High inflation also hit production… Turkish companies are fleeing to Egypt!
Getting closer again after a gap of about 10 years Türkiye And Sweetcornis rapidly increasing its commercial collaborations. Finally, last week, AKP President Recep Tayyip Erdoğan said, Saudi ArabiaHe met with Egyptian President Abdel Fattah al-Sisi during the Extraordinary Joint Summit of the Organization of Islamic Cooperation and the Arab League held in Riyadh, the capital of . The candid images of the two leaders reflected on the cameras also summarize the newly opened white page between Turkey and Egypt.
COMPANIES PREFER EGYPT
After the improvement of relations, especially in Turkey from inflation exceeding 60 percent Turkish companies are overwhelmed and prefer Egypt instead of producing in Turkey. While Turkish brands from many sectors moved their production bases to Egypt, the size of Turkish investments in the country exceeded 2.5 billion dollars.
Business world representatives say that Egypt offers great opportunities in production and exports in the face of difficult production conditions in Turkey.
ECONOMIC RELATIONS CONTINUED AT SLOW SPEED
Turkish companies’ direct investment in Egypt began in 2007, when the Free Trade Agreement (FTA) came into force between the two countries. Turkish companies started to take advantage of the “duty-free trade” agreement between the USA, Israel and Egypt by starting production in qualified industrial zones in Egypt. Many large companies, especially in the textile and apparel industry, established factories in Egypt. Despite the political turmoil in Egypt in 2010-2011, Turkish investments in the country continued to increase.
Following the overthrow of the Muslim Brotherhood government and President Mohammed Morsi with a military coup in 2013, Turkey cut off diplomatic relations with Egypt and openly took a stand against the leader of the coup, Chief of General Staff Abdel Fattah al-Sisi. President Erdoğan has repeatedly “I will never meet with Sisi” He made statements defending the deposed leader Morsi and his supporters, and diplomatic relations were reduced to the level of chargé d’affaires.
In the nearly 10 years that have passed, economic relations have continued, although they have lost momentum. While foreign trade between Turkey and Egypt was 5 billion dollars at the end of 2013, this figure reached 7 billion dollars at the end of 2022.
In the last year, the ice between the two countries has melted. President Erdoğan met with Egyptian President Sisi for the first time at the opening reception of the 2022 FIFA World Cup held in Qatar in November 2022. After this contact, Egypt-Turkey relations quickly returned to their previous state, and Turkish companies, overwhelmed by high inflation within the country, began to turn their attention to Egypt again.
“INFLATION DRIVES COMPANIES TO EGYPT”
In his statement to DW Turkish’s Aram Ekin Duran, Mustafa Denizer, President of the Turkey-Egypt Business Council within the Foreign Economic Relations Board (DEİK), reminds that Egypt abolished the visa application for Turkish citizens in April 2023.
Stating that Egypt has again entered the agenda of the Turkish business world with this development, Denizer said, “The fact that production costs in Turkey have increased significantly due to inflation directs companies to produce in Egypt. In order to compete in international markets with rival countries in foreign trade, Turkish companies from many sectors “It prefers to produce in Egypt,” he says.
According to the information provided by Denizer, Turkish investments in Egypt have reached a total size of 2.5 billion dollars. By 2023, approximately 35 Turkish industrial companies generate an annual turnover of $1.5 billion in Egypt. Turkish direct investments in Egypt are expected to increase by another 500 million dollars by the end of the year.
FACTORY INVESTMENTS ARE BEING MADE RESULTING
Emphasizing that Egypt has great advantages in foreign trade, Denizer said, “Egypt has duty-free trade agreements with the USA, the EU, South American and African countries. By producing in Egypt for Turkish companies, they can reach all these markets at much lower costs than in Turkey.” “It is possible to achieve it through production,” he says.
The labor cost, which is approximately 500 dollars in Turkey, is around 150 dollars in Egypt. In addition, electricity and natural gas costs are very low compared to Turkey. These advantages are increasing the interest in Egypt. Currently, giant Turkish companies from many sectors, from Arçelik to Şişecam, from Temsa to Yıldız Holding, are producing in Egypt.
For example, Temsa, which has chosen Egypt as its production and export base, produces and exports buses and midibuses in its factory with a capacity of 1000 units. Yıldız Holding has a biscuit factory under the Pladis brand in Egypt, which is the second largest biscuit market in the MENA Region. Yeşim Textile, which has factories in three cities in Egypt: Alexandria, Cairo and Ismailia, produces for the world’s leading sportswear brands.
Arçelik, a subsidiary of Koç Holding, Turkey’s largest holding company, is preparing to commission its new factory, which it established in Egypt with an investment of 100 million dollars, towards the end of the year. Turkish companies such as İskefe Holding, LCWaikiki, Eroğlu Group, Yeşim Tekstil, Şahinler Holding and Hayat Holding are also preparing to make new investments in Egypt in the near future.
While Turkish companies directly employ 70 thousand people in Egypt, the textile and apparel sector takes up a large place among the sectors. Currently, one-third of Egypt’s total textile and apparel exports are made by Turkish companies.
“TURKISH COMPANIES ARE WELCOME AT THE DOOR”
Emphasizing that the Egyptian government approached Turkish companies very warmly after the re-establishment of diplomatic relations between the two countries, Mustafa Denizer said, “Both the relevant ministries and investment-related institutions welcome Turkish companies at the door; they support and inform them as much as they can.”
Adding that the only problem Turkish companies experience in Egypt is the delay in payments due to the lack of foreign currency in the country, Denizer says:
“Turkish companies that sell goods directly to the Egyptian domestic market are having difficulty collecting their money. At this point, we demand positive discrimination from the Egyptian government to Turkish companies. In order to overcome the foreign exchange problem, it is on the agenda to conduct trade between us in local currencies. The central banks of the two countries are holding talks on this issue.”
“WE WILL INCREASE COOPERATION WITH EGYPTIAN COMPANIES”
In October, Minister of Trade Ömer Bolat made an official visit to Egypt to strengthen commercial relations between the two countries. Bursa Chamber of Commerce and Industry (BTSO) Chairman İbrahim Burkay, who accompanied Minister Bolat during this visit, said in his statement to DW Turkish: “We aim to increase trade with Egypt to 15 billion dollars in 5 years.”
Noting that they are focusing on developing commercial relations between Bursa, Turkey’s automotive and textile center, and Egypt in the new period, Burkay says:
“We think that we have opportunities for cooperation with Egyptian companies in third countries. We will start working to organize a fair for the home textile industry in Egypt. We will bring the 10 years of fair knowledge and experience of our KFA Fuarcılık company, which has the authority to organize fairs abroad, to Egypt. In Egypt “We will also organize a fabric fair simultaneously with this fair, which will be the first of its kind. We will continue our work to develop our cooperation with Egypt in every field.”
