Egypt, a springboard for a better integration in the Africa - Mediterranean - Europe axis

Report of the African and Mediterranean Breakfast on the topic “Is Egypt a hub between Africa and Europe?”

On Wednesday 11 April, in partnership with Bpifrance and IC Publications, IPEMED organised the second edition of its cycle of African and Mediterranean Breakfasts on the topic: “Is Egypt a hub between Africa and Europe?”. Led by Hichem Ben Yaïche, Editor-in-chief of New African and African Business, the event took place at Bpifrance’s headquarters (8, boulevard Haussmann, 75009 Paris) and gathered 80 people, among which researchers, politicians and manufacturers.

Before the debates, Anne Baudson, in charge of developing international partnerships at Bpifrance, and Jean-Louis Guigou President of IPEMED, reminded the place of Egypt in the Africa - Mediterranean - Europe axis, which plays a strategic role of “hub” between Europe and East Africa, just like Morocco is directed towards West Africa. By favouring coproduction operations, that is to say resorting to a new “win-win” economic cooperation model based on shared added value and technology transfer between Northern and Southern Mediterranean actors, these two hubs would be major actors of the regionalisation process that is happening in the “Verticale” axis.

Indeed, the movement is already under way: the European External Investment Plan (EIP) and the signing of an agreement that plans the implementation of a continental free-trade zone are significant milestones and encourage investments in Africa. Egypt, which is included in this agreement, can benefit from these new dynamics, by highlighting its numerous assets.

Egypt’s structural assets

By citing the very positive forecast of the World Bank, Khaled Aref, Advisor at the Arab Republic of Egypt Embassy, asserted that the Egyptian economy is doing well. Indeed, Egypt’s growth perspectives are of 5.8% for 2020.

Jean-Louis Guigou and Naglaa Fathi, in charge of promoting investments at the Egyptian Ministry of Investment and International Cooperation, reminded that Egypt boasts several assets:

• An economic and demographic dynamism: with a population of 100 million mostly young inhabitants and historic relations with both Africa and Europe, Egypt is a central transit point between the two continents. It is also an investment-friendly land thanks to the numerous free-trade agreements that offer the country an access to a market that goes from Alexandria to Johannesburg, with over 600 million potential consumers.
• A geo-strategic position among the Mediterranean, the Middle East and Africa, characterised by the Suez Canal, along which are established science parks, activity zones and “Mega projects” that can create hundreds of thousands of jobs. Thus, Egypt is an entry door towards the Mediterranean and Africa.
• Thanks to the discovery of the Zoht gas field in Egypt, the country is not only energetically independent, but it can also supply neighbouring countries, with transfers that can exceed that of Qatar.

An active territory at the regional level, Egypt benefits from a demographic dynamism, a proactive and diversified economy, and plentiful energy resources. Its geo-strategic position, characterised by the Suez Canal, makes it a transports and logistics hub. This last point leads us to Egypt’s significant trade relations in the AME axis, that were widely discussed during the conference.

Growth and coproduction levers

Perspectives opened by the reforms carried out by the Egyptian government

For a better economic cooperation and to facilitate the administrative procedures for companies that establish themselves in Egypt, Reda Bebars, Ambassador, Advisor to the Egyptian Minister of Investment and International Cooperation, Mira Ghali, Senior Economic Researcher at the Egyptian Ministry of Investment and International Cooperation and Naglaa Fathi, presented the reforms that were undertaken to improve the business climate. The provisions of the act #72 of 2017 on Investment as well as the application regulation are available on investinegypt.gov.eg and described in the attached PowerPoint. A service centre for investors was also created recently to support and protect investors in Egypt.

For a deep regional integration 

Egypt is part of many free-trade agreements. Therefore, it has access to a significant market of over 600 million consumers on the African continent, but also to the European and Middle-Eastern markets. However, as Chahir Zaki, Senior Economist at the Economic Research Forum, explained, the numerous commercial agreements have a “spaghetti bowl” effect: agreements add up and mingle, but they are not taken advantage of. This is why he recommends an optimal use of these agreements that could be encouraged by a coproduction and integration active policy, as stated in IPEMED’s publication “For an efficient industrialisation of Africa”.

Therefore, Chahir Zaki explains that, for a better integration in the AME axis, it is necessary to take into account regional value chains. This integration through coproduction requires investments in territories. 98% of Egyptian companies are SMBs, have a short life cycle and only 6% of them export. Just like IPEMED, he suggests creating clusters or “secured industrial zones”, favoured by FDIs, in order to guarantee SMBs’ prosperity and serve these markets. These investments could be oriented towards the manufacturing sector, as recommended by Khaled Ared and Chahir Zaki; since this sector has a greater added value than the oil industry. Besides, Egypt boasts a skilled workforce and plentiful energy resources. However, other participants like Manal AbdelMoneim, Executive Chairperson at Sobek, rather recommends focussing efforts on the agricultural sector.

Feedback on coproduction in Egypt

Anne Baudson presented the AVERROÈS Finance fund, managed by Bpifrance in partnership with Proparco, that invests in Africa and commits to develop international partnerships to strengthen bonds between Africa and Europe.

Guy SIDOS, from the cement group Vicat, that has been established in the Sinai region in Egypt for 15 years, talked about the support of Egyptian institutions during the troubled times of the Arab Spring. He calls for a development of the Sinai region, that Mira Ghali also supports, and the securing of transports.

Bruno Schambacher, CEO of Tyllium believes Egypt, the second most industrialised country in Africa, is a very competitive market. For him, Egypt and Morocco are hubs that enable European businesses to access Sub-Saharan markets. He suggests shifting from “goods” export between North and South to coproduction and factory colocalisation.

During the debate, Egypt was compared with the Moroccan hub and its African ambitions, on which IPEMED published a study. Questions were raised about Egypt’s strategy in Africa. Mounir Makar, IPEMED Advisor for Egypt, explained that Egypt is linked to Africa by a deep and historical friendship. By adopting the coproduction concept, Egypt can become a key actor of regionalisation, and take part in the development and socio-economic prosperity of the AME axis.

To conclude this conference, Jean-Louis Guigou expressed his satisfaction to see the commitment of scientists, politicians and manufacturers on this important issue and agreed with Chahir Zaki on the idea to shift from a “superficial” regional integration to an integration based on the redeployment of value chains. We must no longer think in terms of “trade” but in terms of integration, cooperation and transformation, on site, of African natural resources. Nevertheless, a few years ago another economic actor appeared in the AME axis landscape. It will be the object of our next Breakfast: China in the African and Mediterranean economic landscape. We will discuss this topic on 27 June.