How Egypt plans to forge closer economic ties with France

On a visit to Paris, Egypt's minister of trade and industry sought to attract French investments to his country.

al-monitor Egyptian Minister of Trade and Industry Tarek Kabil speaks at a meeting with the members of the Egypt-France Business Council, Paris, France, Feb. 21, 2017. Photo by Egyptian Ministry of Trade.

Topics covered

investment, france, business in egypt, trade, egyptian economy, industry

Mar 2, 2017

Egyptian Minister of Trade and Industry Tarek Kabil paid a visit to Paris recently to further promote Egyptian-French economic relations. During his visit at the end of February, Kabil, with his eye on increasing French investment in Egypt, held several meetings with senior French government officials and the heads of key French companies like Decathlon and Peugeot. Kabil's main goal was to update these officials and businessmen on available investment opportunities in Egypt's diverse sectors.

Kabil's visit came within the framework of the government's broader plan to lure more foreign investors to local projects, particularly in the Suez Canal Development Zone. At the top of the meeting agendas was a discussion of how to increase trade between the two countries and how to foster more strategic partnerships.

Egypt has already adopted extreme economic policies — such as the liberalization of the exchange rate and the introduction of the value-added tax (VAT) — in the hope of reviving the country's struggling economy, which is plagued by inflation and currency fluctuations. Though such procedures have severely impacted citizens' pockets, the Egyptian government, through official visits abroad, is trying to convince investors that such steps have positively impacted the investment sector.

During a meeting with members of the Egypt-France Business Council, Kabil reiterated the country's interest in building closer commercial ties with France. Kabil said that Egypt's economic reform plan, including the passing of economic legislation, has helped create an adequate environment for investment.

Egypt, according to the minister's statements, is eager to make the best use of free trade agreements to enhance its presence in the Arab, European and American markets, with a particular focus on the African market.

Economist Ahmed el-Shamy told Al-Monitor, "The main purpose of this visit is to send out messages of reassurance and to offer publicity for investment opportunities in Egypt. We expect similar visits in the upcoming period."

France is a top industrial country, especially in the pharmaceutical and automotive industries. Egypt, meanwhile, is in desperate need of French expertise to implement its ambitious development projects in the Suez Canal, Sharm el-Sheikh and Ain Sokhna, Shamy said.

According to statements made by Kabil in Paris, the volume of trade between Egypt and France decreased in 2015 to approximately 2 billion euros. Egypt's exports to France, nevertheless, increased by 6% during the same period. Total French investment in Egypt, up until 2016, is estimated at 4.2 billion euros.

Kabil stressed the government's readiness to facilitate investment procedures in a bid to increase Egypt-France joint ventures.

While in Paris, Kabil spoke at a forum organized by a French business agency, Business France, about the potentials of the Egyptian market, which he said values its various industries, including automotive, feeding, textile and chemical.

Business France underlined the importance of the vibrant Egyptian market, which enjoys a strategic location in Africa. The French agency said France is Egypt's sixth largest investor in Egypt over the last five years.

Kabil met with his French counterpart, Christophe Sirugue, to discuss the possibility of widening the scope of economic cooperation between Egypt and France. The two ministers discussed supporting small- and medium-sized enterprises, as well as ways to enhance cooperation in the information technology sector.

Kabil said Egypt seeks to benefit from France's comprehensive knowledge of the mechanisms of marketing products from small- and medium-sized enterprises to local and international markets. French assistance is also required to hone entrepreneurs' skills, he said.

Sirugue expressed France's desire to cement ties with Egypt. He further offered technical support for Egypt's small- and medium-sized enterprises. Sirugue said France has a unique experience in this field since it deals with around 3,500 such enterprises and provides those entrepreneurs with numerous training courses.

"Instead of merely seeking French assistance, Egypt should smartly publicize its resources to lure more investments," Mohamed Othman, an economic expert, told Al-Monitor. "We have priceless historic and geographic advantages. If we failed to exploit these advantages, such visits would be useless."

To support Egypt's automotive industry, Kabil met with the vice president of French car manufacturer Peugeot, calling for the expansion of the company's activities in Egypt, which is one of the world's largest consumer markets with a population of almost 90 million.

Kabil said that the flotation of the Egyptian pound led to an increase in the cost of imported cars, thus giving competitive advantages to locally manufactured cars. Enhancing the presence of the company in the local market will also be essential and fruitful in light of the Egyptian government's readiness to establish a real auto industry in the upcoming period.

"With the declining value of the Egyptian pound against the US dollar, manufacturers will ensure high profits since the production cost will be in the Egyptian pound but the products are to be exported in the US dollar," economist Salah Fahmy told Al-Monitor. "In this case, the liberalization of the exchange rate will be an incentive."

Fahmy said that winning manufacturers' trust is the main challenge, citing Morocco as an example.

"Peugeot cars have flooded the Arab world through Morocco, not through France, since [Morocco] has managed to attract this leading company to manufacture in its lands," Fahmy said.

Keeping in mind the advantageous location of Egypt, Fahmy said, auto manufacturers will flock to the country once the government manages to win their trust by offering them a wide range of incentives.

"Surely, the exchange of such visits will put bilateral relations on the upswing," Fahmy said. "But we hope the officials' statements will be translated into real investments."

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