The American Chamber of Commerce in Egypt and the German Arab Chamber of Industry & Commerce co-hosted a luncheon at the Four Seasons Nile Plaza hotel to discuss whether Egypt could prosper outside the regional trade blocs in Europe, Asia and the Americas. It was the first time for the two chambers to jointly organize an event, and the result was a first-class luncheon with high-profile guest speakers and over 500 attendees.

AmCham president Taher Helmy said in his opening remarks that he was delighted to host the first of what he hoped would be several co-organized events. He went on to introduce guest speakers Minister of Investment Mahmoud Mohieldin and Norbert Walter, chief economist of Deutsche Bank Group.

During his address, Walter said Deutsche Bank research had identified four crucial factors that determine whether a country could become a center of economic growth. The first, he said, was demography. He noted that while some parts of the world have an aging population, the developing world is characterized by a youthful population. He urged youth in these countries to seek the education they will need to effectively work in any part of the world.

The second element Walter highlighted was investment. He stressed that, important as it is, growth in investment should not be regarded as the end of the story. Rather, economic policymakers should look at how money is invested and try to steer it toward those areas that will help create a mature financial system. “In many societies in the world, savings are not invested wisely, so the results of investment are much more modest than they could be,” he noted.

Deutsche Bank’s research also identified a country’s willingness to open up and interact with other cultures and societies as an indicator of its future success. He said such interactions provide a conduit for fresh ideas and that one of the initial steps a country must take before it starts business is to understand cultural differences so that it can compete more effectively in the international market.

Lastly, Walter said, governments and societies should adopt ecologically friendly policies as a means of preserving the resources they would need to sustain growth in the future. He warned that if the environment – particularly finite resources such as Nile water and fertile land – are not taken seriously, Egypt’s prospects for economic growth could be jeopardized.

Walter reflected on the outcome of the recent World Trade Organization (WTO) ministerial conference in Hong Kong, which he suggested was an indication that multilateral trade could slow down. “I am worried that the outcome of [WTO talks in] Hong Kong will not be the trademark for regaining the momentum for multilateralism,” he said. “Rather, I fear that the process may end in only minimum expectations being fulfilled.” He went on to suggest that the multilateral trade system would slow down, while “arrangements on bilateral and regional levels will become more prominent.”

Countries that stand on the sidelines of regional trading blocs (such as Egypt) will suffer, he said. Given the current options, he feels Egypt’s best chance is to throw in its lot with the European Union. “While it’s very obvious that Egypt’s ties to the United States are close, it’s also very obvious that Egypt will not be a part of American regional free trade agreements,” he explained.

Walter encouraged Egypt to look for a sponsor – perhaps France, Germany, or Italy – in its negotiations with the EU. “If there is no sponsor for such negotiations, I’ve learned that they don’t work,” he warned.

He also advised Egypt to identify a country in the region – the United Arab Emirates, for example – as a source of competition and inspiration, in much the same way as Malaysia chose Singapore as its economic model and competitor. “This parallel competition helped the two countries to excel,” he said.

Mohieldin then took the podium, noting that many countries have long been the victims of a “mechanical approach to trade” that excluded democratic, educational and institutional reforms from their trade calculations. “At the beginning of this year, our ministry emphasized the importance of institutional, political and social reform... in order to enjoy strong growth and development,” he said.

The minister pointed out that between September and December 2004, Egypt reduced the weighted average of its trade tariffs from 14.5 percent to 9 percent, a reduction he claimed was made on its own initiative and not as a requirement of the WTO or any bilateral agreement. Such policies come at a cost, he emphasized, but are worth it. This “reformist approach” of opening up borders for trade improves the investment climate, stimulates competition in the economy, and facilitates negotiations with trading blocs, he argued.

Furthermore, Egypt is enacting institutional reform by putting in place sound macroeconomic policies that have eliminated the black market and significantly decreased inflation. “We have seen positive developments, especially on inflation... now down to 3-4 percent from 16-18 percent,” Mohieldin said.

Finally, Mohieldin stressed that a few years of growth will not suffice to provide enough jobs or make the country more prosperous. “This goal can only be achieved through the freedom of our people,” he said. “The necessary choices cannot be taken only by those in parliament.”