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Turkey delights in investments Front Page

Egypt
Egypt braces for a surge of economic activity with Turkey, as the Free Trade Agreement
between the two countries comes into effect, writes Pierre Loza Focus
Region
Turkey's Minister of State for Foreign Trade Kursad Tuzmen headed a delegation of more than 100
International
Turkish investors to Cairo on 10 January, in order to explore investment opportunities, and
coordinate matchmaking efforts between the two sides. During Tuzmen's visit, a memorandum of Economy
understanding on the creation of a Turkish industrial area in the 6th of October City was signed last
week in the presence of Minister of Trade and Industry Rachid Mohamed Rachid. Opinion
Reader's corner
Construction is due to begin next month, on a Two million square metre complex that will house
some 150 Turkish and Egyptian factories, but this is not the first time Turkey underakes such a Press review
colossal task. "We have created many industrial clusters around the world, including Romania, Culture
Bulgaria, Kazakhistan," Tuzmen told Al-Ahram Weekly. "We have experience in this sort of thing
and I think in the coming period you will see this on the ground." Special

The Turkish minister predicted that investments by his countrymen in Egypt could reach $1 billion Features
during 2007. Last year's trade volume between the two countries grew to more than $1.1 billion for Heritage
the first time, a figure which Rachid hopes will increase to $5 billion in the coming period.
Living
Tuzmen said that while it seems that most Turkish companies are interested in the textiles and Sports
garment industries due to the Qualifying Industrial Zones (QIZ) protocol, -- which abolishes tariffs
on Egyptian garments going to the US if they use a percentage of Israeli component -- "I think now Encounter
we are starting to see interest in the automotive industry, electric appliances and machinery." Yet, it
Cartoons
was Turkish- made underwear engraved with Tuzmen's name which made front page news in
Turkey, when he was presented with boxer shorts while visiting a Turkish underwear elastic factory Chronicles
based in Nasr City's Free Zone.
People
The surge in economic activity is largely attributed to the Free Trade Agreement (FTA) which was Listings
signed and ratified last year by the two countries; this will come into effect 1 March, 2007. "This
trade agreement will open a market of 160 million people which is very dynamic in terms of BOOKS
growth, therefore increasing the competitive advantage within Turkey and Egypt," noted Rachid.
TRAVEL
"This compatibility will definitely affect our ability to compete with China and the rest of the
world." Site map

It is no secret that Turkish interest is a result of Egypt's preferential trade agreements with the US,
as well as European, Middle East and African nations. With Turkish worldwide exports valued at
$100 billion, Rachid believes Egypt can be a launching pad for more exports as a result of its
attractive preferential trade agreements. "We are also in the process of completing an FTA with
Norway, Iceland and Switzerland next month," declared Rachid.

Mohamed Fathi, deputy chairman of the Damietta-based Marine Company for the Export and
Import of Industrial Raw Materials, attended a seminar for Egyptian and Turkish businessmen last
week in the hope of benefiting from the latest economic activity. After learning of the event from
the Ministry of Trade and Industry, Fathi was given a list of Turkish businesses which could
potentially partner with him.

"We hope to meet a number of Turkish companies that use raw materials like sand glass," stated
Fathi, who also hoped to invite a number of Turkish companies to his factory to see if he can fulfil
any of their business needs. He is particularly optimistic due to the improvements made at the port
of Damietta which is located close to his factory.

Ahmed Sagun is president of Group Sagun, one of Turkey's most prominent tuna fish production
companies. Sagun plans to invest $10 million in Alexandria, where he wants to establish a tuna
processing factory and perhaps fisheries in the future. "I chose to come to Egypt because it is a
politically stable, fast- growing, emerging market where there seems to be support for foreign direct
investment," he told the Weekly. "I also like the fact that it has a population size of around 80
million, so labour costs are quite low."

Aiming to cater for the domestic Egyptian market as well as exporting, Sagun hopes to employ an
estimated 100 workers. The FTA will allow producers like Sagun to manufacture at lower costs in
Egypt and export to Turkey, where they have already established a market niche.

Based on bilateral concessions similar to those stipulated in the Euro-Mediterranean Partnership

Agreement, Turkish industrial goods will be granted duty-free access into Egypt after a 15 year
transitional period. Egyptian industrial goods, on the other hand, will be allowed duty-free access
immediately following implementation. Negotiations for the FTA took eight years to hammer out
due to fears by the Egyptians of competition from Turkey's heavy industries, especially in the textile
and garment sector.

"I think the qualms of Egyptian industries were understandable," asserted Emre Oztelli, Turkey's
commercial counselor to Cairo. "Unlike many of its surrounding neighbours, Egypt does have an
industry to protect."

Some economists point out that the FTA limits the export of Egyptian agricultural goods to Turkey,
but Oztelli argued that this is accounted for in the accord. "Agriculture is a sensitive subject when it
comes to any FTA, but in the Egyptian-Turkish example you will find some bilateral concessions,"
he said. "Some 24 products that are important to Egyptian agricultural exports like potatoes, rice
and fresh fruits will be granted duty free access when the agreement goes into force."

Currently, there are 62 Turkish companies operating in Egypt with investments worth $100 million.
After Egypt signed the QIZ agreement in December 2004, currently 150 new Turkish companies are
conducting feasibility studies for investing in Egypt. Ferocious competition from Southeast Asian
countries, coupled with higher labour costs in Turkey, has added to the impetus fueling Turkish
interest in the Egyptian market. Turkish textile producers chose Egypt over industrial powerhouses
such as China, according to Ortzelli, because of convenience and vicinity.

"China is not cheap; it has almost the same production costs as Egypt, but it is 20 hours away from
Turkey," he said. Ortzelli added that Turkish investors in Egypt can export to Europe based on the
EU-Egypt Association agreement; sell to the US because of QIZ; tap Arab countries according to
the Greater Arab Free Trade Agreement (GAFTA); and target African markets under the umbrella
of the Common Market for Eastern and Southern African (COMESA).

Nonetheless, the Turkish diplomat complained that despite increasing interest, perennial Egyptian
bureaucracy continues to hinder investment. Basic requirements such as work permits and residency
documentation for non-Egyptian employees constitute a tortuous task, and there is little
coordination between the government bodies involved. Three Turkish companies operating in Egypt
have complained of this problem, which contradicts QIZ stipulations since it allows for 25 per cent
of workers to be foreign. The highly-publicised 72-hour period for the establishment of a new
company appears to be another myth, as reported by nine Turkish businesses which waited three
months for a permit from the Ministry of Interior.

Despite these and other setbacks, however, Oztelli believes that the investment climate in Egypt is
moving in the right direction. "I think that in the past, the person on top seemed to be the only one
who is sincere in helping investors," he asserted. "Today, we are starting to see lower level officials
who are also willing to help."
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