This October Egypt and Serbia have agreed on preserving the cooperative relations between Cairo and Belgrade with the aim of strengthening economic, social and cultural ties to live up to the level of political relations between both countries. The statement was released following a phone call on Monday 19th of October, between the Egyptian Foreign Minister Sameh Shoukry and his Serbian counterpart Ivica Dacic, where the pair discussed a number of regional and international issues of mutual concern emphasizing the traditionally friendly ties between the two countries as a good basis for improving cooperation at all levels.
Hard economic reform – Soft social impacts
Throughout its history, Egypt has witnessed several challenges and conflicts that hampered its path towards development. The country had to overcome all such difficulties, as evidenced by the developments since 2011, and cope with regional and international developments, making use of its unchallenged geographical situation that has contributed the most to its process of development. Starting from 2013, a new vision projected to overcome various accumulated economic hardships in Egypt via an unprecedented set of economic reforms focusing on dealing with root causes of problems and threats, in addition to a full clear perception of the future and its potentials. An economic reform program started in 2017 integrating social justice and redirecting subsidies to the neediest categories of the society who deserve it the most. One example to this is that transportation prices in Egypt are still considered among the cheapest worldwide (US $ 0.5 per subway ticket) in spite of the hike in prices and the high operation cost.
The people's confidence in the government policies of economic reform, in accordance with the IMF-recommendations and in cooperation with the World Bank helped absorb the short-term hardships related to living conditions and resulting from the state decision to lift subsidies. On the social level, the government since the re-election of President Sisi in 2018, focused on investing in the Egyptian citizen. This orientation by the president was translated into investing state potentials in the two sectors of health and education, which were the main focus of the presidential program for the re-election1.
Egypt’s economic development as a game changer
Notwithstanding the 112 years long traditional friendship and a fact that even today two countries fond memories of shared history, the readiness to translate excellent political relations between Belgrade and Cairo into the corresponding level of bilateral economic cooperation has become more profound since 2018.
According to Serbian Agriculture Minister Branislav Nedimovic intentions that Serbia has to have an alternative market in north Africa and after Egypt awarded a certificate that enables Serbia to export wheat to the Egyptian market, Egypt opened its market to Serbian wheat farmers for the first time in 30 years! In addition, the boost to bilateral ties became especially noticeable at the end of the same year, after Serbian Prime Minister Ana Brnabic held a meeting with visiting Egyptian Foreign Minister Sameh Hassan Shoukry when both agreed that economic cooperation between the two countries should be advanced by cooperation, encouraging investments and initiating joint projects. Moreover, during the meeting with Serbian President Vucic it was suggested to conclude additional intergovernmental agreements and create a legal basis to expand cooperation, due to the fact the Egyptian market of around 100 million people offers numerous opportunities for Serbian companies in agriculture, tourism, construction, water management and military technical cooperation.
Accordingly, already in January 2019 Serbia was on its way to penetrating the Egyptian market, with the intention to increase the agricultural trade of the two countries amounted to USD 26 million four times to over USD 100 million. Furthermore, strengthening relations between Egypt and Serbia in the tourism sector after at the beginning of 2020 the official Egyptian tourism delegation – headed by Mrs. Ghada Shalaby, Vice Minister of Tourism and Antiquities for Tourism and with the participation of H.E. Mr. Amr Aljowaily – Egypt’s ambassador to Serbia – held a series of meetings with the concerned governmental parties within the framework of Egypt’s participation for the first time as a partner country (a guest of honor) in the 42nd session of Belgrade International Tourism Fair, a number of positive developments took place in the bilateral relations within the tourism sector were discussed. This included the increase in the number of Serbian tourists visiting Egypt as their number doubled from 2017 till 2019, in addition to re-operating of direct flights heading to Cairo following a fifteen-year of suspension, and to Sharm El Sheikh and Hurghada following a six-year of suspension. H.E. Mr. Amr Aljowaily- Egypt’s ambassador to Belgrade – addressed the importance of cooperation in the tourism sector especially for strengthening bilateral relations in general, along with making good use of bilateral memorandums of understanding to activate its terms in the fields of technical cooperation, which benefits both countries.
Immediate results through improving indicators and encouraging results
The Egyptian government focused, in the last few years, on deficiencies in the Egyptian economic indicators and social problems resulting thereof. In that respect, the government successfully succeeded in decreasing the overall annual inflation rate for August 2020 to 3.4% compared to 4.6% in July 2020, and about 6.7% for the same month of last year, against the backdrop of the continued reduction in the prices of food, beverages, grains and other food products. It has also declared the short-term goal of increasing government investments for the fiscal year 2020-2021 by about 55%, compared to the previous year with a total investment of around 280 billion pounds (225 of it will be provided by the state budget) directing 10 % to drink water and wastewater treatment projects.
