After six years of frustrating negotiations, General Motors Corp. has begun building in Egypt a $45 million truck assembly plant that the U.S. government hopes will restore faith in the ability of American companies to do business here.
The joint venture, involving Japan's Isuzu Motors Ltd. and private Arab funds, is the largest American investment, outside the oil sector, since an "open door" policy of economic liberalization began here nearly a decade ago.
At a cornerstone-laying ceremony Tuesday in the new October Sixth industrial city 20 miles southwest of Cairo, U.S. Ambassador Alfred Atherton hailed the project as a "landmark" in American private investment and congratulated General Motors on taking what he called a "leap of faith" in Egypt. He said he hoped others would follow the example.
Neither Atherton nor any of the other speakers mentioned the years of inconclusive negotiations between the Egyptian government and General Motors that finally required the intervention of President Hosni Mubarak to clinch the deal.
Infighting among Egypt's independent-minded ministries and the unfathomable workings of the socialist-oriented bureacuracy have long discouraged foreign, particularly American, investors from coming here. In addition, government subsidies to the dominant public-sector companies, giving them a sizable competitive edge in the local market, have made American investment in the industrial sector risky.
The catalyst for the GM agreement appears to have been Mubarak's trip to Washington in late January and the government's desire to appease American private and official complaints about Egypt's investment process.
Mubarak apparently agreed to raise by 6 percent, to 25 percent, the tariff on competing imported vehicles in return for a promise from General Motors and Isuzu that their trucks' components would be 40 percent locally manufactured within three years.
Theodore A. Rosen, U.S. Embassy commercial attache, said he expects the GM investment to have a "very positive effect" on the attitude of other American investors holding back because of doubts about operating here.
The assembly plant, managed by General Motors, is scheduled to open in the spring of 1985 and to produce 18,000 light- and medium-duty Isuzu trucks and buses annually. The American firm holds a 32 percent interest in the Japanese car and truck manufacturer and has decided to produce Isuzu products here because they are less expensive than its own on the local market.
The equity ownership here is 31 percent GM, 20 percent Isuzu and the remainder private Egyptian, Saudi Arabian and Kuwaiti investors. The total equity capital is $20 million.
Since the onset of the open door policy in 1974, 52 American firms have come to Egypt with roughly $200 million worth of investment paid in, according to the U.S. Embassy.
Five oil companies account for $80 million of this, five banks another $60 million to $70 million and 16 manufacturing and agribusiness ventures most of the rest. The other American firms are in accounting.
In addition, there are roughly 200 other U.S. companies with representative offices here but without any investment. Despite the relatively small amount of investment, American companies still have the largest share of any western nation here.