'Hooked on Egypt'

Outgoing British ambassador to Egypt, Sir Graham Boyce, speaks with Ghada Ragab about a more active role for British business in Egypt and for British foreign policy in the region
Egyptian and British business people have never been more in the news together than in the past two years. The reason: A British ambassador who has made it his business to strengthen economic ties between two countries which share a long historic relationship, for better or worse.
But for Sir Graham Boyce, the better has obviously triumphed over the worse: He says that only once in the two years he has been here has he met an Egyptian who blamed the British occupation for Egypt's current problems. But while British business has been hailed as taking a more active interest in Egypt, the British government has been criticised for failing to make its mark in the Middle East, and for following closely in the footsteps of the US.
As he leaves Egypt (and the foreign service) for London at the end of this month to start a new career in consultancy, Sir Graham Boyce reflects on the improvements made in economic relations and defends British foreign policy in the region.
You have come to be known as the first British ambassador to give prominence to economic and business relations between Egypt and the UK. What were your aims in this domain and how much do you think you have achieved?
One of the things that I wanted to do was to raise awareness in the UK about Egypt as a market and as an economic partner in the future. That part of the campaign has been very successful. There is much greater awareness now of Egypt. We have seen investment by British companies in Egypt rising by about 20 per cent a year in the last few years. We are now the largest non-Arab investor in the country. We have also seen our overall trade increasing. Egypt's exports to Britain have risen by about 70 per cent in the past year following the big Mission 100 in 1999 which we helped to set up.
We have a common interest in increasing Egypt's prosperity. It's not just a matter of us exporting to you. but also Egypt developing its trade with the UK, expanding its exports, and British companies investing here. All this makes Egypt a stronger economy and a much better trading partner for us in the long term. So we can both benefit from an increase in trade in both directions.
What attracts British business people to Egypt?
In the area, it is a country which has got a very large market unlike the Gulf countries which have a very small domestic market. It can be used as a manufacturing base or a distribution centre which you can work into the large Egyptian consumer market and can be used as a springboard to move further afield into the Arabian peninsula and into Africa.
I have been to visit a number of factories here where the quality of work is exactly the same as it would be anywhere in Europe. Egypt can do things, so it's a good place to invest from that point of view.
Which areas most attract British business?
The biggest one in the future is clearly going to be oil and gas; there are the huge gas fields. British Gas, BP and Shell are going to be major investors and we would expect them to be investing about a billion dollars a year in the next five years, developing LNG schemes, gas liquid schemes and other petrochemical ideas that might be coming up.
How has the outlook of British companies been affected by the current economic slump in the Egyptian economy?
I think that the point about investments is that you don't just look at the picture today. You need a long-term prospect for the country.
We look at Egypt and we still see the fundamentals of the economy as being pretty sound. I think investors in Egypt would be more worried about some of the obstructions in the way of unnecessary bureaucracy, difficulties over customs and taxation and things like that than they would be over the actual state of the Egyptian economy today.
Yes, the economy is flat. but we believe that the government knows what the problems are and is on the way to addressing them. Not perhaps as fast as some people would like, but the direction is clear.
What are impediments to investments which you think still exist after the changes the government has already made in the investment climate?
There is still a long way to go on that; to make sure that there is complete clarity for investors, that there isn't a change in regulations or tax rates. There are too many uncertainties, and this needs clarification and speeding up. The one thing investors are concerned about is uncertainty. If they know exactly what the position is going to be then they are going to be much more comfortable.
We sometimes hear about large British, and European companies (such as Marks and Spencer's) coming to search for business opportunities in Egypt, and then these reports just fade away. What happens with these missions and why are their results never made public?
Sainsbury's investments here arose out of one of these missions. Marks and Spencer's is interested in this market, but no company like Marks and Spencer's is going to open up in this country until the tariffs are reduced. If you have to pay about 45 per cent tariffs on importing manufactured finished garments it's too expensive to be able to compete with stuff which is made locally. When that tariff level comes down, I think we will find a lot of interest from a number of retail businesses not just in Britain but in Europe more widely coming into the Egyptian market.
The companies don't tell you but there are all sorts of structural reasons why they can't actually come in. Sainsbury's experience, which was in the end a great disappointment, could have been a very major breakthrough. The reasons why it failed relate mainly to Sainsbury's own problems back in the UK, rather than to the investment climate in Egypt, but they had started to change the face of retailing in this country, making it much more competitive to give the consumer a much better deal, to bring new efficiencies in to the system.
Now they've gone I hear reports that prices are creeping up again, the consumer is not getting such a good deal, Competition is the only way the consumer will get a good deal in this market.
Have you felt that the pull-out by Sainsbury has frightened away other investors?
Surprisingly, it doesn't seem to have done so. We still have several things in the pipeline at the moment which I can't put a name to at the moment, because they are still under negotiation. But I think investors recognise that the Sainsbury circumstances were special. They did have some problems in the local market but they were problems that could have been solved over time and problems which were partly their own making... They made some mistakes, but the big issue was that a strategic decision was made in London to pull out of over-seas operations. So even if they had been doing much better in Egypt, they still would have gone.
