Since 2004, when Egypt struck an Association Agreement with the European Union (EU), bilateral trade in goods has tripled. The EU is Egypt’s most important export market, absorbing around 30 per cent of Egyptian exports, and is the number one investor in Egypt. According to EU statistics, roughly three quarters of FDI inflows to Egypt originate in the EU.
The EU is a strong supporter of the Egyptian economy, with ongoing assistance in the form of €1.3 billion in grants financing a wide range of development projects covering agriculture, irrigation, and urban transport.
In an exclusive interview with Al-Ahram Weekly, the head of the EU Delegation to Egypt, Christian Berger, who assumed his role in September 2020 amid the ongoing Covid-19 crisis, speaks in detail about the current EU portfolio in Egypt, touching upon political and economic issues of mutual interest.
What are the key features of EU-Egyptian relations?
The EU and Egypt have had a long and close relationship over many years. The EU has relationships and engagements with all neighbours in the Mediterranean and North Africa regions but Egypt is always at the centre of the EU’s relationship with the region’s countries.
Two documents spell out the overall spectrum of our relationship: the 2004 Association Agreement and the 2017 Partnership Priorities. In the current phase, I would add of course our joint fight against the Covid-19 pandemic, its socio-economic impact and ways of overcoming it, including the rollout of a vaccine.
During the first wave of Covid-19, urgent measures were taken by our member states and our neighbours that included many necessary restrictions aimed at containing the pandemic, including the shutdowns, the lockdowns and other associated measures.
At the same time, we saw how European countries and our partners, through working together and assisting each other, have managed to mitigate the impact of Covid-19 and address the socio-economic repercussions of the pandemic, making sure that trade can continue, jobs are secured, and preparations for recovery are launched.
Over the past year we have seen how working closely with our neighbours and partners, including Egypt, is critical in such a time of crisis to deal better with its repercussions, especially its socio-economic impacts.
How has the EU supported Egypt since the onset of the pandemic?
There are broader aspects and more specific and concrete ones in this regard. In May 2020, the EU together with other members of the G20 launched a campaign to collect funding in order to find a vaccine, then we started to contract companies to develop the vaccine and that was for the whole world, including Egypt for sure.
Meanwhile, in December 2020, the EU agreed to provide an €89 million support package for Egypt’s Ministry of Health to be used in Covid-19 related activities.
Moreover, the EU signed in January a three-year “Support to Covid-19 Response” project agreement worth €6 million with the Ministry of Social Solidarity, in collaboration with the UN Development Programme (UNDP), that aims to deal with the impact of the pandemic on the elderly and the vulnerable groups.
Another important aspect was that despite the lockdowns and restrictions trade would continue. For example, we introduced the concept of green lanes that allowed trade to continue within the EU but also with our neighbours. Despite a global slowdown we noticed an increase in trade between the EU and Egypt.
How is the EU supporting Egypt financially?
Grants are the more traditional support that the EU provides Egypt, alongside loans that are provided through two European financial institutions, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).
The two kinds of support have been very important for Egypt, particularly amid the crisis, especially that the EIB’s work focuses on supporting small and medium-sized enterprises (SMEs), an engine of employment and the economy in general, through making sure that SMEs have access to financial resources to finance their activities.
The latest tool has become what we call blending, a combination of over €620 million in grants that has leveraged a portfolio of approximately €7 billion in terms of investment supported by the EU’s Neighbourhood Investment Plan (NIP), which includes Egypt, along with Jordan, Lebanon, Morocco, Palestine and Tunisia, among the NIP’s Southern Neighbourhood region’s countries.
The NIP has managed to leverage around €9 billion in loans for Egypt so far.
What are the EU’s plans in Egypt over the medium and long terms?
We always cooperate closely with our partners on the basis of their own goals, spelt out in the government’s development plans. So, in Egypt, it is the Sustainable Development Agenda “Egypt’s Vision 2030”. In more general terms we will present ideas this week on how we see cooperation between the EU and the Southern Neighbourhoods.
And there is the broader international plan of the sustainable development goals (SDGs). Egypt and the EU are very strong supporters who want to make sure global SDGs are met.
