CAIRO: Minister of Foreign Trade and Industry Rachid Mohamed Rachid signed a free trade agreement Tuesday with Turkish Minister of State Kursad Tuzmen.
The agreement will take effect upon ratification by the Turkish and Egyptian parliaments, at which point the Turkish market will immediately become free of duties to Egyptian businesses for most products. Certain exceptions have been made for agricultural goods, for which tariffs of 32 to 45 percent will apply.
Egyptian duties and trade restrictions on Turkish products will be eliminated in four stages over a period of 16 years. The first stage includes raw materials and machinery, followed by intermediary goods, then finished goods and finally other products including luxury vehicles.
The agreement allows for cumulation of origin,whereby inputs from different countries may be used without losing the preferential trade treatment for the finished product.
“It means that a factory in Egypt can import inputs from Turkey, explained Rachid,”incorporate these into its own products and export these duty-free to Europe under Egypt s Partnership Agreement with the EU. The same applies to Turkish companies and this will create all-important avenues for cross-investment.
The agreement also incorporates anti-dumping measures and safeguards to protect Egypt from a sudden surge in Turkish imports, upon which Egypt may introduce certain trade restrictions in line with World Trade Organization rules.
“Turkish investors have been waiting for a free trade agreement in order to invest in Egyptian factories that will export to Africa, said Metin Turan, secretary-general of the Turkish-Egyptian Businessmen Association. Egypt benefits in this regard from its free trade arrangement with the Common Market for Eastern and Southern Africa.
Turan added that Turkey currently imports a number of goods from Europe – such as petrochemicals – that may now be procured from Egypt at a lower cost as a result of the agreement.This is further justified by the relative proximity of the two countries.
Speaking at a press conference prior to the signing, Rachid and Tuzmen said that they expected trade between the two countries to triple to $3 billion during the initial stages.
“We have already experienced a surge in trade and investment in anticipation of this agreement, said Rachid.
Tuzmen anticipates Turkish investment in Egypt to increase from approximately $600 million to $2 billion, although no timeframe was given for this increase. Such investments are expected to go mainly towards textile factories.
The agreement supports the Barcelona Process,which seeks to make the Euro-Mediterranean region a free trade area by 2010. Turkey has already signed similar agreements with five other countries in the region – namely Israel, Jordan, Syria, Tunisia and Morocco – as well as the European Union.
Discussions on a free trade agreement between Egypt and Turkey began in 1998, followed by six rounds of bilateral negotiations. When Rachid took office, the negotiations gathered momentum and the deadline was set for the end of 2005.
Details of the agreement are not yet clear to some in the business community.
Cumhur Kaur, deputy project manager of TAV Cairo, said that while the agreement will mainly benefit businesses by reducing tariffs on imported materials, it is unclear if exemptions for visa procedures will be provided to Turkish businesses in order to bring Turkish workers into Egypt. Nevertheless, Kaur said that the agreement “will facilitate closer commercial relationship between the two countries.
TAV Cairo, a subsidiary of the Turkish company Akfen Holding A.S., is in the process of building a third terminal at Cairo International Airport worth $350 million.
Turkey is Egypt s sixthlargest trading partner with total trade between the two countries expected to reach $1 billion this year, representing approximately 3.3 percent of Egypt s global imports and exports.