Egypt Business Network

Egypt Business Network

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  • Dr. Nilgün Birgören
    Dr. Nilgün Birgören    Premium Member   Group moderator
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    Egypt-UK Trade
    "Sir Andrew Cahn, chief executive of UK Trade & Investment, says British firms have a new interest in doing business in Egypt."



    While international trade has languished in the wake of the global economic downturn, business between the United Kingdom and Egypt is still thriving.

    In the first two months of 2009, UK exports to Egypt grew 11% to £140 million (LE 1.3 billion) compared to the same period in 2008, according to UK Trade & Investment. The government body, which promotes investment and helps British companies go international, said Egypt’s UK-bound exports also increased, though less dramatically. The increases are a surprise given the global recession and the fact that the UK economy shrunk 2.4% in 1Q2009.

    Sir Andrew Cahn, chief executive of UK Trade & Investment, says one of the factors driving trade growth is an Egyptian economy that is slated to expand by about 4% this year, a number that has UK businesses seeing new potential here. In a bt exclusive interview, Cahn discussed how his organization plans to increase links between Egypt and its largest foreign investor. He shared his thoughts during a visit to Cairo last month. Edited excerpts:

    Can you describe the role of UK Trade & Investment and the goals of your mission here?

    Part of what we do is help British companies export. We also track investment in Britain. Egypt is a very important market for us and [one] I feel has been very successful in recent years, though there’s still scope to do much more.

    [In Britain], many companies have a low level of understanding of the Egyptian market. I wanted to come here and see [the situation] for myself so I can go back to Britain and promote opportunities in Egypt.

    There is also a historical connection [between the two countries], which is always a plus and a minus. But I think there is sympathy and understanding between our two cultures. Many Egyptians have homes in Britain, educate their children in Britain and there is a surprisingly large British community here. Last night I spent time with the British Business Group. I also gave a speech yesterday to the British Egyptian Business Association [BEBA] and spoke to members of the Egyptian British Business Council, which is based in the UK and Egypt. There are a lot of institutional structures in place as well as lots of Britons in Egypt and Egyptians in Britain. Though our trade is healthy, it could be much bigger.

    Why is Egypt such an important market for UK investors?

    Egypt is important because it’s a growing market. We’re in the middle of a global economic downturn. All OECD [Organization for Economic Co-operation and Development] countries are contracting, but Egypt is growing. So it is a market with potential for us. [...] [Trade figures] are up for the first three months this year, so [normally] we would predict another record. But these are turbulent, difficult times. It’s quite difficult to know what’s happening in the marketplace. I’m reluctant to predict, but I think we’ll have another good year.

    What are some other countries in the region the UK considers important markets?

    In North Africa, Libya is an important country for us now because of its oil and gas [reserves]. British companies are heavily involved in the exploitation of oil and gas [there]. We also have a fair amount of business with Algeria, again mainly oil and gas. The rest of North Africa isn’t a lead market for the UK. The proximity of France and Spain make them much more natural trading partners. However, [overall] the Middle East is a key market for the UK. We have a great deal of trade with the Gulf countries; Dubai perhaps is the hub for Britain. There are 250,000 Britons living in Dubai, an extraordinary figure. Most are transients, but they’re there. We have a large amount of trade with Saudi Arabia, Bahrain, Qatar and Abu Dhabi.

    You met with Minister of Trade and Industry Rachid Mohamed Rachid and Minister of Communication and Information Technology Tarek Kamel. What did you discuss?

    One of the themes in my conversations with the ministers was increasing Egypt’s human capital in terms of skills. This is absolutely essential as the economy develops and [the UK] can contribute somewhat to that. I spoke to Minister Rachid on Monday and we had a very good conversation about how we can increase trade. Trade is already pretty good and had been increasing. British exports to Egypt increased 28% last year. Already there is an 11% increase in the first quarter of this year and a 1% increase in Egyptian exports to Britain. Exports are continuing to increase this term, which is surprising given the conditions. So trade is doing well, but we want it to do better.

    Yesterday, I had a meeting with Minister Kamel, which was an excellent meeting. I had just visited Vodafone Egypt where I was able to see the contribution that a British multinational can make to the Egyptian telecommunications market. We were able to talk about how Britain can contribute to the development of the ICT market in Egypt and, indeed, how it can be a two-way contribution. We discussed the importance of innovation. I’ve given several speeches during this trip and the recurring theme has been that countries, economies and businesses need to innovate in order to survive in an increasingly competitive world. Globalization is not going to stop because of the economic downturn. The only way that companies can thrive is to innovate.

