Egypt pushes for China factories
Over the last few months, Egyptian authorities and the private sector have been giving the hard sell to China, and the Chinese have been listening. By eyeing Beijing’s increasing push into the African and Middle Eastern marketplace, Egypt sees the opportunity for the expansion of already close ties.
Cairo considers strengthening trade ties to China as so important that President Hosni Mubarak will be heading up Egypt’s delegation to the first ever China-Africa summit, to be held in early November.
Egypt’s Trade and Industry Minister Rachid Mohamed Rachid is a strong supporter of boosting business links with Beijing, having visited China in September to attend the World Economic China Business Summit and to promote Egypt as an investment destination.
“We want to be China’s gateway to Europe, Africa and the Middle East, through our basket of preferential trade agreements with these markets,” Rachid said.
Currently, the bulk of Chinese exports to Egypt are represented by parts of data processing equipment, tobacco, truck tires, generators, decoders and radio transmission equipment, while China gets Egyptian cotton, marble, plastics, petroleum products, linen, glass and cow hides.
Imbalance of trade
Though trade is sizeable, it only represents $2.3 billion, with the balance firmly in China’s favor. The Middle Kingdom exported $1.93 billion worth of goods to Egypt last year, with just $211 million going the other way. Both the level of trade and the imbalance is something both countries are aiming to address.
While in Beijing, Rachid signed agreements that foresee this bilateral trade increasing to $5 billion in the coming years. The trip also served to boost Chinese investments in Egypt, which are comparatively modest, with China ranked 29th on the list of foreign investors in the country.
Rachid’s visit to China saw the inking of a deal to set up an industrial zone in Egypt to specifically accommodate joint Chinese-Egyptian investment in textiles, footwear and pharmaceutical industries. The zone, which will cover some 500,000 m2 and be located in the Sixth of October City, will be established with the China National Chemical Engineering Group (CNCEC), the largest state-owned construction company in China.
Another joint Sino-Egyptian development that came out of the visit was the announcement that Citic Group, China’s biggest state-run company, is to build an $800 million aluminum smelter in Egypt. When fully operational in five years time, the plant will have an annual capacity of 270,000 tons. Citic will have an 85% stake in the project, with Egyptian banks holding the remaining shares.
There was also an agreement to establish three private sector-operated technology service centers in Egypt, to be jointly funded by the Egyptian and Chinese governments until they become self-sufficient. Two of the centers will focus on the needs of the Egyptian textile sector, while the third will offer Chinese expertise in marble and granite stonework to Egypt’s construction materials sector.
Manufacturing hub
Not surprisingly, Rachid was keen to tout the benefits of investing in his country to his hosts.
“Egypt today has labor costs which are if not equal to or lower than China, the energy cost is definitely lower than China, and we have other infrastructure in place,” Rachid said in an interview with a Chinese news agency. And in an interview with a business journal, Rachid again promoted the advantages that Egypt offered to Chinese investors.
“We want Chinese investors to start using Egypt as a manufacturing hub for the region, by setting up factories and taking advantage of our central geographic location and preferential trade agreements with the US, Europe, Africa and the Middle East,” he said.
