Germans can’t get enough of Egypt’s sun, sand and scenery — and according to Ambassador Bernd Erbel, that’s just the surface of what is shaping up to be an exceptionally valuable relationship
By Beige Luciano-Adams
Germans tend to be romantic about the Land of the Pharaohs — one million tourists keep the flame alive each year. But their long-term love affair with Egypt is based more on a practical, quid-pro-quo exchange — at least to the extent allowed by a north-south relationship, anyway. A history of solid cultural and economic relations, as well as Germany’s lack of colonial history in the Middle East, accounts for the domesticity and humming contentment. And as European-Egyptian trade relations are on the up, Germany stands poised to gain from a direct line to the heart of the liberalizing Egyptian economy.
But as faith in the Barcelona Conference and Euromed process wanes, attention turns toward the new divisions and alliances that will shape economic and political relations between Europe and the Middle East. With France pushing a proposed Mediterranean Union, Northern European powers like Germany have reason to express reservation at the idea, fearing it would replace Euromed, undermine the EU and exclude Northern Europe, which is generally considered to have less interest in or relevance to Mediterranean affairs. It would also give France a more prominent leadership role.
This comes on the heels of what many view as a dead end to the Euromed process. While it can be considered an economic success, detractors point toward the failure of its “second basket,” or the strategic area dealing with politics, good governance and democracy — the impact of which is inevitably felt in economic health.
As Europe’s most important exporter to Egypt, Germany may well have a more robust stake in the Euromed process than its neighbors. With strategic interests in Egypt and the region, including a bright future in Egyptian energy production, it stands to gain from the facilitating role Euromed plays regarding trade and investment, a role that would be usurped by an exclusively Mediterranean alliance.
Certainly, according to the German Ambassador to Egypt Bernd Erbel, Euromed is alive and well, and economic relations between both Europe and Egypt, as well as Germany and Egypt, could not be merrier.
Erbel, a lawyer who also studied Oriental history, and whose diplomatic career spans more than 20 years and eight Arab countries, arrived in Cairo last year to begin his second posting in the capital (he served as deputy to the ambassador from 1995 to 1999). Expressing a hearty enthusiasm for all things German, all things Egyptian —and especially for their blessed union — the ambassador sat down with Business Today Egypt to discuss the state of play. Edited excerpts:What is the hallmark of Germany’s economic policy toward Egypt? How would you define the current relationship?
Germany is the largest and most important exporter to Egypt. In 2006 it was a value of 1.9 billion. And Germany imported from Egypt for the value 825 million. So you can see there is quite a trade deficit, but we should not forget in this context that we have one million German tourists per year here.
And I always like to say that if you take the Egyptian monuments and the sea and corals and the very, very nice Egyptian people as export goods, then you can say that the trade balance is even positive.
The trade deficit is shrinking. So the increase of Egyptian exports to Germany was bigger [last year] than [that of] German exports to Egypt.
The volume of trade between Germany and between Europe and Egypt has grown a lot in the last years, due to the reforms that were realized in Egypt. The trade volume between the EU and Egypt makes up 40% of Egyptian trade, imports and exports, so Europe is the most important Egyptian partner in trade. In 2006, the imports from the EU were 9 billion and the exports were 7.7 billion, so you see between Europe and Egypt the trade deficit is much smaller than between Germany and Egypt.
And what is even more important, and interesting, is that foreign investment into Egypt grew enormously in the last three years. It had been at a very low level in 2004, between $200-$300 million.
In the meantime, foreign investment in Egypt has reached altogether nearly $10 billion. That means an increase of 50 times. And in 2006, Europe was, for the first time, the most important foreign investor in Egypt — before the United States, and even before the Arab countries. There were foreign investments from Europe of $4.3 billion, whereas the investments from the US were $3.7 billion, and from Arab countries, $2.7 billion. So you can see it’s not just the money in the Arab Gulf which flows to Egypt, but also from the US, and for the first time, from Europe. I think this is a very important development for the economic relations between Europe and Egypt and between Germany and Egypt.What are some of the barriers to investment in Egypt for both Germany and Europe?
The barriers have gone down a lot, as you can see from the figures. The reforms realized from 2004 on led to this liberalization. And the results speak for themselves.
Of course, bureaucracy is still not at the very low level it should be. Especially small companies who don’t have experience here in the country; [they] sometimes meet difficulties with procedures and knowing who to contact, with whom to deal. The companies who have longstanding experience in Egypt usually do not suffer from such problems, because they know their ways, they have a network of connections.
Then it is not always easy to find qualified personnel. Like in many other countries, including my own, there is unemployment because people have degrees, diplomas or qualifications which are not needed in the market. And on the other hand, the market is looking for people with qualifications they don’t find. So the aim is, of course, very clear to train people for the needs of the market.
