Today (9 February) Olivér Várhelyi, European Commissioner for Neighbourhood presented a relaunch of the EU’s strategic partnership with the EU’s “Southern Neighbourhood” called “a new agenda for the Mediterranean”.
The new agenda includes a dedicated Economic and Investment Plan to spur the long-term socio-economic recovery in the Southern neighbourhood. Under the new EU's Neighbourhood, Development and International Cooperation Instrument (NDICI), up to €7 billion for the period 2021-2027 would be allocated to its implementation, which aims to mobilise up to €30 billion in private and public investment in the region in the next decade.
Commissioner for Neighbourhood and Enlargement, Olivér Várhelyi said: “With the renewed partnership with the Southern Neighbourhood we are presenting a new beginning in our relations with our Southern partners. It shows that Europe wants to contribute directly to a long-term vision of prosperity and stability of the region, especially in the social and economic recovery from the COVID-19 crisis. In close dialogue with our partners, we have identified a number of priority sectors, from creating growth and jobs, investing in human capital or good governance.
“We consider migration to be a common challenge, where we are ready to work together to fight irregular migration and smugglers together”
“This Communication sends a crucial message about the importance we attach to our Southern Neighbourhood,” said High Representative/Vice-President Josep Borrell, “A strengthened Mediterranean partnership remains a strategic imperative for the European Union. We are determined to work together with our Southern Partners on a new Agenda that will focus on people, especially women and youth, and help them meet their hopes for the future, enjoy their rights and build a peaceful, secure, more democratic, greener, prosperous and inclusive Southern neighbourhood.”
The new agenda focuses on five policy areas:
Human development, good governance and the rule of law: Renew the shared commitment to democracy, the rule of law, human rights and accountable governance
Resilience, prosperity and digital transition: Support resilient, inclusive, sustainable and connected economies that create opportunities for all, especially women and youth
Peace and security: Provide support to countries to address security challenges and find solutions to ongoing conflicts
Migration and mobility: Jointly address the challenges of forced displacement and irregular migration and facilitate safe and legal pathways for migration and mobility
Green transition: climate resilience, energy, and environment: Taking advantage of the potential of a low-carbon future, protect the region's natural resources and generate green growth.
Contract dispute in #Egypt underscores perils for investors
Over the past few weeks, Egypt’s economy has been plunged into disarray, erasing some of the nation’s recent economic success. Now, Egypt and other countries throughout North Africa are looking hard at foreign investment, as they struggle to find a path forward amidst an unprecedented oil crisis and a collapse in tourism.
In Egypt’s case, its pitch to foreign investors is straightforward enough, highlighting its recently-enacted economic reform measures, its reductions in public debt, as well as the rise of the Egyptian pound despite the ongoing coronavirus crisis. It is making this case against the backdrop of a 5% growth rate in the past two years.
But as promising as that pitch may sound to investors, it will not do Egypt any good if the country fails to uphold the rule of law – and its contractual obligations particularly. Anything less would send a troubling message to investors about the willingness of Egypt’s government to honour its commitments. And that would be a dangerous step because investors need assurance that the Egyptian government will pay its bills.
Regrettably, though, Egypt is undermining that trust. Consider the Egyptian government’s handling of its contract with the Damietta International Port Company (DIPCO). In February, the International Court of Arbitration issued an award in favor of DIPCO and against the Damietta Port Authority (DPA)—an affiliate of the Egyptian Ministry of Transport—ordering the DPA to pay DIPCO a total of $427 million, including $120 million in lost profits, as a result of the DPA’s decision to illegally terminate a 40-year concession agreement with DIPCO to build and operate a sea port in Damietta, Egypt.
The expansion of the Damietta Port would have created long-term benefits for Egypt and its developing economy. In addition, as shareholders in the project, the DPA and Egypt stood to reap a huge financial windfall in expanded customs fees from the new port facility. Instead, the International Court of Arbitration panel found that the DPA breached the concession agreement, acted in an arbitrary manner and illegally violated the terms of the contract.
This latest arbitration award against Egypt illustrates an existing pattern of inviting foreign investment only to undermine the projects being backed. Indeed, the DIPCO award is just one of a long string of arbitration disputes and awards against Egypt since the Arab Spring in 2011.
The city of Damietta itself, for example, has been the site of several other international arbitrations involving the natural gas industry. In a recent case, Unión Fenosa Gas, SA (UFG)—one of the three largest gas operators in Spain—had a $2 billion decision rendered against Egypt by an ICSID tribunal.
