Saturday,21 April, 2018
Current issue | Issue 1339, (6 - 12 April 2017)
Saturday,21 April, 2018
Issue 1339, (6 - 12 April 2017)

Ahram Weekly

The business connection

The economy figured strongly on the president’s visit to the US this week

Al-Sisi during his meetings with the heads of the American Chamber of Commerce and the World Bank

It was a busy five days for President Abdel-Fattah Al-Sisi and his accompanying delegation while in Washington this week. Besides the meeting with US President Donald Trump on Monday, Al-Sisi and ministers from Egypt’s economy group sat down with the heads of international financial institutions such as the World Bank as well as top executives from major US companies.

President Trump “wants to increase the focus on economic and commercial cooperation in our bilateral relationship”, one senior US administration official told journalists during a background press briefing ahead of the visit. “Building a more stable and productive economy is a critical step to ensuring long-term stability in Egypt.”

A delegation of Egyptian businessmen accompanied Al-Sisi to the US. “We were there to support the president,” Anis Aclimandos, president of the American Chamber of Commerce in Egypt and a member of the delegation, told Al-Ahram Weekly.

He said the meeting with Trump would regenerate Egyptian-US relations after a period of tepidity during the former Obama administration.

Much of the conversation during the president’s meetings in Washington revolved around reforms adopted by the Egyptian government over the past six months to tighten the budget deficit and jump-start the economy. The reforms are supported by a three-year $12 billion loan from the International Monetary Fund (IMF) as well as other international financial institutions such as the World Bank and other bilateral donors.

The government is now seeking to attract other much-needed investment by improving the business environment and passing investment-related legislation.

Al-Sisi reiterated Egypt’s commitment to reform to World Bank President Jim Yong Kim while seeking to strengthen and broaden social security networks. Egypt has received the second tranche of a $3 billion World Bank loan, and talks are underway for the disbursement of the third and final tranche.

The role of the private sector in promoting growth and creating jobs was also discussed. The government is keen to see a greater role for the private sector in economic development, Sahar Nasr, minister of investment and international cooperation, said on television in Washington.

The team of economy ministers took the opportunity of the visit to invite US investment to Egypt. Finance Minister Amr Al-Garhi said on television that Egypt was doing its best to attract investment. “The Egyptian team took the opportunity to talk to US investors about what they needed,” he said, adding that the government was facilitating procedures and providing quick problem-solving and responses.

“Stability comes from growth, which in turn needs investment,” Nasr said, adding that a new legislative framework for a more attractive investment environment was being finalised.

Aclimandos was optimistic about the prospects of increased US investment in Egypt, due to what the country could offer US businesses. Unlike within the North American Free Trade Agreement (NAFTA), where Trump fears US businesses are moving jobs abroad, Egypt can offer US businesses opportunities to increase their sales in markets which have not been traditionally accessible.

US businesses can capitalise on Egypt’s trade agreements with multiple trade blocs, such as the European Union or the Common Market for Eastern and Southern Africa (COMESA), which would allow US products tariff-free access, he pointed out.

Al-Sisi during his meetings with the heads of the American Chamber of Commerce and the World Bank

“Trump is a man of deals. If there is an interest for US businesses, he will encourage it,” he said.

The input by the private sector during such visits is important, Akrum Bastawi, an international trade specialist, told the Weekly. “These business-to-business and business-to-government dialogues have been the building blocks that shape the intricacies of Washington’s posture towards Egypt for years, even if the larger contours are driven by geopolitical and regional security considerations,” he said.

Their importance stemmed from the fact that such visits were an opportunity for second, third and fourth layers of policy-making in Washington, especially for Congressional staffers on Capitol Hill, as well as senior and mid-level aides at the White House and key government agencies, to discuss details of developments in Egypt affecting US interests and vice versa, Bastawi said.

Their format was typically less formal than those taking place between government officials, allowing for the forging of informal networks that have proven useful at moments of tension or unexpected political change.

With the Trump administration Egyptian businesses needed to highlight how US businesses in various localities could benefit from trade with Egypt, Bastawi said. A sophisticated approach would try to focus on identifying those US businesses that benefited from trade with Egypt and that were in voting precincts where Trump outperformed his Democratic Party rival Hillary Clinton in last year’s elections.

“US firms in those geographies will have disproportionately louder voices in the White House and in Congress over the next four years,” Bastawi said, adding that “it would very much be in Egypt’s interest to have those voices in its corner during US-Egypt trade discussions.”

Nonetheless, Bastawi believes that a Trump administration that is still in its political infancy will not be able to make serious economic overtures towards Egypt in its first year.

In 2015, total trading volume between Egypt and the US reached $6.3 billion, including $1.4 billion in Egyptian exports to the US, according to the Egyptian Embassy in Washington. Meanwhile, US investments in Egypt totalled $21.3 billion in the same year, representing 33.2 per cent of US investment in Africa.

The figures were around 50 to 60 per cent of previous highs over the past decade, Bastawi said. “Egypt remains a net importer from the US and is incapable of creating a policy mix to quickly change that trend any time soon,” he said.

A key shift in US policy towards Egypt under Trump would most likely be a more heavy-handed approach towards international trade rules enforcement, he added. This could include bilateral trade-related investigations taking place on issues such as intellectual property rights, technical barriers to trade and various customs tariffs and procedures.

However, at least in the early stages of the Trump administration, Egypt would likely not be singled out for excessive enforcement on the global stage, even if it would probably be targeted privately through bilateral pressure. “The Egyptian market is, after all, very small by American standards. Marginal potential gains to be made by US firms are not likely to outweigh the value of keeping Egypt constructively engaged in the new US approach to Arab-Israeli peace-making,” Bastawi said.

As for the future of US assistance to Egypt, Bastawi suggested that Egyptian officials must consider it a successful outcome if they simply maintain the status quo, given that the Trump administration is planning to significantly slash the US global aid budget and may get at least some of the proposed cuts through Congress this year.

“In the absence of a major Arab-Israeli peace development in which Egypt plays an unexpected role, US aid to Egypt will likely decline, at least somewhat, during Trump’s tenure,” he said.

Egypt currently receives $1.3 billion in US military assistance and around $150 million in economic and development assistance per year.

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