Category Archives: Europe

Sharm el-Sheikh-UK Flights Should Resume, Says UK Parliamentary Delegation

A UK parliamentary delegation has stated that they would recommend that Sharm el-Sheikh-UK flights be resumed.

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Flights to and from the UK from the Sinai Peninsla resort had been suspended following the downing of a Russian passenger plane in October 2015, and the scrutiny of security procedures in Sharm el-Sheikh airport which followed. A previous UK government delegation had visited in November to assess the situation, including the UK envoy on aviation security and counter-terrorism experts.

The delegation of the UK’s ruling Conservative Party politicians from both the House of Commons and House of Lords was received by Egypt’s Foreign Minister Sameh Shoukry. The delegation also met with Egyptian Prime Minister Sherif Ismail in Cairo on 17 January, discussing methods to boost bilateral cooperation, and the recent first session of the Egyptian Parliament.

Tourism, Jobs and Security in Egypt

According to World Travel & Tourism Council (WTTC) statistics, travel and tourism contributed EGP117.2bn to the country’s GDP in 2014, 5.9% of the total. This figure has been projected to rise by 4.5% per annum over the 2015-2025 period to reach EGP187.7bn in 2025. In 2014, travel and tourism directly supported 1,322,500 jobs, 5.2% of total employment, expected to rise to 1,708,000 by 2025. When including jobs indirectly supported by travel and tourism, the figure reached 2,944,000 in 2014.

President Sisi has pledged to reduce unemployment to 10% by 2020, and getting Egypt’s tourism industry back on its feet will be essential for this. According to Egypt’s Central Agency for Public Mobilization and Statistics, unemployment in Egypt reached 12.8% in the third quarter of 2015, down from 13.1% in the same period in 2014.

Related: Egyptian PM: No More Israel-Egypt Natural Gas Permits

President Sisi has publicly tied reducing unemployment to the country’s internal security issues. In a December announcement on cooperation between the armed forces and the Egypt Sinai Industrial Development and Investment Company in the extraction of marble in Sinai, Sisi claimed that providing job opportunities would reduce the spread of militancy in the country.

Jobs, of course, are not everything. Three European tourists were stabbed in an attack at the Red Sea resort Hurghada on 8 January 2016. For investors in Egypt’s tourism industry, a thorough understanding of the country’s security threats is essential.

Beyond Tourism

Egypt and the UK remain close partners. Prime Minister David Cameron was the first Western leader to visit Tahrir Square following the 2011 demonstrations, and has maintained close ties with the Sisi government. While human rights issues are often the focus of Egypt-UK relations, investment should be far more eye catching.

UK-based companies are some of the largest players in the Egyptian economy. In 2015, UK energy company BP pledged US$12bn of investments in Egyptian gas fields, and BG Group pledged US$4bn. Additionally, the UK’s Vodafone has the highest number of active subscribers to its mobile phone services in Egypt.

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UK Election Result: What now for the EU and USA?

As David Cameron now leads the Conservative majority government few predicted, we dig deep into the details to show you what will really matter in the years to come for the UK’s two key relationships with Europe and the USA.

The UK and Europe

Membership of the European Union is set to dominate British politics, as the Conservative pledge to the electorate of an in-out referendum by the end of 2017 is on course to be delivered.

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Lord Ashcroft’s polling company, one of the UK’s most respected, researched British opinion on Europe in its most comprehensive poll of over 20,000 people in 2014. It found that 41 percent of people favoured staying in the EU, and 41 percent wanted to leave. 49 percent of people believed the costs of staying in the EU outweigh the benefits, as opposed to 31 percent believing the opposite. Following the failure of polling companies to predict the 2015 general election result, it pays to take the figures with a pinch of salt.

Leaving the EU would have deep ramifications for the UK economy, particularly as regulation in the two economies would diverge, creating a drag on companies through additional compliance obligations.

The question of free movement of people between the UK and EU would dominate the debate, with the UK’s biggest party in the European Parliament currently agitating for an Australian-style points based immigration system. At present, UK employers are legally obligated to consider citizens of EU countries before hiring a non-EU citizen. As the UK never joined the Schengen Zone allowing visitors to the EU to use a single visa to travel across the continent, separate UK business visas would remain a headache.

Related: Eastern Mediterranean Oil & Gas: The View from Egypt

We must bear in mind that many Conservative MPs face pressure from within their own constituencies to win votes back from supporters of the anti-EU UK Independence Party (UKIP), who gained 12.6 percent of the vote this time around, and won the most UK seats in the EU parliamentary elections in 2014.

With a strong rural base, the Conservative Party also faces pressure from farmers who work under the EU’s Common Agricultural Policy (CAP). The CAP subsidies and programmes are a huge drain on EU resources, accounting for over 40% of the organisation’s budget. As the new government makes steps to renegotiate a new settlement with the EU, the interests of these local constituents will be at the back of the minds of many in the Party.

The debate often focuses on what leaving would mean for the UK, when we should put it in a wider context. For the EU, the loss of its third largest economy will be a big hit. The UK has been propping up flagging EU GDP growth, growing at 2.8% in 2014, over double that of the EU average. Fears abound of “Brexit” leading to a domino effect of countries fleeing the organisation. For those who stay, the upside will be the removal of the British obstacle to further integration.

