Egypt eyes Iraq
Unfulfilled contracts and an uncertain future. Such is the lot of Egypt's business dealings in Iraq, reports Mona El-Fiqi
Egyptian exports to Iraq -- for years a strong tie between the two countries despite political tensions -- have suffered tremendously as a result of the US invasion and subsequent occupation of the country. Government statistics predict a reduction in total exports of $1.7 billion during the current fiscal year.
Before the war, Iraq was a lucrative market for Egyptian exports. Within the framework of the UN-sponsored Food for Oil Agreement, which regulated trade with Iraq after the Gulf War of 1990-91, dozens of Egyptian public and private sector companies were able to secure profitable contracts. The Free Trade Area Agreement, signed between Egypt and Iraq in 2001, was another factor that helped to boost trade relations.
However, since the US invasion, Egyptian companies have not been able to meet their export commitments, with many shipments leaving Egypt unable to reach their destination. Moreover, many exporters whose products had already been delivered to Iraq before the war, have not yet received payment for their goods. Some exporters had already bought the raw materials but the war prevented them from fulfilling their commitments.
Also lost are millions in deposits which had been made by Egyptian exporters to secure these deals. When exporters concluded deals for business with Iraq, they were required to deposit 10 per cent of the value of the contract with an Iraqi bank.
In an attempt to help these businesses, government officials and representatives of business associations held a number of meetings recently to assess losses and chart a way out of this crisis.
Last week, the Federation of Egyptian Industries (FEI) met with representatives of more than 40 Egyptian companies which had been dealing with Iraq. Khaled Abdel-Azim, FEI deputy director-general, said the FEI had decided to prepare a comprehensive list -- which would include the names of companies and losses incurred under contracts concluded within the framework of the UN "Food for Oil Agreement".
According to Abdel-Azim, this information will be delivered to the UN via the Egyptian Ministry of Foreign Affairs to establish the rights of Egyptian businesses. Minister of Foreign Trade Youssef Boutros-Ghali, and Minister of Public Enterprise Mukhtar Khattab recently held a meeting with exporters to discuss this problem. The ministers promised negotiations will be held with UN officials to guarantee the rights of Egyptian exporters. However, previous experience has made exporters pessimistic about the outcome of these talks.
"We still remember what happened in 1991," said Helal Sheta, deputy chairman of the Exporters Division at the Federation of Egyptian Chambers of Commerce.
"Egyptian businesses incurred great losses as a result of the Gulf War [of 1990-91], and though they presented the UN lots of documents to prove their financial rights, they did not receive any of them until today."
"What makes it more difficult this time is that no one knows who will be responsible for paying this compensation if the UN is deprived of its role in supervising Iraq's oil revenues," Sheta added.
Sheta said the only chance for easing the suffering of Egyptian companies was for them to regain trade relations with Iraq, "particularly since it is not easy for them to find new markets for their products".
But while the companies which used to export to Iraq are waiting to regain their market share in Iraq, governmental efforts are being exerted to help construction companies participate in reconstruction projects.
In a press conference held last week, Fayza Abul-Naga, minister of state for foreign affairs and international cooperation, said that negotiations are currently being held between Japanese and Egyptian officials on how Egyptian construction companies might participate with Japanese companies in Iraqi reconstruction projects.
Moreover, Abul-Naga explained that Egyptian construction companies have a good working knowledge of the Iraqi private sector and market, making them attractive partners for Japanese construction companies which have secured contracts in Iraq.
Although the most lucrative infrastructure contracts have already been awarded to American firms, Egyptian companies have not given up hope of securing some business as subcontractors and suppliers. Abdel-Azim said that the Contractors Union, in cooperation with the division of construction materials at the FEI, have prepared a list of Egyptian companies that have useful experience in this sector. Moreover, representatives of this sector are planning to visit the US to discuss the possibility of securing contracts as suppliers of materials needed for reconstruction.
