Egypt’s exports to South Korea hiked by 156%, reaching $766m by the end of July, compared to the same period last year, according to Sukho Lee — Director-General of the Korea Trade Investment Promotion Agency (KOTRA) in Egypt.
His remarks came during an interview with Daily News Egypt (DNE), which touched on the economic cooperation between the two countries in terms of trade and investments.
The KOTRA inaugurated its office in Cairo in 1974; in your opinion, what distinguished the economic relations between South Korea and Egypt?
Since it’s opening in 1974, the KOTRA in Cairo has been endeavouring to promote trade and investment between the two countries. However, formal diplomatic ties were established in 1995. In the early years, relations between South Korea and Egypt were not that active and limited to economic and political areas.
However, the nature of our relations have dramatically changed and deepened in recent years, culminating in the Korean president’s visit to Egypt in January of this year. Nowadays, Korea and Egypt are cooperating in many fields, such as the economy, culture, as well as defence.
During the South Korean president’s visit to Egypt, President Abdel Fattah Al-Sisi affirmed Egypt’s appreciation of its strong relations with South Korea, calling for the fostering of a comprehensive partnership between the two countries for the interests of their peoples.
Al-Sisi also noted that he and his South Korean counterpart agreed on the importance of bolstering cooperation in order to support an Egyptian vision designed to help the country “enter the era of the Fourth Industrial Revolution.”
Furthermore, the Egyptian president said that he agreed on the continuity of work by the joint committee co-chaired by the Ministers of Foreign Affairs of both countries to further enhance political, economic, and technical cooperation.
What do you think of Egypt’s investment climate and its economic performance; do you think that they are now developed?
I understand that the Egyptian government makes a significant effort to improve its business and investment environment. According to World Bank’s Ease of Doing Business Index 2020, Egypt ranked 114th out of 190 countries, comparing with previous year’s ranking of 120th.
In spite of the impact of the Covid-19 pandemic and fall out of Russia-Ukraine war, the GDP increased by 6.6% by the end of June this year
However, due to certain challenges such as difficulty in opening the L/C (Letter of credit) and remitting money to another country – even for Korean investors in Egypt —it has become difficult for some to import even parts and raw materials needed for the production.
So, I am afraid that these difficulties at the moment might deter potential companies from investing in Egypt.
What are the other main challenges or obstacles facing Korean investors in Egypt?
In recent years, Egypt’s business and living environment have somewhat improved. However, foreign investors still face some challenges, such as bureaucracy, sudden change of government policy without proper preparation period, slow work process, difficulties in obtaining work permits and language barriers, etc.
What are your recommendations to further improve the business climate in Egypt?
As any other country in the world, Egypt needs foreign investment to develop its economy. It is very important for the government to create investor-friendly environment to attract foreign investment.
A stable economy is imperative so that investors could make a long-term plan.
Proper incentives such as tax exemption or reduction, site provision and consultation should be tailored to the need of each investor.
It is also important to solve grievances for existing investors and this could lead to another new investment through the effect of words of mouth.
Changing the perspective of Egyptian people toward foreign businesses in Egypt is also important. The foreign companies doing business in Egypt are Egyptian companies not foreign companies. They hire local people and pay taxes just like any other Egyptian companies. They even can bring new technology and management skills to Egypt.
Could you give us a rough estimate on how many Korean investments are in Egypt?
Currently, about 33 Korean companies are operating in Egypt. During the first six months of this year, Korean investments in Egypt reached $12m. They are not new investments, but an expansion to long-standing investments in the country.
South Korean companies are keen on expanding their businesses in Egypt; for example, Samsung Electronics is continuing to expand its business, and potential investors are also interested in the Egyptian market.
However, due to recent circumstances on the domestic and global fronts, potential Korean investors are forced to delay their investments in Egypt.
What are promising sectors for Korean investors?
I wrote a column for one of the top Korean economic daily a few days ago.
The title of the column was ‘Three key words to enter the Egyptian market’
In the column, I emphasized three promising sectors: manufacturing, infra-structure and environment.
One of the priorities of the Egyptian government is to develop manufacturing sector. Egypt has a very comprehensive Free Trade Network with many countries such as EU, African continent and Turkey. Korean companies can use Egypt as a base for domestic and neighbouring countries.
Opportunities are abundant in the infra-structure projects such as construction of the New Administrative Capital, roads, ports, etc. It seems that the whole country is now development site.
