My last two days in Egypt involved a series of company visits. First to a German auto factory that is producing Chinese cars, then to the Suez Industrial Zone, which is being partially (about 25%) developed by TEDA - the company that developed the questionable industrial zone in Tianjin.
I was overall impressed by the Industrial zone (the car factory was kind of pointless), though there are some major problems that I should enumerate.
First the good things:
1. The biggest point is, the Suez Canal is a really important place, and is bound to get more important as trade with the East increases, so the zone is perfectly situated in that way. Particularly as its connected to the Eastern side of the canal rather than the Western side where most of the ports currently are.
2. The biggest non-obvious point, is that Egypt has an excess supply of skilled labor. This is considerably different from most other states in the region, and I think is one of the main factors that is going to draw investors to Egypt. Most any arab can tell you that the country suffers from a considerable brain drain, as you can find Egyptians in high levels all around the arab world, but Egypt itself doesn't exude talent in the same way as Egyptians abroad (this is a clumsy wording of the situation, but more about this later).
3. The country is trying really really hard to attract investors, particularly because they suffer from high unemployment and a young population, which is a bad combination. Greenfield investment, as would be happening in the Special Economic Zone, is considerably less controversial than privatizations (which are also happening).
4. The general trend with tariffs and state involvement seem to be going in the right direction (down), and infrastructure construction also seems to be taking off in the past few years.
Now the bad things:
1. Our trip to the economic zone was a disaster. The Chinese writers were having problems all week, which I didn't really take seriously because some of it had to do with them simply not being aggressive enough at asking for what they want, but because of this last day I can totally agree with their general frustration at the organization of the trip. We arrived at the zone near 4 hours late, then after they told us we had to hurry so we could see everything, we spent nearly an hour stopping outside various nondescript factories so a French TV crew who had just showed up could get video footage. When the Chinese writers finally started shouting that they just wanted to meet with the Chinese company, we finally got things done, but we ended up having to skip the visit to the wind farm that was on the end of our itinerary. The PR company bungled it so badly that after a while a boss at the company we were visiting was just telling people to ignore them (in Chinese). The point though wasn't that "hey look we had a bad PR company" (who other than this I found quite lovely), the point was that they completely failed in marketing their investment destination. One German writer who was with us put it "In Dubai the special economic zone is nothing, but after their presentation you leave convinced that its the most important place in the world; here its probably a good investment destination, but you leave convinced that you wouldn't recommend it to anyone." In other words, it doesn't seem 'reliable'
2. Employee turnover is quite high at the local factories. 3-4% a month I hear. Men are said to be unreliable because they are too aggressively looking for opportunities (so said one Chinese guy, this is a perpetual problem in China too though). Women are supposed to be reliable until they get married - the factory we visited said all their Egyptian managers were women. The zone subsidizes training to cut some of the bite of all the hiring, but its supposed to be a large problem.
3. On a related issue, there is supposedly a shortage of decently educated low-skilled workers. Meaning there is a high illiteracy level and such, which is a problem for training factory workers. The Chinese company said that maintaining the legally required 90% ratio of Egyptian workers was difficult for them.
4. The zone is really far away from a major population center. They are currently providing transport for its workers from one of the close nearby population centers (Cairo and Suez), but each is about 2 hrs away. Later they are planning a full blown city with a population of around 500,000, but that doesn't sound like it'll be built until at least 2015.
5. The place is currently a mess, but hopefully that will get better as buildings start springing up.
6. This has less to do with the Economic Zone than with the general investment climate, but I hear that there is some controversy directed towards the state's privatization and foreign investment schemes (as there always is when socialism is dismantled). With the president planning on stepping down soon it remains to be seen how these projects are going to fare in the transition.
In general though I hear its among the better run of the economic zones that China is setting up on the continent, and I was really quite impressed by the Egyptian management. As opposed to being passive recipients of investment, they are building the Chinese investment into a larger plan, as well as being seriously aggressive about national laws (I hear the Zambian special economic zone is bordering on failure).
Its obvious that Egypt is one of the countries in Africa that has extremely high potential, and, despite the mess at the end, this trip convinced me that the country is on the way to achieving it.
But it still has a long way to go.
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