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At last, a done deal

Al-Ahram, Egypt

At last, a done deal

5-11 January 2006

A free trade agreement will open new prospects of cooperation with Turkey, reports Sherine Nasr

Days before 2005 closed, Egypt and Turkey finally signed a free trade agreement (FTA) the negotiations of which began in 1997.

The FTA — concluded after six rounds of bilateral negotiations — follows Egypt’s partnership agreement with Europe that allows for the phased liberalisation of bilateral trade in agriculture, industrial products and services.

"The agreement is the outcome of elaborate work and fruitful negotiations," Minister of Trade and Industry Rachid Mohamed Rachid said at a press conference held with his Turkish counterpart last week. "It lays the foundation of a new era of economic, political and social cooperation between the two countries," Rachid added.

The agreement will allow all Egyptian raw materials, goods and commodities to enter not only the Turkish market but EU markets as well. It implies duty-free entrance to all Egyptian goods and industrial products into the Turkish market.

Immediately after the People’s Assembly and the Turkish parliament ratify the agreement, it will be enacted.

In the meantime, Turkish commodities and intermediate materials to Egypt have been classified under four groups which will gradually enter the Egyptian market over a period ranging from three to 16 years. The list includes raw material and machinery equipment, followed by intermediary goods, finished goods and the automotive industry.

According to Rachid, the agreement constitutes a milestone in Egypt’s efforts to competitively integrate into the world’s economy. "The agreement will strengthen our ability to compete in Europe and to attract investment from around the world," said Rachid, adding that by the cumulation of origin between both countries, an Egyptian factory can import inputs from Turkey, incorporate them into its local product and export it duty-free to Europe under Egypt’s Partnership Agreement with the EU.

The Egyptian and Turkish sides have also agreed to progressively work on greater liberalisation of trade in agriculture products, processed agricultural products and fishery products. For Egypt, imports of particular interests include hazelnuts and edible oils, while exports to Turkey include rice, fish, vegetables and fruits.

Egypt is the fifth country to sign an FTA with Turkey following Tunisia, Morocco, Syria and Palestine. Turkish Minister of State Kursad Tuzmen underlined that efforts will continue to include all other Mediterranean countries. "The move is a step towards achieving a EuroMediterranean free trade zone by 2010," Tuzmen said.

The business communities in both countries have welcomed the FTA as a step towards increasing the volume of trade between the two countries. Rachid noted that trade and investment had already experienced a surge in anticipation of the agreement while Tuzmen underlined that Turkish businessmen have already shown noticeable interest in the agreement. "The next few days will certainly witness remarkable flows of Turkish investment into Egypt," he said.

The volume of trade between the two countries has so far been modest compared to the potential. Egyptian exports to Turkey increased by 31 per cent in 2004 compared to 2003, while Turkish exports to Egypt increased by 34 per cent for the same year. Total trade stood at $718 million in 2005. However, prospects indicate that the volume of trade will jump to $3 billion once the agreement comes into effect. Further growth in investment is also expected to register $2 billion instead of the modest $600 million of direct Turkish investment in Egypt.

"We rely on the private sector to play an active part in promoting trade and investment between both countries," said Rachid.

Now that the trade file has been completed, more attention will be directed to services as the final step towards full economic cooperation between Cairo and Ankara. Thus, in the foreseeable future, more cooperation in the field of tourism, transportation and construction is expected.

As a member of the Common Market for East and South Africa, and a country which enjoys duty-free access to the EU under the EuroMediterranean Partnership, and to the US under the Qualified Industrial Zones protocol, Egypt represents an important trading partner to Turkey.

Turkey is the second largest economy in the EuroPersian market with an estimate 580 million consumers. In 2004, the Turkish GDP reached $293.3 billion with a growth rate of 10 per cent. Turkey is Egypt’s sixth largest trading partner.