President Anwar Sadat told U.S. businessmen this week that he expects the first real impact of Egypt's six-year-old "open door" policy for attracting foreign investment to become apparent this year and next.
In a meeting with business executives and financiers Wednesday night, Sadat made it clear that he considers greatly expanded private investment, which U.S. businessmen have avoided so far because of bureaucratic and financial obstacles, essential to the success of his Middle East peace policies.
In his own country, Sadat has used promised of better living conditions to win the support of Egyptians, many of them living in extreme poverty, for his peace treaty with Israel. So far he has been unable deliver on these promises and he knows he must to avoid serious unrest.
At the same time, Sadat's break with the rest of the Arab world to seek peace with Israel has cost him much of the financial support he had received from the oil-rich Arab nations in the Persian Gulf area. He is looking to the United States to make up a significant portion of this investment.
At the meeting with the U.S. group, the Egypt-U.S. Business Council, Sadat expressed what one participant called "a new confidence" in Egypt's ability to attract the considerable foreign investment it needs to put the country on the road toward a sound economy and he reportedly pledged greater efforts to remove obstacles to private U.S. investment.
In return, he asked the Americans for assistance for his priorities: food production, housing, and exportable manufactures that would bring badly needed foreign exchange to Egypt.
The Egypt-U.S. Business Council is the chief organization promoting economic cooperation between the two countries. But even with its high-level representation of U.S. business and banking leaders and, on the Egyptian side, business and government officials, the five-year-old council can, as yet, point to few actual contracts.
Like Sadat, however, John G. Sarpa, executive secretary of the council, thinks that results are imminent.
Sarpa said yesterday that "numerous contracts" involving hundreds of millions of dollars "are 90 percent firm" after what he described as a marked improvement in Sadat's and Egypt's attentions to the problems of U.S. investment over the past year.
Since the signing of the Egyptian-Israeli peace treaty a year ago, Sarpa said, "things have changed. You can see it in our meetings with the Egyptians. With the deescalation of military tensions in the area, Egypt and Sadat are focusing more attentively on their economic problems."
Progress has already been made toward resolving some of the difficulties that prospective American investors and find in Egypt. Archaic customs laws are being revamped, clearer channels are being drawn for project approvals, a treaty to end double taxation is near completion and steps are under way to make Egypt's open-ended liabilty laws subject to a statute of limitations.
Nonetheless, Sarpa said, "that's not to say there's a mad rush to invest in Egypt. That's just not the case." Rather, he said, "what we're seeing now is a greater cross section of U.S. firms looking at Egypt and making a more serious evaluation than they did in the past."
Egyptian businessmen and economic officials, Sarpa said, are "becoming increasingly concerned about the lack" of major private U.S. investment. "They can't understand our reluctance."
The problems regularly cited by Americans in any investing overseas -- U.S. antiboycott and antibribery laws, U.S. taxation of its citizens abroad and inability of U.S. government financial institutions to match competitors' low-interest loans -- combine with the special obstacles in Egypt to explain their reluctance to invest in that country, businessmen here say.
As a result, since Sadat initiated his "open-door" policy to attract foreign investment in 1974, only about $1.3 billion in foreign investment has gone to Egypt -- an amount that, for Egypt's population and potential market of 40 million people, is considered quite small.
The Egypt-U.S. Business Council, in its semianual meeting in Cairo in October, listed more than 60 projects as under active consideration for major U.S. investment.
These range from agriculture and reclamation projects to housing construction, textile plants and factories to manufacture a variety of products.
Egyptian Housing Minister Mostafa Metwalli Hefnawi told the council recently that Egypt needs 120,000 new housing units annually -- an investment it cannot handle by itself.
Egypt's urgent need to develop its agricultural and food processing economies -- both to feed its millions and to reduce expensive imports -- is illustrated by the most recent batch of Egyptian import loans announced by the U.S. Agency for International Development.
Bread, chicken, cornmeal and food oils are staples of the Egyptian diet. Yet in a short period this year, Egypt imported from the United States 7,500 tons of frozen poultry, 18 tons of Vegetable oils, 37,000 tons of corn and $18 million in baking equipment. Three of four loaves of bread in Egypt are made from U.S. flour.
In its consideration of U.S. investment proposals, Sarpa said, Egypt "stresses in each case the potential to build up foreign exchange," either through reducing imports or through manufacturing export items.
Thus, one project near final approval, a major plate glass factory that Sarpa said will have "a fairly large U.S. investment," is geared to address two of Sadat's priorities.
It will provide window glass for new Egyptian housing and, just as importantly, it will produce several thousand tons more than can be exported.