And many investors make this part of their program, and I think this is also very important for the sustainability of such investment, that companies come here and train their own personnel. [This way] they get exactly what they need to be successful in the long run, and they offer Egypt employment. There is a trend in which industries that perhaps aren’t as competitive in Europe anymore — like steel, concrete, aluminum — that are constrained by strict regulation and high energy prices, are moving to Egypt. For example, there is less environmental regulation here, labor is cheaper, but it is still close enough to Europe. Can we expect this kind of movement from German companies in the future?
I think environmental laws are definitely not a reason to come to Egypt, because Egypt is becoming more and more aware of the importance of the protection of the environment, and is really on the way to create good conditions [] It really has a program, and the consciousness of it has also grown a lot in the last few years. I hope that no German company would invest here for these reasons.
Labor definitely is cheaper. And one attraction of course is the low energy prices. If you take for example the fertilizer industry, for them the low price of natural gas is definitely an important [incentive] to come here.
And I think what makes Egypt an interesting country for investment is Egyptian specialties. Concerning tourism I don’t have to explain why. I mean Egypt is a very good location for Europeans, very good climate, and it has a [wide] variety of attractions [] So in this regard it’s easy to see why Egypt attracts investment.
And in the fertilizer industry, for example, there is an enormous consumption, and possibilities for export. Egyptian cotton is very good. Egypt also has in the agricultural field very good possibilities for two or three harvests in production, which we need in Europe — from early potatoes to flowers, etc. So these are all fields where Egypt has especially good conditions.
I would say that Egypt is not a competitor for very cheap production of consumer goods. So it is not an alternative to China or India in some regards, but it is important in the fields I named.
There is one more field in which Egypt is extremely interesting: the production of renewable energies. There’s hardly any region in the world where wind energy can be produced in a more economical way than along the Red Sea coast. You have in this region wind speed of 10 km per hour, and the wind is blowing approximately 80% of the time. So if you produce wind energy there, the output is very, very good and high, much more than in Germany where you have very strong or very weak wind, but not this regularity.
And like this Egypt can and will produce a rather big part of its energy by wind energy. The aim is to produce 20% of all energy by wind in the year 2020; this is exactly the same aim as the Federal Republic of Germany has for itself. And once the price for producing solar energy goes down — and we can expect this to happen — of course Egypt will be also a very important producer of solar energy.
Apart from that, Egypt has a lot of natural gas. So I think that it has a big future as an exporter of energy to Europe. It will be able to feed the energy it produces, which is more than it needs here, into the European power grid. So this is the field where I think Germany and Egypt have very similar aims, and where German industry should be encouraged to invest.
Unfortunately the market for wind is so empty worldwide that people have hardly a reason to look for cooperation because they earn good money anyhow. But I think German companies should see the big chances Egypt offers in this field.What are Germany’s development and aid priorities in Egypt?
We have three fields in which we concentrate: Water and waste water disposal, environmental protection and production of environmentally friendly energies, like renewable energies, and vocational training — and also quality improvement of industrial products.
Concerning water, we’ve had big projects in the past. I think the amount of energy Egypt can produce with water is limited. They produce now only around 13% of their energy through hydro energy. When the Aswan dam was constructed it was 17%, now it’s 13%. That does not mean that the dam produces less electricity but that Egypt consumes so much more.
So of course it is important to keep all of these projects in good shape. And we have also supported the Assiut barrage and the [barrage at] Nag Hammadi, which will be open next autumn. But I would say that these are fields in which we cannot say that Egypt has a big chance to increase.
The use of water in agriculture and water waste disposal is very important for increasing the water reserves of Egypt, and for environmental protection reasons.
In vocational training, you have for sure heard about the Mubarak-Kohl Project, which is vocational training in the framework of the German so-called dual system. Students do not only have theory or work practically, but always a combination. For example, three days work in a company and two days theoretical training or the other way around. We are sure — and the Egyptians see it that way — that this dual system creates the [needed] workforce. With such high youth unemployment rates, and such low participation among women in formal economic life, do you see programs like this addressing Egypt’s unique conditions and needs? Are there gender-based initiatives?
Yes of course. There are many projects that have two aims: one, to increase employment, and of course to foster participation for women and other groups who are not as much in the work force as they should be.
It is always part of the agreement we conclude every two years, about the principles of our cooperation. The aim of the Egyptian government is identical; we don’t have to push them on this, it is an aim of their own.
And I think development cooperation can only work if we agree on the aim and on the destination we want to reach. Development cooperation can but should never be patriarchal. We are partners. And sometimes we are asked, “Why do you cooperate with Egypt in the field of development cooperation?” And I can only say, “A neighbor who is well off and stable is a good neighbor.” And I would even go so far as to say that what is good for Egypt is, practically in all cases, good for Germany and good for Europe. We do not have differences of interest. We might have different methods, procedures and so on, but we can without any problem agree on the aims and then follow [them].