Unfortunately, their pull-out was seen as a vote of no-confidence in the economy and it has left a trail of bad sentiments in Egypt and probably as well as in Britain because of the problems the chain had here.
They probably did have many problems here, having boycotts raised against them and pretty aggressive tactics used by their competition to try and drive them out of the market. But what I am saying is that if the conditions in the domestic market in the UK had been right, these are problems that they could have solved.
How do you think situations such as this should be handled, and if possible, avoided?
Looking into some of the mistakes that Sainsbury themselves made, this was the first overseas market that they really tackled and I think they tried to grow too fast. They opened a huge number of stores very quickly. They probably would have done better to have taken it step by step, to open about 8-10 stores, build those up, consolidate them and then expand.
They recognised at the end that they had gone too fast. We use this as an example in talking to other investors to make sure they do more careful research about this particular market and how to work their way into it.
The Egypt-EU partnership agreement which has recently been signed has given rise to much controversy. The arguments here are that the agreement will open new markets for Egyptian products, but could hit local industries which are not ready for competition. What are some of the parallel arguments for or against Egyptian goods in the UK?
The UK is in some ways slightly different from the rest of Europe. Some of the southern European countries are going to be more concerned about the competition from Egyptian agriculture. The UK has always tended towards being at the most liberal end of the free trade spectrum. We would be happy to see greater access for Egyptian products to our markets, which is what Egypt needs to get out of this agreement.
That is something that can develop over the course of the agreement, which is not cast in stone. After it comes fully into effect there are mechanisms for reviewing all the different aspects of the agreement and I would hope that the access for the agricultural products, which are of particular concern, could expand. As far as Egypt opening up to European markets, you've got a long transitional period, up to fifteen years for some areas of manufacturing.
I can understand the concern that some Egyptian companies have about this. There is no doubt that if you open up Egypt to competition, some Egyptian companies will be driven out of business, because they will not be able to compete. But what we are trying to do through the association agreement is to help Egyptian economies to adapt, to modernise, to live with this competition.
I also believe that if you have competition coming into the country, it is the only way that you will be able to really force through changes in business practices. Although some individual companies will lose out, overall the economy should become stronger, you should be able to create more jobs.
The key role that the government could play is managing that change and making sure that people who are squeezed out of one particular factory can be retrained into a new job created to keep as many people as possible in full employment. Some sectors may suffer more... I think that if we work together, the Europeans and the Egyptians over this transition period, there is no reason why Egypt shouldn't become a very strong part of the Mediterranean- European economy, rather than something which is completely outside of it.
Which are the UK industries which are happiest with this agreement?
I don't think we have problems at all with the agreement. There is nothing really in the Egyptian economy which we regard as competitive with our economy. We will be happy to see more Egyptian goods coming into the country on a pretty free basis. It is not a problem for us at all.
In your opinion, if an Egyptian company would like to search for business opportunities in the UK and get maximum benefits from the partnership agreement, how should it proceed?
It is difficult for one company going in there in isolation with nowhere to start. I think that there is scope for Egyptian business to approach this sectorally, to get missions of people from a certain industry going to the UK and other European markets and looking for business partners, looking for ways in which there can be joint ventures set up, where we might have technology, access to capital which could be valuable in the Egyptian economy and in which we can take advantage of your lower labour cost and geographical advantage.
We are seeing an increased interest by British companies in Egypt, the most recent of which was BP's decision to buy the TotalFinElf gas concession. Is there still unreported news about other companies which are coming in?
I know there are negotiations going on in the banking sector for new investments. Oil and gas will continue to be an important sector. There are people looking into the pharmaceutical sector. Across the range, there is such wide interest in Egypt.
British foreign policy in the Middle East is perceived in the region as being consistently in line with whatever position is adopted by the US government, in contrast with other European states, most notably France, which tries to take an individual position. This is evident in Britain's attitude towards the Palestinian-Israeli conflict and Iraq. How would you comment?
I don't quite understand why we are always seen in this light. If you look more widely in the region, our policy is quite different from the United states towards Sudan, Libya, towards Iran. We have full diplomatic relations, we are in dialogue with these countries, we are working with them in quite a different way from the way in which the Americans are working.
On the Middle East peace process, there is no difference in our approach from that of any of the other European states, or indeed, from the Egyptian government. We are all in the position where we have to accept that the United States has a unique relationship with Israel; that they are the only ones who can really put pressure on Israel if that is needed to change their policy, to push forward the peace process. To support that, we work closely with other European partners. But there is no difference between us and the other Europeans at all on that particular policy.
On Iraq, yes, we are probably closer to the Americans than some of the other European countries. We share with the Americans the perception of the threat which Saddam Hussein would pose if he were allowed to re-arm again. We and the Americans are the only ones who are doing air patrols over the no-fly zone in Iraq. But we have a different approach politically from the Americans to the Iraqi question. We are not actively supporting dissident movements trying to overthrow the regime in Iraq as the American Congress has decreed America should be doing. The key resolution which Britain drafted, Security Council Resolution 1284, provided a route for sanctions to be suspended. It took us a very long time to persuade the Americans to agree to any resolution which involves the idea of suspending sanctions.
