Egypt and Turkey have put the finishing touches on a Free Trade Agreement (FTA) that is expected not only to open up new markets for Egyptian business but also boost the inflow of Turkish investments after it comes into force in February.
Trade between the two has been on the rise for the past few years, coming in at $1.1 billion for 2006, a 30% increase on the preceding year. With the FTA in place, both sides are tipping at least a three-fold improvement on the 2006 figures within three years.
The final inking of the agreement, which has been a number of years in the making, took place in Cairo on January 10. The agreement, based on a protocol signed in December 2005 by President Hosni Mubarak of Egypt and his Turkish counterpart Ahmet Sezer, allows for Egyptian exports of industrial products to Turkey to be exempt from customs duties. Duties on imports of Turkish industrial goods to Egypt will be phased out over a 12-year period.
There will also be a progressive liberalization of trade in other areas, such as agricultural goods, both raw and processed, fisheries products and service industries.
Yet another step in improved relations
According to Egyptian Trade and Industry Minister Rachid Mohamed Rachid, the FTA is just another step in improving relations and trade ties with Turkey.
There are advantages for both in the way it will allow them to utilize a place of origin, meaning they can both work through the agreements each country has made with other nations, with Europe and other partnerships to help increase the flow of goods, he said after the agreement was concluded.
The minister also saw a longer-term benefit for Egypt. Should Turkey become a full member of the EU, it would act as a bridge between the EU member states and the Mediterranean countries, he said with an eye to the possibly distant future.
Egypt and Turkey also see their FTA as a further step in the Barcelona Process, the plan to make the Mediterranean a free trade area by 2010, said Rachid.
Turkish Foreign Trade Minister Kursad Tuzman said there was much to attract Turkish business, especially the textile sector, to Egypt.
Egypt is a significant country for reaching a lot of markets, he said. Textiles and ready-to-wear clothing in particular are very important in Egypt. The country has high-quality raw materials in this field. Turkey, which conducts a lot of exports in the textile field, is facing difficulties competing against high quality and low priced products. Egypt has a highly skilled labor force.
Trade relations with Turkey were also given another boost when the government announced it had allocated a 2 million m2 plot in the October Sixth industrial city to serve as a free trade zone for Turkish firms. Some 100 Turkish companies, mainly in the textiles sector but also representatives of the automotive, chemicals and manufacturing industries are preparing to move in, an immediate by-product of the FTA.
Most of the industrial zone’s production will be exported, the majority going to Arab countries, with the $2 billion development expected to create more than 20,000 local jobs.
The move of Turkish firms offshore also represents a shift in that country’s economy, which has long touted itself as a destination for foreign capital based on low wages and materials costs.
Countering China?
The Turkish press in particular focused on the deal serving to counter increasing Chinese dominance in the global textiles trade and Beijing’s growing economic clout in the region. Turkey’s domestic textiles industry, long a driving force of the economy, has waned as China’s ready-to-wear clothing makers have waxed in the past few years.
However, for Egypt, China’s burgeoning economic presence on the world stage does not appear to cause the same foreboding as it does in Turkey, and Cairo has been actively working to boost cooperation and attract investments.
Indeed, those very Turkish industrialists setting up shop in Egypt to consolidate their position in the campaign to rein in China’s lead in the textiles wars might find they have some unwanted neighbors in October Sixth City.
During a trip to China last September, Rachid signed an agreement to establish a Chinese industrial zone to accommodate joint Chinese-Egyptian investment in textiles, footwear and pharmaceutical industries. The 500,000 m2 zone will also be located in the October Sixth City.
While Egypt is more likely to see an inflow of Turkish investment than Ankara is to see Egyptian FDI come the other way, both countries will gain from the FTA through an exchange of expertise, access to cheaper goods and, most importantly of all, the opening up of markets.