To be fair, Egypt is not alone in getting into disputes with investors. For example, Kuwait is the subject of separate arbitration involving Egyptian real estate investors. That case stems from the cancellation of a contract for the Sharq Heritage Village project by Kuwait's Ministry of Finance.
The Sharq Heritage Village was planned as a major urban-development project, including the restoration of historic buildings, as well as the operation of a hotel, restaurants and several commercial buildings in Kuwait City. But the contract wound up being cancelled, raising legal issues similar to those in the Damietta case.
And across the globe, countries with emerging economies are reneging on contracts or defaulting on debt obligations with foreign creditors with troubling frequency. Moody’s reports that between 1998 and 2015, at least 16 sovereign bond issuers defaulted, with Greece, Ecuador, Jamaica, Belize and Argentina defaulting twice during that same time period alone.
In March, Ecuador conceded that it wouldn’t be able to make a $200M payment on three of its sovereign bonds—a development which is likely to become more commonplace as the COVID-19 pandemic ravages economies in the developing world.
But the situation in Egypt stands out because the number of contract violations and disputes in North Africa’s biggest economy has been discernibly higher than in other countries. In turn, it needs to remedy this situation quickly.
The importance of foreign investment to rebuild from this pandemic is going to be great in Egypt, particularly at a time when international banks have indicated that they may increase the interest rate to reflect the higher risk of default without an effective remedy to recover damages.
But the prospect of such investment is put at risk as a result of the country’s troubling lack of transparency with foreign investors, cavalier attitude towards contracts and apparent disregard for the rule of law.
Meeting between President Charles Michel and President Abdel Fattah al-Sisi of Egypt
Commissioner Neven Mimica visits #Egypt in framework of Egypt's chairmanship of #AfricanUnion
International Cooperation and Development Commissioner Neven Mimica (pictured) is on an official visit to Egypt. Between February 2019 until January 2020, Egypt is chairing the African Union.
Commissioner Mimica said: "We have high hopes for the Egyptian Chairmanship of the African Union, especially when it comes to making progress on boosting investment, strengthening the business climate and continuing the path towards Africa's continental integration. Advancing peace and security is another important point on the agenda. Under Egypt's Chairmanship, we want to take forward our co-operation to do more and better together, by focusing on concrete deliverables and advancing triangular cooperation. Delivering on the Africa-Europe Alliance and further deepening the Africa-Europe partnership should be on top of our respective agendas."
During his visit, Commissioner Mimica has met President Abdel Fattah El Sisi, Foreign Minister Sameh Hassan Shoukry, and Minister of Investment and International Co-operation Sahar Nasr.
Africa-EU co-operation and Egypt's African Union Chairmanship
Commissioner Mimica's visit to Egypt is an occasion to discuss Africa-Europe partnership and related support to the African Union agenda, in particular in relation to taking forward commitments of the 5th AU-EU Summit of 2017 and building on priorities of the Egyptian Chairmanship.
The Commissioner presented concrete plans for putting into practice the new Africa-Europe Alliance for Sustainable Investment and Jobs. The Alliance was created to strengthen economic cooperation, boost investment and trade, including support to the African Continental Free Trade Area, and create jobs across Africa. The Alliance points to a number of sectors for closer economic co-operation, such as infrastructure development and space technology.
The co-operation between the EU, Egypt and Sub-Saharan Africa was also discussed in relation to addressing peace and security challenges in the Sahel and the Horn of Africa. The African Union-EU Memorandum of Understanding on Peace, Security and Governance signed in May 2018 was highlighted as a solid basis for more strategic engagement between the African Union and EU when it comes to tackling more effectively the complex threats and root causes of instability and violent conflict.
Africa-EU relations have steadily deepened and widened since the first Africa-EU Summit in Cairo in 2000. Regular Summits held every three years define the political priorities. The last Summit held in November 2017 in Abidjan agreed on four strategic priority areas for the period 2018-2020: Investing in people – education, science, technology and skills development; Strengthening resilience, peace, security and governance; Mobilising Investments for African structural sustainable transformation; Migration and mobility.
Since the Abidjan Summit, an Africa-Europe Alliance for Sustainable Investment and Jobs was launched in September 2018. Close cooperation with the African Union on implementing the Alliance has been put in place. In the area of Peace and Security, a Memorandum of Understanding was signed in May 2018. It provides an important tool to engage more strategically and systematically, on the different phases of the conflict cycle, including on conflict prevention, mediation, early warning, crisis management and peace operations.
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