Time to rebuild relations with Egypt

Navdeep Suri
Former Diplomat and Distinguished Fellow, Observer Research Foundation

THE decision to invite Egyptian President Abdel Fattah el-Sisi as the chief guest at the Republic Day celebrations is an important gesture and should go a long way in restoring the old lustre in India’s ties with the largest country in the Arab world.

With a population of almost 110 million, a location that straddles Africa and Asia, a standing army that is the largest in the region, a capital that hosts the League of Arab States and a diplomatic presence that punches above its weight in global affairs, Egypt is a pivotal player. It is also a country with which India enjoyed an exceptionally close relationship in the first couple of decades after our Independence.

The personal equation between former Prime Minister Jawaharlal Nehru and then President Gamal Abdel Nasser Hussein was legendary and the two also became the stalwarts of the non-aligned movement during the Cold War of the 1960s. At the political level, the two countries were close enough for India to send clandestine arms shipments to Egypt during the Suez crisis in 1956 and contemplate nuclear cooperation and a joint fighter project in the 1960s.

And yet, the two countries drifted apart, particularly during President Hosni Mubarak’s long innings from 1981 to 2011. An apparently minor protocol gaffe over seating arrangements during the New Delhi NAM summit in 1983 was seen as a personal affront by Mubarak and it took all of 25 years before he could be persuaded to return to India in November 2008. Both sides promised to make up for lost time and the then Prime Minister, Dr Manmohan Singh, visited Egypt for the NAM summit in July 2009. But by January 2011, the ‘Arab Spring’ had claimed Mubarak as its most prominent victim and there was a brief hiatus as the country moved towards a new constitution and fresh elections.

The late and unlamented Mohammed Morsi, to his credit, did make ties with India a priority during his tumultuous year in office. His visit to Delhi in March 2013 held out some hope of a fresh boost but three months later, he too was gone.

President Sisi came to power in 2014 and Egypt again showed its intent, first through his participation in the India-Africa Forum Summit in Delhi in 2015 and again through a state visit in 2016. Prime Minister Narendra Modi was widely expected to make a return visit in 2020, but plans were upended by Covid-19. A visit by him is now well overdue. The Republic Day invitation, meanwhile, will address some of Egypt’s angst that its earnest overtures have not been reciprocated.

Some of the groundwork has been done by back-to-back visits to Cairo by Defence Minister Rajnath Singh in September 2022 and by External Affairs Minister S Jaishankar in October. Defence cooperation is clearly one of the emerging themes and high-level exchanges over the last two years led to ‘Desert Warrior’, the first-ever joint tactical exercise by the air forces of the two countries and the recent exercise between their special forces. The Egyptians have also shown some interest in India’s Tejas fighter jets and Dhruv light attack helicopters, although this is still at a fairly preliminary stage. Equally important is the behind-the-scenes support provided by them in countering hostile moves by Pakistan at forums like the Organisation of Islamic Cooperation (OIC) and by refraining from making any adverse comment during the Nupur Sharma controversy.

Both countries also demonstrated mutual goodwill by helping each other at crucial times: Egypt by sending Remdesivir and urgent medical supplies during our devastating second wave of Covid-19, and India by sending wheat to tide over the supply-side disruptions caused by the Ukraine war.

Bolstered by these tailwinds, bilateral trade grew by almost 75 per cent last year, amounting to $7 billion. But it is Egypt’s emerging investment scenario that offers a more interesting opportunity. Despite the discovery of substantial gas reserves in the Mediterranean basin, the country’s economy is struggling. Growth in the non-oil sector has been anaemic, foreign exchange reserves have dwindled and the Egyptian pound has been in free fall.

On the surface, the picture looks grim, but it hides three important facts. First, a number of Indian companies have invested in Egypt and by and large, they have done well. The largest of these is the $1.5-billion PVC and caustic soda plant set up in Port Said by the Sanmar Group, followed by the Aditya Birla Group, Asian Paints, Dabur, UFlex and a host of others. Second, after several abortive starts and forced by the gravity of the economic crisis, the Egyptian Government finally seems to be getting serious about implementing both economic and administrative reforms.

And third, the ambitious plan to develop the Suez Canal Economic Zone (SCZONE) into a global manufacturing hub is now gathering critical mass. ReNew Power has announced plans to set up a massive green hydrogen facility with an investment of $8 billion. Attractive tax incentives, the strategic location and free trade agreements that make it easy to access the European markets are key factors behind such a major investment.

The 455-sq-km SCZONE merits a closer look by many other Indian companies. It sits astride both banks of the Suez Canal, a strategic waterway that connects the Mediterranean with the Red Sea to provide the shortest link between European and Asian markets. The 18,000 ships that traverse the canal annually account for 20 per cent of the global container trade.

China, as usual, has been the first to take advantage of the opportunities presented by the SCZONE, seeing the canal as a vital part of its Belt and Road and Maritime Silk Road projects. Spread over 7.3 sq km, it has built a vast industrial estate called Teda Suez, an entity jointly funded by the China Development Fund and Tianjin Teda Investment Holding. Egypt’s prevailing economic vulnerability is bound to increase the clout that China enjoys over a major country.

For India, a deeper economic engagement with Egypt, therefore, acquires an additional strategic imperative. While Egypt clearly needs to do more to market itself as an investment destination in India, it is also important for industry bodies such as the CII, FICCI and ASSOCHAM to adopt a more proactive approach. Can South Block lend its support by pitching for a tract of land in the SCZONE that would form the nucleus of an Indian business cluster on the lines of Teda Suez?

For now, there are clear indications that India and Egypt may finally achieve some potential in bilateral ties that has remained unfulfilled in the past four decades.