Oded Beit-Halachani strides purposefully down the lines of sewing machines in his textile factory, stopping here and there to greet an operator, and telling maintenance staff to clean the base on which an industrial washing machine is mounted. There would be nothing remarkable about Mr Beit-Halachani's evident ease with his employees were he not an Israeli and his 2,200 staff, most of them veiled women, not Egyptian.

The managing-director of Delta Textile Egypt, a leading clothing supplier to the British retailer Marks and Spencer, is in ebullient mood as he shows off the air-conditioned factory in south Cairo.

"At the moment we are quite unique, but we have definitely learned that Egyptian workers are very good once they are treated the right way. The important thing is to build a culture within a culture," he says.

Delta Textile, part of the Israeli Galil Industries group, has been sourcing material from Egypt since 1992, well after the Camp David accords. It now operates its main factory in Cairo, and provides technical support to 15 joint venture factories throughout Egypt.

The group employs 15 Israelis in Cairo and at suppliers throughout Egypt to advise on quality. In his six years in the country, Mr Beit-Halachani, says he has never once had security problems and that his business has largely been free of the ebb and flow of the peace process.

"It used to be very good. Now it's just good," he says of the relationship between Israel and Egypt. "We consider ourselves a global company. We are far, far away from politics. We believe that business is the right way to establish relations. We see ourselves as some sort of pioneers," he says.

Aside from Delta, only one other Israeli textile company, Bagir, has recently set up shop in Egypt. Bagir is starting to produce suits for M&S from Port Said and 10th Ramadan Industrial City.

As if to underline the fact that Israeli-Egyptian relations are far from normalised, two Israeli Arabs working for a furniture manufacturer were expelled in March without explanation, according to the Israeli embassy.

A third Israeli Arab, Azzam Azzam, has been held in an Egyptian prison since

1997 after being found guilty of espionage. The Egyptian authorities have rejected all Israeli overtures to free Mr Azzam.

Other Israelis work in agriculture providing expertise in irrigation and specific crops. But the number - only three live full-time in Egypt - is small and lower than that envisaged as part of the Middle East and North Africa peace process. The optimism of the Mena process, which envisaged a Middle East bound together by commercial ties, evaporated when Benjamin Netanyahu was elected Israeli prime minister in 1996.

Co-operation in tourism has not materialised and Egyptians wanting to visit Israel are routinely subject to stringent checks by the security services that discourage contact.

In value terms, trade is dominated by the supply of oil by Egypt to Israel under an agreement which formed part of the Camp David peace accords. In 1998, Egypt sold Israel 800,000 tonnes of crude, down from the highs of the period 1980 to 1996, when Egyptian General Petroleum Company (EGPC) supplied 2m tonnes of oil annually.

In addition, Merhav, the Israeli investment company, has an 18 per cent position in the Midor refinery project under construction near Alexandria, although this does not involve Israeli personnel working directly on the scheme.

Israeli diplomats admit that trade is restricted, for the most part, to oil, gas and textiles. Israeli exports to Egypt were only $53.2m in 1998 against $17.9m in non- oil imports and attempts to boost those levels have fallen victim to the cold peace that has prevailed between the two countries.

The Israeli business community in Egypt is though nothing if not phlegmatic.

"It is very safe. There are policemen everywhere. Egyptians are very nice. I'm more worried about the driving," says one Israeli agricultural expert living in Cairo.

There are more concerns about the potential for mischief making by the opposition press in Egypt. One US-funded aid project was suddenly characterised as a Zionist plot by an opposition paper after the name of an Israeli, an expert on melons, appeared on a report on project report.

Israeli businessmen also complain of the bureaucracy involved in being able to work in Egypt. Israelis currently have to renew their work visas every month in Tel Aviv and the process can take up to a week. There have been unexplained delays when the visas have simply not been forthcoming, the businessmen say.

For Mr Beit-Halachani the concerns are more commercial. He supplies approximately one-eighth of M&S underwear and is acutely aware of the retailer's problems. He receives his designs direct from Britain and shortly expects to receive labelling designs over the internet from Baker Street.

"We are working hand in hand with Marks and Spencer to help them. Our Egyptian base is serving them very well," he says. In fact, Delta Egypt acts as the M&S headquarters in Egypt. Although only 50 per cent of Delta's worldwide produce goes to the retailer the Egyptian operation sells 90 per cent of its produce to M&S.

r Beit-Halachani has many of the paternalistic habits of his main customer in Baker Street. The Egyptian workers earn on average $160 per month, paltry by international standards but well above the minimum wage in free zones and what is paid in other factories. The factory is air-conditioned and spotless and the employees receive English language lessons. Moreover, in a country where unemployment is a concern, Delta offers hope. Mr Beit-Halachani intends to expand his workforce to 3,300 directly, and to a total of 5,000 within a year. "More than that I cannot manage," he says.


Keeping the foreigners happy
Struggling to spread its wings
Search for a new formula
Banks race to follow where new arrival leads