This month, the Turkish government agreed to deposit $2 billion in the Central Bank of Egypt to fund small and medium-sized enterprises following an official visit made by President Morsy to Istanbul late September.
The loan is intended to help finance Egypt’s infrastructure and increase its dwindling foreign currency reserves, Egypt’s Finance Minister Momtaz al-Saeed said.
Two weeks ago, Saeed announced that Egypt’s domestic debt has risen to LE1.39 trillion. The Morsy administration has been seeking foreign help in the hopes of mending the gaping deficit in the state's budget and foreign currency reserves. In July 2012, Egypt’s budget deficit reached almost US$20 million.
The Turkish Embassy in Cairo has announced that half of the $2 billion package would be in the form of bilateral loans, but no further details have been released as to how it might be structured.
“None of the Turkish or Egyptian officials who signed the papers regarding the aid have discussed or explained how the loan will be spent or used,” Zeki Ekinci, chairman of the Turkish-Egyptian Businessmen Association (TUMIAD) told Egypt Independent.
However, it seems that the government loan could be a gateway for Turkish private investment. Turkish companies are planning a series of projects and investments that have yet to be made public, Turkish business leaders say. Chairman of the Egyptian-Turkish Group, Hassan Akyuz, said that among the new Turkish investments would be investment and trade companies, in addition to a hypermarket and Turkish hotels, such as Rixos Hotel.
Akyuz told Egypt Independent that although the projects have not been officially announced, they are already in progress. “No less than 50,000 Egyptians will be employed at such projects, and as according to the law, the companies will have at least nine Egyptian businessmen and one foreigner to work on each project,” he said.
Egypt and Turkey significantly altered their economic relationship when the two countries signed a Free Trade Agreement in November 2005. The agreement resulted in a threefold increase in trade exchange between Turkey and Egypt from 2006 to 2012.
According to Ekinci, the bilateral treaty has led to an increase in Turkey’s exports to Egypt, which include iron, steel, ready-made garments and clothes, while Egypt’s exports to Turkey are mostly textile goods, construction material and chemical products.
There are a total of 210 Turkish companies in Egypt, specialized in manufacturing textile goods, spare parts and garments. These companies currently employ 50,000 Egyptian workers, according to Ekinci. “The total investments from these companies alone have reached $1.5 billion, and in 2010, the level of trade between the countries reached $4 billion,” he said.
As for 2012, trade levels are expected to increase further by 26 percent to reach $5 billion by the end of the year, which means that more and more investments and trade exchanges will continue to boost both economies through December.
Source: Egypt Independant