Premjith Sadasivan – Ambassador of the Republic of Singapore to Egypt
Singapore’s Ambassador to Egypt, Premjith Sadasivan, outlines the strategic significance of the visits made by both heads of state to Singapore and Egypt respectively, the scope for cooperation in the Suez Canal Economic Zone, water desalination and power generation as well as education, and the lessons Egypt can learn from Singapore in terms of the successful implementation of policy to promote economic development.
Ambassador Sadasivan, during your term as Ambassador of Singapore to Egypt you witnessed the heads of state of both countries make their inaugural visits to each other’s countries. Are we now in a new era of Singapore-Egypt bilateral relations?
“Traditionally, Egypt has focused its economic links on its immediate region, Europe and the US, but President Sisi decided that he wanted to diversify Egypt’s economic base by including Asia, the fastest-growing region in the world.”
H.E. President Sisi’s November 2015 visit to Singapore was the first ever by an Egyptian head of state. It is important to understand the context behind the visit. Traditionally, Egypt has focused its economic links on its immediate region, Europe and the US, but President Sisi decided that he wanted to diversify Egypt’s economic base by including Asia, the fastest-growing region in the world. His state visit to Singapore was part of this global outreach – and he initiated this idea, which we welcomed wholeheartedly.
The main purpose of his visit was to break economic ground in three very specific areas that were developmental priorities for Egypt and to which Singapore could contribute specific expertise and experiences. The three areas are the Suez Canal development project, water desalination and power, and education. Singapore’s President Tony Tan’s 2016 visit was to follow up on the progress of the various objectives that President Sisi had laid out.
The bilateral economic relationship is still growing between the two countries. Key companies include Olam International which is one of the biggest agricultural companies in the world; BW Gas, a Norwegian-Singaporean company, provides one of the two floating gas platforms to meet Egypt’s domestic gas needs; and Pacific International Lines (PIL), which recently opened a sizable logistics facility in the 10th October City and are planning to launch five more.
At first glance, it is not obvious what makes Singapore and Egypt good partners. Can you elaborate on the various areas where both countries are pursuing cooperation?
The first is the Suez Canal development project, which underpins President Sisi’s whole idea of positioning Egypt as a regional hub. For the last 60 years, the Suez Canal has only been used as a transit point for ships to go through, not as a hub. But as a strategically important canal for global maritime trade and the shortest route between Asia and Europe, there is a demand for such a hub in the region. President Sisi was keen to learn from Singapore’s experience in having come from nothing to develop a regional hub in less than 30 years. A strategic link-up with Singapore would enable Egypt to transform the Suez Canal Economic Zone into a logistics hub that can serve the rest of the world.
The second area of cooperation is in water desalination and power. 90 percent of Egypt’s water consumption derives from the Nile river. Despite being blessed with significant natural resources, Egypt has become a net energy importer in the past few years and had to cope with energy shortages. During President Sisi’s visit to Singapore, he learnt about the capabilities of Hyflux, a Singapore company, which is the largest water desalination and power company in the world. He was particularly interested in Hyflux’s unique technology of integrating water desalination and power generation, which would effectively kill two birds with one stone for Egypt. The idea is to develop a plant that would not only produce water for the entire Suez Canal economic zone but also generate electricity, thereby lowering the prices of both. Commercial negotiations have already been completed for water desalination plants in the Suez Canal Economic Zone, after just one year, because the political will was present on both sides.
Education is the last area. While this is a huge area, the focus is on primary education and vocational education. President Sisi was not only interested in Singapore’s success in global education rankings, but he was also interested in how education can help achieve religious moderation. For instance, the first place that President Sisi visited in Singapore was the Center for Inter-Religious Harmony, where he was received by ten inter-faith leaders in a mosque, including a rabbi. This was unthinkable in Egypt, and he was curious about how things are done in Singapore. Singapore is a secular state and we come down very hard on anyone who tries to impose their religion on others. We believe that the ultimate recipe for stability and harmony is when no single religious group dominates the other. It is also important for the majority to be magnanimous to minorities.
Singapore has obviously established itself very successful as a regional hub for the Asia-Pacific region, especially in but not limited to the petroleum and logistics industries. What insights can Singapore’s experience offer Egypt?
Singapore’s success was predicated on the global perspective that we took in order to define the partnerships that would be of real benefit to us. Today we have excellent links to the European Union (now our biggest economic partner), Japan and the US. We do not restrict ourselves to doing business only with our geographical neighbors and friends.
The advice that Singapore can give Egypt is what we have said to other countries like China and India: start small pilot projects before embarking on bigger plans. In the 1970s, when the Chinese statesman Deng Xiaoping visited Singapore to meet then-Prime Minister Lee Kuan Yew, he asked for advice on how to develop a huge country like China. Mr. Lee suggested that Mr. Deng consider starting small, with four economic zones around the coast. When those succeeded, the Chinese government replicated the strategy in other parts of China. A similar strategy would work in Egypt.