A classic argument against EU membership is that member states lose the position to negotiate their own free trade agreements (FTAs). In recent years we have seen China pursue FTAs with Iceland and Switzerland, let the EU has been left out in the cold. When dealing with the EU, divide and conquer tactics have instead worked to other countries’ advantages, shown by China using its increases in wine tariffs as a tool to drive a wedge between France and Germany over a dispute over unfairly subsidised solar panels.

The USA and TTIP

The Transatlantic Trade and Investment Partnership (TTIP) between the EU and USA is not expected to be completed until at least 2016. TTIP presents an opportunity for the EU to show a united economic front that can deliver tangible results. If the deal is communicated effectively to the UK electorate, it could buoy the pro-EU referendum vote.

The USA is the UK’s biggest national trading partner, and bilateral trade amounted to over $200 billion in 2014. The UK is the top national destination for USA investment, accounting for 27% of all USA-invested projects in Europe. The UK’s desirable position is down to its utility a springboard to the wider EU Single Market, along with its own significant consumer market. The conclusion of TTIP will also have ramifications for UK-invested projects in the USA, which received £241.2 billion of UK investment in 2013.

The European Commission‘s negotiating position aims for progress on regulatory cohesion, with periodic review of existing regulations, and to establish a framework to identify areas for further such cooperation. Among the specific commitments affecting goods and services, the agreement will cover automobiles, chemicals, machinery, pharmaceuticals, medical devices, and textiles. The agreement would build on World Trade Organization agreements on sanitary and photo-sanitary measures, and technical barriers to trade, standarding requirements such as labeling or safety testing. This has knock-on repercussions for US businesses, as the EU position is to promote International Organization for Standardization measures are also used outside of the EU.

It has been a bumpy ride for some British-focused US investors of late. The UK’s Office of National Statistics found that from 2012 to 2013, earnings from US foreign direct investment in the production industry declined from £6.1 billion in 2012 to £3.4 billion in 2013. This figure should be seen in the context of the global commodities slump, as US earnings in the UK’s mining and quarrying industry fell from £2.4 billion in 2012 to £1.2 billion in 2013.

The balance of the UK’s position between Europe and North America remains crucial. The latest data show that Europe and the USA together received 74.4% of UK investment in 2013, receiving £241.2 billion and £528.9 billion respectively. The current balance has served the UK well; globally the UK and USA shared the top two positions for receiving foreign direct investment in 2013-14.

As we look out ahead, the picture is clear: be wary of the UK political scene, but not over-cautious. Do not let the spectre of Brexit haunt you. Instead, be prepared for the scenario and begin looking into how you may benefit from TTIP.

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Eastern Mediterranean Oil & Gas: The View from Egypt

Greek Prime Minister Alexis Tsipras has announced consultations between Cyprus, Greece and Egypt on maritime borders in the Eastern Mediterranean, crucial to regional oil and gas exploration rights.

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Cyprus, Egypt and Greece have come closer in recent months, having held their first trilateral summit in Cairo in November 2014. At the summit, which focused on combating terrorism and energy extraction, leaders of Cyprus and Greece pledged to act as “ambassadors” of Egypt to the EU. Egyptian President Sisi described the summit as a “new phase of trilateral cooperation”.

Related: UK Election Result: What now for the EU and USA?

Under the previous Morsi-led government, Egypt announced in March 2013 that it would no longer respect its maritime borders with Cyprus and canceled a 2003 agreement with Cyprus defining Egypt’s Exclusive Economic Zone (EEZ) under the United Nations Convention on the Laws of the Sea. The Sisi government signed an agreement with Cyprus to restore its previous EEZ in December 2013, which gained presidential approval in September 2014.

The issue is particularly crucial to Egypt due to its drive to reduce subsidies. Natural gas subsidies were slashed in mid-2014, sending commercial prices up by 30-75 percent. As present low oil and gas prices can’t last forever, Egypt is making the most of this opportunity to secure a reliable supply. The Sisi government strategy on the issue appears clear; avoid Morsi-style brinksmanship over boundaries and reach a pragmatic solution to the issue. Cypriot and Egyptian ministries have recently signed a memorandum of understanding on natural gas facilitation, which is expected to lay the ground to facilitate further development of the Aphrodite gas field, a 100-billion cubic metre reservoir held by Noble Energy and the Delek Group.

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Conspicuous by its absence from the meetings, Turkey remains the elephant in the room. The biggest challenge for relations between the trio and Turkey remains as ever the issue of northern Cyprus, which has been under Turkish occupation since 1974. As a result, Turkey does not recognise agreements made by the Greek majority EU-member Cyprus. A more recent factor has been the vocal support of Turkish AKP President Erdogan for jailed former Egyptian President Morsi. Considering the upcoming 7 June 2015 Turkish general election, the trio would be wise to avoid direct confrontation with Turkey to keep the AKP from involving gas exploration in nationalist populism aimed at the domestic audience.

As Israeli regulatory uncertainty surrounds development of the Leviathan gas field, resources of the Aphrodite field may be mobilised to meet Egyptian demand. Such exploration requires a lot of work on the ground to make the project commercially viable. As it stands, cooperation between the trio is strong enough to lay the groundwork to secure Egypt’s natural gas supply.

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