Egypt and Turkey. What is the future of economic and trade relations between them?

History reflects the depth of relations between Egypt and Turkey in various aspects, in addition to the fact that the two countries currently represent regional powers that have their consideration in many files in the region, and there are files that witness the intersection of relations between the two countries directly, such as the Libyan file and the Eastern Mediterranean gas file.

Relations between the two countries at the political and diplomatic levels have gone through a real crisis since July 2013, although trade relations in particular have not been negatively affected by these events, and Egyptian businessmen have refused to cancel the free trade agreement with Turkey, while the Egyptian government has canceled the transfer agreement between the two countries known as the "Ro-Ro".

However, the past two years have witnessed a positive development in the framework of political and diplomatic relations, the most prominent of which was the handshake between Turkish President Recep Tayyip Erdogan and Egyptian President Abdel Fattah al-Sisi in November 2022, at the opening of the 2022 FIFA World Cup Qatar™.

Recently, the foreign ministers of Egypt and Turkey exchanged official visits, and it is expected that diplomatic relations between the two countries will return to the level of the return of ambassadors soon, and the return of diplomatic and political relations will be accompanied by remarkable commercial and economic activity.

In 2019, the value of trade exchange between the two countries was about $ 5.4 billion, according to data from the Turkish Statistical Institute, but by the end of 2022 the value of trade exchange amounted to $ 7.1 billion.

Over the period from 2019 to 2022, the trade balance was in Turkey's favor, with Turkey's trade surplus with Egypt reaching $1.6 billion in 2019, but jumping to $2.3 billion and $2021 billion in 2022 and <>, respectively.

Egypt is in the list of the top 20 countries importing Turkish goods in 2022, and Egypt ranked 16th in this list, while Egypt does not come among the top 20 countries from which Turkey imports, and if the value of trade exchange between the two countries exceeds $ 7 billion in 2022, this represents only a little more than 5% of Egypt's total foreign trade, which is close to $ 130 billion in the fiscal year 2021/2022.

As for Turkey, the value of its merchandise trade with Egypt represents only 1.13% of its total merchandise trade with the countries of the world, which amounted to $ 617 billion by the end of 2022.

Although the relative weights are important for the nature of trade and economic relations between the two countries, there are direct and indirect interests beyond those relations, some economic and some political, so both Egypt and Turkey are keen to maintain and even increase this relationship.

The media quoted the Chargé d'Affaires of the Turkish Ambassador in Cairo, Saleh Mutlau, that his country hopes that the value of trade exchange with Egypt will reach $ 20 billion in the coming years, and the head of the Turkish Businessmen Association, Nihat Akinci, estimated the number of Turkish companies working in economic activity in Egypt at 200 companies, with investments of up to two billion dollars, and these companies provide thousands of jobs.

As for the Central Bank of Egypt's data on Turkish direct investments in Egypt, the monthly statistical bulletin shows that Turkish direct investments in Egypt amounted to $ 179.9 million in 2021/2022, compared to $ 137.1 million in 2020/2021, which reflects an increase of $ 42.8 million between the two years, and an increase of approximately 32%.

A paradigm shift

According to a Turkish media specialized in economic affairs, one of the largest Turkish companies specialized in rebar will soon enter into a partnership with a local party in Egypt to produce rebar.

It is worth noting that Turkish rebar is one of the important commodities that Egypt imports from Turkey, and the fact that the Turkish company will jointly produce this vital commodity in Egypt, this may greatly help calm iron prices in Egypt, as its prices have reached high levels in the past period.

Egypt liquidated the iron and steel complex in 2021, and stopped the company's activity, after more than 67 years of starting its activity, and there is no doubt that this leaves a gap in the demand for rebar in Egypt, and enables the new Turkish partnership, to acquire a good space in the Egyptian market.

The activity of Turkish companies operating in Egypt since 2005 is concentrated in the field of textiles, ready-made garments and household appliances, and it has been monitored that these companies mainly target European and African markets, by benefiting from Egypt's membership in the Egyptian-European partnership agreement, as well as membership in the COMESA agreement.

Deferred step

As part of efforts to strengthen economic and political relations, Turkey offered Egypt the use of local currencies to settle trade and financial transactions, a step taken by Egypt and Turkey with other countries that would alleviate the problem of foreign exchange in Egypt.

At the same time, it strengthens the position of the local currencies of the two countries, as both the Turkish lira and the Egyptian pound have suffered from their depreciation over the past period, although the problem is more severe in the Egyptian currency, and entering into this step would increase the value of trade exchange and financial transactions between the two countries.

However, according to Egyptian media sources, Egypt believes that this step will be postponed for at least two years, due to technical considerations related to monetary policies, as well as enabling the central banks of the two countries to own mechanisms for dealing in local currencies.

Strengthening political relations economically

The economy and politics are two sides of the same coin, especially after the complexity of international relations, and the intertwining of interests to a large extent, and there are no economic relations without political interests, and there are no political relations without economic interests, and between Egypt and Turkey, outstanding files at the political level, which must be overcome.

Will the positive developments in trade and economic relations be a prelude to breakthroughs in the outstanding political files between the two countries, on top of these files, the issue of Eastern Mediterranean gas, which is a very important issue for Turkey, as it is an importer of a large share of its energy needs, up to 90%?

If the two countries reach a solution to the Eastern Mediterranean gas issue, will we see Turkey as an eighth member of the Eastern Mediterranean Gas Forum?

Politics teaches us that nothing is excluded, but there is nothing without a price, so are the escalating trade and investment relations enough to be the price of penetrating the Eastern Mediterranean gas file, and the complications it carries between Egypt and Turkey?

In addition to the Turkish presence in Libya, and the economic and political interests that this reflects for Turkey, while Egypt demands an end to the Turkish presence on Libyan territory, and the multipolar regional and international Libyan file, will Egypt and Turkey be able to end the state of conflict in Libya and enter the reconstruction phase?

In particular, the two countries have great experience in the field of construction and construction, a stage that Libya greatly needs to rebuild and rehabilitate infrastructure.