CAIRO: As global trade representatives met head-on in Hong Kong to negotiate the reduction of tariffs and agricultural subsidies, Minister of Investment Mahmoud Mohieddin and Deutsche Bank Chief Economist Norbert Walter presented their views on whether Egypt can prosper in the world trade blocs of Europe, Asia and America.
Speaking at a conference on Sunday organized by the American Chamber of Commerce in Egypt,Walter set out what he regards as the four pillars of economic growth in Egypt: demography, investment, environment and openness.
Egypt benefits in demographic terms from a relatively young population compared to Europe.The median age – which divides the population into two equal-sized groups, is 24 in Egypt, 18 years younger than Germany and Italy.
Walter said that the energy of Egypt s young society should be harnessed to work together with Europe in such areas as the exchange of students and teachers.
With the retirement of some key players and recent failures on the global trade front, Egypt has lost its momentum in negotiating multilateral trade agreements through such entities as the World Trade Organization (WTO).
As a result, bilateral relations with key trade blocs, including the United States, Europe, China and Japan, have gained importance.Walter argued that Europe, not the U.S., is Egypt s key trade partner and that Egypt should pick one European country to sponsor its bilateral trade negotiations with Europe.
Meanwhile, the government has dedicated substantial effort to pursuing a free trade agreement with the U.S. Despite years of discussions, the U.S. government has yet to take the necessary steps to begin the official negotiation process for free trade with Egypt.
Over the past few years, capitalization growth and stock market liquidity have resulted in a lowered cost of risk capital as well as boosting foreign direct investment.
The economy has also generally experienced an accelerated increase in output, with the gross domestic product rising in real terms by 5 percent during the first quarter of this fiscal year. Walter stressed, however, that economic growth should not be generated at the expense of the environment.
In terms of openness,Walter emphasized the potential role of women in the economy, particularly in the field of services which he believes is instrumental.
Mohieddin, while agreeing with many of Walter s views, said Egypt has been a victim of its geographic location and the historical failures of its socialist policies. Opening up trade is not enough; he stresses that it needs to be complemented by institutional and social reform as well as the enforcement of the rule of law to improve the standard of living.
Although Egypt has reduced its tariffs below WTO requirements, inefficiencies in the ports and transport systems remain a fundamental bottleneck to increasing foreign trade.
The topic of the conference was timely in light of the ongoing WTO ministerial meeting in Hong Kong.After six days of intensive negotiations, a draft declaration on agricultural subsidies was agreed to on Sunday by all 149 member countries.
The declaration includes the removal of export subsidies on cotton by developed countries before the end of 2006, along with comprehensive elimination of other agricultural export subsidies by the conditional deadline of 2013. Member countries have also committed to work to reduce domestic subsidies on cotton production that distort free trade.
In addition, cotton from the least developed countries will be exempt from all duties and quotas in developed countries.
Cotton cultivation and the associated textile industry employ over one million Egyptians and generate approximately $1.25 billion in export revenues.
Egypt is part of a group of 20 developing countries known as the G20 which negotiates collectively on agricultural issues at the WTO.The group was formed during the WTO meeting in Cancun two years ago and includes China, India and Brazil.
Negotiations on the elimination of agricultural subsidies had faced significant opposition from the European Union, which spends close to half its budget on farm subsidies.