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Talking Turkey

Business Today, Egypt

June 2005

Talking Turkey

Egypt and Turkey prepare to sign an FTA that could double bilateral trade to $1 billion within a year

By Amr Gamal

After seven years of negotiations carried out in fits and spurts - and the near-death of talks under the previous government of Atef Ebeid - Turkey and Egypt are finally set to sign a free trade agreement in the coming two months.

Minster of Foreign Trade and Industry Rachid Mohamed Rachid closed the deal in Ankara this past April when he signed a memorandum of understanding with his Turkish counterpart, Kursad Tuzmen, that saw a high-level Turkish delegation in Cairo late last month to iron out the last wrinkles.

Tuzmen is expected in Cairo for the formal signing this summer, although no date has yet been set. The deal aims to double the total value of trade and investment between the two sides to $1 billion a year within the coming two years, officials say.

Total trade between the two countries averaged $278.83 million a year in 1994-1997, with Turkish exports to Egypt accounting for an average of 67.2% of each year’s trade. When the FTA talks first kicked off, Turkish exports to Egypt rocketed nearly 280% in 1998 to $487.2 million as total trade between the two sides topped $604.7 million that year before settling back into the mid-$200 million range, according to figures from the Egyptian Ministry of Foreign Trade and Industry.

Trade dipped after 1999 as oil exports fell and Egypt imposed anti-dumping duties on Turkish steel; the penalties were dropped in 2004.

Trade between the two sides began growing again in 2002, with the total exchange topping $511 million in 2004. Although trade is still weighted in favor of Turkish exports, Egypt’s exports to Turkey have climbed 115.1% since 2002, rising from $189.4 million to $253.3 million last year.

“If you consider our geographical proximity, the common culture, structure and some complementaries in business, this still does not reflect our potential,” says Ferudun Baser, commercial counselor of the Turkish embassy in Cairo.

Although the FTA could boost trade past the $1 billion mark by the end of next year, Baser says 2005 is already shaping up as one for the record books: “In the current year, I see around a 50% increase in [bilateral trade].”

Although Egypt exports primarily petroleum and agricultural products to Turkey, Baser says, “We also see industrial products exported to Turkey; it’s a big market and there are many opportunities for Egyptian businesspeople there.”

Baser says concluding the FTA is a top priority for the Turkish government of Prime Minister Recep Tayyip Erdogan. “There is great will at the ministerial level to conclude this trade agreement this year. The future looks good,” he adds.

While trade is growing, it may take more time to turn around investment figures: Turkish investment in Egypt tops $40 million to date in automobile manufacturing, fabrics, paint, iron pipes, kitchenware, artificial oils and garment-industry machinery. The newest and highest profile Turkish venture here is furniture giant Istikbal, which recently opened a new flagship outlet in Heliopolis’ CityStars complex.

Turkish investment in Egypt should be spurred by the inauguration last month of a $350 million project to build Cairo International Airport’s third terminal. Senior Turkish government officials including Tuzmen were at the airport last month for the ground breaking ceremony for the project, which should see CAI’s capacity increase from 9.5 million a year to 21 million when the project is complete in mid-2007 - or exactly 833 days from groundbreaking, as promised by Turkey’s Tepe and Akfen Venture (TAV), the lead contractor on the project.

The deal is being financed by a World Bank loan for 70% of costs and is being carried out in conjunction with the Egyptian Holding Company for Airports and Air Navigation. “This cooperation in the construction sector in one of the biggest deals in our mutual history,” says Baser. “We talk about investment and trade, and in the construction sector we see cooperation between companies in the two countries.”

The third terminal at Cairo International Airport should also boost the already growing exchange of tourists between the two countries, says Baser, who notes that Turkish tour operators are sending an increasing number of European tourists to Egypt.

Why the sudden thaw in relations? Look no further than the Nazif government, says the Turkish diplomat, who expects Rachid’s visit will increase Turkish interest in Egypt ahead of the FTA.

“In this visit, some people from the Ministry of Investment explained the general picture about the Egyptian investment climate to Turkish companies,” Baser says. “I’ve seen new interest - they’re now calling [for information on how to invest in Egypt].”

Among the many exports Turkey is offering: Help ramping up Egyptian exports to countries other than Turkey, particularly the European Union. According to figures from the Turkish State Institute of Statistics, Turkey’s trade is growing at a clip of more than 11% per year.

“Turkey’s total trade volume is growing extremely rapidly; it has reached $160 billion. This is a great achievement. So in that sense, we would like to share what we have done to reach this level with our Egyptian friends,” says Baser.

At press time, there were conflicting reports on when the FTA might be signed, with Baser saying the final round of talks in May had not ironed out all the kinks, while Tuzmen was quoted in the Turkish press as saying he expected a deal to be signed in the coming month.