Cairo, 26 March, 2014: The African Development Bank (AfDB) organized a high-level forum at the Four Seasons Residence Hotel in Giza to find ways of boosting regional integration between Egypt and the Common Market for Eastern and Southern Africa (COMESA) trade bloc. The forum also tackled challenges and growth opportunities in addition to AfDB’s role in facilitating trade through financial and non-financial measures. The discussion and potential solutions were recorded as part of a study commissioned by AfDB entitled “Egypt-COMESA Trade Enhancement”
More than 70 senior officials representing Egyptian export councils, leading banks and related ministries attended the landmark event, including; H.E Ambassador Mohamed Al Hamzawy, Egypt’s Assistant Minister of Foreign Affairs to the Nile Basin countries; Mr. Alaa Al Bahie, head of the Egyptian Export Council for Food Industries and Chairman of Mass Food Co; Mr. Walid Helal, head of the Export Council for Chemical Industries and Chairman of El Helal and Golden Star Group of Companies; Mr. Ayman Eissa, Chairman of the Ethiopia-Egypt Business Council and Ethiopia’s Golden Capital; and Mr. Karim Sadek, the Managing Director of Citadel Capital and Head of its Africa operations.
Participants of high level from a number of local, regional and international experts attended the discussion to add their thoughts on the opportunities and challenges to achieving growth in trade and investment between Egypt and COMESA.
In her opening remarks, Ms. Leila El Mokadem, AfDB’s Resident Representative in Egypt, said “Egypt is reforging ties with its African roots to open up new avenues of trade as well as for geo-political relations. Egypt remains COMESA’s leading export country in terms of intra-COMESA trade, accounting for 26.8% of total trade volume followed by Kenya. Egypt is also the largest foreign direct investment (FDI) recipient in the group.”
“We believe Egypt will benefit most by focusing on neighboring African countries in terms of trade versus traditional export markets. It should capitalize on African growth over the past decades. So far, Egypt has not taken advantage of the potential in the African market in terms of domestic industries and natural resources. Egypt must continue leveraging its relationship with Africa, and COMESA nations in particular. Egypt’s overall trade and exports totals grew from $200 million to $2.4 billion between 2002 and 2012. Exports to COMESA countries represent 8% of the aggregate.” She added.
COMESA’s goal to increase regional integration goes hand in hand with economic prosperity. Today, this large marketplace comprises 19 member states, covers a surface of 12 million square meters, accounts for an annual import bill worth $32 billion and an export bill that has reached $82 billion annually.
Transport and logistics, trade finance business knowledge and trade promotion, are the three major challenges that have been identified by the aforementioned study.
Regarding transport and logistics, poor transport infrastructure and high fuel costs remain challenging for both Egyptian and African exporters alike. To change this, major investment in this economic zone have been channeled into improving roads like the Alexandria-Cape Town Highway, regional railways and river transport.
However, these kinds of infrastructure projects take a great deal of time and money to complete. Therefore, the study recommends focusing on sea transport and leveraging the Red Sea-Indian Ocean corridor, which would benefit both northern and southeast African countries by providing a seamless economic corridor. That being said, port logistics must also be a priority. Many facilities along the route are not fully equipped to service African vessels in large numbers. Furthermore, Africa does not have an integrated homegrown shipping service provider, which would greatly facilitate exports and imports to promote regional integration.
The study recommends the creation of an ‘African Stand-Alone’ shipping service that would transport Egyptian exports south as well as link African exports and the European Union through the Suez Canal. In this vein, the study suggests revamping ports along the trade route by establishing transit, logistics and packing facilities so as to maximize products’ added value,” said the resident representative.
The second challenge highlighted in the study involves payment processing, which includes issues over Letters of Credit, foreign currencies, limited insurance facilities, high risk factors perceived by banks and poor knowledge of African markets and cultures.
To remedy this, the study advocates the establishment of an ‘African Bank Network’ to set up a revolving line-of-credit facility exclusively marketed by a network of national African banks.
The third challenge concerns business knowledge and trade promotion, which are hindered by customs and administrative entry barriers at border crossings. African traders’ preference for stocked goods over Letters of Credit has also been identified as a serious issue in addition to lackluster e-commerce facilities a perception that African trading partners are unreliable.
To counter this, the study recommends the establishment of an African Traders Database, whereby banks involved in the African Bank Network could provide detailed profiles of credit worthy clients.
The forum paved the way for a strategic dialogue between Egypt’s business, financial players and Government authorities. The objective was to develop a close collaboration on regional integration to create niche markets and support intra-African trade.
The forum was also an opportunity to present AfDB’s tailored strategies and programs addressing financing options to facilitate regional integration based on four pillars: market integration, trade finance, infrastructure and industrial development. On this occasion, AfDB reiterates its committment to supporting Egypt’s transformation and providing development assistance to the Government of Egypt in the form of loans and grants to priority sectors.