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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Special Travel Living Sports People Time Out Chronicles Cartoons Letters AmCham keeps knocking
By Aziza Sami
An American Chamber of Commerce (AmCham) delegation is heading to the US on 22 February to solicit more American investments and promote trade ties between Egypt and the United States. Armed with feasibility studies on Egypt's mega-projects and reports on the state of the economy, the mission's itinerary will take it through five states.
Part of the 50-member delegation will visit American business representatives in Pennsylvania, Atlanta and Georgia to scout joint projects and investments in technology transfer and agricultural and food industries. Other members will head to New York to conduct meetings in banking and financial circles.
The last stop in Washington will take the delegation to meet with Congressmen, US administration officials and representatives of international funding institutions such as the World Bank and the International Finance Corporation (IFC), as well as several Washington-based think tanks.
According to AmCham President Ahmed Shawqi, political issues, such as "Egypt's pivotal role in the peace process, its stability and any other questions directed to us on the internal situation, such as Muslim-Coptic relations" will figure highly on the agenda. Ironically, it is on these political counts, which were also discussed last year, that the AmCham has cited its success. According to Shawqi, the chamber has done a lot to promote Egypt's image as a politically and economically stable country.
But 16 years of door-knock missions by the AmCham -- the longest-standing business body in charge of trade and investment relations with the US -- do not seem to have been able to raise the chronically weak level of American investments in Egypt. Over the past 20 years, despite close political ties and the huge sums of US economic assistance to Egypt, direct American investments -- the petroleum sector excluded -- have remained minimal. In 1996, the figure stood at $460 million, rising to $707 million in 1997. (Petroleum investments alone in each of 1996 and 1997 amounted to $1.6 billion.)
Over the past couple of years, multinationals such as Motorola, Airtouch and Lucent Technologies have entered the market, primarily through joint ventures and providing technical know-how. However, "most existing American investments are small-scale ones of $30 or $40 million," said Shawqi.
Today, the 16th door-knock mission still harbours as its prime objective what it started out with 16 years ago, "primarily, to promote American-Egyptian trade ties and to raise the level of American investments in Egypt which are clearly meagre."
The balance of trade between both countries is currently tilted in favour of the US, whose exports to Egypt total $3 billion, whereas Egyptian exports to the US amount to only $775 million.
Despite the scarce investments, and the imbalance in trade relations, or perhaps because of them, Egypt and the US signed a Trade and Investment Framework Agreement (TIFA) last May as a precursor to a free trade area between the two countries, whose theoretical underpinnings are still being worked out and which is expected to materialise at a future and undefined date.
Although officials in the upper echelons of the US administration who have visited Cairo have commended the economy's "stability and progress in reform" -- the most recent of whom were US Secretary of Commerce William Daley and Assistant to the US Secretary of State for Middle East Affairs Martin Indyk -- these statements stand in stark contrast with the position on the ground.
The fact is that Egypt, as a market, is still little known to the US investor, as compared to the more lucrative Southeast Asian economies, before they underwent their financial crisis last year, or Africa. American investments have generally flowed in the direction of the fast-growing and economically open Southeast Asian markets, which give a high return on investments. Middle East markets, not only the Egyptian market, are still perceived by American businesses as being still largely regulated and closed.
While US officials who visited Egypt cited the need for "further procedures" to be undertaken in the economy, American businessmen have put their demands more bluntly. They asked for total opening up and deregulation of the economy as the prerequisite for bringing in their investments.
A clear bone of contention between Egyptian and US business representatives has been the Egyptian pharmaceuticals sector. Since accessing the sector would open a sizeable and profitable market for US-based multinational companies, they have been aggressively pushing for complete liberalisation of the pharmaceutical industry. The GATT has prescribed a transition period which is due to end in 2005. The issue is expected to come up again during the AmCham delegation's visit to the US.
"The Egyptian private sector insists on being given a grace period to prepare itself for global competition. It is not the Egyptian government's position, but the private sector's, and this is what we will make clear in our talks," Shawqi said.
American companies are also pushing for early liberalisation of the insurance sector, which represents another sizeable and profitable market for them.
This year, like the last, the chamber is promoting the four mega-projects in the Gulf of Suez, Uwainat, East of Al-Tafri'a (Suez Canal bypass) and Toshka, which might pose a challenge considering the scepticism which has been expressed by American businesses over what has been termed, "environmental concerns" regarding the Toshka project. "Questions have been raised about the water needed for the project and what its effect will be on the soil there," said Shawqi.
In a visit to Egypt last year, head of Congress's agricultural committee, Senator Bob Smith, said at a press conference that American investors needed "a clear plan for the project and the stages of its execution."
Shawqi said that the mission will be taking the full feasibility studies for the project with them on their upcoming visit.
Build, operate and transfer projects will also be promoted, as well as "tourism, which is one very important sector which sees very few American tourists," said Shawqi.
One other reason direct investments are not coming in, according to Shawqi, is that large-scale investors need a compatible counterpart, which they often will not find. He said that multinationals often do not find the suitable (Egyptian) partner who will put in the needed amount of investments. A company like Intel or General Electric will need a partner who can offer them big projects and sizeable investments. There are also the concerns of the general investment climate, the size of the market, the ways commodities are transported and the marketing, Shawqi pointed out.
According to Shawqi, the Egyptian market has yet to counter competition "from other markets which give investors huge tax exemptions."
The issue of investments is expected to become more pressing now that the yearly $815 million of US economic assistance to Egypt will undergo a five per cent annual cut, with 50 per cent diverted to military assistance starting in the coming fiscal year, so that US economic aid will eventually taper off over a 10-year period ending in 2008.
"To turn from aid to trade must be our main focus now," said Shawqi, adding that the soliciting of huge investments needed by the economy must be done through the Egyptian government, as well as businessmen. "We must admit that our business associations, in general, have not mastered the promotional and marketing skills needed to lure investors. It is not enough for us to say that the economic climate is good and that investors will come on their own. We must have work teams which will go out and get the investors," Shawqi said.
