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Sunday, 7 May 2017

AmCham’s 2017 Doorknock Mission has drawn to a close — our final report.

AmCham’s annual Doorknock mission wrapped up on Friday in Washington, DC, on a positive note. We joined the media delegation for a chat with outgoing AmCham President Anis Aclimandos and Omar Mohanna, chairman of the Egypt-US Business Council, for a briefing on this year’s mission. Key takeaways:

  • Overall, the delegation felt that the view of Egypt in DC is very positive — that “a new page” has been turned in Egypt-US relations. This was fueled by President Abdel Fattah El Sisi’s visit to the US. For the first time in years, US administration officials and members of Congress spoke of Egypt as an “ally.”
  • The delegation came seeking partnership, not aid. Egypt brings significant opportunities to the table given its large domestic market of more than 90 mn people and its network of interlocking trade agreements.
  • Egypt’s economic reform program was well received in Washington, where policymakers and lawmakers welcomed the elimination of the FX parallel market and moves to allow the repatriation of profits and capital.
  • There were concerns about the high level of inflation in Egypt, but a recognition that the economy has so far proven able to absorb shocks and that Egyptian consumers are resilient. Other concerns raised centered on savings and tax revenues as a percentage of GDP.
  • A backlog of USD 400-450 in unused US economic aid from previous budget cycles will not be recalled, which sends a positive sign.
  • The strategic dialogue between Egypt and the US will likely have a business component — a significant achievement, in our view.
  • The Doorknock delegation brought up the issue of a free-trade agreement with the US, a perennial “ask” on the Egyptian side that has in the past seen the US counter with conditionality on human rights. (We’re of two minds here: On the one hand, it’s hard to remember a president more predisposed to engage with Egypt than Trump. On the other, Trump’s skepticism of free trade is exceptionally clear.)
  • There appears to no significant US objection to reducing the minimum percentage of Israeli content in exports to the US from Qualifying Industrial Zones to 8.5% from 10.5%. That said, the delegation was told the issue must be dealt with at the political level between Egypt and Israel.
  • Creating better economic opportunities is a weapon in the war against terror. The US sees Egypt as a moderating force in the global struggle against religious extremism.
  • Concerns about human rights and lawsuits related to US NGOs were brought up.
  • The AmCham delegation held a total of 87 meetings including 54 with Congressmen, and nine with executive authorities such as the USTDA, the EXIM Bank, the Small Business Administration, and the Departments of Treasury, of Commerce, of Energy, and of State.
  • The delegation met with International Finance Corporations (the OPIC, the World Bank, and the USAID), influential figures like NY Times columnist Thomas Friedman and George Washington University scholar Nathan Brown. They also met with 16 think tanks.

Egypt’s ambassador to the US Yasser Reda also hosted the delegation at the embassy. Key takeaways:

  • A bilateral “strategic dialogue” on policy implementation is in the works. That dialogue will be run by Egypt’s minister of foreign affairs and the US secretary of state. The ambassador did not specify when the dialogue could kick off, but said he hopes it will be before autumn.
  • Reda highlighted that Egypt will benefit from credit guarantees from the US.
  • There was talk during El Sisi’s visit about a free-trade agreement between the US and Egypt, and early talks are still ongoing at the ministerial level.
  • El Sisi’s visit to Washington wasn’t to sign agreements, but to have Egypt present its views on regional matters to the new US administration while the latter is still shaping its policies.
  • El Sisi met with US companies to promote investment in Egypt. A positive political climate has an indirect effect on encouraging businesses to invest, the ambassador said.
  • Egypt did not come to the US looking for aid, but for a strategic partnership and to attract investment.

Enterprise sat with Hazem El Beblawi, executive director of the IMF and former Egyptian prime minister and finance minister, along with the media delegation accompanying the AmCham Doorknock mission. Key takeaways from the luncheon:

  • The second USD 1.25 bn tranche of the USD 12 bn facility to Egypt will be disbursed six weeks after the IMF concludes its current mission to evaluate progress on the economic reform agenda, said El Beblawi.
  • Asked whether interest rates are an effective means of transmitting and inflation-targeting monetary policy given Egypt’s large unbanked populated, El Beblawi said it is one tool that can be used as part of a larger set of economic reform policies that work together.
  • The IMF’s extended fund facility has made it easier for Egypt to access global credit markets and is a seal of approval on Egypt’s economic reform program.
  • Improving the quality of local goods is the key to boosting Egypt’s exports — it’s not just about cost-competitiveness.

State Department official describes Egypt as “major non-NATO ally”: We visited the State Department last week with the media delegation, where an official described Egypt as a “major non-NATO ally of the United States.” President Abdel Fattah El Sisi’s visit was very successful, he said, adding that the US is looking forward to working with Egypt make progress on files including security, the economy, trade, and regional issues. The official suggested that talk of any specific agreement to liberalize trade between the two countries would be premature.

“The most important thing about El Sisi’s visit is that it happened”: The delegation also sat with Mirette Mabrouk, deputy director and director of research and programs at the Atlantic Council’s Rafik Hariri Center for the Middle East. “The most important thing about [President Abdel Fattah El Sisi’s] visit is that it happened,” Mabrouk said, adding that it is too early to discuss what to expect of the Trump administration because it is still shaping its policies and many Department of State positions are still vacant. It’s also key to remember that Trump does not rule alone, Mabrouk said, noting that Congress will have an influence on how relations between the two countries unfold. That said, it’s clear the Trump administration is putting significant focus on security issues. Mabrouk said the US is “concerned” about what is happening in Sinai, but that it believes it is up to the Egyptian government to deal with it its own way. On fears relating protectionism, she said the US will always be open for business. The only impediments to more US companies doing business in Egypt will be security and the regulatory framework.

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