ECONOMY-EGYPT: Government Not Ready To Cut Economic Ties With Israel

By Cam McGrath Reprint | | Print |

Cam McGrath

CAIRO, Apr 10 2002 (IPS) - Egyptians protesting Israeli acts of aggression against the Palestinian people have called for a full economic boycott of Israel, but the government insists “the time is not right”.

The government of Egyptian president Hosni Mubarak announced last week that it would suspend all ties with the Israeli government except those serving the Palestinian cause.

“The cabinet decided to suspend all contacts between the Israeli government and the Egyptian government except for the diplomatic channel that serves the Palestinians within the framework of the efforts being exerted to save the situation,” a government statement said.

Many were led to believe that the government intended to sever all commercial ties, but officials have quietly admitted that these contacts would continue both through the state and private sector.

“We do not yet have the instruments to stop trade with Israel,” an official at the Foreign Trade Sector said. “The time is not right.”

Trade volume between Egypt and Israel has decreased since the start of the Palestinian Intifada in September 2000.

Israeli economic sources indicate that Egyptian imports of Israeli goods fell to 47 million U.S. dollars in 2001, compared to 58 million in 2000, while non-oil exports dropped slightly to 17.9 million U.S. dollars.

Egyptian officials concur that trade has receded, but insist that the real value of imported Israeli goods, mostly textiles, chemical products and agricultural equipment, was less than 24 million U.S. dollars in 2001. Exports exceeded 200 million U.S. dollars, mostly crude oil and chemicals.

“Economic relations with Israel are not very significant to the Egyptian economy, so a boycott can easily be done,” Samiha Fawzy, lead economist at the Egyptian Centre for Economic Studies (ECES) told Inter Press Service. “However, there is a time frame for trade. Import and export agreements take several months to conclude, so we cannot stop all trade right now.”

The government’s decision to suspend all non-diplomatic relations with Israel is not expected to hinder the conclusion of a three billion U.S. dollar deal between Eastern Mediterranean Gas (EMG) and Israel Electric Company. EMG is a controversial partnership between Israel’s Merhav Group and various Egyptian gas companies in which the state-owned Egyptian General Petroleum Company (EPGC) is a major shareholder.

Under the 10-year agreement, EMG would supply Israel Electric with 1.7 billion cubic meters of natural gas annually, enough to cover 56 per cent of its gas needs.

Sources close to the negotiations say the deal is nearly closed and only a few technical issues remain open to discussion.

“We do not expect any problems to arise at this point,” the Jerusalem Post quoted an Israeli Infrastructure Ministry official as saying. “The bottom line is that this project, while being important to Israel, is even more important to Egypt.” Egyptian officials declined to comment on the gas deal, but pointed out that export contracts were in the best interest of the country. They also highlighted the necessity of certain Israeli firms working in Egypt, particularly those supporting agricultural development.

To expel these companies would likely cause more economic harm than good.

At Delta Textiles, one of two Israeli textile firms operating in Egypt, it is “business as usual”. The company, part of the Israeli Galil Industries group, has operated in Egypt since 1992 through a joint venture with a Dutch company, and is a leading clothing supplier to British retailer Marks and Spencer.

“Our company is not in any way political,” asserts general manager Oded Beit-Halachani. “It is purely a business venture.”

Delta operates out of the Nasr City free zone, employing 3,000 Egyptians directly and securing the jobs of some 3,500 workers at factories that supply the company with its materials. To expel the company would add to Egypt’s startling high unemployment rate and send the wrong message to foreign investors. Thus the government prefers to quietly support the venture, while paying lip service to the angry mobs of Egyptians hounding the Israeli Embassy in Cairo.

“I will never buy anything made by an Israeli company,” maintains Mohammed Amer, 27, who lost his job earlier this year. “No Egyptian is willing to support Israel as long as it is killing innocent Palestinians. We must boycott all Israeli products.”

Arab states have practiced an economic boycott of Israel since its inception in 1948, but Egypt’s landmark 1979 peace treaty with Israel opened the door for direct trade with its Jewish neighbour. Since the start of the Palestinian Intifada, however, the public’s call for reinstating a full economic boycott against Israel has grown and waned according to the intensity of violence in the Palestinian territories.

Chambers of commerce, trade organisations and syndicates have repeatedly issued statements of a boycott, but with the government unwilling to intervene, public shame is the only weapon to enforce it. In the end, the people must decide for themselves.

“It is up to the people. The government will not interfere,” said Moustafa Zaki, head of the Import Sector at Cairo Chamber of Commerce. “Consumers can refuse to purchase Israeli goods. That’s the best we can hope for.”