“INDIA AND THE PROSPECTS FOR STRENGTHENING INDIA-EGYPT RELATIONS”

Text of presentation

by

A. Gopinathan

Ambassador of India to Egypt

at

The Egyptian Council for Foreign Affairs

Cairo

17 February 2008

    I am grateful to Ambassador Abdel-Rauf El-Reedy and his esteemed colleagues at the Egyptian Council for Foreign Affairs for affording me this valuable opportunity to share with such a distinguished gathering some thoughts on “India and the prospects for strengthening India-Egypt relations”.  

    Looking back, it might seem quite surprising today that the very survival of India as an independent nation was in doubt in the late Forties and the early Fifties. The prophets of doom had predicted that India would collapse on account of its vast diversity and multitude of religions, languages and regions. It is a tribute to the vision of the leaders of our freedom struggle that we not only managed to survive but flourish and register major advances. Our progress has been significant, despite persistent problems and challenges, including external threats to security.

    The most important achievement of independent India in the past six decades would appear to be the nurturing and sustaining of the democratic system of governance, with universal adult franchise in a country of over 1.1 billion population with different languages, religions and cultures. This is often not fully appreciated by people not familiar with India. Fundamental rights, embodying basic human rights and fundamental freedoms, are guaranteed by the Constitution and are justiceable. Similarly secularism, that is equal respect for all religions and no discrimination on the ground of religion, is enshrined in the Constitution. Political pluralism has been a source of strength; we celebrate diversity and tolerance. Fiercely independent and vibrant press and electronic media have developed over this period; so also an independent judiciary. The Election Commission has demonstrated its professionalism in election after election at the national and state levels which have been free and fair; the process has been modernised in recent years with nation-wide use of electronic voting machines. Democracy has served us well in managing the aspirations and differences of a diverse and pluralistic society.

    India has demonstrated that democracy and economic growth are compatible and they need not be necessarily in conflict. There is no need for me to go over the figures to show the rapid economic progress achieved in recent years, except to mention the 7 to 9% growth-rate registered in the last five–six years and the phenomenal growth of the Information and Communications Technologies sector. Tributes need to be paid to two sets of factors for this: first, to Pandit Jawaharlal Nehru and his vision of a modern India, his commitment to education, research and development, which led to what have today become centres of excellence such as the Indian Institutes of Technology and the Indian Institutes of Management, and our numerous institutions devoted to pure and applied sciences, and the second, to the liberalisation and reform programme launched in 1991 when the current Prime Minister was the Minister of Finance.

    Our economic reforms and liberalisation processes are thus less than seventeen years old. The structural transformation of the economy during this period has been dramatic. Growth has been driven primarily by domestic consumption and domestic demand, and thus not been over-dependent on exports. Reforms have been pursued in a democratic framework, using incentives, consensus-building and persuasion, and in an age of revolutionary changes in Information and Communications Technologies.  

    India continues to be daunted by enormous development challenges. These include eradication of the worst forms of poverty and deprivation, raising the standard of living of our people in the shortest possible time amidst rapidly rising popular expectations, inadequate infrastructure, provision of safe drinking water to a population of 1.1 billion, degradation of the environment and the need for its protection, enhancing agricultural productivity, development of skills to keep pace with the expansion of the Indian economy, and the long-term requirements of food security and energy security. What has changed, however, in recent years is the resilience of the economy and the optimism and confidence imparted by the consistently higher growth rates, growing service economy, vibrancy of markets, impressive rates of savings and investment, substantial flows of FDI and FII, expanding foreign trade, comfortable foreign exchange reserves, a competitive private sector, efficient use of capital and beginnings of the modernisation of infrastructure.  Enterprises are making more efficient use of capital and natural resources, and are acquiring greater competitiveness and better integration with the world economy. The development by TATA Motors of people’s car ‘Nano’ at US$2500 is a good example, with its potential impact on the world automobile industry.

    This audience needs no reminding of the close and friendly relations between our countries over centuries owing to shared common history, civilisational affinities and historical ties. We enjoyed exceptionally close political relations in the Fifties and the Sixties. We continue to consult and co-ordinate in the UN and other international forums; we have similarity or identity of views on most issues. Economic interaction in recent years has been intensifying. More heartening is the strengthening of people-to-people contacts with estimated 82,500 Indians visiting Egypt in 2007, an increase of almost 35% over the 2006 figure. 

    Being societies in similar stages of development, we face common challenges in the area of socio-economic development. Several examples could be cited, such as the pressure of population on limited land, pollution and degradation of environment, quality of education, health-care and housing, requirements of food security and energy security, employment, problem of targetting subsidies to the needy, management reform of public enterprises, inflation, modernisation of agriculture and industry, terrorism and religious extremism, and the struggle to cope with the aspirations of a young population. We should, no doubt, be aware that Egypt is an oil and gas-exporting middle-income country while India is an oil and gas-importing low-income country.

