| COUNTRY PERSPECTIVES
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EGYPT |
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Country presentation |
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Egypt's prominent role in geopolitics stems from its strategic location, with the Suez Canal (“the vital route”) connecting the Red Sea to the Mediterranean. Egypt has historically been a peacemaker in the region, thanks to its undeniable influence in the Arab world and the size of its population, the sixteenth most populous country worldwide with almost 79 million people. |
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Introduction |
Egypt has embarked on major economic and structural reforms since 1991 and is currently in an important phase of transition from a centralised to a market-oriented economy. After a government reshuffle in July 2004, the new team has sought to accelerate trade and financial liberalisation and broaden economic and structural reforms. Substantial progress was made in 2005 in the areas of tax reform, management of public finance, monetary policy, privatisation, and restructuring of the financial sector.
Egypt's GDP growth rate slowed between 2000 and 2003, averaging only around 3.5 percent per year, mainly because of external shocks such as security-related events, the aftermath of the September 11th attacks, and the war in Iraq. However, worldwide recovery and devaluation of the Egyptian pound enabled the country to reach a higher growth rate of 4.1 percent in 2004, 4.5 percent in 2005 and estimates for 2006 close to 6 percent (according to the CIA/EIU), stimulated by greater demand in the tourism sector and resumption of investment. Egypt’s main revenues are generated by tourist receipts (US$ 6.4 billion in 2004-2005), remittances from workers living abroad (US$ 4.3 billion), fees for using the Suez Canal (US$ 3.3 billion), and oil exports (US$ 1.2 billion).
Agriculture is the main economic sector, employing over 30 percent of the labour force and accounting for 14.7 percent of GDP. The oil and gas sector accounts for approximately 9 percent of GDP and over a third of Egypt's export of goods. The sector is very attractive to foreign investors and periodic discoveries continue to feed reserves and production of natural gas in Egypt. The country is working to enhance its ability to export natural gas by building gas pipelines. Egypt could thus become the sixth world exporter in 2007. |
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Challenges |
In spite of the major reforms already under way, the challenges involved in building a more dynamic private sector remain considerable.
Economic growth over the past few years has not been high enough to reduce unemployment (estimated at 10 percent) and absorb new job seekers (500, 000 to 700,000 each year).
The overall government deficit continues to be high and total domestic debt amounted to 98.7 percent of GDP in 2003-04 and 82.9 percent of GDP as of the end of September 2005 (some US$ 29.7 billion). This high level of internal debt is a constraint to securing the funding required to build the infrastructure base Egypt needs for future growth.
The investment rate (16-18 percent of GDP) remains weak in comparison to the country’s development needs.
Tourism brings in income that is crucial to the current balance and economic activity, but the sector is endangered by the threat of terrorism. |
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Strong points |
Egypt has an abundant, competitive labour force.
It has diversified sources of income: fees from the Suez Canal, tourism, private transfers, and remittances, gas and oil exports.
Foreign-exchange reserves are at a comfortable level and foreign debt remains moderate.
The country’s strategic location as a gateway to Africa and the Middle East and as a regional mediator ensures the political and financial support of Western countries.
Structural reforms have been introduced aiming in particular at streamlining bureaucratic procedures for investments and tackling impediments to higher growth, promoting the privatisation programme, improving the business climate, and introducing numerous investment incentives targeting upgrading of the business environment and modernisation of the economy.
New natural gas reserves were recently discovered in the Mediterranean and this resource could become the “engine” of the hydrocarbons sector in the next ten years. In 2003, Egypt started to export its gas to Jordan through an underwater gas pipeline connecting Taba to the Jordanian port of Aqaba.
Egypt has become an important recipient of foreign direct investment (FDI) in the last few years, with considerable increases (almost US$ 10 bn in 2005-2006, up from less than one billion in early 2000s), according to Central Bank of Egypt statistics. FDI can be either direct or through joint ventures, in the oil sector, cement industry, pharmaceuticals, automotive engineering but also tourism, real estate and telecommunications.
The country’s international profile has improved thanks to legislation encouraging foreign investments, the possibility of repatriating invested capital and profits, tariff cuts, corporate tax reform, promotion of exports, creation of special economic free trade zones and protection of intellectual property. It is hoped that further privatisation will lead to a further increase in foreign investment in Egypt. |
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References |
| Capital |
Cairo |
| Surface area |
1,002,000 km2 |
| Population |
78,887 million inhabitants (July 2006) |
| Languages |
Arabic is the official language, English is widely spoken in business circles & sometimes French |
| GNP (dollars) |
US$ 109 bn (2005-06) |
| GNP/per capita (dollars) |
US$ 1,381 (4,200 in ppp.) in 2005-06 |
Currency (March 2007)
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Egyptian Pound (EGP)
1 Euro = 7.71 EGP - 1US$ = 5.77 EGP |
| Religion |
The Majority are Muslim, most of the remainder are Copts |
| National holiday |
25th April (Sinai liberation day)
18th June (Evacuation day)
23rd July (revolution of 1952 day)
6th October (Armed Forces day) |
| Association Agreement with EU |
Signed on 25/06/2001; implemented since 1/06/2004
EU web site: http://www.eu-delegation.org.eg/
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| WTO membership |
Member since 1995 |
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Sources: IMF, Article IV 2005, Country Report n°5/177 and World Development Indicators 2006. Fiscal year starts 1st of July.
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