In March 2016, Egypt’s President Abdel al-Sisi travelled to South Korea, where he signed a comprehensive partnership agreement that aimed to broaden the scope of cooperation between the two countries, particularly on trade and military matters.
In turn, South Korea’s then-president, Moon Jae-in, was received in Cairo during his tour of the Gulf and North Africa in January 2022, and the two presidents signed several memorandums of understanding MoUs that demonstrated how far the relationship had progressed in six years. These included a $1bn deal on “financial cooperation”, with Seoul also offering hundreds of millions of dollars in loans and grants.
Last year, trade between South Korea and Egypt surpassed $3bn, with Egyptian exports to Seoul reaching an all-time high of $1.69bn – an increase of over 160% compared to the year before. According to the Export-Import Bank of Korea, as of 2022, South Korea had made cumulative investments of just under $800m in Egypt. But what explains the increased political and economic significance both countries are attaching to a relationship that continues to grow in scope, depth, and geopolitical importance?
Learning from Korea’s economic miracle
Egyptian officials have suggested that it sees South Korea, which developed rapidly in the years after the conclusion of the Korean War in 1953, as an inspiration for its own potential development. In the early 1960s, successive South Korean governments decided to use the cheap labour available in the country as a competitive advantage for the production of cheap goods for export.
With the assistance of development finance provided by the International Monetary Fund (IMF) and World Bank, South Korea become a global hub in manufacturing, electronics, and other products destined for export in a process dubbed the “Miracle on the Han River”. The World Bank has noted that South Korea “is one of the few countries that has successfully transformed itself from a low-income to a high-income economy and global leader in innovation and technology.”
Some have implied that Egypt could be looking to follow this example. In a recent meeting with the South Korean ambassador to Cairo, Kim Yong-hyun, Egyptian finance minister Mohamed Maait emphasised the importance of South Korean investments in Egypt for stimulating development. Hany Selim, the Egyptian ambassador to Seoul, has talked enthusiastically of bringing South-Korean inspired projects to Egypt.
For its part, Seoul has appeared willing to assist in the task of promoting Egyptian development. In June this year, South Korea’s Economic Development Cooperation Fund (EDCF) signed a deal with Egypt’s Ministry of International Cooperation that will see the South Korean government provide $460m towards the production of metro trains in Cairo. In April, the two governments signed an MoU to enhance customs cooperation, make trade between the countries easier, and enhance Egypt’s export market. In 2022, the South Korean government designated Egypt as an Official Development Assistance (ODA) Priority Partner.
South Korea has an interest in encouraging stronger and more resilient Egyptian industry for several reasons. On the economic front, stronger ties between Seoul and Cairo have seen South Korean companies secure major manufacturing contracts in the North African country. Last August, Korea Hydro & Nuclear Power Company, a subsidiary of Korea Electric Power Corporation, in which the government owns a majority stake, won a $2.5bn contract to construct Egypt’s first nuclear power plant. In August, South Korean giant Samsung obtained a “golden licence” from the Egyptian government to establish a mobile phone manufacturing factory in Beni Suef.
South Korea sees Egypt as its gateway to markets across the Middle East and North Africa. Hong Jin-Wook, one of the country’s former ambassadors to Egypt, said earlier this year that “we expect Korean companies to actively participate in exporting from Egypt as the hub to neighbour countries through the African Free Trade Agreement (AfCFTA).”
According to Alon Levkowitz, a lecturer in Asian Studies at Bar-Ilan University in Tel Aviv, these economic developments could have important geopolitical implications. He believes that South Korea could play an important role in “stabilising the economy by promoting and building projects that will offer work for Egyptians.”
He tells African Business that “South Korea is a ‘middle power’ state… it declares that it doesn’t have any imperialist agenda, as the superpowers have, nor does it have any hidden agendas that will erupt once it starts doing business. Seoul tries to keep a neutral policy in the Middle East, in order not to be seen as tilting towards one side.” A greater role for a “neutral” power in Egypt could help bring much-needed stability in a country that has often been the site of geopolitical competition between great powers.
Egypt’s pivot towards South Korea is also an important development for Seoul because Cairo has traditionally had warm relations with its belligerent neighbour, North Korea.
“These relations stem from the Suez Crisis in 1956, when North Korea expressed solidarity with Nasser’s decision to nationalise the Suez Canal,” Edward Howell, a lecturer in Korean politics at the University of Oxford, tells African Business. “Both states also engaged in mutual exchange of Scud ballistic missiles in the 1980s and 1990s. Egypt has also been complicit in helping North Korea evade United Nations Security Council sanctions, allowing North Korea to export weapons to Africa through Egyptian ports.
“Although Egypt reportedly cut military ties with North Korea in 2017, the importance of history cannot be underestimated. Egyptian telecommunications company, Orascom, has in the last two decades been instrumental in collaborating with a North Korean telecommunications company to operate North Korea’s only 3G mobile telephone service.”
Greater ties between Seoul and Cairo therefore have important security ramifications in East Asia and could help further South Korea’s attempts to isolate its main adversary diplomatically, economically, and militarily. Indeed, in February last year, the Egyptian armed forces signed two MOUs with their South Korean counterparts to further military cooperation. South Korean company Hanwha also secured a deal to manufacture K9 howitzers for Egypt. On wider foreign policy, President Sisi has also pledged to ensure that “we coordinate the two countries’ positions in various international forums.”
The ever-closer relationship between South Korea and Egypt is a highly significant one for both countries. Seoul is battling to avoid an era of economic stagnation amidst sluggish economic growth, sinking exports, and an aging population. Opening access to fast-growing markets in North Africa is an important part of the government’s strategy to revitalise the South Korean economy and rejuvenate the country’s exporters.
For Egypt, which is also facing serious economic challenges, strong relations with a global economic power could hardly be more welcome. Rapidly rising exports to South Korea could be a particularly important source of the foreign exchange which the country so desperately needs.
There is, however, space for a rapidly growing relationship to grow faster still. Since January 2022, South Korea and Egypt have been conducting joint feasibility studies on how a bilateral free trade agreement could work, in what would be Seoul’s first trade deal with an African country. Egyptian politicians have suggested such a move could see business between the two countries double.
While it remains to be seen whether this deal will come to pass, Seoul and Cairo both say they remain committed to deepening ties across the board.
Source : African Business