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Heavy Blow Dealt to Egypt Tourism Industry Likely to Last

The decision to ban Russian flights to and from Egypt after the terrorist attack carried on by the IS in the Sinai region which caused the explosion of a Russian airplane mid air, is likely to have a lasting impact on the Egyptian economy, heavily dependent on tourism revenues
Two Egyptian horse-keepers wait for tourists at the Giza Pyramids in Giza province, Egypt, 11 November 2015. Photo imago stock&people

Egyptian tourism officials continue to work hard to open new markets following the disastrous explosion and crash of a Russian plane in Sinai on 31 October 2015, in a terrorist attack claimed by Islamic State. The incident dealt a heavy blow to the tourism industry in Egypt, which is a major source of hard-currency income, at a time when the country’s economy has been suffering badly following the removal of former President Hosni Mubarak in a popular revolt on 25 January 2011.

Following the crash of the Russian plane, killing all 224 people on board, Russia and the United Kingdom suspended flights to Sharm el-Sheikh Airport, where a homemade bomb was allegedly smuggled onto the jet and triggered in midair 23 minutes after take-off. Russia poured salt in the wound, banning Egypt’s national carrier, EgyptAir, from flying to Russian airports.

The harsh Russian measures shocked Egyptian officials who have developed political, military, and economic ties with Russia over the past two years. Egyptian President Abdel Fattah el-Sisi met several times with his Russian counterpart, Vladimir Putin, and the local media praised Moscow’s understanding of Egypt’s ongoing war against terrorism, at a time when the United States and other Western countries have been sharply critical of Cairo’s human-rights record.

Egypt and Russia have also signed several weapons’ deals, and, in a clear attempt to mend ties and convince Russia to reverse its decision on banning flights, the two countries signed, on 19 November, a major deal to build four small Russian nuclear reactors in Egypt’s Western desert to generate electricity. No figures have been disclosed by either country, but the deal is estimated to be worth billions of dollars.

Egypt is losing nearly $300 million each month since the Russian and British decisions to ban flights to Sharm el-Sheikh, according to Tourism Minister Hisham Zazou. Nagy Eryan, deputy chairman of the Egyptian Tourism Companies, said he expected a 60 per cent decrease in the country’s income from tourism in 2015.

This mounts to nearly half of Egypt’s annual tourism income, ranging from $6 to $7 billion in 2014. This is far less than the $14 billion generated by tourism in 2010, before Mubarak’s removal. Nearly ten million tourists visited in Egypt in 2014, compared to 14 million in 2010. Millions of Egyptians who work in the tourism industry, from hotel owners to taxi drivers, will also suffer and join the increasing number of unemployed.

Cairo University economics professor Fakhry El-Fikki said, in an interview, that Egypt was aiming to increase tourism revenue in 2015 to $9 billion, but such a figure will be impossible to achieve, particularly as the Russian plane incident occurred before the lucrative Christmas season.

Egypt’s hard currency reserves in the Central Bank have fallen to scarcely $16 billion, as all key sources of income—the Suez Canal, remittances of millions of workers abroad, and tourism—have suffered in recent years due to insecurity and instability in Egypt and the region. This has forced the government to devalue the Egyptian pound several times over the past two years, adding to the economy’s problems.

In 2014, tourism generated 11 percent of the country’s GDP and 15 percent of hard-currency revenues. Due to the political tensions in the capital Cairo and the threat of terrorism, Sharm el-Sheikh and a few other Red Sea resorts, such as Hurghada, became the major tourist destinations. Sharm alone attracted one-third of the tourists who visited Egypt in 2014, according to Tourism Ministry figures. Nearly 80 per cent of the tourists who visited Sharm came from Russia (nearly 4 million) and the UK (nearly 2 million).

Intensifying Negotiation with Russia and the United Kingdom

Ahmed Abu Zeid, Foreign Ministry spokesman, said, in statements to reporters on 6 December, that Cairo was intensifying negotiations with Russia and the UK to convince them that authorities have reviewed all security measures at Egyptian airports to assure the safety of passengers and that they should reverse their decisions on banning flights.

One positive sign, according to Abu Zeid, was that Moscow agreed to allow an EgyptAir cargo flight to land in Moscow on 28 November and that there would be at least one flight each week. A diplomat at the Russian embassy in Cairo said, however, that it would probably take “a few months” for Moscow to decide to resume regular flights between the two countries and to lift the ban on Russians travelling to Egypt. “We need more time to review the security measures at Egyptian airports,” he said.

Egyptian talks with British counterparts produced no better outcome. Major British tourism companies, such as Thomas Cook and Easy Jet, said that they would not reconsider their decisions to ban flights to Sharm el-Sheikh until early January, which means missing the city’s all-important Christmas tourism season. Now, Sharm’s beaches are empty, dozens of hotels are closed, and the situation is not expected to improve anytime soon.

Besides offering generous 50 per cent discounts for foreign tourists in travel and hotels, Egyptian officials initially announced that they would seek to promote local tourism to Sharm el-Sheikh and other Red Sea destinations in an attempt to compensate for the losses in Russian and British tourists. However, Sameh Saad, a tourism expert and a former senior official at the tourism ministry, said, in an interview, that this was unlikely to solve the problem, because spending by Egyptian families would remain lower than that of foreign tourists and that it would be in the local currency and not the badly needed hard currency. Saad also noted that most Egyptian families could not afford the flights to Sharm.

He added that Egypt had no option at this stage but to try to attract more tourists from oil-rich Arab Gulf countries, such as Saudi Arabia, the United Arab Emirates and Kuwait. Zazou, the tourism minister, said he was also trying hard to keep tourists coming from Germany, Eastern Europe, and Ukraine. The number of tourists arriving in Egypt is a daily item in local newspapers, hoping to create the feeling that the situation was gradually improving.

However, with the US and European military escalation in Syria following the terrorist attacks in Paris on 13 November, which was claimed by IS, and the newly opened front between Russia and Turkey, after Turkish authorities downed a Russian fighter jet for allegedly violating its airspace on 24 November, it would be wishful thinking to expect that tourism in Egypt and the entire region could improve. “We’re in a sharp downturn for some time to come, not months, but perhaps a few years,” said Saad, the tourism expert.

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