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Al-Ahram Weekly 25 February - 3 March 1999 Issue No. 418 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 25 February - 3 March 1999 Issue No. 418
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Travel Living Sports People Time Out Chronicles Cartoons Letters Bilateral momentum
By Nevine Khalil
The stalled Middle East peace process, the Iraqi crisis and the apparent breakthrough in the Lockerbie stand-off were among foreign issues on President Hosni Mubarak's agenda during his two-stop trip in Europe this week. Additionally, economic ties between Egypt and both Germany and Italy also featured prominently in the president's talks with Italian President Luigi Scalfaro and German Chancellor Gerhard Shroeder.
President Mubarak shake hands with Italian President Scalfaro
(photo: AFP)
Europe has increasing faith in Egypt's economy as a result of the country's on-going economic reform programme. Over the years, foreign investors have been attracted by reform, and there has been an increased amount of economic activity, mainly dependent on the private sector.
Italy is Egypt's number one trade partner in Europe, with the volume of trade between the two countries amounting to $2.3 billion in 1997. Egyptian exports are mainly cotton, textiles and ready-made garments, oil and its by-products, aluminium and metal sheets. More than 60 per cent of Egyptian imports from Italy are heavy machinery and capital goods.
Italian economic aid to Egypt amounts to $420 million, of which $120 million are unrepayable grants and the remainder are soft loans.
Italian investments in Egypt only amount to one per cent of all foreign investments, with an investment cost of $920 million and a capital of $80 million in 73 projects. While low on the investment side, Italy is Egypt's number one tourism partner. Around 70 per cent of tourists visiting the Red Sea resorts are Italian.
Under discussion with the Italians at present are two water treatment projects and a third for the development of small- and medium-sized industries as well as more financing for the Social Development Fund. The Italians are also interested in funding the third phase of the Alexandria library, having donated $1 million through the UNESCO.
Germany views the Egyptian economy favourably and, according to Hamed Metwalli, trade minister plenipotentiary in Bonn, "the success of reform policies has markedly changed the view of German businessmen. Now there is real interest in investing in Egypt."
Cairo is also interested in German investment which brings with it top quality capital and technological products. "Germany is a leader in mechanical and electrical machinery," noted Metwalli, "and in recent years, Egypt has become more dependent on German expertise and technology in new mega projects such as Toshka."
An Egyptian-German business day on 9 March at the Cairo Trade Fair will aim to promote industrial and commercial relations between the private sectors of both countries. A focal point will be industrial production and feeding industries with the aim of transferring German technology to Egypt.
A top economic source told Al-Ahram Weekly that the technology transfer is "almost automatic" when cooperating with any "advanced giant", especially Germany. "When these firms begin operations in Egypt, they bring over their technology and provide Egyptians with training. Therefore, we are bound to get the technology," he added.
The Mubarak-Kohl project is designed to provide technical education as well as on-the-job training and develop human resources in order to raise living and production standards, while keeping the production costs low. Following its success, the programme has been recommended as a prototype for a nationwide professional training programme.
The Mubarak-Kohl initiative emerged during discussions between Mubarak and the then German Chancellor Helmut Kohl in 1991. One year later, a unit responsible for managing the project was established in cooperation with the Egyptian Ministry of Education. A sum of $16.4 million was allocated in the form of grants between 1992 and 1998, and more funding is expected this year through Germany's economic assistance programme.
By paying the salaries of instructors and shouldering the cost of tools and machinery used in training, Germany helped finance the creation of training centres in the satellite industrial cities of 10th of Ramadan, 6th of October and Sadat, as well as a programme for training nurses. The Egyptian side would like to further expand the Mubarak-Kohl programme by building centres in six other governorates: Sohag, Qena, Port Said, Ismailiya, Menoufiya and Gharbiya.
Economic relations between Egypt and both Germany and Italy are similar in many ways, both in the volume and shape of trade and the type of projects funded by their financial assistance. Italy and Germany rank second and third respectively as Egypt's trade partners after the US.
Trade with Germany in the first 10 months of 1998 amounted to $2 billion, but with the trade balance greatly tilted in Germany's favour, only $247 million were Egyptian exports. And yet, this figure marked a 13 per cent rise over the previous year.
The Germans are partners in 128 investment companies in Egypt with a total capital of $565 million and an investment cost of $960 million. The German share in these companies is around 27 per cent of the total capital.
Germany will give $114 million in aid to Egypt this year and, although Bonn has reduced its foreign aid budget, Egypt's quota stayed the same.
Most of the money contributed by Germany and Italy is spent on infrastructure, environment and technical assistance projects, and other schemes, the aims of which are to alleviate poverty and finance small and medium businesses.
A clear difference between German and Italian aid to Egypt, however, is the fact that German assistance comes as untied aid, similar to that of Japan, while Italy's is mainly tied aid, similar to US aid. Tied aid basically means that most of the money received by the recipient country is spent on the purchase of goods from the donor country.
Projects in the pipeline with the two European countries include German cooperation in increasing Egypt's railway revenues. Negotiations, however, have not yet resulted in any concrete steps. Germany is also interested in funding the third phase of the wind energy project at Zaafarana. Germany and Egypt are also discussing the building of a German University in Sinai, in order to further cement economic and cultural ties.
The Italian oil giant ENI has allocated over $1.2 billion over the next four years to develop new oil and natural gas fields in Egypt.
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