With a major agreement between Egypt and South Korea to supply Egypt with trains for its underground metro lines signed on Monday and the recent Korea-Egypt Manufacturing Business Partnership event encouraging Korean companies to invest in Egypt, trade, investment, and cultural relations between Egypt and South Korea are growing, Director-General of the Korea Trade-Investment Promotion Agency (KOTRA) Sukho Lee told Al-Ahram Weekly.
How has the Korea-Egypt Manufacturing Business Partnership 2023 affected trade and investment relations between the two countries?
The Korea-Egypt Manufacturing Business Partnership event held recently is the first one-to-one business consultation seminar about manufacturing industry to be held in Cairo since the Korea-Egypt Summit in January 2022.
It is an export-directed investment promotion event in which Korean companies wishing to enter Egyptian manufacturing industry got the opportunity to consult with potential Egyptian partners and Government authorities, including the Egyptian Ministry of Trade and Industry, the General Authority for Investment and Free Zones (GAFI), the Arab Organisation for Industrialisation (AOI), and the National Organisation for Military Production (NOMP).
The event was held to support Korean companies wanting to invest in Egypt and to resolve any obstacles or management difficulties that may stand in their way. Sectors appealing to Korean companies for investment in Egypt include electronics, veterinary vaccines, and transportation, among others.
Trade and investment relations between South Korea and Egypt are growing at record high rates. What are the main reasons for this?
South Korea and Egypt have been partners on the economic level since before the establishment of diplomatic relations in 1995. KOTRA, which is affiliated to the Commercial Section of the Korean Embassy in Egypt, established a presence in Cairo in 1974, 21 years before the establishment of official diplomatic relations. It has been helping with the promotion of trade and investment between the two countries, with many trade delegations coming from Korea to Egypt to encourage and support Korean investors looking to invest in Egypt or supporting existing investors.
One of the main reasons why trade and investment relations are growing is that many Korean Companies have considered Egypt as a base for investments in the Middle East and Africa, leading Korea’s cumulative investments in Egypt to reach $817 million in 2022.
Consequently, the trade volume has increased along with the investment volume. In 2022, the bilateral trade volume reached a high level of $3.1 billion, with exports from Korea reaching $1.4 billion and exports from Egypt to Korea reaching $1.6 billion.
Exports from Egypt to South Korea grew last year, mainly due to rising natural gas and naphtha, an increase of 705 per cent and 107 per cent, respectively, compared to 2021.
These two items contributed to increased Egyptian exports to Korea last year.
Other products exported from Egypt to Korea include food products and food waste like sugarcane waste that is used in Korea to feed livestock, in addition to minerals and cement.
Egypt imports semiconductor chips, synthetic resin, and auto parts from Korea, and these work as feed items for Korean companies operating in Egypt.
Are there other areas of cooperation between Egypt and South Korea?
Relations between Egypt and South Korea include trade and culture as main sectors of bilateral cooperation, with culture being an important part with a growing popularity among Egyptians of especially Korean drama and music. There are also a growing number of Egyptian students enrolling into the Korean Language Department at Ain Shams University’s Faculty of Literature in Cairo, which was established in 2005.
However, economic cooperation is the main area of bilateral relations. Korean companies invest in Egypt in many sectors, most importantly in the textiles, electronics, defence, transportation, and chemicals industries. An agreement to supply Egypt with 320 trains for its underground metro lines was signed on Monday. Egypt’s Ministry of International Cooperation signed the $460 million deal with the Korean Economic Development Cooperation Fund (EDCF) to implement a project for co-manufacturing and providing trains for the Cairo Metro lines 2 and 3.
Korean companies are also involved in the modernisation of the railways’ signalling systems, with a first phase from Nagaa Hamadi to Luxor and a second phase from Luxor to Aswan. The project is currently in the feasibility study phase.
What are the main obstacles that hinder Korean investment in Egypt?
There are some difficulties taking place not only in Egypt, but also globally. There have been two global economic disruptions in the shape of the Covid-19 pandemic and then the Russia-Ukraine war, which has caused high inflation, uncertainty, and the disruption of normal economic activities.
Korean companies looking to invest or expand existing businesses in Egypt have discussed with Egyptian officials issues like subsidies on exports, the value-added tax (VAT), and the required licences to finalise investment-related procedures. Additionally, one of the main issues currently is that Korean companies operating in Egypt are having difficulties obtaining the foreign currency they need to buy parts and raw materials for their factories.
Some Korean companies are struggling to bring the needed quantities of spare parts and raw materials into the Egyptian market. The problem has led many factories to reduce their production capacities.
The remittance issue and the prolonged process of establishing a business and obtaining the needed licences are main problems facing Korean businesses in Egypt. We would appreciate any efforts to improve the investment environment in Egypt and solve these issues as soon as possible. And I witness that the Egyptian government is working hard to make Egypt a better place to do business.
* A version of this article appears in print in the 15 June, 2023 edition of Al-Ahram Weekly
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