The Egyptian-Russian Business Council was recently launched, marking the efforts of both governments to increase bilateral economic ties. Daily News Egypt sat down with the council’s Secretary General Alaa Ezz.
Ezz, who is also Secretary General of the Federation of Egyptian Chambers of Commerce (FEDCOC), discussed the measures taken by both sides to increase their bilateral trade along with future projects that will be discussed during the Russian business delegation’s visit to Egypt.
What was the purpose of your recent visit to Russia?
Basically, we are focusing on all our investment partners as complete blocks, whether we are talking about the European Union (EU), Russia, China or the US, to promote trade and investment. We are focusing on two key issues. The first is the post-Sharm El-Sheikh issues, as we are promoting the projects that were launched in Sharm El-Sheikh.In parallel, we are promoting two key elements; the first is subcontracting, which is bringing companies that are looking at local manufacturing with low risk involvements, which means they use Egyptian factories, upgrade them and provide them with technology, market access and quality control and use Egypt as a manufacturing hub for the region. As a second step, they would probably [set up] green field investments. The second thing that we are promoting in the context is that Egypt is no longer a 90 million consumer market. Egypt is a 1.6 billion consumer market, based on our free trade agreements.
Discussing Moscow, we have two main issues in this context. First, we are capitalising on the four past summits that are increasing political relations. In our opinion, as the federation of chambers, political relations are a very good vehicle to promote economic relations. However, they are not the key issue. There should be economic benefits. Secondly, we were working on having 120 company delegation come to Egypt. Here, we are not talking about companies, we are talking about holding companies so each one has tens of subsidiary companies in different sectors. They are all looking at doing business in Egypt. Part of the last visit I had was to do the presentation about doing business in Egypt so that they’d become aware of what they will be coming into, and the second thing was discussing the logistics of that delegation. The delegation is headed by Russia’s Ministry of Industry and Trade, and it includes about 70-80 government officials. We will discuss the ease of doing business between those two countries. At the moment 84% of our exports to Russia is agri-foods, which is growing, but it can grow faster if we make life simpler for exporters.
Did some Russian investors show interest while attending last March’s Economic Summit? Did they promise any investments?
I don’t use the word “promise” with business. Governments promise, but businesses see the opportunity and jump to it to make profits. There are no promises there. Actually, our work is to make their entry into the Egyptian market simple and easy. Several of the companies that were here [during the Economic Summit] are going into key businesses. There have been three focuses for them. The first is the Suez Canal corridor and they are waiting for the launch of the master plan and the specific projects it will entail. The second is the Damietta megaproject. Russia is one of the key exporters of grains, and Egypt is the number one importer of grains in the world. If you look at the Damietta project, it’s based at the tip of the Nile, where the project includes storage, manufacturing and a river port, and the aim is that Egypt becomes a hub for the region. Russia has a problem where the ports are frozen for three months a year, so practically storing their grain in a location more proximal to the market will be a win-win opportunity for both sides. The third group is manufacturing. At the moment, you have hundreds of factories that were built using soviet technology, and upgrading these factories is again a win-win opportunity for both sides, where Russia can provide the technology, equipment, machinery and market access. A simple example is the steel factory in Helwan and the aluminium Nag Hammadi complex.
What we are doing with this huge delegation that is coming is that during the first day there will be grass hopping between different ministries, and in the evening we are inaugurating the event. During the second day, we have an inauguration followed by two key parallel sessions, where one of them will show the sources of finances coming from Russia and the investment opportunities that both sides are proposing. Then we’ll break into five parallel sessions followed by another five parallel sessions. One of the sectors to be discussed is the manufacturing of civilian airplanes, with another sector being heavy equipment that we need for both the huge construction going into Egypt and agriculture. Most of these products are trade sensitive and have a high transportation cost. There are high customs. There are so many sectors that we are covering. There will be a small airplane show for the civilian jets that will be manufactured in Egypt, which will be the last thing on the last day.
Regarding manufacturing civilian airplanes, when can we expect such project to be launched?
Let’s be realistic. First we need the agreement between the local factories and the companies, and these negotiations normally take about six months. By the time they do the feasibility studies for which airplanes should be manufactures, they are looking at manufacturing small jets for CEOs and companies. The Egyptian market is promising in that sector, and there is potential within the Gulf. People are looking at renting planes instead of buying them. There is full support from both governments. There are sufficient sources of finance to get the job moving.
Where will the finances come from?
We are looking at three sources of finance. Russia is coming in with the investment promotion fund. The companies themselves are coming in as investors. You also have the local partners with the local banks. You also have the multilaterals, like the IFC and the European Investment Bank. Any company established on Egyptian soil becomes an Egyptian company, so it’s eligible to all sources of finance.
We’ve discussed that the majority of products exported to Russia are agri-foods. Why is that?
About 40% of the food products coming to Russia were from the EU. What happened was that due to the trade boycott on Russia from the US and EU, the trade is both ways imports and exports. This was a window for proximal countries that are relevantly competitive: Egypt, Turkey and Tunisia. We immediately jumped in with a delegation of 200 companies and we started promoting Egyptian products. At the moment, trade, investment and tourism with Russia have doubled over the past four years.
What about the export to Russia before and after the boycott?
They have almost doubled. Let’s not forget that Russia is the number one source of tourism, even with the drop of the Rouble. If you look at trading goods, the trade balance is in the benefit of Russia, but if you look at the trade and services there is a counterbalance. That’s why we deal together with local currency. It is a very complicated thing that is being studied in the moment, so we can balance and offset each other.
Will this be discussed during the delegation’s visit to Egypt?
No, this will be discussed during the joint commission, which will be held sometime in the near future.
What about the procedures taken to increase exports other than agri-foods?
We are looking at two ways to increase our trade. One was is that we are trying to diversifying exports. We identified several sectors, such as the ready-wear garments. We are studying increasing the importing of timber and manufacturing it in Egypt and then sending it back. There are a lot of chemical products that Egypt is competitive in. More importantly, we are looking into third country cooperation. Russia exports to us components that we can manufacture in Egypt then export to a third country. This will increase the level of exports for both countries, but not reflect on their joint trade balance.
What is the volume of Russian investments in Egypt?
Russian investments in Egypt are low, about $56m. After this delegation, we hope to add a zero or more to this figure.