FICCI Survey on ‘The Impact of Political and Social Instability in Egypt on Indian Trade and Investment’

As the Egyptian economy gears up for a revitalized role in the country’s development process it is time for India and Egypt to chart a fresh map of cooperation and create a win-win scenario for each other. Bilateral trade between India and Egypt has increased by over 60 per cent in 2011-12 from last year. This, combined with the strategic location of Egypt and the market access it offers to Europe and the Middle East, would ensure Egypt remains a focused area of investment and trade for India.

The Arab Spring that began in a Tunisian street in December 2010 snowballed and took the Arab world by storm. Egypt, the most populous Arab country, could not remain isolated from the uprising that spread across Libya, Tunisia, Bahrain, Syria and Yemen, and witnessed a yearlong turmoil that shook the socio-political and economic fabric of the nation. After months of chaotic developments, Egypt has had free and fair elections. Mohammed Morsi took over as President of the first democratically elected Government in Egypt, which is committed to put the economy back on tracks.

With the advent of democracy in Egypt, it is an opportune time for India to move towards a new era of relationship and cooperation with Egypt. The changes in Egypt have thrown up new opportunities for cooperation in infrastructure development, petrochemicals, tourism, etc. The two countries should continue with positive outlook to enrich their collaboration further in the new political dispensation in Egypt.

Against the backdrop of a new political dispensation in Egypt and India’s longstanding economic and political relationship with the country, FICCI conducted the survey to adjudge the impact of political and social instability in Egypt on Indian trade and investment. The survey was carried out in the months of August and September 2012 and drew responses from companies having either investment in Egypt or dealing with export and import of goods to / from Egypt, or looking forward to invest and expand their operations in Egypt.

The Survey – ‘The Impact of Political and Social Instability in Egypt on Indian Trade and Investment’ clearly reflects that Indian businesses are positive about the newly elected Egyptian Government and are looking forward to an economic reform plan that would encourage growth and foreign capital flows into Egypt.

The key findings of the survey are:

Besides,

• 69% of the respondents reposed confidence about the safety of their existing investments in Egypt. Nevertheless, some of them would observe the economic situation for sometime before taking a decision to move out to other potential destinations.
• Another positive finding was that there had been relatively no decline of Indian personnel deployed in Indian business establishments in Egypt.
• There was a decline in Indian business by more than 21% due to political instability and civil unrest in Egypt. 62% of the respondents surveyed admitted to the said decline.
• According to the companies surveyed, 44% respondents were fully acquainted with the current political situation in the Arab world and were closely monitoring the developments.
• There have been mixed opinions, however, on the time required for the normalization of situation in Egypt. Thirty one per cent of the respondents were of the view that it would take more than a year for the political situation to stabilize.

Investment sentiments are directly influenced by the political and economic situation of a country and by a region’s stability, alike. The unrest in Egypt may have dampened investors’ sentiment but the situation fortunately has not led to exodus of investments to safer destinations. The situation in Egypt is still not unconducive for many Indian investors to look for options to take their current investments outside Egypt. Most of them do not perceive the current economic situation in Egypt to be bleak enough to trigger concern for the safety of their investments.

At a time when the world is facing a crisis with a slackening demand in the US market, the sovereign and financial crisis in the Euro zone and the socio-political upheavals in the Arab world, the companies surveyed were asked if they consider Egypt as a potential destination for their investments or they were exploring other alternative markets.

The jump in Egypt’s stock market indices after President Morsi’s victory was a clear signal that investors are looking for the return of confidence and stable political environment. The government is putting together a programme for reforms to salvage the economy and set a long-term path aimed at increasing investment and jobs and easing the state’s burgeoning budget deficits. President Morsi’s campaign programme was based on a renaissance project, which focuses on rebuilding the political system, rapid and comprehensive transformation of the economy.

Conclusion

The survey clearly reflects that Indian businesses are positive about the newly elected Egyptian government and were looking forward to an economic reform plan that would encourage growth and foreign capital flows into Egypt. As the Egyptian economy gears up for a revitalized role in the country’s development process it is time for India and Egypt to chart a fresh map of cooperation and create a win-win scenario for each other. The two countries should continue with positive outlook to enrich their collaboration further in the new political dispensation in Egypt.

“India enjoys warm and cordial relations with Egypt. With the advent of democracy in Egypt, it is an opportune time for India to move towards a new era of relationship and cooperation with Egypt. The changes in Egypt have thrown up new opportunities for cooperation in infrastructure development, petrochemicals and tourism. The time to cash in on the opportunities is now.” – RV Kanoria, Past President, FICCI (2012)

You may read the survey in its entirety on our Slideshare channel