Egypt. Reforms are blowing fresh wind into the sails of the economy – that is picking up speed despite the political swell.
The desert as living space
In antiquity, Egypt was the granary of Rome. Today more than half of the food has to be imported. The productivity in agriculture is quite high, although only a fraction of the land is habitable and arable. Nevertheless, production cannot keep up with the high population growth – and even the cities are becoming too small. Egypt's recipe against this: The population of the desert.
"The population is growing by more than two million people per year. This means that every year a large Vienna is needed," explains Martin Woller, the Austrian economic delegate in Cairo. "The population is currently concentrated in the Nile delta. This is what they want to change." Twenty completely new cities will be built in the next few years, including a new, still nameless capital about 50 kilometres east of Cairo, which will once accommodate five million people. The raw material-rich areas in the south of the country are expected to be more populated, as well as the Mediterranean coast, where the 3 million metropolis of New Alamein City is being built.
Reforms are effective
Such an investment programme naturally calls for international stakeholders who see a great opportunity here. Especially since the economic environment has improved significantly in the second half of this turbulent decade. "The last ten years have been very exciting. But reforms have been implemented for three to four years now, and we are now seeing the first results," says Woller. "Of course, analysts and companies around the world notice that Egypt is now doing a lot better – so Europe has to be careful not to be late."
Egypt rose also in the OECD country classification this year, as country expert Ines Baumann from OeKB reports: "Due to the overall more favourable outlook Egypt has improved from category 6 to category 5". Baumann also emphasises the "constant growth path" which will bring economic growth of around 5.5 percent this year. She also praises the reforms of recent years: "These should strengthen the economy in the long term and increase investor confidence. She also points to the variety of foreign exchange earnings: "Beside to the Suez Canal, oil and gas exports and tourism also generate income, in addition to private remittances from Egyptians abroad. A small drop of bitterness for Baumann: The foreign debt is rising strongly due to the high investments. "On the other hand, the trade deficit should decrease in the upcoming years."
Not that solvent yet
The economic delegate Woller sees opportunities in many sectors for Austrian companies, especially since the infrastructure of the existing cities has to be expanded: "For example, Egypt still has a lot of catching up to do in environmental technology and water resources management. However, there are generally few economic sectors that can be ignored. The situation for consumer goods is still difficult at the moment: After the exchange rate of the Egyptian pound was released in 2016, the currency devaluated sharply against the dollar and the euro. Although this boosted Egypt's own export economy, it weakened the purchasing power of the population for imported products. "Sooner or later, however, consumer demand will also recover," says Woller.
However, the devaluation of the local currency is generally a challenge for Austrian export companies because many are now struggling with high prices in Egypt. "Austrian companies need to identify those projects that are financially stable and where the focus lies on quality," says Woller. "Good quality is in demand in Egypt, but the price level of cheap suppliers – this is increasingly becoming a challenge for European companies".
Paper and pharmaceuticals in demand
The trade volume between Austria and Egypt is currently approaching its 2016 peak again. "In the first half of 2019, Austrian exports increased by more than 15 percent over the previous year to 143 million euros," reports Ines Baumann of OeKB. "Imports increased even more – on a percentage basis, but at a lower level – to 41 million euros. Austrian exports include not only the "usual" goods such as machinery but also paper and pharmaceutical products.
Some Austrian companies also have subsidiaries in Egypt. For example, Alpla took over a manufacturer for plastic packaging north of Cairo in 2015. Agrana has also been operating a fruit preparations joint venture for the dairy, bakery and ice cream industries since 2010.
The Harvard Center for International Development ranks Egypt among the world's top 5 growth markets until 2027. Anyone who wants to snack on this cake shouldn't hesitate for long – but shouldn't rush either. "A fast, unique business is difficult to achieve. Similar to other Arab countries, the relationship culture plays a fundamental role" explains economic delegate Martin Woller. "It's also worth taking a closer look when choosing a partner and taking a longer time to consider – and not choosing the first one who promises everything."
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Using Nubia's sun
The Oesterreichische Entwicklungsbank (OeEB) is co-financing the world's largest photovoltaic project in Egypt's desert.
Egypt's potential for solar energy is huge, but it is still barely exploited. This is expected to change soon: The government has set the goal of increasing the share of renewable energy in electricity production to 20 percent by 2022. Numerous solar projects are now being developed in the Benban Solar Park, a desert area near Aswan in the south of the country. Photovoltaic power plants with a total capacity of 1,650 MW are to be installed in the 37 square kilometre area. In comparison: Austria's currently largest photovoltaic plant in Flachau has a rated output of 3,2 MW. OeEB is participating in three photovoltaic plants with a financing of 20 million US dollars through the "Nubian Suns" programme of the IFC (International Finance Corporation). Through Nubian Suns, a consortium of international development banks is providing a total of 653 million dollars for the Benban Solar Park. This will finance the construction and operation of 13 solar projects with a capacity of 752 MW. In the future, they will generate clean electricity for around 350,000 households.
Egypt in numbers*
Egypt's high culture developed around 3,000 B.C., when a common kingdom of Upper and Lower Egypt emerged. With the end of the New Kingdom (around 1,200 B.C.) the glorious times under famous Pharaohs came to an end. In 332 B.C. Alexander the Great conquered Egypt from the hated Persian foreign lords, founded Alexandria and initiated the Greek-Roman period. The wealth of the country also lasted during the Eastern Roman-Byzantine phase (395 to 640 A.D.) as well as after the subsequent conquest by the Arabs and only disappeared when the country was already part of the Ottoman Empire (from 1517). Due to the expensive construction of the Suez Canal (1859-1869), the lenders gained influence in Great Britain and France before the British occupied Egypt in 1882. The country has been sovereign since 1936. Wars against Israel in 1967 and 1973 were followed by a peace treaty in 1979. From 1981 to 2011, Hosni Mubarak ruled authoritarian. The Arab Spring brought the soon unloved Muslim Brother Mohammed Mursi to power until July 2013, when Colonel General Abd al-Fattah as-Sisi putsched himself to the head of state.
*source: WKO, CIA World Factbook
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