The handshakes of Egyptian President Abdel Fattah Al-Sisi with his Turkish counterpart Recep Tayyip Erdogan are becoming more and more self-evident, more and more warm. For ten whole years the two men maintained rather estranged relations, it was evident that one hardly tolerates the other’s presence. A first hesitant approach was made in Qatar, a year ago, on the sidelines of the Soccer World Cup. It was a short handshake. But two more meetings followed, first at the G20 summit in New Delhi in September and then at the Organization of Islamic Cooperation summit in Riyadh a few weeks ago.

“Ice” in Cairo-Ankara relations

For ten whole years it was almost impossible to break the “ice” in Turkey-Egypt bilateral relations. The explanation is obvious: In 2013 Al-Sisi overthrew Egypt’s democratically elected president Mohamed Morsi, who was supported by the Islamists of the Muslim Brotherhood, in a military coup, and Erdogan rushed to take Morsi’s side. Erdogan called Egypt’s new strongman a “coup”, “assassin”, “tyrant” or even “Pharaoh”, while also adopting the Muslim Brotherhood’s symbolic salute of four raised fingers and a folded thumb.

For its part, Cairo accused Erdogan of supporting the terrorist activity of the Muslim Brotherhood and offering refuge to Islamists. Diametrically opposed were the interests of the two countries in Libya as well, especially with regard to the exploitation of natural gas deposits. But the co-conspirators of the economic crisis force Turkey and Egypt to look for an opportunity for rapprochement. In 2023, for the first time in nine years, economic delegations of the two countries met in an effort to rekindle bilateral trade relations.

Inflation “persists” in Turkey

For years, Turkish businessmen have been particularly dissatisfied with the economic environment in their homeland. Erdogan’s unconventional monetary policy, insisting on low interest rates, is pushing inflation to unimaginable heights. According to recent data, official inflation in Turkey exceeds 61%, while the cost of energy remains high and the unpredictable policy of the central bank does not ease the situation.

The new economic staff, led by Finance Minister Mehmet Simsek and Central Bank chief Hafiz Gaye Erkan, is theoretically advocating a more “conventional” monetary policy and promising single-digit inflation rates until 2026 at the latest. However, it has yet to convince markets. and the business world in Turkey. In an effort to reduce production costs and limit the uncertainty of currency fluctuations, many are looking abroad for alternatives.

Egypt seems to offer attractive solutions, especially since last April, when the visa requirement for Turkish citizens was abolished. The labor cost, but also the total cost of production is significantly lower in Egypt. For the current year, Turkish investments have reached 2.5 billion dollars and it is estimated that in 2024 they will exceed 3 billion.

Low cost, access to new markets

In addition, Turkish companies have the opportunity to gain access to third country markets through the Egyptian market, which is one of the largest in the MENA (Middle East and North African Economies) zone. There are no tariffs on trade with the US, the EU, South America, and some African countries. “Egypt has always been an attractive investment destination, but the visa abolition was the decisive turning point for even more investors to come,” Mustafa Denizer, president of the Turkey-Egypt Business Council, tells DW. He estimates that 35 industrial companies from Turkey are already active in Egypt, with their annual turnover reaching 1.5 billion dollars.

Examples are the companies Arcelik, Sisecam, Temsa and Yildiz Holding. Temsa manufactures buses and trucks in Egypt, which are also exported to other countries. Yilmaz Group has established the Pladis confectionery industry. Yesim textile already operates three factories in Cairo, Alexandria and Ismailia. The Arcelik appliance industry, which has also penetrated Europe under the Beko brand, has invested more than 100 million dollars in a new factory in Egypt, which is expected to open at the end of 2023.

Low labor costs are certainly an important incentive. In Egypt the average salary does not exceed 150 dollars per month, while in Turkey it reaches 500 dollars. Turkish employers in Egypt already employ 70,000 workers, not including suppliers. It is estimated that one third of the total production in the textile sector comes from subsidiaries of Turkish companies. On top of that, Mustafa Denizer emphasizes that Egypt also has a “culture of friendly reception” for Turkish businesses.

Optimism for the future

The only serious problem is the lack of foreign exchange reserves, as a result of which payments are often delayed for Turkish businesses in Egypt, especially for those that are mainly aimed at the domestic market. But Denizer argues that the central banks of the two countries are jointly looking for a solution to this problem.

At the political level, the rapprochement initiatives continue anyway. In October, Turkish Economy Minister Omer Polat visited Egypt accompanied by a business delegation. Ibrahim Bourkai, head of the Chamber of Commerce and Industry in Bursa (Bursa), a city with a particularly dynamic economy, was also present. He declares himself particularly optimistic and points out that “our goal is to more than double the volume of trade between the two countries within five years, reaching 15 billion dollars”.