Middle East is underestimated as export region

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Swiss exports to the Middle East are just as important in terms of value as those to China, according to the latest Swiss foreign trade figures.

They accounted in each case for around SFr7 billion ($7.4 billion). However, apart from oil and gas, Switzerland imports little from Arab countries.

Mass protests in Tunisia and Egypt are partly explained by the fact that although there are many well-educated people, there are very few jobs.

A look at the structure of trade relations between Switzerland and these countries shows that the Middle East, the Gulf States and some North African countries are – at least in terms of exports – as strong as China, the world’s second-largest economic power.

This is clear from the foreign trade figures recently published by the Federal Customs Authority, which show a total of SFr7 billion. If you include Israel, the figure is SFr8 billion, according to Ruedi Büchi, a Middle East and Africa expert at the Swiss trade promotion umbrella organisation Osec.

“Hardly a word”

“Yet while trade relations with China are in everyone’s mouth, there’s hardly a word spoken about trade with the Arab countries,” he told swissinfo.ch.

Even in comparison with other regions the relevance of the Middle East is often underestimated, Büchi said.

“Everyone talks about the increasing importance of the Bric countries (Brazil, Russia, India and China) and newly industrialised countries.”

But even these countries, he noted, were not much more important in export terms than the Middle East. About SFr2.5 billion of goods were exported each to India and Brazil, while in the case of Russia it was SFr2.6 billion.

What are the reasons for this perception? One explanation is the differences between the Middle East compared with the Bric and Asian countries.

While mainly crude oil and gas flow to the industrialised world, the Asian and Bric countries export an increasing amount of finished industrial and consumer goods.

“Good reputation”

“Switzerland enjoys a very good reputation in Egypt and the entire Arab world. Egypt represents for Switzerland a large populous market and to promote economic ties a free trade agreement was concluded in 2009 between Cairo and the European Free Trade Association, which includes Switzerland,” Büchi said.

“[But] as in other countries, bureaucracy and to some extent corruption can be found in Egypt.”

As far as labour markets and the education system are concerned, an imbalance has also developed in the until recently state-controlled economies of the Middle East.

“The basic education system was made available to the masses after the end of colonialism, Franz Schultheis, a sociologist at St Gallen University told swissinfo.ch with regard to the situation in North Africa. But there were no labour markets in these countries for those people who had completed their university studies.

“There are an estimated one million skilled and well-educated workers from Egypt in the Gulf States alone,” confirmed Osec’s Büchi. “Egyptian medical staff are particularly well known and appreciated abroad.”

Important role

With its control of the Suez Canal and its central location in the Arab world, Egypt plays an important role in the politics of Africa, the Mediterranean and the Middle East, as well around the world.

It is the most populous Arab country and the second largest industrial African country after South Africa.

It has a very long tradition as a tourist destination and generates more than ten per cent of its GDP through tourism. Egyptians are cosmopolitan and very well informed. They are very capable of assessing their own lives, Büchi said.

“As a result of economic opening and contacts outside the country, many young and well-educated Egyptians are increasingly aware of how slim their prospects are.”

They know about Western values and can compare them with those in their own country. They know for example about the extreme differences in income and wealth in Egypt and this naturally leads to discontent.

Academic proletariat

Money from tourism revenues has gone directly into the education system, says Schultheis, and this has resulted in an academic proletariat which lives in highly precarious conditions.

This imbalance is also manifest in Switzerland’s foreign trade balance with these countries.

At a time when Switzerland exports machines and tools as well as luxury watches to China, and now imports high technology goods such as computers and mobile phones from the Chinese, it has for decades imported dates, beans and grapes from Arab countries, including Egypt.

However, Büchi says Swiss exports to both regions are similar, namely investment goods, factory equipment, precision instruments, pharmaceuticals and chemicals. More than SFr4 billion of the total SFr7 billion was exported to the Gulf States alone.

The imbalance in foreign trade with the Middle East can best be illustrated with a look at Swiss imports from Egypt. The biggest country in the region – with a population of more than 80 million – supplies Switzerland with goods worth about SFr100 million. Switzerland exports goods worth seven times that amount to Egypt.

Egyptian economy

With a population of 83 million and an annual population growth of 3%, economic growth is a certainty for the country on the Nile.
 
Each year, 600,000-700,000 young people join the labour market. The official unemployment rate is 9-10%, but the actual figure is much higher.

From 2006 to 2008, the Egyptian economy grew by 7% annually. According to the OECD, growth was 5.1% in 2009/2010 – a good sign.
 
But according to the government plan, it was supposed to increase by about 6%. This has not been the case because of the global financial and economic crisis.
 
Tourism accounted for about 11% of the GDP before the crisis, but since the there have been fewer visitors.

When the global economy is slow, fewer vessels cross the Suez Canal; the canal fees usually constitute 3% of the GDP.
 
The remittances of Egyptians abroad amounted to around 4% prior to the crisis. Also, foreign direct investment, which had risen from $1 billion since 2003 to nearly $13 billion (about 8% of GDP) in 2007, has since fallen back.
 
Despite all efforts, Egypt’s GDP per capita in 2010 amounted to only $2,000 (SFr1,910), which is about half of the Tunisian GDP.
 
(Source: OECD)

Swiss firms

More than 100 Swiss companies operate in Egypt: ABB, Clariant, Novartis, Nestlé, Buhler, SGS, Roche, Credit Suisse and UBS. The Mövenpick Hotel chain, whose founder Ueli Prager set up shop there in the 1970s.
 
Mövenpick employs 2,800 people in Egypt and has announced that it will remain open for business. Other firms have decided to interrupt production on a short-term basis.
 
After South Africa, Libya and Algeria (natural gas and oil), Egypt was Switzerland’s fourth largest African trading partner in 2009.
 
Swiss exports reached SFr656 million ($688 million), while imports totaled SFr109 million.
 
In February 2009, former Economics Minister Doris Leuthard visited Egypt with a delegation of business representatives.
 
Egypt signed a free trade agreement with Efta in 2007.

(Translated from German by Robert Brookes)