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Cablegate: Rosy Reports of New Investment in Egyptian Textile

VZCZCXYZ0003
PP RUEHWEB

DE RUEHEG #1338 1271306
ZNR UUUUU ZZH
P 071306Z MAY 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 5066
INFO RUEHAM/AMEMBASSY AMMAN PRIORITY 1633
RUEHAK/AMEMBASSY ANKARA PRIORITY 0574
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0172

UNCLAS CAIRO 001338

SIPDIS

SENSITIVE
SIPDIS

NEA FOR ELA
USTR FOR SAUMS

E.O. 12958: N/A
TAGS: ECON ETRD CH JO EG TU
SUBJECT: ROSY REPORTS OF NEW INVESTMENT IN EGYPTIAN TEXTILE
INDUSTRY

REF: A. 2006 AMMAN 6886
B. 2006 CAIRO 7219

Sensitive but unclassified, not for Internet distribution.

1. (SBU) SUMMARY: A recent press report of new Jordanian
investment in the Egyptian textile industry is indicative of
a trend of increasing FDI in Egypt and expansion of the
textile industry in particular, as foreign investors eye the
rapidly expanding Qualified Industrial Zone (QIZ) program for
duty-free exports to the United States. However, GOE and
private-sector contacts caution that the press accounts of
new investment plans are often overblown and may come to
little in the end. END SUMMARY.

2. (U) The Ministry of Trade and Industry's Industrial
Development Authority has approved plans for the Jordanian
firm Tagamoaat to establish an industrial zone in 10th of
Ramadan, Egyptian press reported May 6.

3. (SBU) Mohamed Kassem of the Egyptian Chamber of Textile
Industries told econoff that Tagamoaat participates in the
QIZ in Jordan, exporting ready-made garments that include at
least 8 percent Israeli content to the United States
duty-free. He said the firm is interested in moving
operations to Egypt to avoid the labor problems plaguing
Jordanian QIZ factories (ref A).

4. (U) The report was consistent with a number of recent
press and anecdotal accounts of plans for new FDI in Egypt
including investment by Chinese and Russian investors. For
example, the GOE also announced recent approval of a Chinese
plan to manufacture electrical wires in 10th of Ramadan
industrial zone, while a news report on April 10 noted the
signing of a memorandum of understanding to establish a new
USD 550 million Russian industrial zone on the Mediterranean
coast to manufacture cars, aircraft, and other products. As
in similar accounts, the story refers to a new GOE
"eastward-looking strategy, shifting the focus of its trade
development from its traditional Western partners." In
addition, a number of Turkish investors have announced plans
to invest in Egyptian QIZ factories.

5. (SBU) Ali Awni, head of the Egyptian QIZ unit, said no
new factories have sought the required USTR designation to
export under the QIZ program because plans are still
preliminary and often come to nothing.

6. (U) Even so, exports under the QIZ program have risen
steadily during its first two years (ref B), and FDI in Egypt
has increased sharply as well, from USD 3.9 billion in FY05
to USD 6.1 billion in FY06 to USD 7.2 billion in only the
first six months of FY07. (This year's dramatic increase was
driven by a USD 3.1-billion UAE investment in a national cell
phone license.)


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