Spain is pressing
for a bigger share of the Egyptian market and a more dominant role
in the Mediterranean sphere. A look at how Egypt could benefit from
closer economic ties to the Iberian peninsula.
won't escape stagnation unless the nation dramatically increases
exports: Political and business leaders could not be more aware of
that. So it seemed a little odd that in February leaders were
invited to the Cairo International Fairgrounds to learn about the
benefits of importing from Spain rather than exporting. But in fact,
the ExpoSpain 2002 business exhibition wasn't as tough a sell as the
timing might suggest. From biscuits to heavy equipment, the
exhibitors had a message customized for cash-strapped Egyptian
businesses: Spain is cheaper.
are not so expensive as American, German or Italian products.
They're not as high in quality," says Angel Borruel, foreign trade
advisor with the Madrid Chamber of Commerce, one of four Spanish
chambers that organized the expo in Nasr City. "But in Egypt, they
don't need the highest quality at the most expensive price. They
need something that works and which is of medium-to-high quality."
While the expo may
have caught Egypt in lean times, it showed a confident Spain looking
to increase its presence in the Euro-Mediterranean region. Spanish
business advocates chose to hold their annual trade fair in Egypt
because they want to woo Egyptian customers who previously bought
specialized products from other highly industrialized European
countries. They also see Egypt as an entry point to attract
customers in neighboring Middle Eastern and North African countries.
Moreover, the trade
push comes at a time when Spain is asserting itself as a political
leader on both sides of the Mediterranean. Spain took over the
rotating, six-month presidency of the European Union on 1 January.
Meanwhile, Madrid has taken on the task of mending the rift between
European and Muslim nations with a EuroMed summit slated for April
in the eastern port city of Valencia. And supporters of a
Palestinian state are expressing hope that Madrid, which hosted
groundbreaking peace talks in 1991, will again exert influence in
the Israeli-Palestinian deadlock.
regional leadership is part of a natural evolution in the view of
Jordi Pujol, the president of Spain's Catalonia region. From the
late 1970s until just recently, Spain was inward-looking as it
tackled the challenge of transition from an authoritarian government
to democracy. The country was then preoccupied with rehabilitating
its economy to qualify for membership in the European Union's common
currency, the euro, which began circulating on 1 January.
"After this aim was
accomplished, Spain made major investments in Latin America. And now
we must intensify our presence in Maghreb and the eastern
Mediterranean countries," says Pujol. "Spain as a whole, and the
government of Catalonia in particular, will do everything possible
to help solve the problems of the Mediterranean economies."
Egypt could benefit
from studying a country that in many ways will be a counterpart
further down the road of economic liberalization. The achievements
of Spain are something Egypt should aspire to. Spain, for instance,
has managed privatization without increasing unemployment and has
built up its infrastructure while incubating a high-tech industry.
"Spain has passed
from an autocratic regime to one of complete liberalization and
economic development," Egyptian Foreign Trade Minister Youssef
Boutros Ghali said in a speech at the opening of the Nasr City
event. "We have much to learn from this process, but also from that
of Spanish industrialization."
say they feel left out of Egypt's trade priorities. "Trade between
Spain and Egypt is very low compared with the other European
countries," says Jaume Almirall, a foreign-trade officer with the
Barcelona Chamber of Commerce. "We think we can really be more
present in the Egyptian market."
In 2000, about $625
million (LE 2.88 billion) worth of goods moved between the
countries, with Egypt importing $393 million (LE 1.8 billion) in
goods from Spain and exporting $231 million (LE 1.07 billion). The
gap has steadily narrowed since 1998 as Egypt began to boost its
exports to the Iberian peninsula.
buys machinery and electrical supplies from Spain, as well as
supplies for the local leather industry such as dyes. Plastics,
metal, paper and wood are the next largest categories of imports
from Spain, followed by animal fats and ceramics. (Only Italy
produces a higher volume of ceramic floor tiles.)
