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TRADE-EGYPT: Out With ‘‘The Pyramids’’, In With Liberalisation

Leslie-Ann Boctor

CAIRO, Aug 1 2007 (IPS) - Earlier this year, a group of prominent Egyptian business leaders had gathered at a downtown Cairo hotel to discuss building a successful export industry. A presenter opened the discussion by asking for a show of hands to indicate who was wearing Egyptian-made shirts or shoes.

A small number of hands went up, which led the presenter to pointedly ask, ‘‘How can we get the world to trust us if we can’t trust ourselves?’’

It is a question confronting Egypt’s government and business leaders who are eager to promote foreign investment in the country. Egypt is in the process of launching a long-awaited branding initiative.

Nation branding is basically the use of strategic marketing to promote a country’s image and attractiveness to tourists and companies to draw foreign direct investment (FDI).

Rather than relying on the sphinx, the pyramids and cheap beach holidays to drive the country’s identity, positive economic achievements should be leveraged as part of the country’s image, says Ehab Nada, the branding agency Logic Enterprise’s managing director for north Africa.

Egypt needs to undergo a fundamental soul searching exercise to determine its identity and its best assets, he says. ‘‘Any strategy that plays on the pyramids and monuments is not going to help the country in terms of investments and exports. It might help in terms of tourism, but not in terms of investment.

‘‘You have to address other areas if you want to attract investors, privatize a massive public sector, export your local products and become a big player on international markets. We have to figure out what we are capable of delivering on, so we can go boldly to the world and say, this is who we are, this is what we are good at.’’

The possibilities could include agriculture, textiles, mining, human capital and of course, the country’s vast cultural assets. Nada says the country could even go in a new direction and develop itself as a strategic knowledge or financial hub in the region.

But strategists caution that if Egypt’s branding exercise is to be successful in ultimately generating long-term FDI, that gnarly question of trust has to be ironed out – from the inside out.

Now beginning his third year, Egypt’s Prime Minister Ahmed Nazif, a Canadian-educated engineer, has pulled off a mini-brand strategy himself with his trademark slogan ‘‘Egypt is open for business’’.

It was the sign-off he used when he visited the US’s White House three years ago, the first Egyptian prime minister to do so. He has consistently used the slogan to end his speeches ever since.

There are certainly promising signs. Foreign direct investment has risen sharply in Egypt since the government started an economic liberalization program.

According to the publisher Business Monitor International, Egypt attracted 6 billion dollars worth of foreign investment inflows in 2005-2006, a considerable gain over approximate inflows of 300 million dollars in 2003-2004.

Corporate taxes were cut in half to 20 percent. Growth in gross domestic product, which had been stuck at near three percent a year for the early part of the decade, rose to five percent in 2005 and 6.9 per cent last year. The tourism industry has doubled in size in less than five years and is predicted to grow by 12.5 percent in the coming 12 months.

While government and business leaders are eager to communicate Egypt’s new found optimism and opportunity, there is still a fundamental credibility gap among investors, says Nada.

‘‘Investors still do not know to what extent they can take a chance on investment in Egypt. In their minds there is a question mark over credibility .We have what I would call a weakness for being slow and for having broken promises… like promising to deliver facilities or equipment and not delivering,’’ says Nada.

‘‘If you have a reputation for broken promises, you scare foreign investment away,’’ he argues.

Egypt was placed 77 out of 133 in the anti-corruption civil society organisation Transparency International’s 2006 Corruption Perceptions Index. It takes a long time to get rid of a bad reputation, says policy advisor Simon Anholt, who advises countries on how to build a good reputation. He likens a bad reputation to a natural catastrophe.

‘‘Having a negative reputation is like a tidal wave or a volcano erupting. If people have a negative view of a country, and people do have a negative of Egypt, you simply cannot change that through communication. You have to work on it for a long time and change it through real action,” says Anholt.

‘‘Changing a country’s image is an investment in innovation and structural change,’’ from his point of view.

Economic change has been high on the agenda. Egypt’s economic reform programme was launched in the early part of this decade. Under Nazif’s ambitious reform plans, multinational corporations opened offices and made profits.

Domestic businesses expanded and diversified. With a large workforce and trade agreements in place with European, Arab and African markets, it seemed that Egyptians had a rosier future to look forward to.

However, reversing a half century of socialist policies based on state control has proved to be no easy task. The western-educated cabinet ministers surrounding President Hosni Mubarak have inherited a decrepit bureaucracy left over from the 40 year rule of Gamal Abdel Nasser from which, some economists say, the country is still recovering.

Egyptian industries suffered from bad management and an absence of competition, says Tarek Nour, chairperson of Tarek Nour Communications. ‘‘We could not advertise business in Egypt before because it was run by bad government. There is definitely a residue left behind… We have basically had 50 years of bad management.

‘‘I am sure a minister today gets discouraged when he finds 35,000 people in his ministry doing nothing… It is a legacy that is very difficult to untangle,’’ says Nour.

But Nour says the new guard is a different calibre of bureaucrats who are working hard at overhauling bureaucracy and getting their own house in order. He points to his own business as proof, which he says has doubled in the last couple of years because of the economy’s performance.

Business leaders are quick to praise Mubarak’s team of cabinet ministers for tackling some of Egypt’s trust issues. Egyptian industry has been dogged by inconsistent quality, poor delivery on deadlines and poor customer service.

In an effort to boost exports and raise standards, the Egyptian government is funding a quality improvement programme to modernize and upgrade some 1,000 small and medium-sized enterprises to become more export oriented.

The programme aims to create an estimated 50,000 new jobs in the manufacturing industry, attract approximately 2.5 billion dollars in investments and double the sector’s exports to almost 1.5 billion dollars.

The minister of trade and investment has created a network of councils representing industries from furniture and textiles to food processing. Their task is to advise the minister on how to improve regulatory and business climates to boost exports.

Empowering industry leaders seems to be working. In the furniture sector, exports are expected to quintuple in the next three years from 200 million to 1 billion dollars.

Branding efforts have to begin with the Egyptian people. As the government steps away from its socialist tradition to embrace private enterprise and pursue global markets, it’s also stepping back from its subsidies that Egyptians have depended on for decades.

The prices for basic goods have shot up as subsidies are stripped away and Egyptians see no change in their meagre wages. Inflation rocketed from three percent at the end of 2005 to 12 percent by last October. Understandably, Egyptians have little faith in their government.

Egyptians need to feel good about their country, says Anholt, as that is the basis for a long-term, positive branding effort. ‘‘It has to be a fundamental, deep rooted cultural change that comes from self-respect and doing well, personally and nationally.’’