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Al-Ahram Weekly 13 - 19 July 2000 Issue No. 490 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 13 - 19 July 2000 Issue No. 490
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Focus International Economy Opinion Interview Culture Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Facing up
By Aziza Sami
Can Egyptian industry deal with the competition it will face when the partnership with the European Union is implemented? The furor of the past weeks, in which industry representatives protested aspects of an agreement which has taken five years to negotiate, reveals concerns that they might not be able to access EU markets with the same success they expect will be met by their European counterparts in entering Egypt's market.
The concerns are justified, and may be attributed partially to the inherent imbalance between the advanced economies of the EU and that of Egypt. It is therefore pertinent to look at whether current domestic policies are impeding, rather than promoting, needed preparations for liberalisation. Part of the responsibility for difficulties which Egyptian products could encounter in accessing EU markets may be borne by both the Egyptian private sector and the government. Egyptian industries, in general, have not prepared themselves seriously for competition. The government has not worked hard enough -- through necessary legislation and minimising bureaucratic impediments -- at preparing industries for inevitable liberalisation dates ordained by the GATT.
The result is that the Word Trade Organisation last month rejected Egypt's request for an additional three-year extension of its customs valuation transition period. Great pressure was put on customs departments, which on 1 July scrambled to adjust to GATT-consistent customs legislation.
The Egypt-EU partnership agreement, which President Mubarak referred to the government to sign in first letters last week, is based on both parties' obligation in the context of the GATT. Partnership negotiations have extended the 10-year transition period after which both sides will remove tariff barriers an additional 19 years.
There have been warnings of the seriously debilitating effects a liberalisation for which they are not prepared adequately will have on Egyptian industries. What have they done? Major businesses have capitalised on their ability to lobby with the government in extending protection, ignoring correct market practice and stalling antitrust laws which would have enhanced competition and strengthened national industries. The government, for its part, has allowed a multitude of bureaucratic, fiscal and legal obstructions to work against private enterprise's ability to become productive and competent.
The impending partnership will put Egypt's ability to compete in global trade to the test for the first time. It is the most important agreement entered into to date, both because the EU is Egypt's major trading partner and because there is a great deficit in the trade balance in favour of the EU, which can absorb all Egypt's exports combined. The potential will be as great as the challenges -- but only if a major drive is undertaken to reverse the patterns impeding the economy's competitiveness.
There is a misunderstanding, compounded by statements attributed to Prime Minister Atef Ebeid by the press last week, that the EU partnership agreement has yet to be submitted to a national referendum. This gives the impression that principal issues will still be negotiated, which is not the case. These have already been agreed upon, and the agreement will subsequently enter the phase of ratification. Some contentious issues related to quotas and rights of equal access for Egyptian products will be dealt with as finer points of detail, possibly to be reviewed by virtue of stipulations in the agreement itself. They pertain to textiles, foodstuffs, automotive spare parts and engineering industries, and were raised by the Federation of Industries in a memo to PM Ebeid in April. The details of the industrial modernisation programme and EU economic assistance are also being worked out.
The government and business must defend Egypt's interests through negotiation. But a similar effort must be exerted to support the economy's internal strength, without which there can be no global competition. This will not occur solely through the EU-coordinated industrial modernisation programme. The government must take serious steps to facilitate bank credit and debt rescheduling at reasonable interest rates, offer more flexibility in restrictions on import requirements and complicated drawback procedures. Investors must not have their confidence shaken in the government's seriousness when it says it will promote exports. A case in point is the declaration made by the previous government that it would fully exempt export operations from taxes. The promise was immediately retracted with the new cabinet's accession -- no explanations given. The Egyptian private sector, on the other hand, has not accepted free competition, engaged in proper entrepreneurial practices or contracted strong local alliances.
The government and the private sector, through legislation and correct practice, must respect the local market's right to high-quality products at low prices. When this happens, Egypt's industries will capture Europe's markets.
