Establishing a qualified industrial zone (QIZ) in Egypt

The new government of Egypt, under recently appointed Prime Minister Ahmed Nazif, is committed to becoming a Middle East regional leader in economic, political and social modernization, according to Rashid Mohamed Rashid, Egypt's Minister of Foreign Trade and Industry.

Egypt is seeking free trade discussions with the United States to provide momentum to this agenda, the minister said.

"For many years, Egypt has been following an approach and a policy of protection, and one of the difficult and immediate decisions that this government has taken is that we have announced very explicitly that we are reducing protection for our markets and our industry," Rashid told a group of economists and business leaders at Washington's Institute for International Economics November 15.

He said the new government is achieving change with unprecedented speed and decisiveness.

Nevertheless, Rashid said, "Egypt's vision of reform centers on an aspiration for balance." He spoke of the need to balance a market economy with strong government and the need to balance political reform with the rule of law, and said that if political reform moves too fast, "we risk losing the entire initiative to radicalism and vested interests."

Taher Helmy, of the American Chamber of Commerce in Egypt, said that the government's newfound commitment to economic reform is due to the inclusion of many private sector business leaders in the new Egyptian cabinet. Rashid, who is the former president of Unilever North Africa, Middle East and Turkey, as well as a former director of HSBC Bank, is one of these new ministers.

Rashid is visiting the United States for the first time since assuming his ministerial post in July. He met with U.S. Trade Representative Robert Zoellick to discuss the possibilities of pursuing a U.S.-Egypt free trade agreement (FTA) and of establishing a qualified industrial zone (QIZ) in Egypt. A QIZ would allow tariff-free access to the U.S. market for products with a specified percentage of inputs (product components) from both Egyptian and Israeli firms.

The minister said that Egypt's growing population is demanding greater economic growth and job creation and added that Egypt must open up and integrate into the world economy in order to meet the needs of its people.

"For Egypt to maintain public support for change, we must create some rapid wins," Rashid said.

Rashid believes that a QIZ could provide the immediate evidence of the benefits of free trade that the government needs. "This could have a very quick impact which could be felt quite fast on the ground in Egypt," he said.

Rashid sees the QIZ as a first step toward a broader free trade agreement. He said that access to the U.S. market, which Egypt would gain with a QIZ, would prepare the country economically and industrially to handle a more comprehensive reform of the trade regime while showing the public the advantages of global economic integration.

He also believes that by entering into FTA negotiations, the government can create greater momentum behind reform efforts. "If we pursue a free trade agreement, that will help, even if we don't get to a free trade agreement in the next few months. But the process itself is a catalyst for change," he said.