In the other
direction, Egypt sells Spain a steadily rising volume of raw
materials including fossil fuels, iron, steel, aluminum and
untreated leather. Exports of raw cotton have decreased in recent
years to $12.74 million (LE 58.8 million) in 2000, but sales of
synthetic fiber rose sharply in that time to $10.1 million (LE 46.5
million) the same year. Chemical products flow in both directions.
analysts consider their presence in Egypt to be underdeveloped. The
level of trade between Egypt and Italy is, by comparison, some 33%
higher. Spain is offering itself as a discount alternative in some
of the same categories in which Italy excels, such as specialized
industrial machinery and leather products.
"Italy is selling a
lot here. That's the goal, to take some of the market from Italy,"
Borruel of the Madrid chamber says. "In quality and prices, Spain is
quite dangerous to Italy."
Browsing the booths
at the expo, one family of Egyptian importers bought into the
value-for-money argument. Omar Ismail and his father Mohammed import
decorative supplies including wallpaper, marble and carpets from
Italy, England and France through their Cairo business, the Medecor
Group. At ExpoSpain, a Spanish wallpaper company caught their
attention. "It's less expensive than England, and it's similar in
design," Omar says.
many of the 50 firms that raised booths at ExpoSpain say they are
unsure whether they can win a foothold in the Egyptian marketplace.
Some, like brass bolt maker Munne Alsina of Cornella, are looking
for local distributors or agents. A number of exhibitors say they
would be interested in making Egypt a pass-through point, a base
from which they could sell their products to neighboring countries.
"Egypt will serve us as a platform for the penetration of other Arab
countries," says Nuria Ventimilla, manager of the José Blay, a fan
factory in Valencia.
But the Egyptian
business community had a different agenda at ExpoSpain. When they
accompanied the delegation to a luncheon, domestic business leaders
were urging Spanish officials to encourage their business people to
invest in Egypt's economy by building facilities and taking
ownership stakes in domestic companies.
"If we talk about
the potential for increasing Egyptian exports to Spain, I can't name
any specific areas. About FDI, foreign direct investment, I will
talk wholeheartedly," says Mostafa Waly, general manager of the
Federation of Egyptian Industries. "We were trying to convince our
friends during their visit that we have the chance and potential for
joint ventures in Egypt."
Mubarak made a similarly blunt appeal in a speech before the Spanish
parliament during a May 2000 visit, saying, "We look forward to
welcoming more Spanish investors in Egypt, as may be commensurate
with the close cooperation between the two countries in many
though, were noncommittal. "You can't tell exactly if they're
interested. This is a free decision. Nobody can force anybody," Waly
notes. But even if Spanish investors don't pour cash into the
economy, Waly is optimistic that Egypt can benefit from Spain's
intellectual capital. Spanish expertise would be valuable for
Egyptian business involved in leather production, cotton spinning
and automotive component manufacturing. "FDI or joint venture, it
doesn't always mean money. It could be know-how; it could be
technical assistance," Waly says.
Egypt is already
calling on Spain's expertise in agriculture. In the Fayoum, a
Spanish aid program is planting some of Spain's legendary olive
trees to spur domestic olive oil production. In 34 villages from
Beni Sueif to Luxor, another Spanish project is teaching cow farmers
the basics of artificial insemination aimed at dramatically
improving animal husbandry. The cow project has also seen 25
Egyptian veterinarians visit Spain for training. "Now in Upper
Egypt, Spain is much more known than before. Now they know that
Spanish livestock is very good," says project manager Gregorio
Velasco. "If some private company can reap benefits from that some
day, I will be happy."
Almirall of the
Barcelona chamber believes Spain lags behind some European countries
because Spanish companies turned to export activities only in recent
decades. Proportionately, fewer Spanish companies are involved in
exporting than their German and Italian counterparts.