And I would say that, especially in the field of development cooperation, this is rather ideal because we agree completely, on the projects and on the ends. And we agree before we start working on a project. What is Germany’s position regarding the status of the ENP and Euromed process?
On March 6 of this year, the agreement was finalized on the Joint Action Plan [JAP] between the EU and Egypt in the framework of the Neighborhood Policy. One should avoid one misunderstanding: the ENP does not replace the Barcelona process or the Euromed cooperation; it is an additional tool. This tool exists also for Eastern European companies. But always on a bilateral basis — EU toward one country.
And the JAP of the EU with Egypt is an addition to the development cooperation we had before. But it is now very specifically planned and cut to fit Egyptian needs. It covers all fields, and I think one can consider it like a toolbox, which one has to use. You know the projects don’t grow by themselves; they have to be proposed, agreed and so on. But we have a big financial framework. From 2007-2011 we have 580 million at our disposal, for projects in practically all fields. This is not just the traditional fields of let’s say, agriculture, energy and so on, but it’s also coordination for standards. For example, if we unify standards this makes it much easier for Egypt to export. We have [a procedure] where one country takes a sponsorship for one field [] so for instance one country advises Egypt in the field of tourism, another country — Germany, advises in the fields of postal services.
So this JAP really has the aim of creating an extremely narrow network between Europe and Egypt without Egypt being a member of the EU. But we want to be the closest possible, wherever needs and possibilities enable us to do so. With Germany’s strategic interests in Egypt, would you say they have a more optimistic orientation to the Euromed process than say, Italy, Spain or France, who have expressed skepticism? What about suggestions that a different process [ie, Medmed] might replace it — that Euromed is not working?
No. I think one can’t say that. If you compare 10 years ago, or 1995, when the Barcelona process was started, and what we have now — especially after the Association Agreement of 2004 — I mean, the figures in trade and investment are very impressive. So in this field, the success is overwhelming. It’s also very overwhelming for Egypt. Egypt is now a very important partner of Europe. One can of course deplore that we have not found a solution to the central political problem of the Middle East. We have not succeeded in doing so. We all wish that we had been more successful in this regard. But I think that does not devaluate the Euromed process altogether.
And we have now Euromed conferences, not only in the area of trade and investment. For example, we have in June, here in Cairo, we have the Euromed conference for higher education and science. And lots of projects are following from that. Big scholarship programs, with Egypt and other Arab countries. And we also have joint research funds, for example, which enable not only Egyptians to go to Europe but Europeans to go to Egypt. It should not be a one-way street. Students should not only go from south to north, but also the other way around. To some extent, Germany will be bound by European financial and foreign policy. To what extent do its own priorities and goals differ regarding Egypt?
I don’t think there is a difference of goals. The EU has other tools than we have. But we always try to coordinate; this is not double, or double-crossed efforts. A very narrow coordination is very important. But when we say, for example, in our bilateral development cooperation we concentrate on the fields I named to you [] Then, we are very happy if other fields, which we cannot cover, are covered by the EU. Because if we were active in all fields, we would not be successful. It is better to concentrate on a few fields where we really have the expertise and where the cooperation with Egypt is based on very good experience and where we know each other very well. So I would not say they are different goals, but we just have different means and procedures.Egypt and Germany have very good economic relations, historically. Are there any outstanding economic or political issues, any problem portfolios or areas at this point?
Not at all. Concerning the economy, we have described positive developments. In politics I can say that Egypt is very highly estimated as a pillar of stability. Egyptian politics are very reliable, very stable. People do not expect any quick leaps in any direction, but big reliability and stability.
This is very important in a region where the number of problems is bigger than ever. If you look around, from Palestine and Israel to Lebanon, to Darfur and Somalia, to Iraq and Iran, the region is very unstable. And Egypt within this region is a very important partner for any mediation efforts.
We all would wish to be further towards a solution of the Middle East problem, definitely. But we also know that we will not be able to succeed without Egypt, which is one of the very few countries who has relations to all conflict partners, and also where trust exists between the conflict parties and Egypt. That’s a very important point. And the times when Egypt would change alliances or break diplomatic relations according to political events, is long, long, long past. There are decades now of a very stable and reliable foreign policy. We estimate that very highly.
So I can say in the field of politics we consider it very much in the mutual interest to keep close contact. You saw that President Mubarak was three times in Germany last year, and Chancellor Merkel during one of the first visits during the German presidency in the EU. And contacts are very intensive on all levels.
One field I think our bilateral relations are deep and longstanding and important is culture. You know, investment and trade are very important. They might go up and down according to world economical developments, but culture creates very sustainable relations —person-based relations.
