Egypt and EU: A New Chapter of Strategic Ties

Updated 4/2/2024 8:00:00 AM

Egypt and the European Union (EU) have jointly decided to elevate their relationship to a strategic and comprehensive partnership, built upon principles of fairness, mutual respect, and trust.

This ambitious agreement promises to deepen economic ties and unlock significant growth potential for both parties.

The relationship between Egypt and the EU has entered a new and exciting chapter with the signing of this strategic partnership agreement.

This agreement goes beyond mere trade ties, forging a deeper, multifaceted partnership with the potential to significantly impact the two sides.

Beyond Trade: the EU and Egypt Forge Deeper Ties

The recent signing of the joint declaration on the strategic partnership between Egypt and the EU marks a significant milestone in their cooperation. This agreement moves beyond mere trade relations and establishes a profound partnership with the potential to significantly impact both parties.

The partnership outlines six key priorities, with an emphasis on economic stability, sustainable investment, and trade. It also underscores the importance of political relations, migration and mobility, security, as well as people and skills.

The EU has pledged €7.4 billion ($8.1 billion) in aid and investments, aimed at bolstering Egypt's economic development. This package is planned for the period from 2024 until 2027, and it includes €600 million in grants, €5 billion in soft loans, and €1.8 billion in additional investments under the southern neighborhood economic and investment plan.

Beyond the strategic partnership, there are other future plans to foster ties between Egypt and the EU. The EU is holding an investment conference in Egypt on June 29th. This conference, which was scheduled for May, is expected to bring together around 450 European companies.

Wafaa Ali, a PhD holder and an economic and energy expert, comments on Egypt’s upgraded relationship with the EU to strategic, telling Arab Finance that it brings "projects aiming to increase the efficiency of using renewable energy, transfer technology, and open new horizons for employment opportunities.”

“They are also aimed at attracting more investments and financial packages for energy and other projects, bolstering the quality of life for Egyptians, and ensuring energy sustainability across the European continent," Ali says.

A Pathway to Growth and Prosperity

The Egypt-EU strategic and comprehensive partnership represents a significant step towards a more integrated and prosperous economic relationship.

By focusing on trade facilitation, sustainable development, and human capital development, this collaboration has the potential to unlock long-term economic growth for both Egypt and the EU.

The value of trade exchange between Egypt and the EU countries hit $31.2 billion in 2023, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). Meanwhile, Egyptian exports to the EU countries valued at $11.8 billion, while the value of Egyptian imports from the EU reached $19.4 billion.

This partnership is expected to positively impact trade movements and economic relations between the two parties.

“Strengthening relations between Egypt and the EU to the level of a comprehensive strategic partnership will have a major impact on Egypt's exit from its complicated economic crisis due to the shortage of foreign currency,” Neama Zahran, Economist at the Information and Decision Support Center (IDSC) and Head of Publication Committee at the Scientific Advisory Committee at IDSC, says.

“In turn, this leads to the depreciation of the Egyptian pound, especially after the President of the Commission’s announcement," Zahran adds to Arab Finance.

Talking about foreign direct investments (FDIs) has become a main concern now, especially since the whole world is facing a very complex economic and political equation.

“Despite all the challenges, Egypt has had its say, as it seeks horizons and visions towards sustainable growth,” Ali says.

“Therefore, the partnership came to extend hands to complete the building of a competitive economy, in which positive performance is reflected. It affects all sectors of the state, opens new horizons for employment opportunities, and attracts more FDIs,” Ali explains.

Moreover, the strategic partnership with the EU is set to boost investments in several sectors of the Egyptian economy.

This comes as the EU is pledging a significant €5 billion investment boost to boost cooperation with Egypt in key areas of the modern economy.

These areas include renewable energy, advanced manufacturing, sustainable agriculture, digital infrastructure, and water management. The investments will be backed by guarantees from the EU's development fund.

Additionally, the elevated relationship with the EU "will contribute to attracting huge European investments to Egypt, especially in the renewable energy sector (green hydrogen),” Zahran points out.

“This contributes to creating many job opportunities for young people, opening large export markets, and raising the standard of living of citizens," Zahran highlights, adding that "the strategic partnership will further help the two sides in solving critical issues such as energy security, combating illegal immigration, and combating terrorism."

Challenges on the Road to Partnership

The EU-Egypt strategic partnership might face several challenges, yet when addressed, they offer great opportunities.

Zahran mentions that the biggest challenge facing the partnership goals is “the stability of the foreign exchange market in Egypt, which the comprehensive partnership will contribute to addressing through the financial support package to Egypt worth €7.4 billion.”

Not only are foreign currency challenges a concern, but trade facilitation could also encounter obstacles from other elements.

“I think the most common challenges facing trade facilitation and market access for Egyptian goods in the EU market and vice versa are administrative and customs procedures. This is along with bureaucracy, a lack of coordination between the concerned parties, and the competitiveness of Egyptian goods in European markets,” Zahran points out.

The EU-Egypt relationship presents a promising roadmap for a mutually beneficial future.

By fostering deeper economic ties, prioritizing sustainable development, and investing in human capital, this partnership has the potential to unlock long-term growth and prosperity for both sides.

While challenges like foreign exchange stability and trade facilitation complexities exist, the €7.4 billion aid package from the EU demonstrates a commitment to overcoming these hurdles.

By Sarah Samir