In fact, many
analysts see Spain as being near the bottom of top-tier European
nations: Spain's gross domestic product is 20% less as a measure of
its population than the average GDP of the four largest Western
European economies. Its unemployment is the highest in the European
Union, although the rate has decreased steadily under Prime Minister
José María Aznar. Aznar also gets good marks for having implemented
deregulation and privatization programs. Spain takes pride in not
having been left behind in the European Community's move to a shared
currency, but analysts say it must continue economic reforms to
compete effectively in the Eurozone.
Leaders in the
private sector have kept established industries competitive by
introducing new technology. The country is becoming a significant
producer of consumer electronics, telecommunications products and
computers: The Spanish electronics industry was ¤65 billion (LE 260
billion)-strong in 2000, an almost 25% jump over the previous year.
The Basque and Catalonia regions have become leaders in the
production of valves, pumps and other fluid-handling equipment, and
Spain's steel industry is also healthy, with 6 million tons of
exports in 2000. Overall, the Spanish economy is growing faster than
the European Union average.
At the same time,
Spain has reached out as a political facilitator across the region.
The 1991 Madrid peace conference rejuvenated Israeli-Palestinian
dialogue; Egypt's ambassador to Spain, Hussein Haridi, recently
expressed hope that Spain will reassert itself in that crisis by
pressuring Israel to recognize Yasser Arafat's legitimacy as
Spain has also
encouraged pan-Mediterranean understanding through
Euro-Mediterranean Cooperation, an organization established at a
1995 conference in Barcelona. Spanish officials say the organization
is more important than ever after the 11 September attacks widened
the gulf of distrust and misunderstanding between Europe and the
Arab world. They hope the upcoming April meeting of the EuroMed
group will repair some of the damage.
Taking the same
effort further into the future, Catalonia's Pujol announced in
February that the Spanish government will launch an "Initiative for
Cultural Dialogue in the Mediterranean," presenting the results at
an international conference scheduled for 2004.
aftershocks of 11 September have dampened commerce between Egypt and
Spain. Spanish airline Iberia previously ran four flights a week
from Cairo to Barcelona and Madrid in the winter and up to seven in
the summer. After the attack on America, Iberia cut back to two
flights a week on a smaller plane. Exporters in both countries saw
available cargo space plummet. "This is not business. This is
catastrophe," says Tarek Leheta, co-owner of Iberia's local agent,
Avia Trans, though he is optimistic that Iberia will add a third
weekly flight at the end of this month.
Still, Spain's bond
with Egypt has strengthened in the last decade. Under trade
agreements between the two countries, Spain waives custom duties on
many industrial and agricultural imports from Egypt. The two
countries signed pacts in 1991 and 1992 pledging economic
cooperation and favorable tariff treatment. A 1997 visit to Egypt by
King Juan Carlos I spawned a number of investment and business
seminars. Then, in 1998, Spain put its money where its mouth was,
offering $310 million (LE 1.4 billion) in grants and loans for
public works projects ranging from drinking water plants to new
government is also paying to study the feasibility of building a
$1.5 billion (LE 7 billion) high-speed train line between Cairo and
Alexandria, along with $10 million (LE 46 million) in loans for
small tourism industry projects. Underscoring a sense of
collaboration, the Barcelona chamber is making room in its
headquarters for use by the Egyptian Trade Representation Office
starting this month.
official promotional materials praised Egyptian officials for
maintaining healthy economic growth and moving toward a fully open
market while controlling inflation and the budget deficit.
Individual exhibitors and organizers, however, say the country's
protectionist policies are scaring away foreign investors.
