May 03 2012
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Now that there is a political rift between Riyadh and Cairo, Sherine Abdel-Razek finds out how deep the two countries' economic ties are
Meanwhile, more than 1.5 million Egyptians work in Saudi Arabia, and their remittances represent half the value of all that Egyptian expats the world over send home.
The overall value of Saudi investments in Egypt amounts to $45 billion, while trade between the two countries adds up to $10 billion. Out of all the Arabs, Saudis are the biggest investors in the local stock market, and the most frequent visitors to Egypt's tourist destinations. Just under a week ago, a Saudi delegation visited Egypt to discuss ways to extend financial aid that planning and international cooperation Minister Faiza Abul-Naga said would include a $1 billion deposit and $750 million to buy treasury bonds.
But relations have been tense ever since the revolution began. Many Egyptian commentators have blamed Saudi cultural influence for the surge of radical Salafi Islamist thought, a trend that plays an important role in Egypt's political arena today. Some say that Saudi Arabia had its reservations against ousting former president Hosni Mubarak, a friend of the Saudi royal family, and that it had fears the public would export revolution to their territory.
While some observers expect the much-needed assistance to be halted now, Egyptian officials seems confident it will not. "It will arrive for sure," Egypt's Central Bank Governor Farouk El-Okdah was quoted by Bloomberg news agency as saying earlier this week, without elaborating. "This has been agreed on between the two countries."
Egypt needs financial aid after last year's uprising stressed the economy, cutting economic growth and reducing foreign investment and tourism, the country's two top sources of foreign exchange. A $3.2 billion International Monetary Fund (IMF) loan has yet to be delivered, with the organisation insisting that Egyptian officials secure broad political support for the move before the aid is approved.
Relations were also shaken by a series of decisions implemented after the revolution, with many Saudi-financed projects and lands being nationalised and confiscated. Abdallah Dahlan, head of the Saudi-Egyptian Business Council said these moves paralysed 20 Saudi projects, with overall investments of around $4 billion.
Noubaria Seed Production, Tanta Flaxseeds and Oil, and Omar Effendi are three examples of companies with Saudi investments that were nationalised over the past year, following claims of corruption in its sales or unfair pricing.
Dahlan stressed that these cases did not contribute to the tension that caused the embassy closure. Just a couple of days before El-Gizawi's arrest, Al-Masry Al-Youm newspaper reported that the Egyptian government was holding secret meetings with Saudi investors whose businesses were nationalised after the 25 January Revolution, in order to solve their problems.
While no public statement has so far been made about Saudi investors withdrawing their investments, a quick look at the foreign direct investment (FDI) figures during the first quarter of the year shows that investments from the kingdom stood at $20 million, compared to $112 million in the first quarter of 2011.
As for the stock market, with Saudis representing the biggest Arab investors, some believe that the market might face sudden sell-offs. But so far, there has been no indication of this, in spite of the recall of the Saudi ambassador. According to deputy head of the stock market, Saudis invested $1.7 billion in Egyptian stocks in the first three months of the year, representing almost nine per cent of overall market transactions through the period.
Hundreds of thousands of Egyptians visit Saudi Arabia each year for hajj -- the pilgrimage Muslims make as mandated by one of the five pillars of Islam -- or for the small pilgrimage omra. Many Egyptian tourism companies depend largely on this form of travel for their income.
"We cannot yet estimate the overall losses of tourism companies. They already made downpayments for hotel and airline reservations, and in case of cancellations because we cannot get the necessary visas, the tourism companies will bear all the losses," said Khaled El-Manawi, head of the tourism company chamber in the Egyptian Chambers of Commerce Union. The Saudi authorities stopped providing visas to Egyptians earlier this week.
El-Manawi said that while the current period is not considered a high season for the visits to the holy mosques in Saudi Arabia, this year the demand is relatively high. Visits to Mecca have increased over the past year, thus inflating potential losses.
If the problem persists, according to El-Manawi, it will be the Egyptian side that suffers more. Each year 80,000 Egyptians perform hajj, and up to 600,000 perform omra. Saudi Arabia can very easily replace them with visitors of other nationalities, but Egyptian tourism companies will not likely find a substitute for the demand and revenues on those visits.
While Egypt is trying to attract more Arab tourists to support its faltering tourism industry, the number of Saudis visiting Egypt might decline. This is not because the Saudi authorities might prevent them from travelling to Egypt, "but it is a psychological thing, no one will feel at ease with going on tourism to a country that has tense political relations with his country," said Dahlan.
"Saudi Arabia is an important market for us. Over 46,734 Saudi tourists visited Egypt during the last four months. Last year, during the same period we received only 32,718 tourists from KSA," Minister of Tourism Mounir Fakhri Abdel-Nour told reporters on Monday.
Furthermore, the number of nights Saudi tourists spent in Egypt is about 806,000, compared to approximately 460,000 nights in the first quarter of 2011, which again shows an increase of 75 per cent. Records show that the number of Arab tourists who visited Egypt during the four months is 483,834 tourists.
© Al Ahram Weekly 2012
© Copyright Zawya. All Rights Reserved.
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