    We think that British companies like Vodafone can bring innovation and new technologies here. Another thing that I believe in strongly is that British companies operating in Egypt have a duty to help increase the skill levels of Egyptians. I was very pleased to award certificates at a ceremony here on Monday to 35 Egyptian employees from [technology and engineering group] Invensys. The company has a scheme to train up their engineers to global standards. There are about 500 people in the program. These [35 engineers] were the first to get their certificates. It was a mark of great pride to [see] that Invensys is contributing to [increasing the] level of skills in Egypt.

    What are some of the contributions that UK-based companies have made here?

    I visited the BG Group integrated liquefied natural gas [LNG] plant up in Idku, just to the east of Alexandria. It’s absolutely state of the art and has contributed hugely to Egypt’s balance of payments trough the export of LNG — and it’s run primarily by Egyptians. Again, I’m very pleased that BG has [trained] Egyptians so they can actually run the plant, which is very sophisticated in a technical sense and upholds extraordinarily high health and safety standards. BG also has a very effective corporate social responsibility program.

    Oil and gas are clearly already successful here. There are many more reserves to be discovered and exploited and British companies, such as BG, Shell and BP, are clearly major contributors.

    I was enormously impressed by Vodafone. I think what they have brought to Egypt is technological sophistication and innovation, new products, as well as new ways of doing business. They raise the competitive bar, which is good for Egypt. It’s also good for Vodafone.

    Education is another area I would highlight. Britain has four of the top 10 universities in the world and a hugely vibrant educational sector, both at the tertiary and secondary levels. We look forward to doing more with Egypt both in terms of Egyptian students coming to Britain, but also, I hope, in terms of doing more here in Egypt. I would also like to see, in due course, the development of other sectors like retail and creative services as this is where Britain is particularly strong.

    Britons are also [proficient] in the professional sector; [they are] lawyers, accountants, insurers and they, of course, work in the finance sector.

    I visited Barclays in Alexandria where they have opened what they call their flagship branch. It is a wonderful facility for business people to come in and do business. Barclays has raised the bar for domestic and international banks by providing quality services.

    Trading across borders and getting companies to invest across borders is a valuable thing. It raises the competitive bar and forces domestic companies to do better because overseas companies offer new products, technologies and approaches, forcing domestic companies to respond. And that’s not just true for Egypt. We in Britain positively welcome foreign investment precisely because we know that it forces British companies to try harder.

    What are some of the challenges companies based in the UK face when doing business in Egypt?

    There are positives and negatives, as always. The positives are that there is a growing economy and Egyptians are very good people to do business with. You can establish relationships of trust and friendship that continue for many years.

    There are, of course, some downsides. Sometimes investors find that fees, taxation and regulatory arrangements change retroactively and that is very bad for investor confidence. It’s also important to be able to have complete confidence in the legal system if there is a dispute. In business there are disputes, that’s just part of life. But they must be resolved, fairly and absolutely according to the law. There are areas of some concern there.

    Levels of taxes of course are always a worry and there are issues about infrastructure, which you have in every country. But overall, I do not get [many] complaints [from business or associations]. What I would say is that the government has been following a liberalizing trend in recent years and it’s very important it continues. I think really good results have flowed from the Egyptian government’s decision to be investor friendly and that’s been beneficial for both the Egyptian people and the economy.

    How has the UK responded to the £20 billion (LE 184 billion) stimulus package approved at the end of last year? Are there signs the recession is nearing its end?

    Britain has been severely affected in the same way that most OECD economies have. There are certainly signs now that the worst is over and that we’re beginning to see some stability. The banking sector has been stabilized and is now well ordered. I think we can take pride that [British Prime Minister] Gordon Brown took the lead in recapitalizing banks, which other countries then followed. We also take pride, incidentally, in the G20 summit, which I think led the way in defining the international actions that need to be taken globally to drive recovery.

    The British stock market has bounced back by 30% in the last three months. Since stock markets are usually reasonably good predictors of the future, that’s a very encouraging sign. Economic activity is beginning to pick up but there’s no doubt that we have suffered a very significant reduction in our growth over the past 12 months. Still, some sectors are really quite buoyant.

