Chinese companies are expected to inject about $2bn over 2019 in the Egypt market, especially in the manufacturing sector, said Han Bing, economic counsellor at the Chinese embassy in Egypt, over his participation in a roundtable held at the Daily News Egypt headquarters in presence of Hussein Abedurabo, board member of DNE, Mohammed Samir, deputy executive editor and Rick Yang, economic and commercial attaché at the counsellor’s office.
“We are sure regarding $1bn to be funnelled into the Egyptian market by the next year, while the other expected value of investments is considered as we receive many investors who show their interests for putting new Chinese money in to the local market,” added Bing.
The DNE’s roundtable included the several aspects of cooperation with China, in terms of trade, investments, new projects in the New Administrative Capital, as well as tourism. The transcript for which is below, lightly edited for clarity:
Would you please elaborate about the new expected investments in Egypt? which sectors?
A Chinese company will be built with capital worth $800m at the small textile park in TEDA zones. The Chinese company will not establish a new textile city as mentioned over some media reports. Next year will witness a new investment in the sanitary products field for infants. Chinese company is interested in steel production sector, but not that kind of steel is used in construction, but the high special steel and high quality steel. One of the Chinese companies plans to co-invest in a petrochemicals project.
There are some other existing Chinese companies, which plan to enlarge their investments including Jushi, which completed its four phase plan. The company is looking for new investment in Egypt. Jushi’s new investment will be in a new activity not the fibre glass that used to invest in for the past years. the new activity has not been decided yet. I hope that the Chinese companies will invest the expected $2bn.
Can you please tell us more about the developments of the Chinese economy indicators?
China’s GDP reached $12.2tn last year, sharing 16% of the world’s GDP. We had very stable inflation rate recording about 2% from 1.8% over the last years. urban employment rate ranges from 4% to 5%, hence it is also quite stable, as we are a country with a very high population, we have to provide 13 million new jobs for the market every year to maintain the economy’s stability.
Last year, China’s GDP growth was 6.8%, while in the first half of 2018, China’s GDP was 6.7%. China’s government focuses on the domestic force boast the economic activities. Spending of the external part like exportation was lowered over the past years from 70% of the GDP to only 10% when compared to 10 years ago.
Before years ago, China’s economy relied very much on the international markets but after the world trade conflict driven by the US against China, the government is relying much more on the domestic market. I think that the current trade conflict will not harm the Chinese economy much, sure it will a kind of effect it, but not seriously as we can stand by for these challenges.
China’s economy is now open and will be even more opened. We announce many economic procedures to allow more foreign direct investments (FDIs) to be injected in the Chinese financial market for example, we lowered the custom duties and taxes for quite number of products as tax automobiles from 25% to 13%.
We had big steps moving forward to attract more foreign investment and maintaining the economic growth stability, generally speaking the Chinese economy achieved extremely good performance figures.
For example, the FDIs growth to the Chinese market is not very high as it is less than 2% annually, but the important matter is the numbers of newly registered foreign companies in China, which are increasing with major growth reaching 90%.
The Chinese government focuses on three main areas of cooperation to maintain its economic stability, which are related to the economy, whereby this year the three main targets of our economy are as follows, the first one is to consolidate the economy, the second main area is the reduction of poverty, while the last, but not the least area to focus on, is related to environmental measures.
Moreover, we have now about 30 million Chinese living in poverty and we set our target to eliminate poverty until 2020, thus we have to help about every year about 10 million annually to achieve our target, especially that over the last years, we had an annual reduction of poverty rate that range from 13 to 14 million people annually.
For our environmental plans, the Chinese government is working very closely with factories to take strictly measures to improve its environment standards, therefore if we find big factories with big air pollution we will close it until they use new technology to reduce its pollution rates.
We had a big move to officially send groups checking the environmental policy implementation to the investments, I can say that we achieved quite good results in this issue.
For example, over the last four years, we significantly reduced about 60% of the air pollution, while comparing to other countries like the US.
How can Egypt benefit from the Chinese experience in terms of poverty reduction?
