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10 Jun 2009

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Egypt – An Emerging African Market: Bright Future for Thai Trade and Investment (Business Brief No.2529)

KASIKORN RESEACH CENTER (KResearch) views that the Egyptian economy will likely improve this year in line with the world economic recovery. The Egyptian economy in 1Q09 grew 4.3 percent, against the 4.1-percent growth achieved in 4Q08. As a result, Egypt should offer bright opportunities for Thai exports and investments.
Since Egypt undertook economic reform in 2004, trade between Thailand and Egypt has expanded rapidly, averagely 26.6 percent p.a. between 2004-2008, thanks to Egypt's geographical advantage being a gateway to neighboring countries and those located within inner Africa. Egypt has also exhibited steady economic growth, averaging 5.9 percent p.a. Although Egypt's outward trade has been adversely affected by the global economic crisis, their government's economic stimuli that include both fiscal and monetary measures have now helped trade and investment within the country. It is expected that the Egyptian economy will improve in 2H09 due to the rebound in their production and investment sectors, particularly increased foreign direct investment (FDI) because the global economic crisis shows signs of bottoming out. Therefore, Egypt is an interesting emerging market.

It seems that a bright future will lie ahead for many Thai exports in Egypt, such as cars/parts, frozen/processed seafood, rubber products, plastic pellets, textiles, electrical appliances/parts, electronic appliances/parts, etc. The exports of raw materiel to supply industrial production will enjoy lower tariff rates (with discounts of 5-10 percent from the tariff rates on finished goods). Regarding Thai investment opportunities in Egypt, they would include food processing, textiles, petroleum/petrochemicals plus services such as spas and Thai restaurants, because Egypt has abundant raw materials. Meanwhile, Egypt is a famous tourism magnet, attracting travelers from around the globe, particularly high-income Europeans. Comparing wages between Egypt and Vietnam, the average wage in Vietnam – which is one of most attractive destinations for foreign investment – is USD1,200/year, while the average wage in Egypt is USD1,537/year. Egypt's labor cost is still rather low on global scale.

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