Egypt: familiarity with the economic situation of this country

03 September 2020
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Egypt is one of the Middle East countries with lots of potential. In this article you are going to get some general information about the economy of Egypt, and the condition of exports of Iran to this country now and in the future.

Egypt is one of the Middle East countries with lots of potential. Similar to Turkey, Egypt has no oil-dependent economy and its main economy parts are dependent on the Nile. Trade, export and import relations between Egypt and Iran is better than other African countries because of some particular reasons. On the other hand, major needs of Egypt for export goods of Iran give a very potential opportunity to Iranian investors.  In this article of Sindbad, we are going to examine the importance of export to Egypt.

Why Egypt?

Egypt can be chosen as one of the potential export destinations of the country because of many reasons including having a large Muslim population, rich national resources, huge industrial factories, abundant foreign exchange earnings from the tourism industry, extensive business facilities, geographical situation, and also geographical proximity to Iran compared to other African countries. A collection of these facilities and capabilities can provide the basis for economic cooperation and expansion of trade relations between this country and Iran, but there is a deep gap between Iran's potential and realized trade capacities with Egypt.

Why Egypt?

General information about the Egyptian economy

Despite lacking any crude oil, Egypt has become one of the top economies in the Middle East and Africa, relying on the tourism and agriculture industries. Economy of Egypt is depended on Nile very much. Since the annual amount of rainfall varies from 20 cm in the north to 0.5 cm in the deserts, agricultural activities are limited to Nile Delta. There are grains, fruits, rice, sugarcane and vegetables in Nile Delta. Flax and clover are the two main export products. Raising cattle, sheep, goats and camels is also common in Egypt. From the important mines of Egypt we can point to phosphate, iron ore, manganese, and chromium; its significant industries are cement, steel, wood and food.

The tourism industry, receiving tolls from ships crossing the Suez Canal, the stock exchange, the growth of the telecommunications, foods, beverage and assembly industries are other sources of income for Egypt. Nonetheless, the process of the growing of economic reforms of this country is slow in a way that in terms of attracting foreign investors, Egypt is ranked 165th out of 175 countries and in terms of transparency policies it ranked 77th.

By the aim of developing non-oil exports, marketing and penetrating in far and close markets are considered as crucial steps. Being familiar with countries’ markets is also requires extensive research on its dimensions and elements. Egypt is unknown for economic and commercial activists of Iran. Any kind of relationships, especially economic and trade relations and cooperation requires basic information about this country.

The situation of Iran’s exports to Egypt

With cosine index of 0.708 and 0.635 regarding exports and imports with Iran, Egypt has the highest degree of complementary commerce among other countries in Africa.  Also, during the mentioned period, the annual value of Iran's normal export potential was $ 90.2141 million which was realized only about $ 8 million per year. Actually, the average of annual value of normal export potential that has not been realized is very huge amount. Also, the percentage used of Iran's potential to Egypt was 0.51%. In the following picture, you can see the major exporting countries to Egypt which does not include Iran.

The situation of Iran’s exports to Egypt

From the goods with high export potential from Iran to Egypt, non-oil export products of Iran with high added-value, low volumetric weight, and final consumption are in the first priority of Iran's exports to Egypt.

In any kind of bilateral trade cooperation between countries, there is no need to have a view of regional economic arrangements. There is no idea that Iran will establish regional trade arrangements with African countries.

But the fact that the trade cooperation between Iran and the mentioned countries is a win-win cooperation requires presenting reasons and theoretical discussions. Given these considerations, the main factors and background of regional integration include geography, the size of the economy, political will, and cultural commonalities. Among non-economic incentives for regional integration, we can mention regional stability and security, motivation to stabilize reforms, and increasing the ability of bargaining.

Iran’s exports to Egypt in the future

Considering the fact that Iran’s economy is similar to Egypt in terms of the amount of Gross Domestic Product (GDP), it is expected that bilateral economic and trade relations of Iran with this country has far more potential than other countries on the African continent. The results of studies show that the more economies with GDP per capita are similar the more possibility of business development there are. The GDP of Egypt in the last 25 years is shown in the following picture.

Iran’s exports to Egypt in the future

Based on this small difference (equality) between Iran's per capita GDP and Egypt's GDP per capita, facilitates the possibility of more economic and trade relations. Of course, the more geographical distance of countries increases, the more trade potential and possibility of bilateral exchange decreases. According to this, we conclude Iran's trade relations with North and East African countries, including Egypt have been wider than in other parts of Africa.

According to information provided in all three categories of Egyptian economic indicators, the country has a leading position in Africa. These indicators include economic and trade development variables such as economic Freedom index, human Development Index, total and per capita GDP, ratio of gross capital formation to GDP, the share of value added of factory industries from GDP, the share of foreign trade from world trade, Economic openness index, the share of factory exports in total exports, and the ratio of foreign direct investment to its total in the world. All these facilities and capabilities provides the basis for economic cooperation and expansion of trade relations between this country and Iran.

The last word

Developing exports to oil-dependent countries, including our own country, Iran, can facilitate the way for the growth and development of the country's economy. According to the non-oil economy they have, African countries such as Egypt can be a very proper choice to develop trade relations. On the other hand, the important point is that our country has significant similarities with Egypt both culturally and economically. This issue provides the necessary basis for developing exports and imports between the two countries. In this regard, extensive reforms have been made by both countries regarding the further development of trade, export and import relations, which we will discuss in a separated article.

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