In 1974, shortly after he kicked out the Soviet Union, President Anwar Sadat vowed to lure foreign investors to Egypt to make up for the lost Soviet aid.
Since then, however, foreign investors have not flocked to the Middle East country, even after the special 1974 investment law was rewritten in 1977 to make things easier for them. Sadat, who swung Egypt to an alliance with the United States, especially desired American investment.
But today in Cairo, Egypt will announce one of the foreign investments Sadat has coveted since 1974 -- one of the first joint ventures ever between a private American company and a publicly owned Egyptian firm.
What major new product will Warner-Lambert Co. and the Egyptian Company for Foods (Bisco Misr) team up to produce for the Egyptian consumer?
Warner-Lambert, the big New Jersey health care and consumer products company, and Bisco Misr will build a $5 million plant in Alexandria to make one of Warner's best-known products: Chiclets, both the candy-coated kind that comes in a box and the stick type that comes in a cellophane wrapper.
At the outset the new firm -- the International Company for Gum and Confectionary -- will import the gum base, the chewy synthetic substance that is the essence of gum, from Warner's facilities in Dublin.
But if sales volume builds, Warner-Lambert plans to introduce gum-base technology in Alexandria. For competitive reasons, Warner says, the company does not want to reveal that target sales level, although it says it wants to reach that level by 1984.
Warner-Lambert's secrecy is normal corporate practice. But in Egypt the only official competition the new company will face comes from co-owner Bisco Misr, whose top-selling brand is Lucky bubble gum.
Lucy, however, seems not to have attracted the fancy of many Egyptian chewers. Much of the gum chewed in Cairo today is smuggled into Egypt, to avoid the high duty the government imposes on imported chewing gum. A high proportion of the contraband gum is made by Warner-Lambert -- the generic name for chewing gum in Egypt is chiclets -- or Wrigley, the other big name in world chewing gum. Warner-Lambert has gum plants in both Lebanon and Morocco and some of their production is bought by Egyptian entrepreneurs who sneak it back to their home country.
But even adding the contraband gum and Lucky together, Egyptian gum consumption is trifling, certainly by U.S. standards and even using other Middle East countries as a gauge.
In the United States, per capita consumption of chewing gum is about four boxes a year, according to Aracelia Garcia, manager of international communication at Warner-Lambert. A box of gum contains 20 to 24 packages, with five sticks in each package. In the Middle East, per capita consumption is two boxes. Egypt's 42 million citizens consume only 10 million boxes a year, or 0.2 boxes per person.
Warner-Lambert and Bisco Misr see a large untapped market for chewing gum on the Nile. Egyptians are chewing. They just are not chewing a lot of commercially produced gum. Instead, Garcia said, many Egyptians chew mastiche -- hardened tree sap that is similar to chicle, the original base for commercial chewing gum. The new company wants to wean the mastiche chewers off bark sap and lure them to Chiclets.
"We see a growing market for chewing gum in Egypt," Garcia said. The 42 million Egyptians are adding 100,000 babies a month to the nation's population. Today's babies are tomorrow's adolescents, and people do most of their gum chewing between age 8 and age 20.
The new International Company for Gum and Confectionary (or Incogum) plans to start making Chiclets during the last three months of 1981. The plant will hire 100 Egyptians and only the manager of the facility, who once was No. 2 at Warner-Lambert's Lebanon plant, will not be a native, Garcia said.
"We'll need about 60 skilled workers and 40 unskilled laborers. We'll send send people to the United States for training and we'll send our people to Egypt to train them," she said.
One thing is clear: Warner-Lambert will have total management control, even though the new company will be 57 percent-owned by Warner and 43 percent by Bisco Misr.
"We didn't want to inherit the employment policies of a public sector company," Garcia said. "We wanted the work force to be newly hired."
One of the reasons Egypt has had problems attracting foreign investment, experts say, is because of the government's highly protective attitude toward its public companies. A joint venture with one of those public companies is harder to put together because the public sector company often wants to put its unemployed workers in the new venture, whether those workers have the requisite skills or not.
Potential foreign investors also have been put off by the Egyptian bureaucracy itself, despite Sadat's desire to attract companies to his country.
"There seems to be no consensus among the cabinet members on the importance of foreign investment in Egypt," said one American official familiar with Egypt. "The investment authority often finds itself unable to enforce its decisions elsewhere in the bureacracy. Often the Customs Authority will refuse to recognize commitments made by the development authority, for example."
U.S. firms have a huge oil investment in Egypt -- about $1 billion worth -- and other U.S. investments have been growing slowly. According to Egyptian figures available at the U.S. Commerce Department, another $99 million of U.S. capital is invested in ongoing production facilities in Egypt. The largest investment is by Union Carbide, which built a $15 million plant to make dry-cell batteries.
The batteries compete with two other products made by public-sector companies (there are about 400 government companies in Egypt). Although Union Carbide's batteries are more expensive than the price-controlled Egyptian batteries, they also are of higher quality.
"If an Egyptian can afford the Union Carbide batteries, he buys them," according to one source familiar with Egypt.
According to the same Egyptian figures available at the Commerce Department, there is another $189 million of U.S. capital in projects that are either under construction or approved for production for the Egyptian market and several hundred million dollars more in projects designed to make goods for export.
Some of those projects are with private Egyptian companies, some with public sector companies and some are wholly owned American ventures.
But many American companies with an eye to Egypt will look carefully at Warner-Lambert's experience. While the U.S. government officially is neutral on foreign investments by U.S. companies, the Carter administration, at least, hopes that American companies will invest in Egypt in the wake of the Camp David accord. A more properous Egypt is a more stable Egypt, and a stable Egypt is one of the keys to Middle East peace.
Warner-Lambert, of course, has not embarked on a gum-and-butter campaign, but sees the investment as purely commercial.
"There are't any international gum manufacturers in Egypt although a lot of foreign gum finds its way there," Garcia said. "And the local gum cannot compete in quality.
She said Warner-Lambert -- with sales of $3.5 billion last year, nearly half of it outside the United States -- became interested in Egypt in 1974 after Sadat announced the open investment policy. In 1978 the company took another look.After marketing surveys were promising, the company decided to try to build a plant there.
"Since chewing gum is a simple product, we felt it would be an easy deal to put through."
It Egyptians take to Chiclets the way Warner-Lambert and Bisco Misr think they will, by 1984 or 1985, Egyptians may be able to buy a wider assortment of Warner-Lambert gum: Dentyne, Clorets or Freshen Up. Who knows, they may even introduce a sugar-free gum like Trident or go head-to-head against Lucky bubble gum with Bubblicious.