We are very precisely targeting poverty reduction, all the 30 million Chinese, who are in poverty, yet they are not living in harsh conditions, what we do is to set what we call family, which includes data and information about each family living conditions, ages of individuals, earnings, the climate conditions they live in to identify the most suitable kind of small businesses they can do.
For example, if people live in hard condition that electricity is not stable, and the place is not suitable for people to live in, we recommend an economic activity, which is tailored to suit their conditions or moving to another area, where they can practice another economic activity.
In some cases, the government recommend planting special food for some people and gives them settlings to live in, send experts to teach them how to plant some fruits, and help them to show their products in the internet over the e-commerce network, where people from urban areas have information about that and buy their products, while some cases are given chickens with GPSs to grow them up in open areas, which is more profitable than chickens in farms.
However, the government has to continue giving cash and grants for those in old ages and cannot work, given that they must be benefitting from the governmental initiative as their last solution.
You have praised the Egyptian economic reforms in many occasions; are there any issues which Chinese investors still facing?
Last year, the Egyptian government took some important procedures to improve the business climate including the News Investment Law, and we can well realise those improvements and its positive effects on the investors’ decision, that is why we hopefully expect the next year to witness injection of $2bn in the Egyptian market. We will have very good investments on a large scale and in manufacturing sectors as textile, steels and some other investments.
A lot of Chinese investors come to our office and show their interest about investment in Egypt, we see very good chances to invest in Egypt.
For the challenges, sure there are still some challenges that face the foreign investments. I think the main challenge is feeling that the local policy of Egypt is not transparent or stable enough, the custom raises duties of some products or prevent from entering the market without a clearance. I met with some companies who ask our help in customs problem, some companies were importing some equipment for monitoring systems, as they planned to attend an exhibition in Cairo, but unfortunately the customs authority halted the entry of these equipment however, we imported same equipment for our office in the embassy months ago. We were surprised as we did not receive any clearance to explain that.
Moreover, it is very difficult for some goods to enter the market, since the customs authority does not accept the value of imported products, which is officially approved through contracts and customs estimate other prices, which are not suitable for the goods in many times despite companies providing official papers proving the accurate price, but the Egyptian customs does not accept these papers.
The above mentioned simple issues give a strong impression of uncertainty and this is quite a big problem. Chinese investments in Egypt face another issue, which is the very slow administrative procedures process. I know that the government is working on that problem and the situation improved, but sometimes getting licenses is not certain. Two weeks ago, I attended a forum where firms and Egyptian entities affirmed our point of view about the current issues that face the business climate from improving.
Additionally, our office receives a lot of complaints about the taxes system. One of our companies received a document from a tax officer telling the company that they will fire it if the company does not pay a certain tax, while the company does not know which tax and say that they are legally paying all the needed taxation.
The tax officers approach the companies and they do not care about how the company is operating, which makes investors feel that there is an uncertain environment.
Would you please tell me the name of the company?
TEDA received last month a letter from tax office saying that they will close the office if they did not pay a tax. However the company is contracting with SCZone, hence they contacted them to ask for more details. The Finance Ministry and the Egyptian entities should open new channels for communicating with foreign investors.
TEDA also had a closed case in the Suez court. But the company was surprised after the case was finished that the court sent them the bill with a huge sum of fees when they say regulations is groundless for this amount. For example, the regulation fees are only 1%, but the amount that the court was asking for was 10 times higher.
To be fair, the investment situation is improving when compared with the past two or three years ago. We believe that we will have a better future in terms of investments in Egypt.
On 19 August, the minister of investment and international cooperation, Sahar Nasr met with the Chinese ambassador to Egypt, Song Aiguo where he reaffirmed the historical relations between China and Egypt, adding that the Chinese investments will remarkably grow over the next period, especially, after the implementation of the Egyptian reforms including the New Investment Law.
The meeting was done in the presence of the Asian department head at the ministry, Mona Ahmed and officials responsible for the Chinese file at GAFI, according to a ministerial statement.
The statement noted that the meeting discussed boosting Chinese cooperation with Egypt in terms of development aspects and their investments in the local market.
