Eliminating Trade Barriers: Egypt Sees Potential in Russian Industrial Zone
Flickr / Gary DenhamBusiness01:19 24.05.2018Get short URL1
In wake of the upcoming start of the investment cooperation between Russia and Egypt, Sputnik spoke to Egyptian Minister of Industry and Trade Tarek Kabil to get more insight into the business issue and an ambitious project of the Russian Industrial Zone.
Sputnik: How do you assess the level of investment necessary for creating a Russian Industrial Zone in Egypt?
Tarek Kabil: Based on the initial preliminary discussion, first of all the area is about 5 million square meters. It will be built as a city rather than as an industrial area, so it will have housing, people living there. Initial investment estimated at seven billion dollars when it is completed.
Sputnik: It is expected that the agreement for the creation of this industrial zone will be signed within the framework of the upcoming intergovernmental committee. When do you expect the initiation of this zone and which Russian companies will first start to work in it?
Tarek Kabil: Let me tell you the process so you can understand when it will be happening. Today we will sign the agreement, the agreement will be government to government. It will be between government of Russia and government of Egypt. Because it is government to government it has to go through the parliament of Egypt to be approved.
Post the signing today they will start developing the contract between a Russian developer who will manage the development of the area and the economic zone of the Suez Canal. So that contract will include the details of the construction and power required, very nitty-gritty details. So probably I would expect in the neighborhood of six months to finish the contract and the approval of the parliament. After that then the developer is free to start preparation.
Today I had the chance to meet almost 50 or 60 Russian companies who are interested to be in the area, including some big companies like Kamaz who showed interest in joining the area. Between the developer and the companies, there are many companies who said yes we are interested. The good thing is that they’ve already studied the Egyptian market, the export opportunities out of that particular area. So it would be premature for companies.
Sputnik: For a long time there has been talk about the creation of a grain hub in Egypt with the participation of Russian companies and the Russian Direct Investment Fund. What has been the result of these negotiations and efforts, and when can we expect the creation of this hub?
Tarek Kabil: I don’t know if the grain hub is one of the top priorities as we speak. Today probably the priority is more on the Russian Industrial Zone. We have built several grain hubs in Egypt so that will be more of an investment opportunity for any Russian company who wants to build.
Sputnik: Which agreements and memorandums is the Egyptian delegation planning to sign or support during the St Petersburg International Economic Forum and in the framework of the intergovernmental committee?
Tarek Kabil: No it will be here. I am not going to St Petersburg. We are building on with the Ministry of Agriculture on both sides to ease the inspection and the flow movement of agriculture product between the two countries.
Sputnik: That is today?
Tarek Kabil: Yes
Sputnik: As it is known, Egypt is now conducting negotiations about the construction of a gas pipeline from Cyprus to Egypt. Will Russian specialized companies take part in this project and is Egypt conducting any talks about the possibility of their participation?
Tarek Kabil: I don’t know but I mean that in general we are quite open. It is all about price and quality but I don’t think the Ministry of Petroleum have issued a tender for that yet. It is more the discussion today with Cyprus about the entire project because Egypt is a great place to be a center of the export of gas because we have the infrastructure. We are just missing the pipeline so there is a commercial agreement on top of building the pipeline.
But of course Russian companies are definitely welcome. Rosneft is there as part of Zohr, so that gives it even a bit of a push.
I know that the discussion right now is with Cyprus to finish all the commercial agreement. Then they’ll issue the tender for the piping. Bear in mind that Egyptian companies will build the pipeline between Zohr and Egypt.
Sputnik: Egypt has this year beaten another record on the purchase of wheat from Russia. To Egypt, from July 2017, 7.8 million tons of wheat were delivered to Egypt. Will Egypt continue to increase the purchase of wheat in the future?
Tarek Kabil: Quality, price. When Russia meets these two of course we will, we always give a Russia a better chance once they’re equal or better.
Sputnik: And if you consider the quality and price of wheat provided by Russia today will Egypt continue to increase the purchase of wheat in the future?
Tarek Kabil: So far yes, because we are taking more out of Russia.
Sputnik: What level of growth is Egypt planning to reach in 2018?
Tarek Kabil: We’re increasing the agriculture area of wheat locally. So we have a population growth, two million people every year, we have more area of wheat and ten the balance – this is what we buy. We cannot really tell.
Sputnik: Trade and economic relations between the two countries have been markedly developing. The volume of trade turnover for the first quarter of 2018 reached 1.334 billion dollars and rose by 55 percent in comparison to an analogous period last year. What growth do you predict for trade turnover for the end of 2018?
Tarek Kabil: 2017 it reached the highest level of trade, excluding the military since the Soviet Union. So there is a significant growth happening in 2017 and that growth continued in 2018.
We believe it will be 2017, but again we cannot specifically tell because it is related all to private sector, other than wheat, which the government in many cases gets involved. The rest are purely private sector but the trend is very positive between the two and partially, part of the objective of this joint committee meeting is increase the growth level, increasing the trade growth level comes from many areas. Part of it comes from elimination of barriers like agriculture between both of us.
That is one of the barriers. So eliminating barriers on the Russian side and on the Egyptian side improve the flow hence increase the trade level. The discussion about doing our b2b businesses also help in increasing trade. So major part of the objective of this meeting is two things, increase investment, increase trade. Honestly both of them are linked together.
Sputnik: What is the largest barrier to increasing trade turnover between Russia and Egypt?
Tarek Kabil: Increase the level of investment and the changes internationally. I mean when you talk commodities, commodity price change everywhere, every day and this could be, could impact the direct relations, direct trade between the two countries. Lack of investment is probably one of the biggest barriers in my view.
The more you increase investment, the more you will indirectly increase the trade. So for example the Russian Industrial Zone, today we have a gap – the trade level is good but the balance of trade in the favor of Russia significantly, and this is not good and it is not sustainable. We will not allow it to be sustainable.
So having the Russian Industrial Zone, manufacturing a few things in Egypt and re-exporting back to Eurasia it’s a part of balancing that. So that’s why investment and trade is linked together.
Sputnik: When you speak of investment which spheres are you talking about?
Tarek Kabil: For example we have developed a clear industrial strategy for Egypt from 2016 to 2020. The main focus will be in four main sectors, engineering sectors including automotive, chemical, building material and textile. Those are the major four sectors. Those by the way constitute 75 percent of our export.
Sputnik: Egypt is looking into signing a free trade agreement with Eurasian Economic Union. What are the prospects of signing an agreement? When will such an agreement be signed?
Tarek Kabil: You know that the Presidents of Eurasia have approved the start of the negotiation. I think we have started the negotiations with the head of Eurasia, even had a meeting with her today.
We have already sent a draft of the agreement because we actually have a lot of experience negotiating on free trade agreement; we have free trade agreement with almost two billion people. We will continue to negotiate few elements. The draft has been circulated to all the Eurasian countries; I think she is waiting for their input. The final, the first face to face interaction will happen at the end of the summer. We are ready to sign it yesterday.
Sputnik: Previously, in interviews, the former Egyptian minister of industry and trade said that Russia and Egypt were discussing a possibility of using the ruble in specific grain deals and loans as well. Is that idea still salient?
Tarek Kabil: It’s always an idea but that will be up to the Central Bank to discuss it.
Sputnik: Are there any ongoing negotiations on this possibility with any Russian companies? For example, I know that at some point Gazprom was interested in using rubles for transactions with Egypt.
Tarek Kabil: No.