EGYPT-SECURITY/EMBASSIES Egypt fears economic squeeze after embassy closures

Record ID: 735003

  • Title: EGYPT-SECURITY/EMBASSIES Egypt fears economic squeeze after embassy closures
  • Date: 14th December 2014
  • Summary: CAIRO, EGYPT (FILE - NOVEMBER 9, 2014) (REUTERS) TOURISTS VISITING PYRAMIDS AND SPHINX VARIOUS OF SPHINX
  • Embargoed: 29th December 2014 12:00
  • Keywords:
  • Location: Egypt
  • Country: Egypt
  • Topics: General
  • Reuters ID: LVA68CCK35NKTM8SNABPBIDBWNNO
  • Story Text: EDITORS PLEASE NOTE: THIS EDIT CONTAINS MATERIAL WHICH WAS ORIGINALLY 4:3
    Egyptians fear the closure of some foreign embassies in Cairo could cause severe damage to their country's economy.
    Canada's embassy closed until further notice last Monday (December 8) because of security concerns, a day after the British Embassy in the Egyptian capital also closed its doors to the public.
    Some say the closures are likely to lead to a drop in tourism at a time of year when visitor numbers would normally be high.
    "Tourism will be greatly affected during the current period, particularly because tourists come to Egypt during the holidays - Christmas and New Year. The number of tourists always increases during this time. So, I think Egypt will lose a large number of tourists during this time. And I think the decline will continue for a long time, even if no terrorist acts take place, as some of these embassies are expecting," said economy expert, Dr. Ihab al-Desouki.
    Egypt is battling an Islamist insurgency largely centred around Sinai, a strategic area near the border with Israel, Gaza and the Suez Canal.
    One security source told Reuters it was not yet clear what threats had prompted the embassies to close their doors.
    But another source, who spoke on condition of anonymity, said a suspected militant who was recently detained by Egyptian authorities had confessed to plans to target foreign embassies.
    As well as tourism, it's feared the embassy closures will also make investors nervous, damaging an already fragile economy.
    "Besides tourism, there's also going to be an impact on foreign investment, whether direct or indirect. The impact on indirect (investment) will be quick. It's expected that the size of foreign investments on the Egyptian stock market during this week and next week will decline greatly. Foreigners will sell more than buy - which might lead to a decline in the stock market index and a decline in stock market trade," said Desouki.
    Insurgent attacks have mostly targeted Egyptian police and soldiers, killing hundreds in the past year, but Egypt's most dangerous militant group said last week it was behind the killing of an American oil engineer in the western desert in August.
    Smaller bombs also regularly explode in Cairo and the Nile Delta, usually causing limited injuries.
    Desouki said a major attack in Egypt could cause long-lasting damage to the economy.
    "In fact, the decisions of foreign investors depend on the long-term, not the short term. Also, investors usually take some time before they make their decisions. Also, it depends on confidence in the country's economy in the future and is not based on current conditions. So, when it comes to foreign investment, there may be some delays or they might be more cautious. If any terrorist activities do take place, as these embassies expect, foreign investment might really be affected for a long time. But if there is no big terrorist act, as these embassies expect, I think foreign investment will continue at the same rate. The rate in Egypt is generally depressed. Procedures will only be delayed for a couple of weeks and then they will pick up again," he said.
    The U.S. embassy, which is in the same part of Cairo as the British embassy, was open as usual, a spokesman said.
    However, it released a statement on December 4 warning staff not to stray too far from their homes.
    Australia also updated its travel advice to Egypt on December 6, because of reports early in the month indicating that "terrorists may be planning attacks against tourist sites, government ministries and embassies in Cairo".
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