3 - 9 May 2001
Issue No.532
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Al-Ahram Weekly On-line 3 - 9 May 2001 Issue No.532 |
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A Russian syndrome
The once substantial levels of trade between Egypt and the former Soviet Union have been halved during the political upheavals that followed the collapse of the latter and now stand at a meagre $500 million.
Yet if such figures generate a degree of pessimism, the fact remains that Russia, along with the republics of the former Soviet Union, today represent a market that holds out substantial opportunities for Egyptian exports.
The economies of Russia, the largest member in the federation, and those of several other member states, including the Ukraine, are becoming increasingly market-oriented, generating substantial demand for a wide range of commodities.
The massive economic restructuring undertaken in Russia since the early 1990s has entailed privatisation and the liberalisation of its trade and domestic markets. Per capita income has risen and the Russian federation enjoyed a trade surplus assessed at $12 billion in 1996.
Despite political risks and the bureaucratic impediments that still exist within the former Soviet states, multinational companies have been quick to recognise the potential represented by these markets. They have sought to export to the region, and also to set up joint ventures within Russia and other federation states with the result that foreign joint ventures currently account for 6.4 per cent of Russia's exports.
Over the past 12 years, the US has become the leading investor in the former Soviet states, with American companies pouring in $2.8 billion in investments into Russia, and $245 million in the Ukraine alone.
Feasibility studies undertaken by these multinationals indicate that Russian firms are particularly open to contracting joint ventures with foreign partners, and in helping them cope with bureaucracy, assess the price of real estate, and obtain competitive prices for necessary, sub-contracted services.
The former Soviet states should offer an equally lucrative opportunity for Egypt's private sector-especially as an export market. For years, Egypt enjoyed a competitive edge in the former Soviet market. In the mid-sixties several industries thrived through non-traditional export operations to the market though, with the reduction in bilateral trade, this period of prosperity has waned.
Furniture manufacture as well as the making of leather goods have both been adversely affected by the reductions in bilateral trade. Both industries, too, are facing problems in accessing other markets.
Nevertheless, despite the severance, in the mid-seventies, of the once close political and economic ties between Egypt and the Soviet Union the potentials of investing in the Russian market led some Egyptian businessmen to retain a presence. The market, after all, still retains a huge demand for several commodities in which Egypt boasts a comparative advantage, including foodstuffs, chemicals, pharmaceuticals and mineral products. It also holds opportunities for joint ventures in the telecommunications sector, one in which Egyptian companies have already made inroads in African and Arab markets, as well as in the financial services sector.
The government has determined to double levels of trade with the Federation of Russian States, and hopes, in the long term, to see the figure triple to $3billion. But to achieve this goal export policies must focus on supporting the competitivity of Egyptian goods within the targeted markets.
Efforts are being directed to completing free trade arrangements with the EU and the US, which are, when all is said and done, saturated markets in which many Egyptian products will face fierce competition.
The economies, on the other hand, of the federation of former Soviet states, are, after all, are not a new market, having witnessed over two decades of interaction with the Egyptian economy. If the proper strategies are adopted versus these markets they will, hopefully, be more accommodating of Egypt's exports.
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