Investment, trade and economy are key elements for our mutual engagement. These include aspects of human development, involving education, vocational training and making sure that women have access to business opportunities. Other key aspects are promoting the concept of a green economy, business enhancement, and broader issues like governance and regulations to enhance the business environment and attract more investments.
This is fully in line with our 2017 partnership priorities with Egypt and its three big clusters: a sustainable modern economy and social development; foreign policy; and enhancing stability.
How do view the investment environment in Egypt?
Egypt is very attractive for European investments. It has the second largest foreign direct investments (FDIs) from the European Union in the Mediterranean with about €39 billion euro in 2019, following Turkey. I think these investments are the biggest in Africa as well.
That shows how Egypt is attractive for foreign investments, and I think this is due to the well-developed infrastructure and a young, well-educated population. In addition, there are a lot of initiatives that the government launched over the last few years that aimed to improve the investment climate.
There are European business institutions and chamber of commerce that see Egypt is very attractive for their investments.
What kind of measures does Egypt need to take to create a more welcoming climate for foreign investors?
There are many things that are already happening. There is a lot of work on the regulatory framework. For instance, the procedures of opening a company and registering a business are easier. And issues such as tax payment are much easier. What else could be done is to work on the identification of feasible investments for possible EU investors. Direct communication and promotion could be a way of doing this. What the companies look for when deciding to start a business in a country is a safe environment, easy procedures, fair competition, and a system of dispute settlement.
How do you view the measures Egypt has applied to contain the pandemic and its impact on the economy?
Egypt has done very well in containing the pandemic compared to other countries in the region. It has managed to keep the right balance between measures that needed to be taken, but not impacting the socio-economic situation very negatively.
What is the total amount of trade exchange between Egypt and the EU?
Since the signing of the Association Agreement with Egypt in 2004 trade volume between the two sides has tripled.
In 2019, total EU goods exports to Egypt recorded €19.1 billion, while Egypt’s exports to the EU posted 8.3 billion. For services, EU exports to Egypt registered €3.6 billion while Egypt’s exports to EU countries were 6.2 billion. The overall trade volume is not bad but it can, of course, improve. We can do more going forward.
We are currently in discussions in Europe to shorten supply lines to minimise the impact of Covid-19 and overcome likely problems when taking measures to contain the pandemic. In this regard, the situation with Egypt is perfect. All these aspects speak in favour of strengthening Egypt as a production hub for EU countries.
To what extent will the UK’s exit from the EU affect the EU’s business relations with other regions like the Middle East?
All countries that inked association agreements with the EU, including Egypt, have signed a similar agreement with the UK as well. The principals are more or less the same. For us, it has not made much impact but of course it is important for them because they want to make sure that their trade with the UK will continue and will not be disrupted.
How do you see the future of cooperation in supporting Egyptian civil society?
The EU is following this very closely. The EU is the biggest supporter of civil society organisations around the world. The new legislation is an opportunity for the EU and Egypt, in the framework of our 2017 partnership priorities, to further support an enabling civil society environment and work together with civil society to contribute to the economic, political and social development process in compliance with the Egyptian constitution and respective national legislation.
Just to mention some of the most promising provisions, the new bylaws introduce a fund for capacity building for civil society organisations and to provide technical assistance. The engagement of volunteers is also foreseen, which may have a great impact in terms of youth motivation. We believe that civil society covers a wide range of issues; people who deal with daily issues and problems can, actually, contribute in solving these issues. Civil society is not limited to certain aspects. It covers a very broad approach.
The recently approved law [NGO law] is a critical step and makes it easier for these organisations to work. We will work with all concerned bodies to ensure that the implementation of the law is done in such a way that it helps in this regard.
The EU was invited as an observer to the Grand Ethiopian Renaissance Dam (GERD) negotiations. How do you view the obstacles in the way of the negotiation process?
We see these negotiations are very important and would like to see an agreement as soon as possible. We are ready to offer both technical and political support to help finding a mutually acceptable solution to generate jobs, wealth and prosperity for the three riparian states.
The EU has a strong interest that this issue to be resolved in the best manner for all concerned countries.
*A version of this article appears in print in the 11 February , 2021 edition of Al-Ahram Weekly