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Egyptian-Turkish Economic Relations: A Promising Future

By Mohamed El Agamy

Turkish investments in Egypt expected to reach USD 3.5 billion and the trade exchange USD 5 billion
Egyptian-Turkish relations have made great progress after the visit of the Turkish Prime Minister, Recep Tayyip Erdogan, to Egypt. According to official figures, the volume of trade exchange between both countries exceeded USD 3 billion and the volume of Turkish investments in Egypt reached USD 1.5 billion. The economic relations are expected to witness another "push" after the Arab-Turkish Industrial Cooperation Conference to be held in December this year in Turkey, under the auspices of the Turkish Prime Minister and the League of Arab States . This raises a number of questions about the nature of the economic relations between Egypt and Turkey: what about the future of these relations and the efforts made during the previous phase?

Investment Volume

Mr. Adel Lamei, Chairman of the Egyptian Side of the Egyptian-Turkish Business Council, believes that the future of the relations between Egypt and Turkey is proved by the numbers, which rose dramatically during the past period, especially after the signing of the Free Trade Agreement in 2005. This Agreement had led to the increase of Turkish investments in Egypt, reaching USD 1.6 billion, and an increase in the trade exchange between both countries reaching USD 3.25 billion, while the trade surplus is in favor of Turkey. Lamei expects a high volume of trade exchange between both countries, up to USD 5 billion by 2012, and a high volume of Turkish investments in Egypt of USD 2.5 billion, particularly in light of the great similarity between Egypt and Turkey in the number of population, area and transport means. This will result into an economic partnership between the two, indicating that this requires the Egyptian and Turkish governments to remove all obstacles faced by the investors, especially after both governments have facilitated the visa procedures for businessmen; therefore, the visa currently does not need more than 48 hours to be issued.

He added that the Arab-Turkish Industrial Cooperation Council will be held on December 6 and 7, in the presence of the Arab and Turkish Ministers of Trade and Industry, under the auspices of the Turkish Prime Minister and in cooperation with the League of Arab States , in order to discuss the contracting sector, tourism, transport and others. A Coordination and Follow-up Unit was formed by the representatives of the Committee on Construction and Real Estate Investment and the Egyptian Federation Construction and Building Contractors, led by Eng. Hassan Abdel Aziz, President of the Egyptian Contractors Association and the Consulting Engineers Forum. This Unit will be headed by Dr. Amr Ezzat Salama, and its mission is to prepare and coordinate the cooperation with the Turkish side in joint projects covering the construction, building and contracting fields. This Committee will examine the projects suggested by both sides during the twelfth session of the Egyptian-Turkish Business Council.

Lamei added that cooperation with Turkey is based on three axes including the cooperation in the field of transport and logistics; taking advantage of the same to enter other markets through the connection of the Mediterranean ports to the African ports and the logistic areas in coordination with the Egyptian and Turkish Ministries of Transport; in addition to the cooperation with the small and medium enterprises, and the transfer of the Turkish experience.

Relationship Roots

According to the study of Egypt State Information Service, economy was the key that opened the door to the solid relationships between Egypt and Turkey: Necmettin Erbakan, leader of the Islamic Welfare Party, visited Egypt in October 1996 in order to form an Islamic economic group with the membership of Egypt. Egypt agreed and the first summit of the Group of Eight Developing Islamic Countries (D-8) (Egypt, Turkey, Pakistan, Iran, Nigeria, Bangladesh, Malaysia and Indonesia) was held in Istanbul in June 1997. The study indicates that several trade exchange agreements were signed between Egypt and Turkey, namely the trade agreement in 1976, renewed in 1994, followed by a number of agreements to enhance the commercial relations during the last four years, which increased the volume of economic exchange. Given the similarity between Egypt and Turkey in many conditions and characteristics, they had the common idea to develop the economic relations between them, which resulted into a significant growth in all exports and imports from 1983 to 1992, and consequently an increase in the trade exchange between both countries. In 1996, Turkey's exports to Egypt reached USD 314 million and Egypt's exports increased by around 300%. The Egyptian exports include crude oil, rice, cotton, coal, aluminum, glass sand and quartz, and the Turkish exports include clothes, soap, food and cement. In 1995, the volume of Turkish investments in Egypt reached USD 4.6 million, compared to the Egyptian investments in Turkey that reached USD 1.6 million.

Cooperation Steps

The Egyptian-Turkish Business Council was established to operate in the trading and economic fields and support cooperation between both countries. The members of this Council focus on the cooperation in contracting and tourism, by building tourist villages and signing a memorandum of understanding for the export of liquefied natural gas to Turkey. The joint Egyptian-Turkish Committee holds periodic meetings in order to discuss spending and support of the establishment of joint ventures between the private sectors of both countries. It also plays a major role in the increasing mutual cooperation in the fields of agriculture, industry, housing and drugs. Four agreements were signed covering several fields, namely: the protection and encouragement of investments, the support of trading and economic relations between both countries, the recognition and execution of judgments, and the effectiveness of cooperation in all fields, pushing the trade exchange between both countries to reach USD 2 billion before the end of 2000.

According to the same study, in November 1996, an Egyptian-Turkish memorandum of understanding was signed for the export of Egyptian gas through a pipeline from Port Said to El Arish in the Mediterranean Sea, up to Iskenderun in southeast Turkey. In 2006, the Board of Directors of the Free Trade Zone at Port Said approved the establishment of an Egyptian-Turkish joint venture as an Egyptian shareholding company (50% of the capital paid by Egypt and 50% by Turkey). This company's objective was the textile industry, dyeing, printing and processing, with 300 Egyptian workers and 15 foreigners. Two million square meters were allocated for the creation of a Turkish industrial zone in 6^th of October City, in order to promote the investments between both countries. President Abdullah Gul has laid the basis of this zone during his visit to Egypt in early 2008. The zone includes around 400 factories and it aims at attracting a large number of Turkish companies to invest in Egypt, especially in the clothing and textiles sector and to export all their productions to European, African and US markets.

Trade Exchange

According to the Egyptian Ministry of Industry, the volume of trade exchange exceeded USD 3 billion in 2010, compared to around USD 2.3 billion in 2008; in addition to the increase of the trade volume during the first seven months of 2011 by around 16% over the same period of 2010; further, the value of Egyptian exports increased by 53% during the same period.

The volume of Turkish investments in Egypt reached USD 1.5 billion in the textiles, food industries, pharmaceutical and chemical services and industries, mining and tourism. The trade exchange between both countries reached USD 1,886 million during the first half of 2011, USD 702 million of which are exports and USD 1,184 million imports. From January to August 2009, the trade exchange amounted to USD 2,396 million, while the Egyptian exports to Turkey were of USD 403 million from January to August 2008 and the Egyptian imports from Turkey USD 1,993 million.

Great Boom

Relations between Egypt and Turkey will experience a great boom in the coming period, after the visit of the Turkish President to Egypt last month, as confirmed by Mohammad Aglan, head of Construction Committee at the Egyptian Young Businessmen Association, who stressed that this boom depends on the restoration of internal stability in Egypt. He added that the businessmen shall play a major role in driving the growth and prosperity of the relations between both countries and this will be achieved, along with an economically special relationship with all countries. In case the current conditions do not help, it is certain that these conditions will change in the near future.

© Zawya 2011