    Oddly enough, the financial sector is doing rather well and a lot of confidence has come back. Some financial services companies are now hiring people again. Some other sectors are in great difficultly, the car sector being the obvious one. Britain is not alone in this, of course.

    Lastly we face a real challenge over the next few years in handling the fiscal situation. Now, of course, it was right and proper to have fiscal stimulus. But of course it leaves a really serious challenge in how you get your budget back into a healthy state and that’s going to be the huge political challenge in the next 12 months.

    Has the recession in the UK affected British trade and investment in Egypt?

    I don’t think it has. If anything, it’s made investment in Egypt more attractive. The Egyptian economy is still growing, perhaps only at 4%, which is small compared to last year, but it’s still growing in real terms.

    What project ideas are you bringing back to the UK on your return?

    It’s become clear to me that we must organize more missions between the two countries. When British companies come out here, they see the opportunities and business is done. I’d like to see more missions in the educational sector.

    I would also like to see more links between Egyptian legal firms and British legal firms and Egyptian accountants and British accountants, because Britain does lead the world in those sectors. I think that we can contribute to the development of these professions in Egypt.

    The British Standards Institution [BSI] is here under a European commission partnership program to help Egypt develop its standards, which will promote trade. What happens at the moment is if you want to export fruit and vegetables or sophisticated equipment to Europe, Egypt has to get a European agency to come and validate its standards and quality. That’s wasteful from an Egyptian point of view. If Egyptian agencies can be brought up to European standards, it’s beneficial for Egypt and Europe. It reduces costs and most of all increases standards of operations here and changes the mentality. That’s a really good piece of work the BSI is doing here. I very much hope that will lead to further work for BSI. It’s that sort of thing I think is most productive.

    I also have hopes that we can see even more British creative professions like design companies coming out here. There is a very vibrant Egyptian wealthy class which like quality products. Britain’s a great source of those and I think we should bring more here. Another huge contribution Britain makes to Egypt is tourism. We have over 1 million British tourists here every year — that’s a huge invisible export for Egypt. I’ve come here myself as a tourist and Egypt has to constantly strive to increase the quality of its services to tourists, particularly during the downturn. Long distance tourism is decreasing and Egypt needs to work harder to retain its tourist numbers. There is so much here to attract the tourist, it’s extraordinary. Today, quality of services needs to be at the right level.

    In Britain we have positioned ourselves as a hub or springboard for companies to invest in the rest of the world. Our pitch to foreign companies is: Come to Britain and then do business in Europe. I think the most interesting thing that I saw is that Egypt has the potential in the same way to be a hub. Geographically, it’s very well situated. It’s not quite Africa or the Middle East or even the Mediterranean — it’s a bit of all of these. So geographically Egypt is well positioned to be a hub. It has good transport infrastructure, [though it] could be better, and it has a workforce capable of creating this hub.

    The challenge for Egypt, which I think we in Britain can help to overcome, is that the workforce still needs to increase its skill level and sophistication. I think transport infrastructure, aviation, road and shipping links all need to be improved. The government needs to make sure the regulatory arrangements are attractive for companies to come. Dubai has worked very hard on its infrastructure, regulation and skills. I’m not suggesting for a moment Egypt should become like Dubai, but there are various things the government can do to make Egypt a more attractive location as a hub for companies. The enduring conclusion that I go away with is that there is that potential. bt

    Quick Facts

    The UK is the largest foreign investor in Egypt. Foreign direct investment in FY2007/08 totaled $3 billion (LE 16.8 billion), up from $16.9 million (LE 94.6 million) in FY2003/04. Most of the investment is in oil and gas, however, UK firms have also invested in sectors such as financial services, tourism, pharmaceuticals, telecommunications, textiles and consumer goods. Other sectors the UK is potentially eyeing for investment include education and skills, ports and logistics, railways, water and wastewater, agriculture, chemicals, the environment, fire and security, healthcare, and ICT and renewable energy, according to UK Trade and Investment. Though trade with the Middle East is down compared to last year, the UK also saw growth in exports to the UAE, Jordan, Lebanon, Libya, and Syria during the first two months of the year.


    Source: Financial Times
    • 05 Sep 2009, 3:47 pm