At the Security Council four of the members -- China, France the US and the UK -- were all agreed on this new approach of changing the sanctions regime, making it much clearer than is was, only targeting Saddam's regime and removing the obstructions in the way of getting more goods into the Iraqi economy. It was only the Russians who opposed it. The Russians had their own commercial reasons for opposing. It had nothing to do with the rights and wrongs of the resolution, because what we were trying to achieve was precisely what the Russians said they were trying to achieve. It is a great pity that the resolution was not agreed upon by all the members. It would have been much better for the Iraqi people had that been done.
I believe it's a matter of perception, because what you describe as the means to lift the sanctions eventually has been seen by many Arab and African as well as some European countries as actually being a method of keeping the pressure on Saddam Hussein until his regime falls one way or the other.
We have always been clear that if he complied with Security Council resolutions, then the sanctions would have to be lifted. I can't speak for the Americans, but we do not have an agenda designed to overthrow the regime in Baghdad or to say that sanctions can never be lifted as long as Saddam Hussein is in power.
We don't like him, we don't think he is good for the Iraqi people, but it is for the Iraqi people to decide in the end who their government should be.
Why do you think this difference in perceptions exists?
I think that is always a problem; that the Iraqis are very active in their propaganda and we find that our messages don't get heard so much. It is a fact that over the last six or eight months the Iraqi government has not even been asking for food and medicine. It has never asked for enough food, even though there was money to pay for it, to give people the necessary calories they need to stop starvation happening.
There are four billion dollars sitting in the Iraqi account which they haven't bothered to use. The Iraqi propaganda says these things are essential for our country, but they don't order them. They want to order luxury goods and sophisticated machinery rather than things which are essential for the people.
Under the oil-for-food programme there is more money available for food and medicine in Iraq per head than there is in Egypt or Syria or Jordan. So there is no reason for people to be starving or to be deprived of medicine in Iraq at all. There is plenty of money, there are no restrictions on these things going into the country, but the regime there chooses to make its people suffer in order to make propaganda particularly in the Arab region as a whole.
On the Palestinian Israeli front, things are becoming increasingly complicated and it is becoming evident to the Palestinians and to the Arabs as a whole that Sharon is not serious about peace and that he is only waiting for an opportunity to destroy the Palestinian Authority and kill Yasser Arafat. Do you foresee a change in the role of Britain in the Middle East under these circumstances?
We are extremely worried as well about the present situation. When Prime Minster Sharon met Mr Blair recently, Mr Blair expressed very clearly our concerns to him. We need to get the peace process moving again. It is not reasonable for Israel to say that there must be one hundred per cent no violence, no stone throwing, nothing at all before you start a clock on seven days of quiet. It is important that the Israeli government give the Palestinian people hope that an end to the Intifada will lead to a real change in their conditions, that there will be serious negotiations about the final status, and that there is a realistic hope that this final status will lead to something which will mean a just settlement for the Palestinian people.
We are quite clear about that and we have made that position clear to the Israeli government and to the Americans as well. It can't be a totally one-sided thing. We are also urging Yasser Arafat to try to do more to make it clear to the Palestinian people that it is important that the cease-fire holds because there would be benefits in the long term. As we said to the Israelis, a hundred per cent end to the violence is not a reasonable thing to ask, but a hundred per cent effort by the Palestinian Authority to control the violence is a reasonable thing to ask.
That is what we are looking for at the moment, but it doesn't look good. It is very hard to see an optimistic scenario at the moment and, therefore, we have to do all we can to make sure the situation does not deteriorate any further. It is a worrying time. We have our new minister for the Middle East who will be coming out here on a fact-finding mission trying to find out what is going on.
I think that now that we have our general election behind us we will see that the UK will want to become more engaged in this; not just following an American policy but, with our European partners, looking for a more active role to try and make sure we can move back towards the peace track. With the downward spiral the real danger here is not only for the Palestinians and the Israelis but for the countries in the region and more widely in Europe. We are all affected by this, so we all have to make an effort to make sure we can get back on track again.
As you leave your post in Egypt, what are the personal impressions that you are taking with you?
I have become particularly interested whilst I have been here in Egypt's history. It is a fascinating country and I feel I have only just started on that process and even after I leave here I shall want to continue to study and learn more about Egypt. I've got hooked on it, if you like.
I hope to come back and visit on many occasions, if only as a tourist in the future. We have become very attracted to many parts of the country, both the Nile Valley, and the oases, the monasteries the Red Sea. There are so many different aspects of the country we have come to enjoy and to love.
I find that the Egyptians' attitude to their own history is a remarkably broad- minded one. When I came here I was sort of expecting hostility over Britain's role in Egypt's past, but I have found the Egyptian people not to dwell on the past. I have only once met someone who blames Britain for all of Egypt's problems, such as they may be. They say Britain should be doing more because of its historic role in the region. There is a sophistication and a maturity here that is extremely refreshing.
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