    Both India and Egypt have discovered in recent years that the benefits of economic reforms and liberalisation do not spread evenly among the population, and that, at least in the beginning, they tend to accentuate disparities between different sections of population and between different regions of the country. Therefore, minimising inequalities stemming from reforms and liberalisation programmes through sensible and prudent interventions becomes an important priority task for our governments. Both our countries are engaged in efforts in making development to be equitable, inclusive and sustainable. We should equip ourselves to deal with the new vulnerabilities confronting developing countries.

    It would be useful to recall the common global challenges that we both face as developing countries. Deriving the maximum possible benefits from globalisation while minimising its negative consequences would seem a major challenge. Ensuring a peaceful and stable neighbourhood that is conducive to rapid economic growth would be another. Another would be enhancing national capacities to deal with ‘global bads’ such as international terrorism, proliferation of weapons of mass destruction, HIV/AIDS and other pandemics, cyber-crime, trans-national organised crimes such as money-laundering, trafficking in humans, particularly women and children, arms and narcotics. 

    It is necessary to underscore at this stage the outstanding position enjoyed by Egypt in the region, both by virtue of its strategic location, and as a center for peace, stability and security, and as an ardent advocate for the establishment, through dialogue, of an independent Palestine. Egypt is the largest country in the region with the highest population, which also implies the largest market, the largest armed forces, the largest educated class and so on. Both Egypt and India are currently on high-growth trajectories following years of reforms and liberalisation, which have opened up new avenues for widening and deepening trade and investment flows. We perceive these efforts not as a predator of natural resources, but as a partner for co-operation for mutual benefit by providing value-addition, generating local employment and contributing to the efforts of the Government of Egypt in reducing regional disparities and developing backward areas. The challenge for us is to address ways of transforming into concrete policies and measures the enormous goodwill and friendliness towards India seen everywhere in Egypt, thanks to the legacy of the Nehru-Nasser era and the enormous popularity of Indian movies, film stars and film music.

    In attempting a roadmap for strengthening Egypt-India relations in the coming years, in keeping with the recent global trends, the accent would be on the economic dimension. This is not surprising, as most developing countries try to integrate themselves more with the global economy. Consequently, the private sector will be in the driver’s seat and commercial considerations would naturally get more weightage in the building of our relationship. Consolidation of economic ties will inevitably lead to stronger political ties in the long run. Political cooperation will tend to become more issue-specific, as has been the case even with countries of the West.

    India has emerged as Egypt’s third largest trading partner after US and Italy in recent years and as the largest importer of Egyptian products. India is the 12th largest foreign investor in Egypt with investments close to $750 million in about 40 projects. These are likely to go up to about $2 billion by 2010.

    Rather than merely expressing pious hopes and aspirations for co-operative action, it would be practical to suggest concrete action in specific areas.

    Indian business and industry are not sufficiently aware of the size, evolution and importance of the Egyptian market, and its capabilities and requirements. Equally, Egyptian business and industry are not fully aware of the recent achievements of the Indian economy and its capabilities and its requirements. We have been trying to address this information deficit by encouraging visits of delegations, participation in one another’s trade fairs, specialised exhibitions and organizing buyer-seller meets. We have been taking measures to facilitate travel by Egyptian businessmen to India. We pledge to continue our efforts in this direction.  

    Proximity to Europe and EU’s neighbourhood initiative make Europe a natural destination for Egyptian exports. QIZ facility for exports to US is another attraction. Egypt’s membership of COMESA opens the door to many African markets. Indian manufacturers should set up joint ventures here to create mutually beneficial partnerships.

    In agriculture, we are grateful to the Government of Egypt for according approvals for resumption of imports from India of tea and frozen buffalo meat.  We could do more in exchanging information and co-ordinating action while purchasing wheat in the international market.

    Egypt has a wealth of expertise in desert reclamation, desert irrigation and desert agriculture. Indian enterprises can benefit through collaborative projects in these areas.

    India has expressed its readiness to share with Egypt her experience in creating co-operatives in the production and marketing of milk, vegetables, pulses, edible oils and fertilisers. The experiences of the National Dairy Development Board [NDDB] and the Indian Farmers’ Fertiliser Co-operative [IFFCO] would appear relevant to the Egyptian context in mobilising and empowering farmers in ways free from governmental and bureaucratic interference. In the field of fertilisers, IFFCO has offered to put up for the use of Egyptian farmers a plant which would help in ameliorating the skewed consumption of fertilisers here [NPK ratio in Egypt is 26:2:1 as against the global norm of 6:2:1 or 5:3:1]. Microfinance and rural credit schemes are also areas of potential co-operation.

    Both our countries have witnessed the resurgence of avian flu in recent months. We should engage in more intensive consultations and exchange information and experience on dealing with this menace.

    Egypt’s accumulated experience and expertise in producing and maintaining world-class tourist infrastructure are considerable. Egyptian companies and conglomerates would be encouraged to share such expertise with India. This could cover a variety of industries and activities such as hotels, construction, roads and highways, preservation of historical monuments, and so on.

    Similarly, India can share with Egypt her experiences in the field of modernisation of railways, including in signalling, speed control, early warning systems, and use of ICT, shipping and port services, and airports and aviation through specific projects designed in each of these areas. Another promising area is the mandatory use of CNG for public transportation in urban areas which has led to considerable reduction in air pollution in cities like Delhi.

