CAIRO: Egypt s trade with Israel is expected to rise 130 percent this year, according to the latest figures, the result of a U.S.-brokered agreement that has created an estimated 15,000 Egyptian jobs, an indication of how better relations can produce economic growth. Israeli investment in Egypt, by contrast, remains stagnant, largely because of lingering distrust and political sentiment. Figures from the Israeli Export Institute show Egyptian-Israeli trade will rise from $58 million in 2004 to a projected $134 million in 2005.The volume is small - Egypt s global exports are worth about $12 billion a year, Israel s are about $30 billion - but it amounts to a U-turn by Cairo, which has long kept ties with Israel to a minimum. Suspicions remain. Many Egyptians still see Israel as "the enemy, says Cairo property developer Hesham Ashmawy. Many Israelis remember Azzam Azzam, an Israeli textile businessman who was jailed in Egypt for eight years for espionage - a charge he and Israel denied. He was freed last year. Nevertheless, a door has opened. Wages in Egypt s textile and garment industry - the country s largest manufacturing sector - have risen 25 percent since December 2004, when Egypt, Israel and the United States signed the Qualified Industrial Zone (QIZ) agreement, according to Mohammed Kassim, the vice chairman of the Chamber of Textile Industries, and Magdy Tolba, the head of the Ready-made Garment Exporters Association. The QIZ agreement is at the heart of the trade boom because it enabled Egyptian exports to enter the U.S. market tariff-free, as long as 11.7 percent of their inputs - textiles, dyes and packaging - were made in Israel. It has proved so popular that Egyptian workers and companies successfully pushed their government to secure Washington s agreement in October to expand the "tariff-free zones to the whole of greater Cairo, the Suez Canal cities of Ismailiya and Suez, and four Nile Delta provinces. Ironically,Egypt declined the QIZ when the United States first offered it in the 1990s. But Egyptian manufacturers urged the government to obtain such a deal when they saw they were going to be out-competed this year by cheaper clothes from China and India.They had also seen how much their Jordanian peers had benefited from a QIZ. Tolba estimates at least 15,000 jobs have been created since the QIZ accord. His association reckons that 30,000 jobs will be created next year. The new jobs and higher wages should not be vulnerable to any future flare-up in Israeli-Palestinian violence because the boom is driven ultimately by orders from the United States, where consumers are rarely directly affected by events in the Middle East. The trade is taking place against a political background that has been transformed since the death of Palestinian leader Yasser Arafat in November 2004. Egypt returned an ambassador to Israel in March - his predecessor had been recalled after the intifada uprising began in 2000. In June, the two governments signed a $2.5 billion (euro2.1 billion) deal for Egypt to supply Israel with natural gas for 15 years. Israel s withdrawal from the Gaza Strip in September enhanced relations with Egypt. "There is no question that the overall better political and security atmosphere in the region is very helpful in creating a better climate for business to flourish, said Dan Catarivas, the foreign trade director of the Israeli Manufacturers Association. What is not flourishing is Israeli investment in Egypt.After 26 years of Israeli-Egyptian peace, there are only two sizable Israeli factories in Egypt. In contrast, 11 years of peace with Jordan have produced 20 Israeli factories in the kingdom - wholly Israeli-owned or partnerships with Jordanian firms. "The only query I get from Israeli businessmen is about supplying Israeli content - the 11.7 percent, said the director of the QIZ unit in Egypt s Ministry of Foreign Trade and Industry, Ali Awny."I haven t heard anything about investment. Yet the potential is huge. Israel has the technology and the marketing skills, and Egypt has the low-cost labor and highquality cotton. "The word Israel still shocks many people in Egypt, said property developer Ashmawy, recalling the sentiment fermented during the country s four wars with the Jewish state. A champion of closer ties with Israel, Ashmawy said that after he hosted the current Israeli ambassador, Egyptian security officials questioned him, asking "why did I invite him and what did I have to do with him? Ashmawy blamed the lack of Egyptian-Israeli joint ventures on both prejudice and practical difficulties, such as the long time it takes an Israeli to get a visa from the Egyptian Embassy. Although the government signed the QIZ accord, civil servants tell businessmen to be careful in their dealings with Israel, Ashmawy said. The Foreign Trade Ministry s Awny said he is not aware of anti-Israeli sentiment in government. Israelis, too, recall the past. "There is no question that Azzam Azzam is still something that people remember, Catarivas said. He said he recently received a call from a businessman who asked: "Is it safe to do business in Egypt? Catarivas also pointed to the visa delays, the few flights between Tel Aviv and Cairo each week and fears that Israelis might be harassed in Egypt. One Israeli businessman who has broken through the barriers is Dov Lautman, the CEO of Delta Galil, whose Cairo factory is one of the biggest clothing manufacturers in Egypt. It employs 5,000 people. Lautman built his factories in Egypt and Jordan in 1994-95 - the heyday of the Oslo peace process. He says because all their production is exported to Europe or the United States, they were not affected by the subsequent fighting. But intifada does discourage investment."You hesitate to invest because you re afraid. You re worried your (staff) will go, Lautman said. AP
