What the UAE taught Egypt on doing business with Israel – Haaretz

Posted By on April 11, 2022

It took more than 40 years, but now Egypt is gradually waking up to the potential of economic ties with Israel.

Its hardly anything resembling the warm and powerful embrace of the United Arab Emirates in the wake of the 2020 Abraham Accords, but signs abound that the regime of President Abdel-Fattah al-Sissi wants to strengthen economic ties above and beyond the $15 billion natural gas deal the two countries reached four years ago.

The signs are most evident in the tourism sector. Last October, state-owned EgyptAir began flying to Tel Aviv under its own name rather than through its unflagged Air Sinai affiliate, and this month the first direct flights between Ben-Gurion International Airport and the Sinai resort of Sharm el-Sheikh took place.

Earlier in the year, the leader of Egypts Coptic Church gave official imprimatur to his followers pilgrimages to Jerusalem. Egypts Tourism Ministry even sports a Jewish Heritage section on its website as a come-on for Israeli visitors.

Meanwhile, Israeli gas exports to Egypt are growing quickly. The first gas began flowing in January 2020 through a Sinai pipeline delivering 5 billion cubic meters annually. That figure has expanded by as much as 50 percent since the end of February, when more gas began to be sent via a pipeline running through Jordan. The number will rise even more with plans to increase the Sinai pipelines capacity to 6.5 BCM.

The government of Egypt and the elite now realize that economic ties with Israel are a net positive. They have seen the success of the UAE and Israel, and they think they should jump on board, says Hussain Abdul-Hussain, a research fellow at the Washington-based Foundation for Defense of Democracies.

To see the speed at which the UAE moved to establish business, trade and investment ties with Israel, you only need to look at the size of bilateral trade, which reached $1.15 billion in 2021, the first year after the Abraham Accords were signed. The two countries agreed on terms for a free trade agreement earlier this month, and cross-border investment, led by Mubadala Petroleums $1 billion purchase of a stake in Israels Tamar gas field, has taken off.

By comparison, Israeli-Egyptian trade, not counting energy, came to just $246 million last year, most of it Israeli exports to Egyptian companies in the framework of U.S.-sponsored qualified industrial zones. QIZ rules allow Egyptian companies to export their goods duty-free to the United States as long as a little over 10 percent of the products value was made in Israel.

In 2019, before COVID put an end to tourism, some 500,000 Israelis visited Egypt. But nearly all of them are taking beach holidays at isolated Sinai resorts reachable by car. Few Israelis tour the rest of Egypt and only 8,000 Egyptians visited Israel in 2019.

The difference, experts say, is attitude. While the Emiratis have accepted Israel with open arms welcoming Israeli tourists and openly hosting business executives, for instance Egypts opening to Israel remains an elite phenomenon.

At this point, the awareness [of the change] is at the top level of government and the private sector it has not seeped through to the rest of the population, which remains, to put it nicely, skeptical towards Israel, Abdul-Hussain says.

That means that while commercial ties with Egypt may be growing, they wont be much in evidence no glittery investment conferences or press releases announcing deals, as there have been in the UAE. Thats due to hostile public opinion, which only gets worse every time Israel and Hamas clash in deadly fighting.

Within Egypt, public sentiment against Israel is very high thats not going to change in the foreseeable future, as much as Sissi would like to make the change, says Gabriel Mitchell, director of undergraduate studies at the University of Notre Dames Tantur Center in Jerusalem.

The powerful professional syndicates, which organize doctors, lawyers and even artists, are a major source of anti-Israel feelings. Even if the Muslim Brotherhoods influence in them has diminished since it was banned by Sissi, anyone doing anything that smacks of normalization with Israel is likely to be called out. The private sector remains wary, Mitchell says.

So long as they arent protected by the government or in some way affiliated with the military or intelligence community, its far more difficult for Egyptian businesses to cooperate with an Israeli company, Mitchell says. Its not that theres anything built into the economic system resistant to business with Israel but due to social factors how they would be perceived by Egyptian and other Middle Eastern partners.

Thus its no surprise that in March 2021 the Israeli delegation to the biggest get-together of Israeli and Egyptian business executives in two decades was led by then-Intelligence Minister Eli Cohen and was held in Sharm el-Sheikh (a kind of desert Geneva for bilateral meetings) rather than Cairo. At the Egyptians request, the meeting got almost no media attention, and if any deals have emerged from it, theyve been kept private.

Still, the militarys role in the Egyptian economy shouldnt be underestimated. The size and scope of the armys business empire is murky, but its believed to comprise 60 or so companies with an annual turnover as high as $7 billion, The Financial Times reported last year.

Growing rapidly under Sissis rule, army-affiliated companies now encompass wide swaths of the economy, including the role of prime contractor for Egypts new $45 billion capital city. Tellingly, East Gas, which holds the Egyptian stake in the pipeline bringing Israeli gas to Egypt, is controlled by Egyptian intelligence, according to the Egyptian news site Mada.

Sissis efforts to strengthen commercial ties with Israel comes as Egypt struggles to generate enough economic growth to create the 1 million new jobs that it needs each year.

More recently, the economy has been buffeted by the Ukraine war, which has interrupted critical supplies of imported wheat. Last month, the Egyptian pound was devalued 14 percent, which will exacerbate inflation.

At this point, Sissi and his government are trying everything to make the economy work, Abdul-Hussain says.

The Abraham Accords are also changing attitudes by making commercial ties with Israel more acceptable, he adds. The UAE is causing regional economic integration, and if youre Egypt or Jordan, or any other country, its in your interest to jump on board. Things are happening you only have to capture a piece of it.

For now, however, the business opportunities will be limited to easier targets like Sinai tourism, Mitchell says. Promising sectors are in areas like agricultural and water technology, where Egypt faces enormous challenges. One way Israeli companies can enter the Egyptian market is via joint ventures with Emirati or European companies that would lower the Israelis profile, he suggests.

Mitchell sees the atmosphere in Egypt slowly getting warmer, as long as Sissi remains in power. But it will take time.

Everyone understands this and is committed to a long-term approach, he says. Israel has the desire [to strengthen economic ties] and typically likes to charge ahead, but Israel has a long history with Egypt and understands that Egypt works at its own pace.


What the UAE taught Egypt on doing business with Israel - Haaretz

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