This is why I believe, contrary to popular opinion, that the recent Suez Canal expansion project was essential. The Canal needed to be widened and deepened in order to allow the big ships to pass. The timing was a little unfortunate because it coincided with the global economic downturn, which saw revenues decline from USD 5.6 billion to USD 5.2 billion, at a time when Egypt’s other revenue sources had also fallen. But from a longer-term perspective, the project needed to be done; it was a potential game-changer. If Egypt could not get this project off the ground, then how could it develop other parts of the country? I think this project was necessary not just from an economic standpoint but from a much-needed political one to change mindsets.
Another area where the Egyptian government can make improvements is in the investment environment. If you take a look at the World Bank’s Doing Business Index. Egypt is currently ranked 134th. Egypt can certainly do much better. Singapore’s strategy is to look at countries that outperform us on specific metrics and study their best practices. Egypt can likewise focus on concrete metrics, like the time it takes for goods to clear customs at Egypt’s ports, which is currently 33 days (compared to Egypt’s nearest competitor, Jebel Ali in Dubai in the UAE, which takes 7 days), in order to improve them. It is possible for Egypt to move from 134th to the 70s or 60s within a very short period. Small steps can snowball into big improvements in the underlying investment climate.
What challenges do you see ahead for Egypt?
Egypt’s biggest challenge lies within. There is a tendency to think that Egypt is a big country and, therefore, change can only occur gradually. This is not the case. Countries like India and China have shown that big countries that have suffered economic malaise can make that leap forward into economic development within 10 to 15 years. Much depends on creating an ecosystem where the Ministers, the civil service and the private sectors work together. Egypt’s current government is relatively new and inexperienced. While parts of the government understand the strategic picture, the Egyptian bureaucracy is not used to giving equal importance to policy implementation. In Singapore, the way we measure success of a government policy is only when it is implemented. Policy is implementation. In Egypt, many projects are routinely announced but implementation is often patchy and uneven.
To be fair, President Sisi is trying to change the mindset of the bureaucracy. He has pushed through civil service reform, which for the first time incorporates a performance appraisal system within the bureaucracy. This is a new initiative and it will take time for people to grasp the importance of performance evaluation, especially with Egypt’s seven-million-strong civil service. Most objective observers believe that Egypt only needs a one-million-strong civil service to govern the country.
In the private sector, there are large and successful Egyptian companies like Hassan Allam, one of the largest construction companies in the region, and Orascom, but there is a dearth of second-tier, medium-sized companies. The experience of successful economies suggest that SMEs is an important driver for economic growth.
Another key challenge is structural economic reform. There are only two solutions for Egypt’s economic woes: massive foreign direct investment (FDI) Egypt and exports. With Egypt’s currency having fallen by 50 percent after floating its currency, there is a huge economic opportunity for Egyptian exporters to export its products. As for foreign direct investments, the foreign investors are waiting for the passage of the new investment law. It is a very good draft law but it needs to be passed and then implemented well. Many investors are all looking for signs of a positive change in the investment climate here.
What role do you think the oil and gas sector can play in fostering Egypt’s economic development?
Egypt’s Zohr gas field is a potential game-changer. Currently, 94 percent of Egypt’s energy mix comes from fossil fuels, with 51 percent of the overall coming from gas and 43 percent from oil. With the Zohr discovery, the natural gas component is going to get ever bigger, allowing Egypt to not just satisfy domestic needs but become an exporter again – not only to neighboring countries but to Europe. They naturally face competition from Cyprus, Israel and Turkey, which is working with Russia to build an undersea pipeline in the Black Sea. If Egypt positions itself well, their gas reserves will see them very comfortably through the next few decades: enough for themselves and enough for the EU. There will also be positive spillover effects in other sectors of the economy. The lure of Egypt’s oil and gas sector will also drive further FDI. Overall, if managed well, Egypt’s economy will see a double boost: through exports and through FDI. But Egypt also needs to move towards a market-friendly regime and a more predictable regulatory and legal regime. These will help regain investors’ trust.
For Egypt to become an energy hub, it also needs to ramp up building its export infrastructure. This will require billions of dollars and Egypt would not be able to finance them alone. Egypt thus needs to adopt a global and regional perspective by seeking positive-sum relationships with its neighbors and further abroad. This is a lot of potential for regional collaboration but this collaboration is contingent on individual country’s domestic politics and foreign policies.
Have you got a final message for our readers?
“The perception outside of Egypt that there are no opportunities in Egypt is not the case at all.”
When I first arrived in Egypt in July 2013, the country was completely unstable –politically and economically. Two weeks after my arrival, we had to evacuate all the Singaporean citizens in Egypt out of the country. Since then, there has been steady improvements on the security front and, more recently, on the economic front as well.
There are two lessons to be gleaned from Singapore investors in Egypt. First, new investors should understand Egypt’s developments first-hand by sending business missions here to evaluate opportunities themselves and get a feel of the place. The perception outside of Egypt that there are no opportunities in Egypt is not the case at all. Second, new investors should speak to both the local and foreign investors here and develop a better understanding of the market here. I am not saying there are no challenges – there are huge challenges but, at the same time, there are also huge opportunities.