No piece of pizza pie
Despite the growing cooperation between Italy and Egypt, a number of obstacles need to be removed for this relationship to achieve its full potential, as Sherine Nasr finds out
Bilateral relations between Egypt and Italy have been growing steadily in almost every field of cooperation. The recent trends in Egyptian-Italian trade relations reflect not only successful and large commercial activities but also balanced trade relations. Italy ranks as Egypt's second largest trading partner in Europe.
According to Nicoletta Bombardiere, head of the Commercial Department at the Italian Embassy in Cairo, the volume of bilateral trade between both countries in 2002 was EU2.3 billion. "It is interesting to note that this volume of trade is not only large but has always been balanced compared to Egypt's balance of trade with other European countries such as Britain and Germany," she commented.
Oil comes at the top of Egypt's exports to Italy, with an estimated value of EU630 million in 2002. However, over the last few years, Italy has been absorbing a steadily increasing inflow of non-energy products, particularly fresh produce and processed food products. "The value of these imports to Italy has increased from EU310 million in 1999 to EU500 million last year," said Bombardiere.
On the other hand, Italian machinery occupies a prominent place in the list of Italian exports to Egypt. Although in 2002 exports of industrial machinery from Italy fell by 26 per cent, it quickly recovered to increase by 40 per cent in 2003. "This reflects a tendency among Egyptian manufacturers to invest in upgrading their productive units," said Bombardiere, adding that Italian machinery is particularly compatible to Egyptian technology.
In other areas of economic cooperation, Italy has been very active in the Egyptian market. According to the latest statistics released by the General Authority for Free Zones and Investment (GAFI) on the foreign direct investment (FDI) in Egypt, excluding oil and tourism, the EU is the main investor in Egypt, its investment making up more than 30 per cent of total FDI. Italy is considered the third largest investor, following the United Kingdom and Holland with $200 million stock in capital companies. Seventy per cent of Italian investments are in the industry sector while the rest fall into other sectors such as agriculture, finance, services, infrastructure and tourism.
"There are 100 Italian companies operating in Egypt. We are doing our best to convince Italian businessmen that Egypt is a promising market in which to invest," said Antonio Badini, the Italian ambassador in Egypt. It is worth noting that the number of joint ventures is also increasing, particularly in the field of steel manufacturing and chemical additives.
In 2002, two Italian companies were awarded the contract for a 15 year project to build two major solid waste management plants in Cairo and Giza. In the meantime, a pilot project between both governments has recently been launched to introduce the "concept of traceability" in the field of food products. "This is one crucial step that has to be taken by Egypt in order to ensure that the country's food produce enter the EU markets," said Badini. The project is sponsored by the United Nations Industrial Development Organisation (UNIDO) and is scheduled for completion by 2005.
In a serious attempt to increase Egypt's non- oil exports to Europe, both governments signed a joint declaration in 2002 to adopt the "Green Corridor" initiative to promote the Egyptian agricultural exports to Europe, especially non-competitive and out of season products. "Through the initiative, Italy will act as the platform to distribute Egyptian agricultural products to all European markets," said Badini.
Moreover, Italy has been providing technical support in the form of technology centres to upgrade wood work, leather products, fashion and marble industries. "We are looking forward to have a more solid presence in these areas. Italy will provide the know-how, while Egypt will make a better use of its resources and cheap manpower. The initiative will not only help Egypt improve its products in these fields but will also provide vocational training and new employment opportunities to a good number of people," she said.
Although Italian businesses in Egypt are a success story, many obstacles are still in the way of more fruitful cooperation between the business sectors of the two Mediterranean countries. Many Italian businesses in Egypt, for example, complained of the haphazard fashion in which the sales tax is being imposed in Egypt. "The law is clear, but the application of the law by the sales tax inspectors is arbitrary," argued Giancarlo Cifarelli, general manager of a construction services company.
Cifarelli claimed that his company, which has LE2 million in capital, was charged LE4 million in sales taxes, a figure which was later reduced to LE952 after a long series of disputes. "However, we can not ignore the fact that our office was turned upside-down for the past nine months before a settlement was achieved," he said.
Italian businessmen argue that although Egypt has completed substantial reforms towards becoming a more market-oriented economy, more improvements have to be introduced to encourage the presence of foreign medium-sized companies. "There are other areas where an action is needed to upgrade the business environment," said Bombardiere, explaining that the fiscal and customs systems sorely need comprehensive reform. Other areas include an effective and fast mechanism of dispute resolution, stability in the exchange rate and currency market, a law on competition and a need to reduce the red tape in setting up new businesses.
"It is crucial for Egypt to create a more friendly business environment so as to attract more investments and encourage new forms of cooperation," concluded Bombardiere.