Alberto Aceña of
SOS Cuétara, a Madrid company that makes sweet and salted biscuits
and rice, complains about high import duties. So does Miguel García
Pérez, logistics director for Waycont Industries, a Barcelona-based
cosmetics company. Catalonia's Pujol more subtly suggests that Egypt
should follow Spain on the path to free trade, saying, "Spain was a
protectionist country, and thus a weak country. Now the new
situation has given us new confidence, and we are competitive. We
have an open economy. Spain's presence is increasing worldwide --
share the perception that Egypt's sluggish bureaucracy is a
hindrance to business. Itziar Otero Areia, director of foreign
commerce for Agrymin, a maker of specialized mechanical wheels for
industrial applications, has an acquaintance who complains that his
business is still not considered legally incorporated in Egypt three
years after he submitted the paperwork. Tarek Leheta of Avia Trans
says Spanish investors are discouraged by news coverage that
suggests the court system does not protect businesses' rights.
Mostafa Waly of the
Federation of Egyptian Industries says such criticism is
exaggerated. "In such issues, we should not generalize. A lot of
international companies are working all over the world. You don't
hear about many drastic disputes which are not settled," Waly
claims, adding that Mubarak and other top officials are personally
making the case for foreign direct investment.
"We are a
well-established society when it comes to law and order. And the
government is trying to implement favorable, attractive laws for
investment to minimize the hassles for people getting into business.
It's also acting as a really good host," he notes.
Avia Trans' Leheta
says Spanish financiers are also wary of the weakness of the
Egyptian pound. Spain has invested heavily in Latin America in
recent years and lost heavily when Argentina's government defaulted
on its debts. Spanish investors don't wanted to get burned twice,
but the president of the Barcelona chamber, Antoni Negre, brushed
aside that sort of fear.
"Our argument is
clear: When you go to a place that happens to be booming, there is
so much competition you can't get in," Negre says. "Foreign trade is
an effort of every day, every minute, every second. It requires
tremendous devotion, but the results are seen in the medium and long
Spanish companies with offices in Egypt:
Fenosa: The Madrid-based energy company with an office on
Cairo's Corniche is at the forefront of Egypt's natural gas
industry. Working on what could be a $1.7 billion (LE 7.8 billion)
LNG plant near Damietta expected to begin operations in September
2004. Gas would be shipped to Spain for consumption there and in
Europe. Técnicas Reunidas, a Madrid firm with a local office in
Mohandiseen, is participating in the project.
Group: The multinational construction and services firm based in
Madrid was already substantial before its recent merger with Dutch
firm HBG; merged entity has 70,000 employees and sales of ¤10.8
billion (LE 43.4 billion) in 200 and claims to have more
infrastructure projects in the works than any other international
firm. Based in Zamalek, Dragados's Egyptian arm is bidding for
highway construction projects from Cairo to Port Said and to
Alexandria/Mazru. Garbage-collection subsidiary Urbaser is looking
to reap rewards as collection is privatized: It's Heliopolis office
recently won a 15-year, LE 1.05-billion contract for western Cairo
and is bidding for similar deals in south Cairo, Giza, Ismailia,
Port Said and Aswan.
Another Madrid-based construction firm with a local office in
Zamalek, but not as big. Ranks in the top 60 international
construction firms, with revenues of $2 billion (LE 9.4 billion) in
Builder of water treatment plants based in Madrid; its Heliopolis
subsidiary specializes in plants for industrial water treatment,
sewage treatment and desalination.
Reunidas: A major builder of turnkey industrial and
power-generation plants and a strong engineering presence in the
domestic oil and gas industry. International projects account for
more than 80% of the company's turnover. As of mid-2001, TR had
secured three Egyptian projects worth in excess of $250 million (LE
travel: Sol Melia, based in Plama de Majorca, is one of world's
10 largest hotel chains and specializes in "all-inclusive" luxury
resorts; one of its newest properties is in Hurghada. Partner Hotels
of Madrid has an office in Dokki, while the airline Iberia has an
agency in Tahrir Square.
Troll Lighting specializes in outdoor lighting and street lights;
its Mohandiseen office lit Cairo's Le Méridien hotel. Grupo Cuñado
has a branch in Alexandria's El Ameryia Free Zone, while Agencia EFE
has one in Zamalek; both are based in Madrid.
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