    The development of small and medium enterprises [SMEs] is another area where many have expressed interest in co-operation between the two countries. Indian institutions such as NRDC, NSIC, NISIET, NISIBUD and SIDBI can make important contributions in this regard by working with SFD and other identified counterpart institutions. As more and more multinational corporations establish themselves here and Egypt becomes a manufacturing hub for the region, SMEs supplying intermediate products and inputs for large plants can be established successfully as auxiliaries to these large plants, on the Indian model.

    As and when the people’s car designed by Tata Motors, Nano, enters the market towards the end of the year, it would be desirable to explore co-production arrangements with Tatas for producing the fuel-efficient and environmentally compliant vehicle for Egypt and the region.

    Both India and Egypt have highly-developed textile and garment industries. Egypt imports a large part of the requirement of man-made fibres for its textile and garment industries from India. Such imports have significant potential to expand, given the rapid growth of the garment industry in Egypt. On the other hand, India is the largest importer of Egyptian raw long-staple cotton and cotton yarn for its textile and garment industries. India’s National Institute of Fashion Technology has signed a Memorandum of Understanding for cooperation with the Egyptian Businessmen’s Association in textile and fashion technology. Representatives of Egyptian textile industry have been going to India under the Indian Technical and Economic Cooperation (ITEC) programme for training in textile factory operations. Ample potential exists for Indian companies to invest in Egypt’s textile sector and to participate in upgradation and modernisation of Egypt’s textile industry.

    The Gas Authority of India Limited (GAIL) has equity stakes in gas distribution ventures in Fayyoum and Cairo and Natgas.  In April 2007, OVL (the external arm of ONGC) and its partner IPR Red Sea Inc. announced a significant oil field discovery in the North Ramadan Concession in the Gulf of Suez. GSPC has secured two exploration blocks in partnership with a Canadian company. India has emerged as the largest importer of hydrocarbons from Egypt. There is considerable interest among Indian companies in long-term LNG supply arrangements from Egypt.

    Indian companies have evinced interest in setting up petrochemical industries in Egypt. The Dhunseri group of Calcutta is setting up a PET resin plant in the north. Three Indian conglomerates have expressed interest in setting up refineries in this country. IFFCO has an agreement with Al-Nasr Mining Co. to establish a phosphoric acid plant in Upper Egypt entailing an investment of over US $ 450 million.

    An area where the two countries can work together is that of renewable sources of energy, especially solar energy as both countries have abundant sunshine and have acquired some experience in utilising solar energy, with beneficial implications for environmental protection.

    Another area for enhancing co-operation is that of human resource and skills development. We should put in place more programmes on the model of that between the Indian Institute of Management, Ahmedabad [IIM-A] and the Future Generations Foundation [FGF].

    In the field of Information Technology, three Indian majors are establishing business development centres in Egypt. More are expected to come in. Together, they would enhance the skill-levels of Egyptian IT personnel; assist in realising the goal of making Egypt the hub of IT in the region, and help Indian companies in fielding Arab professionals in the region. We applaud Egypt for joining the pan-African e-network which seeks to provide connectivity across the African continent and for offering to participate in the tele-education and tele-medicine components of the project.

    Another promising area of collaboration is the financial services sector. We both have begun experimenting with an array of non-traditional financial instruments. Ensuring their effective regulation without undue governmental or bureaucratic interference in their operational freedom is an area where both can exchange experiences and learn from each other. The Central Bank of Egypt, Cairo and Alexandria Stock Exchange and regulatory authorities here have been performing commendably. The Fixed Income, Money Markets and Derivatives Association of India held their annual conference here last month. Regulation of capital markets, depositories, venture capital firms, investment and merchant banks, private equity funds, establishing more credit-rating institutions, and those for mortgage finances are other areas where institutions in our countries can collaborate. A small beginning has been made by the Housing Development Finance Corporation of India in collaborating with the Egyptian Housing Finance Co. Many more such activities could be undertaken. Such collaboration will also help us to deal with the current volatility of world financial markets and the fears of a global meltdown following the downturn in US and the depreciation in the value of the dollar.

    Collaboration in the health sector is another promising area, sharing our experience in producing pharmaceuticals and developing high-end indigenous capacity. Co-operation could also be envisaged in other areas such as space, peaceful uses of nuclear energy and defence production.

    These are only a few illustrative areas where we can agree to move decisively, demonstrate tangible progress in a relatively short period of time, and lay the foundation for a solid edifice of co-operation. In most cases, Government only needs to play the role of a facilitator, in bringing the two sides, most often the private sectors, into contact with each other, and then allowing them to work out the terms for mutual benefit. We would strengthen people-to-people contacts, and learn from each other by exchanging experiences in managing economic reform, reform of the public sector and dealing with some of their negative effects on our societies. Together, we can chalk out a path of collaboration and co-operation between enterprises and institutions in Egypt and India, and contribute to one another’s efforts in removing the worst forms of poverty and deprivation in our societies. There is enough cause for optimism in this respect.

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