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Cablegate: Under Secretary Hormats, November 23, 2009

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UNCLAS STATE 124580

SENSITIVE
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E.O. 12958: N/A
TAGS: ECON ENRG ETRD EG
SUBJECT: UNDER SECRETARY HORMATS, NOVEMBER 23, 2009
MEETING WITH EGYPTIAN MINISTER OF TRADE AND INDUSTRY
RACHID RACHID

1. (SBU) SUMMARY. In an hour long meeting, Under Secretary
for Economic, Energy and Agricultural Affairs Robert Hormats
and Egyptian Minister of Trade and Industry Rachid Rachid
discussed the global economic situation and its impact on
Egypt. Both agreed that it was important to ensure the
strong bilateral relationship was reflected in strong
business to business ties, as these gave the average citizen
a stake in the relationship. Minister Rachid asked for U/S
Hormats' help with QIZ expansion to Upper Egypt, and
Ambassador Shoukry raised G20 participation for Egypt. U/S
Hormats encouraged Rachid to engage with U.S. companies,
including General Electric, on new technology and the
development of wind and solar power, and possibly, finding
the means to export solar power to Europe. END SUMMARY.

2. (U) Participants:

U.S.
Under Secretary Hormats
Colleen Hyland, Special Assistant
Katherine Allen (NEA Notetaker)

EGYPT
Minister Rachid
Ambassador Sameh Shoukry
Samiha Fawzy, Deputy Minister
Ashraf El-Rabiey, Minister Plenipotentiary

------------------------------
Global Macroeconomic Situation
------------------------------

3. (SBU) In discussing Egypt's continued growth, even during
the global financial crisis, Minister Rachid credited major
economic reforms accomplished over the last five years, which
helped bring inflation under control in 2007-8 and paid off
again during the recent crisis. Rachid highlighted the
construction sector's continued growth of 15 percent during
the crisis, and he attributed this success in part to
government stimulus projects in infrastructure and in part to
a new housing law that increased the ease of building
especially in rural areas.

4. (SBU) Rachid referenced his meetings with American CEOs
in New York during the prior week and noted that many were
worried about spending, consumption, and job creation. U/S
Hormats agreed, adding that relatively few companies were
achieving robust top line revenue growth. The health of the
financial services sector was improving compared to several
months ago, which was a good sign. However, U/S Hormats did
not expect that debt-burdened American consumers would return
to previous levels of consumption in the near future.

----------------
Renewable Energy
----------------

5. (SBU) U/S Hormats mentioned a recent meeting with General
Electric (GE) CEO Jeff Immelt and observed that GE was very
interested in solar energy projects in Egypt. Rachid pointed
out that Egypt had made a commitment that by 2020, Egypt
would derive 20 percent of its energy consumption from
renewable sources, both wind and solar. One of the most
efficient wind tunnels in the world, Rachid explained, was
along the coast of the Red Sea, and Egypt was aggressively
pursuing concessions from BP, Italian companies, and Egyptian
companies.

6. (SBU) Rachid described solar as another potential source,
but expressed some concern with the cost, which he said was
three to four times higher than wind and four to five times
higher than oil and gas. He acknowledged solar power was
gaining momentum, however, and that the Europeans were
enthusiastic about drawing on North African solar power. U/S
Hormats encouraged Rachid on the project, noting that it was
a means to decrease European dependence on Russian gas, and
it could tie in with objective of the Copenhagen climate
conference in December.

7. (SBU) Rachid expressed a strong interest in U.S.
cooperation to help Egypt with new energy and environmental
technologies. Due to domestic energy consumption growing at
10 percent annually, and similar trends with water, Rachid
characterized efficiency and conservation as urgent needs for
Egypt. He hoped to work with the U.S. to develop a longer
list of projects where the two countries could cooperate.

---------------------------------
U.S.-Egyptian Business Engagement
---------------------------------

8. (SBU) U/S Hormats asked about the existing forums for
bilateral discussions of energy and environmental projects.
Rachid highlighted a new bilateral business council now
formed with 15 members on the Egyptian side and 10-12 on the
U.S. side so far. Rachid did not mention U.S.-Egyptian
efforts to develop a new framework for a bilateral trade
dialogue.

----------------------------------
Qualifying Industrial Zones (QIZs)
----------------------------------

9. (SBU) Rachid raised the issue of QIZs, emphasizing that
the QIZ agreement had been a significant step in
Egyptian-Israeli and Egyptian-U.S. relations, both
politically and in terms of increasing trade volume. Egypt
wanted to extend the QIZ project to Upper Egypt to attract
investment and reduce unemployment, which Rachid said was 15
percent in Upper Egypt, reaching 20 percent in some areas.
It would be good for the peace agreement, Rachid argued, if
Egypt's bilateral relationships with Israel and the U.S.
could be seen as key factors in developing the poor areas of
Egypt. Rachid also pointed out that the QIZ would complement
major infrastructure improvements in Upper Egypt to
facilitate development, including airports, natural gas
lines, river transportation, and railway expansion. Rachid
asked for U/S Hormats' help with the expansion. U/S Hormats
appreciated the success of the QIZs to date and promised to
take a hard look at the Egyptian proposal.

10. (SBU) Rachid asserted that the additional zones would
only add USD 100-200 million of textile exports to the U.S.
over the next five years (above the current level of USD 900
million). Rachid said that the increase in Egyptian exports
would not displace American jobs, but would primarily shift
U.S. imports from China and Asia to the Middle East.

---
G20
---

11. (SBU) As Rachid and U/S Hormats moved to end the
meeting, Ambassador Shoukry raised the Egyptians' request to
participate in the G20 and asked for U.S. support. U/S
Hormats relayed that the Secretary would soon send a letter
on the issue, and that the United States recognized Egypt's
importance in Africa and the Middle East. The United States
takes the request seriously, U/S Hormats said, but the issue
was complex since the G20 already included more than 20
countries. U/S Hormats concluded that he saw a definite need
to build the bilateral relationship for economic, political,
and strategic reasons, and agreed with Rachid that it was
important to develop economic ties as these gave the average
citizen a stake in the relationship.
CLINTON

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