Egypt is a host country for this year’s COP 27 which will be held in Sharm El Sheikh in November this year. The Egyptian government intends to be a leading country in the environmental issues. The promising sectors include renewable energy such as solar and wind power, water and sewage, waste treatment, electric cars and charging station and desalinization etc.
How does the South Korean private sector view Egypt’s Prime Minister’s latest announcements that Egypt intends to give more room for the private sector to operate?
The direction of the policy is well-founded and better for potential investors and will provide more opportunities for Korean investors. The private sector is viewed as more competitive than the public sector.
Having said that, the acquisition of the 5 of the largest Egyptian companies by Abu Dhabi Holding Company is a good signal that Egypt is open for the business.
How did the pandemic and the war impact Korean investments in Egypt?
Not only in Egypt, but there was a global disruption due to the pandemic. The COVID-19 pandemic presented Egypt with multiple challenges. The economic fallout from the pandemic was felt in the near standstill that occurred in tourism, a decline in domestic demand and exports, and unprecedented volatility in capital flows.
The crisis also stretched the government’s budget, as the economic slowdown impacted revenues and spending increased — particularly in health to support vulnerable people and businesses.
Regarding the war in Europe, the cost has been quite high. It caused high inflation, uncertainty, and disrupted normal economic activity, especially that Egypt was relying on Russia and Ukraine in its wheat supply.
These situations definitely affected the decision of potential Korean investors.
What about trade exchange between Egypt and Korea during the first seven months of 2022?
By the end of July 2022, Korean exports recorded $967m — a 2.8% increase from the same period last year. Meanwhile, Egyptian exports to South Korea reached $766m by the end of July — an increase of 156%, compared to the same period last year.
My forecast is that the trade volume between the two countries will exceed$2.5bn by the end of 2022, compared to 2021’s $2.3bn, and the trade balance by the end of the year will also be in Egypt’s favour, given that Korean companies are facing great difficulty in exporting products to Egyptian markets due to the import restrictions whereas Egyptian exports to Korea increased significantly.
What is the reason behind this huge increase?
I think it is because of the considerable rise of import of petroleum products and natural gas from Egypt. The rate of increase is 279% and 319%, respectively.
What about the latest developments around economic partnership agreements between Egypt and South Korea?
During the South Korean president’s visit to Egypt, the two counties signed a memorandum of understanding (MoU) to conduct a joint feasibility study for a trade and economic partnership.
This MoU is only the first step towards a full free trade agreement (FTA).
After the MoU, there were a few dialogues between the two sides to advance it, and they are still working on it.
I understand that it could take some time to see the implementation of the final agreement depending on the intention of the both countries.
Why will it take time to see the final agreement? Is it because of obstacles? Or is it just a time-consuming process?
Yes, the process itself takes time. The negotiation for the trade agreement is tedious and time consuming. The two countries need to find out the optimal point for the FTA. The agreement should be beneficial for both countries involved.
One of the obstacles for the agreement might be a difference in the industrial structure of the two countries. This results in the difference of export and import items.
South Korea exports to Egypt mainly, finished goods such as consumer electronics, cars and displays, whereas main import items from Egypt are natural resources such as petroleum product, natural gas and cereals, etc.
Has the KOTRA undertaken any preparations to send business missions to Egypt in the remainder of 2022?
Due to the pandemic, we carry out most of our trade missions online instead of off-line. We expect that this situation will continue until the end of this year.
One of the most important events the KOTRA in Cairo is the Egypt-Korea Infrastructure Development Seminar that ran from 30 August to 8 September.
The purpose of the event was to introduce the Egyptian infrastructure market and its projects to potential Korean construction and engineering companies interested in this sector.
What are the KOTRA’s plans in Egypt over the coming few years?
We are focusing on the manufacturing, infrastructure, and renewable and green energy sectors. We are also closely monitoring the Egyptian government’s policy priorities and business environment to ascertain promising opportunities for Korean companies.
1-The acquisition of the 5 of the largest Egyptian companies by Abu Dhabi Holding Company is a good signal that Egypt is open for the business.
2- My forecast is that the trade volume between the two countries will exceed$2.5bn by the end of 2022, compared to 2021’s $2.3bn.
3- In terms of a full FTA, I understand that it could take some time to see the implementation of the final agreement depending on the intention of the both countries.