The statement said that both sides discussed collaboration with the Chinese Egyptian Business Council with the aim of increasing Chinese investments in Egypt, adding that the meeting discussed the developmental cooperation through Chinese funds and grants for Egyptian projects.
Nasr affirmed Egypt’s keenness to reach great benefits from the comprehensive strategic partnership with China in several areas of cooperation, adding that the bilateral relations remarkably progressed over recent years.
Egyptian government looks forward to China’s acquiring a rank among the top 10 invested countries in Egypt, said Nasr, noting that China has about 1,558 firms in Egypt working on several sectors, such as energy, ICT, transportation.
Chinese investors have a great participation in the New Administrative Capital; are there any expectations for Chinese investments in it?
One of the Chinese companies have signed a contract with the Ministry of Housing for building the Central Business District (CBD) on two phases with total value of $6.5bn, the agreement was signed during the president Abdel Fattah Al-Sisi visit’s to China.
Al-Sisi paid China a four-day visit in early September before participating in the China-Africa Cooperation (FOCAC) Forum, which was held from 3 to 4 September.
In early September, Egypt and China signed five cooperation agreements during a visit by Al-Sisi to the east Asian country, according to an official statement, clarifying that agreements included the fields of industrial quality, cooperation in projects related to productive capacity, a loan, and a Chinese-funded electric train that will run to Egypt’s planned new administrative capital.
In 2017, Egypt announced its plan for the $255m electric train project to run to the new capital. Officials have said it will save millions of dollars in fuel subsidies and reduce traffic. The project is financed through a loan from China to be paid back over 20 years.
The agreements also included the manufacture of an Egyptian satellite, as well as a framework agreement for future projects in the coming three years.
The signing took place in a meeting between Al-Sisi and his Chinese counterpart Xi Jinping. Both leaders had also held another meeting to discuss ways of boosting bilateral ties across various fields and issues of mutual interest.
What about mining sector? Do you have projects in this area?
We have one Chinese company in a joint venture with the Egyptian army in mining black sand in the north coast. It is a very good project as it is environment-friendly, using the latest technology to process. Off course there are some other Chinese companies operating in minerals. For my information there are Chinese companies are participating in the Golden Triangle Project, but they are small private one cooperating with local companies, but they do not have very significant projects.
Are there any negotiations for new Chinese financial packages to Egyptian banking sector?
There are two new financial packages, one for Central Bank of Egypt (CBE) as the China development bank signed agreement with Egypt worth RMB 7bn, which are more than $1bn, over the latest presidential visit to China early September.
The second financial package worth $600m as financial facilities with the National Bank of Egypt (NBE). I would like to say that cooperation is very good with the NBE.
There are about $7bn Chinese financial facilities are ready to be used in the Egyptian financial system. the facilities are available, and we need to use these facilities for business. Last week I met with Chinese companies and seven commercial banks’ representatives to discuss how to cooperate and use these available facilities from financial Chinese institutions.
In general it is a sufficient support in the future, if we find a good way to use these facilities, now only 30% are used from the $7bn, which is less than half and not satisfying.
For the first five month of 2018, the total trade exchange hiked by 61% to reach $4.1bn comparing to same period of 2017. Exports from Egypt to China recorded $450m with 37% increase comparing to last year’ same period, while Egypt’s imports from China recorded $7bn with 30% increase when compared to the first five months of 2017.
Over the last two years of 2016 and 2017, we had a decrease in our trade exchange, but this year will witness a trade recovery, which is clearly showed over the first five months statistics.
This year, we have very good outcomes of Egyptian exports to China and I think this area will witness a continuous growth over the next years. We hope that in the future we can import more from Egypt as we knew that Egypt will start exporting gas over the next year, thus we are very interested to import the Egyptian gas, we will discuss that matter with the government, as China is a very big consumer of the natural gas, I think that this will ease the imbalance between China and Egypt in the trade exchange.
Last year trade exchange was $10.8bn and it is expected to reach $12bn, while we recorded our highest trade exchange in 2015, which was $12.9bn.
How can Egypt attract more Chinese investments?