IMF reports showed a remarkable improvement of the economic conditions in Egypt since the beginning of the reform program including the liberalization of the exchange rate, acceleration of growth rates, reducing the external and financial deficit, increasing monetary reserves, a drop in the unemployment rate to 8.3%and in inflation which is expected to reach its lowest levels by the end of fiscal year 2020-2021, compared to 2011 rates. In its September 2020 report, credit rating institution Moodys praised Egypt's credit competence, rating it at B2 with a stable future outlook, associating it with a state's capability to cope with debt and diminish the overall financial requirements, while maintaining high levels of foreign reserve. Moreover, Goldman Sacks confirmed the ability of the Egyptian economy to cope with the Covid-19 repercussions, citing the return of about 50% of indirect foreign investments (estimated at US$ 10 billion) that left the country at the early stages of the pandemic crisis. Speculation for Egypt was positive for the end of the current year vis-a-vis inflation rates, the strength of the Egyptian pound and some touristic revenue despite the pandemic2.
Long term investments - infrastructure and productivity
Under President Sisi, Egypt successfully transformed its pattern of spending from a consuming to a productive one, conducive to building and further developing the necessary infrastructure (roads and bridges- reclamation and cultivating hundreds of thousands of feddans- providing housing for the poor and medium income population-establishing a new administrative capital- upgrading factories- developing slums...). The Armed Forces Engineering corps has been enrolled to implement national projects, being well renowned for its vast experience, cost effectiveness and ability to meet deadlines, in cooperation with the private sector, especially employing youth, in a way that generates job openings and transfer of knowledge and experience. In doing so, it has been subjected, like private companies, to rules and regulations that govern the market mechanism. In parallel with these mega projects, in productive sectors across various provinces, a digital transformation program aims at building a modern state governance structure. For the first time, the government is working on a precise digital registration of real estate and agricultural land with the aim to settle the problem of the eroding agricultural land and mitigate the crisis of the utilities resulting from the post-2011 random expansion of building on agricultural land.
The need for investment in huge government infra-structure projects, especially in building and construction sectors, was perceived as the engine for the Egyptian economic growth during the covid-19 crisis. Egyptian efforts in this regard have contributed significantly to a positive growth rate (3.5%) for the fiscal year 2019-2020, curbing at the same time the rise in unemployment rate associated with the delay in the private sector investments due to the crisis, with a slight increase of the unemployment rate for the second quarter of 2020 (9.6% compared to 7.7% for the first quarter of the same year with an increase of 2.1% as opposed to the same period of last year). Furthermore, allocating spending for such projects has contributed to the provision of liquidity in the markets to act as a catalyst for various economic activities.
Overcoming Covid-19 hurdles
The Covid-19 pandemic -undoubtedly- has had a toll on world economies. Yet, and in spite of the impact this has had on state resources, international economic institutions categorized the Egyptian experience in this regard-along with a limited number of other countries- as successful in achieving a positive growth rate in times of crisis. One challenge the Egyptian government had to deal with was to maintain the development process while coping with challenges brought by the pandemic. The Egyptian government allocated large portions of the state budget to develop health and education sectors, in addition to handing out financial aid to day laborers and the families that were worst affected by the pandemic.
Even tourism and civil aviation, two sectors most hit worldwide by Covid-19, have shown signs of resilience. Wiz Air, the third largest low-cost airways in Europe, declared the resumption of 3 weekly flights between Milan and Alexandria, and so did Royal Dutch which declared the resumption of its flights to Cairo after a 3- year suspension period. Flights from Serbia, Russia and Kazakhstan to Egypt were resumed as well, while putting in place some precautionary measures by the government for the reception of tourists.
Opportunities for Serbia
During the 19th October talks, the two sides agreed that it is necessary to make efforts to improve and expand the various areas of cooperation such as economy, tourism, construction, agriculture and water management. Certainly, the economic developments in Egypt may merit attention from Serbian businesses. If we add to them the perspective that Egypt represents as a gateway to Africa, with now the largest free trade area in the world, one could realize how much potential there is for Serbian companies and opportunities for increasing bilateral trade and investment. This could further solidify the already excellent diplomatic relations between the two countries. The representatives of the two countries also agreed that the next Join Committee will be held in Cairo after the lockdown brake in both countries.
1 The data from official Egypt resources and international organizations cited in the article have been provided thanks to the help of H.E. Mr. Amr Aljowaily, Egypt’s ambassador to Serbia.