Diplomacy Journal Lee Sung Jun |  Korea and Egypt have officially launched Comprehensive Economic Partnership Agreement (CEPA) negotiations, elevating bilateral economic relations to a new level. Korea's expanded economic diplomacy in the Middle East and Africa, together with Egypt's foreign investment attraction strategy are seen as the impetus behind the agreement.

Yeo Han-koo, Korea’s Chief Negotiator for the Ministry of Trade, Industry and Energy, and Hassan El-Khatib, Egypt's Minister of Investment and Foreign Trade, signed a "Joint Declaration on CEPA Promotion" in Cairo on January 18 (local time). This agreement is designed to be a comprehensive economic pact encompassing not just tariff elimination but also investment protection, supply chain cooperation, and industrial partnerships.

Broader than a Free Trade Agreement (FTA), a CEPA utilizes economic cooperation as a means to deepen bilateral integration within the World Trade Organization (WTO) system. Korea has already concluded similar agreements with Singapore, ASEAN, the EU, and others.

Egypt is a strategic trading nation with approximately 12% of global maritime trade passing through its Suez Canal. Possessing one of the largest consumer markets in the Middle East and North Africa (MENA) region, Egypt’s population exceeds 100 million—Africa's third largest after that of Nigeria and Ethiopia.

Korea and Egypt have cooperated in construction, energy, and telecommunications since establishing diplomatic relations in 1995. Bilateral trade volume stood at approximately $2 billion as of 2023. Korea primarily exports automobile parts, electronics, and steel to Egypt and imports mainly petrochemical products and agricultural goods from it.

Chief Negotiator Yeo visited the Suez Canal Economic Zone (SCEZ) and held talks with its chairman, Waleid Gamal El-Dein, to discuss entry plans for Korean companies. The SCEZ is a 460-square-km industrial complex established by the Egyptian government to attract foreign investment through tax benefits and simplified administrative procedures.

Particularly noteworthy is the "Qualified Industrial Zone (QIZ)" agreement between the U.S., Egypt, and Israel. Under this system, products manufactured in QIZ-designated areas that contain a certain percentage or more of Israeli components can be exported to the U.S. market duty-free. This is part of a 2004 U.S.-Egypt trade agreement introduced to economically support the Middle East peace process.

For Korean companies, this holds significant strategic value as an alternative production base to circumvent high U.S. tariff barriers (particularly the trend of additional tariffs on Chinese products).

These negotiations are taking place amid international economic structural changes involving intensified U.S.-China competition and global supply chain reorganization. The U.S. is promoting supply chain construction centered on allied nations through "friendshoring" policies, while Korea is also strengthening economic cooperation with the Middle East and Africa for supply chain diversification.

Egypt has been pursuing economic reforms through IMF structural adjustment programs since 2016, prioritizing an influx of foreign direct investment (FDI). Although it experienced a foreign exchange crisis in 2023 following the Russia-Ukraine war, Egypt is recently regaining economic stability by attracting large-scale investments from Gulf countries, including the UAE.

Chief Negotiator Yeo stated, "We aim to proceed swiftly with CEPA negotiations for an early conclusion,” adding that we "will produce a SCEZ investment guidebook to provide Korean companies practical information." He also proposed establishing a regular consultative body between KOTRA and the SCEZ Authority to institutionally support Korean companies' local entry.

International trade experts forecast that if this agreement is concluded, it will become an important milestone in Korea's economic diplomacy toward Africa. Particularly with the launch of the African Continental Free Trade Area (AfCFTA) lowering intra-regional trade barriers, analysts suggest that using Egypt as a base for entering African markets could prove lucrative.

The negotiation schedule and the contents of specific agreements will be determined through future working-level consultations. (AI translated, editied by David Kendall)