From my point of view, now there is no problem for Chinese tourists to come to Egypt. Last year more than 300,000 Chinese tourists visited Egypt. However, Egypt needs to improve the tourism environment, whereby tourists feel well in Egypt.
A lot of things should be done from the Egyptian side as many Chinese tourists come here, but unfortunately sometimes they face unpleasant situations in the touristic areas like the pyramids related to some local people promoting their products and some tourists complain from harassment.
Chinese come to visit Egypt, but over their stay they do not feel very comfortable and go back with bad memories.
Egypt has very rich tourism resources, wonderful nature, I think we should work on this to improve touristic environment, for example, there are no shopping tourism in Egypt, as choices for shopping are not very convenient. In China we do not use cash anymore we rely on mobile applications and electronic payment, it makes shopping very quick as you do not have to wait.
Some Chinese tourists told me that they faced difficulties when they were shopping in Egypt even from well-known shops and they had to wait two hours, which is a very long time. These small things should be improved to keep a good impression, as of course the pyramids, temples, Red Sea are amazing and very impressive, but always complaints come from unpleasant situations during tourists’ stay here.
From your point of view, do you think that Egypt can achieve its past plan to attract 1 million Chinese tourists?
It depends on what kind of tourists the government is targeting as for historical places in Egypt it will be a problem if 1 million come, as Egypt does not have such a capacity, while for relaxing in the red sea Egypt can absorb even 3 million Chinese tourists.
When will the Belt and Road initiative be fully operational?
Egypt and China have signed a governmental agreement on the cooperation under the One Belt, One Road initiative. We have good cooperation in this regard as Egypt is working on projects in SCZone projects. We achieved significant results to make it operational.
The initiative is focusing one five areas, the first is policy coordination, where we have several mechanisms for the cooperation in the governmental level with Egypt.
Over the latest visit from Egypt’s President Abdel Fattah Al-Sisi, we signed an agreement with four ministries involved, in which are Egypt’s Ministry of Trade, Investment and International Cooperation and from the Chinese side is the National Development Reform Commission and Trade Ministry.
For the SCZone cooperation, we signed a governmental agreement and there is an expected meeting between SCZone and Chinese officials in November.
We also are coordinating with Egypt over additional mechanisms as the FOCAC, the China-Arab States Cooperation Forum (CASCF) for the policy coordination.
The second area of cooperation is infrastructure connectivity in terms of the electricity transmission projects, light train, which was agreed upon last year and now railway from Ain Sokhna to Al-Alamein connecting the Red Sea to the Mediterranean Sea.
The third area is trade and investment facilitation, for example in agriculture, we opened our market for Egyptian oranges. Egypt is the fourth biggest exporter of oranges to China after South Africa, US, and Australia.
This year we have one group investigation to open our market for the Egyptian dates, other agriculture products will be entering the market over the next years.
Fourth area is financial cooperation, where we have several agreements under the FOCAC and the CASCF. On July we have formed banking community from Arab and Chinese banks, from Egypt we have the National Bank of Egypt and China Development Bank (CDB), in addition to banks from Morocco, UAE, and Lebanon.
Under the FOCAC in September, we formed the banking community between China and Africa’s banks and from Egypt we have Bank Misr. Therefore, we have good results in the financial cooperation area.
The fifth area of cooperation under the initiative is people to people exchange, where we host students, for training courses, in the two years we received about 1,000 Egyptian.
We totally believe that China and Egypt will share benefits of the One Belt, One Road initiative in the future.
Notably, China is currently undertaking what it considers the largest project of the century—building a network of railroads and shipping lanes, linking itself with 70 countries across Asia, Africa, Europe, and Oceania. The main focuse of the “Belt and Road” initiative—also known as “One Belt, One Road”—are in infrastructure, transportation, and energy.
Countries including India, Pakistan, Russia, New Zealand, and Poland have all joined in the project. Together they make up at least a third of the world’s GDP.
“Belt and Road” initiative consists of two parts: the “Belt,” which recreates an old Silk Road land route, and the “Road,” which is not actually a road, but a route through various oceans.