 4 million.  The share of European tourists in total lost 11 percentage points and went down to 57% from 68%.

Despite hiccups such as the Arab Spring, the changing conjunctures in the region brought to power regimes close to AKP. Primarily conservative Turkish businessmen invested heavily in the MENA region. The Anatolian capital, that forms the economic base of the AKP, focused on textiles, retail, food and construction for lucrative profits, but also took serious risks.

Now the winds have changed direction and are coming from the other direction. The AKP’s wrong political choices in the Syrian crisis caused serious losses to these businessmen. The coup in Egypt — while the crisis in Syria is still ongoing, and regardless of whether the Erdogan government’s position is right or wrong — has become a source of fear for the businessmen.

Risks higher in Egypt

It is possible to say that the Turkish business world is more anxious about Egypt than about Syria. Figures tell the story. Relations under Morsi have improved but they were already at high levels under former President Hosni Mubarak. Today, about 250 Turkish companies have invested nearly $2 billion in Egypt. There is a heavy concentration in textiles. Turkish companies use high-quality Egyptian cotton and benefit from custom free sales to the US market. In recent years, Turkish companies also increased their investments targeting Egypt’s domestic market and made substantial investments in retail. Egypt is the 13th-largest market for Turkey’s exports with about $3.8 billion a year. Egypt is one of the rare countries with which Turkey doesn’t have a foreign trade deficit, as our imports from Egypt are not more than $1 billion.

In a nutshell, Egypt is a market that must not be lost for Turkish businessmen close to the AKP, who have made almost all the Turkish investments there.

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