Old ties, new money

An Egyptian ministerial delegation recently visited India to stimulate economic ties. Mukul Devichand reports on how the free market is changing the relationship between the former pillars of Third World unity
"I have agreed with my Egyptian counterparts that economic and technological cooperation between our countries will be taken to a new level." So spoke RL Bhatia, former Indian minster of external affairs, on a visit to Cairo last week. "We have invited President Hosni Mubarak to visit India," he told Al-Ahram Weekly.
Bhatia's measured prose hides a new dynamism in relations between the two states. Together, Egypt and India are the grand old men of Third World cooperation; but the era of open markets and multinationals often changes the way old friends see each other. Visions of centrally- planned development have now been replaced by the buzz of market access.
This, at least, is the reason both countries give for rediscovering their closeness, despite the relatively meagre volume of trade between them -- a total of $249 million in the first half of last year.
Bhatia's visit, part of a "goodwill delegation" to explain India's position on Kashmir, was preceded by a more business-oriented exchange. A fortnight ago, a delegation of Egyptian ministers led by Minister of Foreign Trade Youssef Boutros Ghali visited India's southern IT capital, Bangalore. In troubled economic times, attracting India's newly groomed stable of multinationals to invest in Egypt was, of course, high on the agenda.
In his address to the Confederation of Indian Industry (CII), Boutros Ghali emphasised Egypt's open investment policy and tax exemptions, telling Indian businessmen that Egypt was a gateway to Middle Eastern and African markets, according to a CII press brief. "Come visit Egypt," urged the minister. "We will take you on a round of pharmaceutical companies and clinics so that you know our requirements."
But the high-level contacts suggest that both countries hope to gain more from each other than pill sales alone.
For Cairo, visits to south India in particular conceal a hope that Egypt can mimic the area's astonishing growth in small enterprises and the software industry. No surprise, then, that Minister for Industry and Technological Development Ali Fahmi El-Saidi and Hussein El-Gammal of the Social Fund for Development were also dispatched to India.
Nevertheless, Egypt has not yet grasped the reason behind Indian IT success -- at least according to Mustafa Kamel El-Sayed, director of Cairo University's Centre for Developing Countries Studies. "They think India has simply been more successful than we are in attracting foreign companies. But the truth is that it's a 100 per cent Indian story. They successfully attracted investment from Indians settled abroad and took an early decision to educate in IT. India also benefits from being an English-speaking country with extremely low labour costs."
Indian success in small-scale entrepreneurship is also being eyed up by Egypt's Social Fund for Development (SFD), which aims to stimulate small enterprise here. An SFD representative who went to Bangalore told the Weekly that India "has a long history of developing credit programmes and much experience in training. Our visit aimed at stimulating collaboration between members of the SFD and members of the CII."
So is India the leader, Egypt the follower? "No, it is a case of mutual benefit," argued the SFD representative. "Of course, we can't compete in terms of software but we can help, for example, in know-how on stimulating exports, an area in which we are ahead of India."
Nevertheless, the old Egypt-India unity of the heady days of Prime Minister Jawaher Lal Nehru and President Gamal Abdel-Nasser has disappeared beyond recognition, according to El- Sayed -- who himself has just returned from an official trip to India.
"Nowadays both India and Egypt are trying to court the USA. They want to embrace the free market and reform the public sector," El-Sayed told the Weekly. "Egypt is ahead of India on this because we have actually privatised our state-run industries and India hasn't yet."
So why are Egyptian eyes trained eastward? The answer may be that while Egypt has embraced reform faster, India has encouraged enterprise more successfully. "In the 1960s, both countries developed strong central planning systems, but while India's private sector remained large, Egypt's was totally displaced," El-Sayed explained.
India's version of democratic and federal government is also better for business than the Egyptian system, it seems. "India has strong autonomy at the state level, which allows more initiatives. A good example is IT, where state financial autonomy and education built strong industries," El-Sayed argued.
"Egypt's central concentration of power is crippling in contrast to India's multi-party system which gives politicians the incentive to reform in a way that brings local benefit," he said. "Egypt has essentially got a one-party system which does not create similar incentives."
But despite their economic success at home, Indian companies have not found the Egyptian market an easy ride. "I'm not sure Egypt's market will simply open up to India," El-Sayed said. "They face stiff competition here from Chinese and South East Asian products which are every bit as good, and cheap."
Given that, what has India to gain from increased cooperation? The answer may be less economic than political.
India's constant face- off with Pakistan over the Kashmir valley -- a sad and drawn out conflict which has intensified of late -- has it courting opinion in Arab and Muslim states because of the religious undertones to the tension in Kashmir. "India's interest in the Arab and Muslim worlds has a lot to do with Kashmir," El- Sayed said.
India's new-found status as an IT powerhouse, together with Egyptian clout in regional politics, gives both governments every reason to rekindle the close ties of the past.
But New Delhi's strategy may not be succeeding. "India's image is marred by its growing military cooperation with Israel," said El- Sayed. "I told them I was disappointed. They have only words for the Arabs but increased trade with Israel."
Indian officials are quick to defend themselves. They say they trade with Israel for practical reasons but support the Palestinian state politically. At last week's press conference in Cairo, RL Bhatia's delegation claimed that a 35-year-long US arms embargo on India forced New Delhi to buy weapons from France, Russia and Israel. Nowadays, they argued, Israeli weapons were better available, and cheaper, than arms from France and Russia. Dryland farming, another Israeli success story, is also a technology India is eager to gain.
Still, the Indian delegation was keen to point to long-term Indian support for a "viable" Palestinian state -- both political and economic -- and noted that it was not only India but also Arab countries which now traded with Israel. "I can assure you our relationship with Israel will not be at the cost of the Palestinians," RL Bhatia told the Weekly.
But judging from the dismayed reactions of some of the journalists at the press gathering, many Egyptians have yet to be convinced. The logic of capitalism has redefined the Third World's oldest friendship. And rightly or wrongly, not everyone is pleased.
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