Foreign trade ministers from the two countries signed the deal on Tuesday in the presence of Hosni Mubarak, the Egyptian president, and Ahmet Necdet Sezer the Turkish president.
"We have today witnessed the signing of a free trade agreement between the two countries that opens new horizons for consolidating bilateral trade and increases investments in joint projects," Mubarak said after the signing.
The agreement removes customs tariffs on certain Egyptian products entering Turkey and vice versa, and lower tariffs on others.
Mubarak said that the deal offers preferential trade status in various fields, including industry, agriculture, and agricultural products.
"It will open a new door and lend a big support for economic and trade activities between the two countries," Sezer agreed.
"We have today witnessed the signing of a free trade agreement between the two countries that opens new horizons for consolidating bilateral trade"
"We aspire to enhance cooperation in different fields," he added.
Egyptian and Turkish officials predicted that the agreement would increase the volume of bilateral trade, which currently hovers at around a billion dollars annually.
Sezer pointed out that the volume of bilateral trade already increased by 60% this year.
Cairo is optimistic that the agreement will improve its access to Turkish markets, especially in the area of consumer and industrial exports such as cement, iron, medical equipment and ceramics.
Rashid Muhammad Rashid, the Egyptian foreign trade Minister, told reporters on the eve of the signing ceremony that "The agreement offers a number of Egyptian industrial products preferential status in Turkish markets,"
Kursad Tuzmen, the Turkish foreign trade Minister, forecast that the deal would also help boost bilateral ties and considerably increase his country's investments in Egypt, which stand at about $600 million.
"It will open a new door and lend a big support for economic and trade activities between the two countries"
Ahmet Necdet Sezer,
Tuzmen said the agreement would enable that to jump to an estimated two billion dollars.
Plans are already underway to establish a Turkish bank in Egypt that will draw shareholders from the country's public banks, Tuzmen said. "Private Turkish banks will also open offices in Egypt," he added.
Turkish investors also have their eyes set on Egypt's textile industry.
Under the free trade agreement, Turkey will open its markets to Egyptian customs-free products immediately, while Egypt will lift trade barriers gradually over a 16-year period, Rashid explained.
It also allows Egypt better access to markets of countries in the region with which Turkey has free trade agreements such as Israel, Jordan, Syria, Tunisia and Morocco, as well as European markets.