Crisis will funnel growing FDI funds into region

Abu Dhabi: The global credit crunch, which has hit investment flows and production growth in the US and Europe, will boost foreign direct investment flow into the Middle East, a visiting Egyptian minister told Gulf News on Tuesday.

"Against the background of the global financial crisis and the economic slowdown, the region will receive large volumes of foreign direct investment inflows and the inter-Arab investments and trade will enormously increase," Egypt's Minister of Trade and Industry Rachid Mohammad Rachid said in an exclusive interview here.

"The growth over the next few years will come from this region...the developing world. IMF experts estimate that the developing countries will achieve three to five per cent growth, compared to other advanced countries, which will experience zero growth at the best case scenario.

"So it is important for us to have a clear strategy on how to achieve this growth. Inter-Arab trade, which has almost doubled since 2004, is also expected to grow more...Our next goal is to achieve the Arab Customs Union to ensure smooth movement of goods and services among the Arab countries," he said.

Admitting that no country will escape the impact of the crisis, Rachid said unlike the West, Egypt and the Gulf countries are not facing a banking crisis due to high liquidity in their banks and markets being less risky.

"Investors in the US and Europe have been inflicted with 40 per cent to 60 per cent losses," he said.

"Creating a unified regional response will help the economies of the region continue their growth momentum and prevent the re-emergence of international protectionist policies which will make futile the efforts of the countries in the region over the past few years to further integrate into the international economy," he added.

Rachid discussed the impact of the economic slowdown on Egypt and the region with President His Highness Shaikh Khalifa Bin Zayed Al Nahyan and His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

"This visit is part of an overall policy to strengthen our economic co-ordination with other countries in the region in order to mitigate the impact of the current international economic crisis," said Rachid.

"It is important for us to co-ordinate our efforts as a region in order to ensure the continued growth of bilateral and regional trade and investments as one of the ways to reduce the impact of the crisis on the citizens."

The minister also discussed tools to ensure the success of the Arab econ-omic summit in Kuwait in January, which will discuss the impact of the international economic crisis on the economies of the region.

"We know that whenever there is an economic crisis, there are always opportunities. We believe that Egypt promises to present one of those opportunities due to high liquidity in its domestic banks, as well as a large domestic market, and strong bilateral and multilateral trade agreements.

"These agreements give Egyptian products preferential treatment in many strategic markets. There is a strong commitment in the government to continue our economic reform process, which we embarked on four years ago, and we will continue to provide investors the necessary support in order to facilitate their entry and growth in the Egyptian market."

He warned that unless the world addresses these challenges, the livelihoods and food security of millions of people, as well as the economic, ecological and political situation in many developing countries will remain at risk.

Prior to his departure, Rachid held several meetings with members of the Egyptian Federation of Industries, the Industrial Modernisation Centre, and major investors and exporters to discuss the support they would need from the government in order to not only maintain their current investment and export levels but to expand them further.

MOU: Trade facts

Egypt and the UAE have a bilateral agreement on trade, economic and technical cooperation as well as a bilateral memorandum of understanding on cooperation in various areas.

Bilateral trade grew in 2007 to $823 million (Dh3.02 billion), with Egyptian exports rising to $370 million and UAE exports rising to $453 million.

Egypt's main exports to the UAE include benzene, petrol, white rice, and furniture.

The UAE's main exports to Egypt include aluminium components, polyethylene, diesel engines and shrimps.

Trade between the two countries more than doubled over the past three years from $400 million in 2004 to $823 million in 2007.

Investment Facts

UAE investments in Egypt have reached 13.4 billion Egyptian pounds or around Dh20.1 billion as of August 2008.

The majority of the investments are in following sectors: telecommunications and information technology; financial services, tourism, services and industry.

Main investors include the following: the Abu Dhabi Investment Fund, the Abu Dhabi Fund for Development, Emaar, Al Futtaim Group, Damac Holding, Al Ghurair Group and Dana Gas.