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Prime for investment, COMESA countries must be more than export market - Daily News Egypt

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Prime for investment, COMESA countries must be more than export market

Egypt's African offices will maximise benefit of storage areas for Egyptian exports, making them serve as starting points for the distribution

Egyptian investors are seeking further inlets into the markets of neighbouring African countries under the parameters established by the framework of the Common Market for Eastern and Southern Africa (COMESA).

To this end, Plenipotentiary Trade Minister of the Egyptian Commercial Services (ECS) Ali Al- Leithy said that Egypt will inaugurate new representational offices in five African countries in 2016 to better promote its national products in African markets, especially COMESA member states.

Al-Leithy recommended that the Egyptian government and investors change the way they perceive Africa as only a market for exports since it offers great potential for investment as well. The government aims for an increased presence in African markets as a supplement loses it has faced in Arab countries, who have been negatively impacted by recent political events.

What is the volume of trade exchange between Egypt and COMESA countries in 2014 and what is the target for 2016?

Exchange between Egypt and COMESA countries in 2014 amounted to about $2.7bn. Egyptian exported goods worth over $2bn including plastic products, ceramics, and electrical appliances. Egypt also imported tea, coffee, copper, and livestock worth about $700m from COMESA member countries in 2014.

Egyptian exports to COMESA countries accounted for about 8% of its total exports in 2014. Although the percentage is not large, it is expected to increase in the upcoming years, especially as COMESA markets absorb significant proportions of Egyptian exports.

For instance, COMESA markets receive about 25% of Egypt’s exports of ceramic products, 10% of plastic products, 35% of sugar production, 20% of fruit and vegetable exports, 25% of cement and paper exports, 18% of dairy exports, and 15% of medicine and glass exports.  Various engineering products have an export percentage that ranges from 8% to 25%. These are impressive proportions that must be preserved and increased.

africa 2016What are the main countries that cooperate with Egypt in Africa?

A large part of Egypt’s trade with African countries is with COMESA markets, particularly Sudan, Ethiopia, Kenya, and Zambia. In 2013, Egypt’s exports to the three trade blocs—COMESA, South African Development Community (SADC), and the East African Community (EAC)— amounted to $2.7bn, while it imported goods worth $810m from all 25 African countries over that year.

Collaboration among the African blocs will open the doors for Egyptian exports, especially as the SADC countries of Angola, Namibia, Mozambique, and Botswana, import goods worth over $50bn every year.

Currently, Egypt has little penetration into those markets. The country mainly imports machinery, equipment, vehicles, and electric appliances.

What are obstacles that hinder increasing trade with African countries?

There are several barriers to increase trade with African countries. We do not have data on those markets. This will be the main task of the new Egyptian Commercial Services offices stationed in these areas.

Logistical constraints, which relate to the lack of reliable trade and transport routes, also hinder cooperation. But we are pursuing a solution. In light of the Ministry of Industry and Trade’s focus to maximise the benefit from global companies like the French Bollere manage a number of African ports so as to facilitate exporting to the markets, especially the west coast countries.

A number of logistical centres will be established to solve the problems issues related to the lacking representatives and agents in Africa and promote Egyptian products. These centres will include storage and exhibitions areas to display samples for direct sale.

How do you see the African market?

It is wrong to look at the African market exclusively as an export market. This traditional view has now changed. The state tends to focus more on industrial and development projects in African countries to reach common gains. In addition, we work to increase the participation of Egyptian companies in infrastructure projects.

Some Egyptian companies aim to work with countries in the African bloc to take advantage of lower production costs and proximity to other African markets. There is a number of successful models of Egyptian investments in African countries. The number of Egyptian investment projects in Ethiopia stands at approximately 140 projects, whether financed entirely by Egyptian capital, or through Ethiopian-Egyptian joint investment projects. These projects are estimated at nearly $1bn.

There are also successful Egyptian investments in Zambia in the industrial sector as well as contracting and construction.

