ipr    Info-Prod Research (Middle East) Ltd.
Home      Country Guide      Reports      Services      Business Development-    Clients      About IPR         Publications      Contact Us

	Egypt		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   THE ECONOMY   INVESTMENT ISSUES   PROJECTS   PROSPECTS

Principal Commercial and Political Characteristics Egypt is the largest of the Arab countries, with a population of sixty-three million people. Population has increased almost six times in the last century and three times since 1950. Even under a moderate growth scenario, Egypt will have over ninety million citizens by the year 2035. Under more rapid growth, as has been the case in recent years, Egypt may reach 103 million in the next forty years. In 1991, faced with large external debt service arrears, declining growth, a worsening balance of payments, 20 percent inflation, and a comprehensive economic reform program. This program was a major departure from the static economic policies of the previous four decades and represented a shift from the piecemeal reforms of the mid-1980s. As a part of its stabilization program, supported by an International Monetary Fund (IMF) Standby Agreement, the government freed interest and exchange rates, sharply reduced the budget deficit and disciplined monetary growth. With assistance from a World Bank structural adjustment loan (SAL), Egypt developed a framework for public sector reform and privatization and liberalized trade and investment policies. The result has been exchange rate stability, a balance of payments surplus, a liberalized banking regime and lower inflation rates. The next stage of the government's reform efforts, already underway, highlights privatization, reduction of trade barriers and the elimination of unnecessary regulations and restrictions. Major structural reforms proposed include: accelerated sales of state enterprises, reductions in the maximum tariff rate and elimination of tariff exemptions, consistent application of quality control standards, unification of the laws governing investment and commercial activity and a labor law that allows employers to dismiss workers for economic reasons. Economic stabilization in Egypt has been achieved for the most part, with some important steps made in structural economic reforms. At the same time, internal security problems have adversely affected the tourism industry and have had a negative impact on general business confidence. Muslim extremists, however, are unlikely to destabilize the governing regime. Furthermore, government promotional efforts have brought increases in tourism related revenues. The Egyptian economy is still not achieving the targeted growth rate of 6 percent. The catalyst for this growth was intended to be the private sector. The accelerating pace of privatization, however, and the increasing interest in the Cairo stock market may yet provide a boost to the real economy. As part of the Camp David accords, Egypt receives more than US$ 2 billion per year in US-based economic and military aid. Foreign reserves are estimated at over US$ 18 billion and rising, exceptionally high for an economy engaged in many of the liberal economic reforms that Egypt has undertaken. Egypt's budget deficit is now under 2 percent of GDP. Inflation is also down to under 6.5 percent of GDP. Because Egypt served as a linchpin in the 1990-91 Gulf War, it has benefited from a US$ 10 billion write-off in debt relief. Egypt has seen significant success since President Hosni Mubarak appointed Kamal al-Ganzouri prime minister in early 1996, Egypt's first new premier in nine years. It is predicted that as long as President Mubarak remains healthy and is viewed as the guarantor of political stability, the substantial majority of Egyptians will overlook calls for radical change and re-elect him for a fourth presidential term in 1999. Nonetheless, Egypt faces one of the most serious fundamentalist threats in all of the Middle East and North Africa. Commercial Outlook Egypt's 1997-98 budget intends to cut the deficit to 1 percent of GDP. The current deficit, for the year ending June 30, 1997 was budgeted at 1.5 percent of GDP, but ministers say they managed to trim it to 1.1 percent in the first six months of the fiscal year. Total government spending in 1997-98 is slated to rise 10 percent to US$ 25 billion. Spending for 1996-97 was projected to reach US$ 22.9 billion. Investors have reacted positively to Mubarak's moves to invigorate the private sector and to expand activity on the securities market. President Mubarak issued a series of decisions in January 1995 after a meeting with ministers, bankers, business leaders and the heads of the Investment Authority and the Capital Market Authority (CMA). The decisions entailed reducing fees investors have to pay and speeding up procedures on the stock market. The government has also announced plans to draw up a new law harmonizing economic regulations. This is likely to include the passage of a unified company law, replacing the three main laws now in operation, and the removal of all price controls. It was also announced that the Investment Authority will no longer require applicants to pay fees for registering new projects. These fees ranged between US$ 7,350 to US$ 14,700. Additionally, Mubarak has ordered that industrial projects having capital of at least US$ 14.7 million may proceed without Investment Authority approval. Previous Chapter Contents Menu Next Chapter

Home      Country Guide      Reports      Services      Business Development-    Clients      About IPR         Publications ;   Contact Us