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Egypt President’s Visit To India: Taking Historic Friendship Forward – Analysis

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Egyptian President Abdel Fattah Al-Sisi undertook his first bilateral visit to India this week. Sisi last visited India in October 2015 for the third India-Africa Forum Summit. India and Egypt enjoy excellent relations marked by strong, traditional and civilizational ties. The bilateral relations between the two countries have three pillars which are political, economic and cultural exchanges and the discussions during the visit would cover those three areas. Both countries also have a strong economic relationship as India is Egypt’s sixth largest trading partner.

During this visit, the Egyptian president held talks with the top Indian leadership, including Prime Minister Narendra Modi on key issues particularly, terrorism and deepening economic engagement; the two issues that have dogged his presidency. It is ideal for India-Egypt relations to find areas of cooperation in respective challenges.

Egyptian Economy

Egypt’s economy suffers from increased accumulated debts whose servicing constitutes 30% of public spending. Egypt’s domestic debt has reached about 2.25 trillion Egyptian pounds (USD 253 billion), while its foreign debt stands at USD 53 billion. On July 28, Egyptian Finance Minister had announced that Egypt would seek a USD 21 billion loan package to make-up the budget’s financing gap. The loan package would include a USD 12 billion loan from the International Monetary Fund and the rest would come from two loans from the World Bank and the African Development Bank, besides a bond sale and loans from other sources.

A World Bank study of July 2016, conducted in collaboration with the European Investment Bank and the European Bank for Reconstruction, indicated that 50% of companies surveyed in Egypt saw political instability as the main impediment to doing business, in addition to electricity and funding problems. The report surveyed 6,000 companies in the Middle East and North Africa, including 1,500 Egyptian companies. Other problems are land acquisition, complex administrative issues, the current investment law, procedures for tax assessment, the customs complexities, access to energy and bureaucratic procedures to obtain approvals for investment projects and licenses

To address the issue Sisi through a July 3 decree, established a Supreme Council for Investment to oversee the state’s investment policies in all sectors and provinces under his direct supervision. The Council, which is to meet at least once every two months, seeks to assure all Egyptians and foreign investors that the country’s investment system will witness a quantum change.

New Suez Canal

A part of Sisi’s problems comes from the low returns from his pet project of the New Suez Canal due to slow down in global economy. In November 2015, the Egyptian president announced a comprehensive project to develop the Suez Canal zone, including setting up of a large seaport east of Port Said, an industrial zone, a logistical zone for servicing ships, a residential zone and a fourth area for fishing farms. Sixth August 2016 marked the one-year anniversary of the inauguration of the new Suez Canal whose construction began in August 2014. The cost of the project, has now exceeded $8 billion, but the canal has not succeeded in bringing about any noticeable increase in revenues due to a decline in global commercial transit.

White Gold

According to recently released data, Egyptian cotton exports fell by 54.2% during the second quarter of the 2015-2016 agricultural season, compared to the same period in the preceding year. Falling cotton exports has been the trend for last few years. Egyptian government even attempted to ban cotton imports to support sale of locally produced cotton. It has now agreed to buy cotton from farmers in an attempt to encourage them to cultivate cotton. Further most of the cotton types that are being cultivated are falling prey to diseases and climate change. Gradual disappearance of pure Egyptian seeds has been blamed for lower productivity and quality.

Water Woes

Amidst the worst drought to hit the Horn of Africa in the past 100 years, the Egyptian Ministry of Water Resources and Irrigation had declared a state of extreme emergency in early May until August next year. Nile’s water output last year was below its annual average due to the drought conditions in the Nile Basin and Ethiopia. Cairo was forced to fall back on water from its strategic reserves at Lake Nasser. Current fears among Egyptians concerning the entry into operation of Ethiopia’s Renaissance Dam, and the resulting potential decrease in Egypt’s 55.5 billion cubic meter annual water quote from the Nile.

Tourist Blowback

Egypt’s tourism industry has been devastated by terrorism. A report by the Central Agency for Public Mobilization and Statistics issued in late July showed that the number of tourists visiting Egypt from all over the world in June 2016 plunged 59.9% to 328,600, as compared to 820,000 tourists in June 2015. Given the continuous decline of the tourist inflow due to a slew of security and political issues, Egypt has been searching for creative and unconventional ways to revive tourism.

Indian Cooperation

Recently a prominent India linen manufacturing company lost almost half its share value after it was found that it was ‘mis-labelling’ the content of Egyptian cotton in its exports. It has been reported that clothing industries in India and Pakistan can get enough of Egyptian cotton for their production. The incident when seen together with the Egypt’s cotton woes indicates both the potential and disconnect in Indo-Egypt trade cooperation. While focus has shifted to new items of trade, the traditional have languished.

The Grand Sheikh of the Al-Azhar Mosque, has reportedly been impressed with the idea of the India assisted IT centre on the main campus of the Al-Azhar University in Cairo and has expressed interest in Delhi doing the same in other institutions affiliated with the university. India is already setting up an IT centre on the main campus in Cairo under a pact signed in 2013. The plan now is to extend its expertise in building such facilities across Egypt.

Counter-terrorism cooperation is another area where there has been hectic coordination for some months now. Defence cooperation, largely focussed on training and shored up by commonality in Russian weaponry, needs to increase particularly in the maritime domain. Egypt’s geopolitical readjustments with Israel, Turkey, Russia besides rest of the Arab world opens up new areas of cooperation between the two counties.

History has always been a strong building block for vibrant bilateral relations and India and Egypt have excellent memories. At this point New Delhi must work out a set of urgent measures to aid Sisi and the Egyptian citizens surmount their current challenges.

*Monish Gulati is Associate Director (Strategic Affairs) at Society for Policy Studies, New Delhi. Comments and suggestions on this article can be sent on: [email protected] This article was published at South Asia Monitor.


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Monish Gulati

Monish Gulati is an independent analyst based in New Delhi.. He can be reached at [email protected]

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