Why is COMESA disabled on most Egyptian exports to Africa?

On the contrary, the agreement is 100% activated. Egyptian exports to Africa’s COMESA countries increased to $2bn in 2014 compared to $50m in 1998, which is when Egypt joined the COMESA agreement. Bilateral trade volume between COMESA’s nineteen countries has been steadily growing and increased from $8bn in 2004 to $22bn in 2014.

Meanwhile, there are 14 member states that applied for full exemption from all import duties from other member states through the free trade zone of COMESA. Egypt, Eritrea, and Uganda apply 80% exemptions on customs duties according to the principle of reciprocity. Egypt and Ethiopia share a customs reduction of 10%. Swaziland and the Democratic Republic of Congo do not apply any customs cuts since they heavily rely on the income generated from tariffs.

Egyptian exports have benefited from the structure of imports of the member states of COMESA, where these countries seek importing high-quality Egyptian products such as food, medicine, engineering industries, home appliances, building materials, aluminum, iron and steel, and leather products. These markets have also been a good source of many low duty-free products for Egypt since most COMESA countries rely on exporting raw materials for key commodities such as copper, tobacco, coffee, tea, raw leather, meat, and sesame.

How many offices does ECS aim to open in the upcoming period?

We will open five new offices in Côte d’Ivoire, Ghana, Uganda, Tanzania, and Djibouti. This will raise the number of ECS representative offices in Africa to 11, including those in Ethiopia, South Africa, Zambia, Nigeria, and Senegal.

This is part of the Ministry of Industry and Trade’s strategy to focus on African markets and benefit from preferential trade agreements. Our offices in Africa will work to maximise the benefit from the establishment of storage areas for Egyptian exports and make this a starting point for the distribution of our products to neighbouring countries and to enter into partnerships with international and African companies operating in fields of business process services. These fields include those of transport and logistics to promote trade. We will also intensify trade missions, promotions, and specialised exhibitions of Egyptian products, especially electrical appliances, chemicals, pharmaceuticals, food products, and construction materials.

What is your evaluation of the African bloc agreement and why have we not seen any concrete steps following the signing of the agreement last June in Sharm El-Sheikh?

The agreement is very important for Egypt and Africa. It is an important step on the road to achieve African integration and reach an African free-trade zone and customs union. However, it is not limited to the promotion of trade relations between COMESA countries since there are other objectives of the bloc of equal importance. This includes cooperation in planning and implementing infrastructure projects especially in the construction of roads, railways, ports, airports, and power projects.

It will also contribute to the establishment of the bloc and strengthening coordination between member states to serve their interests in the multilateral trade negotiations. Moreover, it will improve the investment climate by adapting applicable investment incentives and bring ruling governments together.

The integration of the three main African blocs into a single economic entity is a new step in Africa, where the 26 countries of the bloc account for 48% of the member states of the African Union. The total GDP of the bloc is over 60% of the total GDP of Africa. It also accounts for about 57% of the total population of the continent. Intra-regional trade between member states has increased from $30.6bn in 2004 to $102.6bn in 2014. This indicates the volume of trade doubled more than three times in the span of 10 years, which reflects great potential for further cooperation. The agreement must also be ratified by parliaments of the member states prior to its implementation.

What are the obstacles facing the activation of that agreement?

There are no technical obstacles to activating the agreement but there are general challenges such as the low-quality infrastructure and high cost of freight. Once the agreement comes into force, 60% of the items and terms will be immediately written. This ratio should reach 85% between five to eight years. The remaining 15% will be agreed upon through consultations among member states.

There are a number of technical issues that are still under discussion and negotiation between parties privy to the agreement, including rules of origin. There should be positive results about unifying rules of origin of the three blocs in the first phase of the regional integration, which is currently being discussed. The agreement suggested applying a regulation that stipulates that 35% of components must be of local origin. Mechanisms to resolve disputes and arbitration settlement as well as the issue of free economic migration are still ongoing topics of consultation.

Topics: africa COMESA Export

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