Egypt signs US$1bn infrastructure finance deal with South Korea

By Amit Jain

President Abdel Fattah Al-Sisi signalled Egypt’s growing economic prominence in Africa when he inked a significant infrastructure finance deal with his South Korean counterpart in Cairo on 20 Jan 2022. Under the terms of the agreement Egypt can borrow up to U$1 billion from Seoul's Economic Development Cooperation Fund (EDCF) at almost zero interest for major infrastructure projects and would have decades to make repayments.

The deal gives Korean firms a foothold in Egypt allowing them to compete against China in bidding for major railway, subway, and marine desalinisation plants. South Korean President Moon Jae-in who was in Egypt on his first visit to the country was accompanied by representatives of several Korean conglomerates including Hyundai Rotem, Samsung Electronics, Myoungshin Industry, and Doosan Heavy Industries among others. The two leaders witnessed the signing of a series of agreements including a US$251m loan to upgrade the Luxor-High Dam railway line. The project is aimed at renovating traffic signals of a railway between the historic city of Luxor and the Aswan High Dam in the south. Seoul is also considering assisting Egypt in the construction of its first nuclear power plant - El Dabaa. Site approval for the four-unit nuclear power plant was granted in 2019. The first unit of the power plant is scheduled to come online in 2026 for which Russia has lent Egypt US$25bn. Natural gas currently provides most of Egypt’s power needs, but Cairo wants to diversify its energy mix and would like to get at least 8% of the country’s electricity from nuclear power by 2030.

The US$16bn trade between Egypt and South Korea is overwhelmingly in Seoul’s favour with exports of automobiles and electronics where Hyundai and Samsung dominate. According to the Korean Ministry of Foreign Affairs, the size of Korean expatriate community in Egypt is among the largest in Africa. Egypt is the first African country with which Korea is seeking to forge an FTA. If signed, the deal could make Egypt the gateway for Korean companies to enter Africa. Samsung and LG. already have a dominant position in the electronics sector in Egypt, but Korea sees rich opportunities in hard infrastructure where its firms have a competitive advantage.

Since coming to power in 2014, President Sisi has put infrastructure development at the centre of his economic policy. Construction of roads and power plants, modernisation of ports, and the establishment of free trade zones have attracted significant investments – primarily from China.

 

References

Ministry of Foreign Affairs, South Korea

Statement By H.E. President Abdel Fattah El-Sisi At Press Conference With President of Republic of  South Korea, AFNWS, 21 Jan 2022

‘Egypt, Korea Agree to Establish Political, Economic Partnership’, Ashaq-al-Awsat, 21 Jan 2022

‘Egypt,  South Korea  agree on boosting cooperation in various fields’, Xinhua, 21 Jan 2021

‘South Korea  offers $251.6m loan to finance railways signalling system in Egypt’, Daily News Egypt,  22 Jan 2022

‘South Korea  to Provide Egypt With $250Mln in Loans for Railway Modernization’, Sputnik News Service, 23 January 2022

‘S. Korean president's visit to Egypt boosts bilateral ties: experts’, Xinhua, 24 Jan 2022

‘South Korea inks deal to lend Egypt US$1bn for infrastructure’, Nikkei Asia, 21 Jan 2022