Egyptian President Abdel Fattah el-Sisi with Prime Minister Narendra Modi in New Delhi in 2016 | Photo Credit: File photo: V. Sudarshan
There is the danger that after adrenaline-rushing and consequential talks in the United States, Prime Minister Narendra Modi’s visit to Egypt (June 24-25, 2023) may look a bit disappointing. It is anything but.
Historically, Indo-Egyptian relations are probably the oldest civilizational link. In 2750 BCE, Pharaoh Sahur sent ships to the “Land of Punt”, which historians identify with peninsular India. By the middle of the second millennium BCE, Egyptian mummies were wrapped in indigo-dyed muslin, both of which came from India.
Links and some key data
It is this historical inspiration that needs to be implemented with the goal of greater bilateral relevance and adequacy. While the contacts of the last century generated a lot of goodwill and vernacular – from colonialism to non-alignment and from the Bollywood-mania of Egyptians to the incorporation of Egyptian music into Indian music – they have yielded little of substance. India’s trade with the most populous Arab country is set to reach $6,061 million in 2022-23, a decline of 17% over the previous year. About a third of this was related to petroleum. India was Egypt’s 6th largest trading partner, while Egypt was India’s 38th. Indian investments in Egypt were spread across 50 projects, totaling $3.15 billion, of which half the amount was contributed by a single company. Egypt has invested only 37 million dollars in India. There are less than 5,000 Indians in Egypt, of whom nearly a fifth are students.
The poor performance of bilateral relations is not due to the lack of bilateral institutional mechanisms, but due to their effectiveness and sense of purpose. India has a Joint Commission, Foreign Office consultations and at least nine Joint Working Groups. Last year its Defense and Foreign Ministers visited Egypt. Its bilateral summit took place less than five months ago when Egyptian President Abdel Fattah el-Sisi visited India. All this perhaps confirms that both India and Egypt have formidable bureaucracies and public sectors that specialize in rearranging chairs on deck.
Opportunities and Challenges
If the upcoming Cairo summit is not to become another event management exercise, it will need to take advantage of opportunities while avoiding pitfalls. Egypt is a large country (population 105 million) and economy ($378 billion). It is politically stable and its socio-economic conditions are largely similar to those of India. Egypt’s biggest imports are refined petroleum, wheat (the world’s largest importer), cars, maize and pharmaceuticals – all of which India has the capacity to supply.
In addition, the Egyptian government has an ambitious infrastructure development agenda, including 49 mega projects including the construction of New Cairo ($58 billion), a $25 billion nuclear power plant, and a $23 billion high-speed rail network. During 2015–19, Egypt was the world’s third largest arms importer. These present opportunities for India.
But these opportunities are offset by serious challenges. First, Egypt’s economy is in serious trouble. The huge financial commitments coincided with a stagnant economy, the pandemic, the global recession and the Ukraine conflict. As a result, tourism has declined and imports such as grain have become more expensive. Annual inflation is above 30% and the currency has lost more than half its value since February 2022. The shortage of foreign exchange has forced the postponement of payments for essential commodities such as wheat. While a $3 billion bailout package was negotiated with the International Monetary Fund six months ago, it is conditional on tough economic reforms that are failing due to vested interests and crony capitalism.
Prosperous Gulf Arab states initially supported Egypt’s economy with around $30 billion, but have been reluctant until recently, citing various governance issues in Egypt. Egypt’s foreign debt is over $163 billion (43% of GDP) and its net foreign assets are minus $24.1 billion. The dire forex situation forced the government to issue an order to postpone projects with large foreign exchange component and cut non-essential expenditure in January 2023.
dangers to avoid
Keeping this backdrop in mind, the Indian summit in Cairo may need to carefully balance its performance in Egypt with the opportunities at hand. India may face manageable eco-political risks to participate in Egypt’s lucrative opportunities through various innovations such as EXIM credit line, barter and rupee trade. However, it should avoid a repeat of its experience with Iraq in the 1980s and 1990s, which had to defer its hard-earned construction project dues until they were finally paid by the Indian taxpayer. In addition, such an arrangement can set a precedent that can be followed by other equally friendly countries. Instead, India may consider tripartite financing arrangements for such projects with its partners in the Gulf, the G-20 or multilateral financial institutions in Egypt or elsewhere.
Mahesh Sachdev, a retired Indian ambassador and an Arabist, is currently the President of Eco-Diplomacy and Strategies, a Delhi-based consultancy.