Egypt: Business in Focus

Aired August 2004

Egypt has been continuously developing for over 7,000 years. Before the borders of the modern world were established, Egypt was home to the most developed civilizations in the ancient world, from the Pharonic to Coptic, Byzantine, Roman and Islamic civilizations. The pyramids of Giza, Tombs of Aswan and Temples of Luxor are lasting reminders of the strength of this nation and its role as a bridge between Africa, the Middle East, Europe and Asia.

The Arab Republic Egypt, as it is officially known, is located in the northeast corner of Africa. Egypt borders Libya to the West, Sudan to the South and the Palestinian Territories, Israel and Jordan to the Northeast. Egypt has an extensive coastline, with the Mediterranean Sea to the North and the Red Sea to the East.

Egypt’s position at the center of the Arab world has resulted in a culturally and economically diverse nation. Egypt has a population of nearly 70 million, and it is the second largest economy in the Arab world. It is the largest Arab nation and most densely populated nation on the African continent.

Egypt has become one of the most proactive nations in the Arab world, responding directly to the needs of its growing population and the challenges of globalization

By investing in infrastructure upgrades, breaking down bureaucratic barriers, and increasing government transparency, Egypt has developed a liberal, market-based economy driven by the private sector.

The United States is the leading investor in Egypt. Total US investments in non-petroleum industries have exceeded $400 million, and are expected to rise as this relationship continue to evolve.

BANKING AND FINANCE

The Egyptian financial system consists of capital markets, banking and insurance. The development of a private sector, investment-driven economy depends on a sound financial sector. For this reason, the Egyptian government has implemented new laws to help stimulate the growth of the Egyptian economy.

The new framework has created a platform for mergers and acquisitions, and strengthened the regulatory environment. The Financial Action Task Force on Money Laundering has reviewed transparency and the compliance of public and private sector banks. The review has resulted in the removal of Egypt from the international money laundering blacklist. These developments have helped to restore integrity to the financial sector and created a base for continued improvement.

Recent changes in the mortgage law will help to revive another cornerstone of the economy: the real estate market. The new law is in line with the government's policy to guarantee decent housing for all, especially for limited income groups. The state has built three million housing units over the last 20 years.

TRADE AND INDUSTRY

The diversification of Egypt’s manufacturing base, the expanding domestic market, plus advances in production, are attracting a growing number of international companies to base their operations in Egypt. 77% of Egyptian manufacturing output is directly contributed by the private sector.

An ambitious privatization program throughout the 1990s has created dramatic improvements in the manufacturing sector. This program helped to reduce bureaucracy, which was hindering investment. Subsequently both public and private sector companies have benefited.

Egypt's maritime and transportation sector is also undergoing privatization. To facilitate trade relations with the US and the rest of the world, Egypt began restructuring its ports to handle rising import and export volumes in recent years. Today Egypt has a number of privately run ports, including the Ain El Sokhna Modern Port, the East Port Said Container Hub, and the Marsa Alam Port.

The iron and steel industry in Egypt has been extremely successful, primarily as a result of the availability of low cost labor. This labor-intensive industry has created jobs outside Cairo, in more industrialized areas. Egypt is recognized as one of the foremost producers and exporters of steel in the Middle East North Africa Region and the world, accounting for 5.2% of total steel production.

PHARMACEUTICALS

Egypt enjoys a competitive advantage in several industrial sectors, especially pharmaceuticals. Egypt has the largest pharmaceutical industry in the region. Every major multinational company is engaged in production to meet the needs of the local market. The private sector accounts for 76% of total production, and the public sector less than one-third. The value of manufacturing production in the sector has more than doubled over the past five years, to over 60 million USD.

A large number of these pharmaceutical corporations are based in Alexandria, a hub for manufacturing and trade. Alexandria is well known for its diversified industrial base.

TOURISM

Egypt is described as the “Gift of the Nile.” Tourism is one of the largest contributors to the GDP, based on Egypt’s historical heritage and proximity to the Red Sea. As a tourism destination Egypt is extremely diverse, providing a combination of ancient history, year-round sunshine and attractive beaches.

The historical cities of Cairo, Giza, Luxor and Aswan are rich in the Pharaonic tradition. Egypt has a number of sunny coastal cities on the Red Sea, including Taba, Sharm El Sheikh and Hurghada. Egypt’s history combined with its beaches gives it one of the strongest and most diversified tourism sectors in the Middle East North Africa region.

To ensure its position as a regional hub for tourists and business travelers, Cairo’s airport is undergoing a major refurbishment. The World Bank has provided the primary funding for this renovation and has been a major contributor to infrastructure developments in Egypt in recent years.

Egypt’s position at the center of the Arab World makes its capital city Cairo the preferred destination for regional business conferences. Cairo is consistently chosen to host the majority of the region’s public and private sector conferences and expos, including many international events. Cairo has a good mix of sound infrastructure, transport capacity and proximity to tourist attractions, making it an ideal business conference destination.

Egypt’s tourism sector is the primary source of foreign earnings for the national economy. In the last 10 years there has been a 100% increase in inbound tourism. In 2003 Egypt hosted over 5 million tourists, and this number is expected to grow.

Egypt is an extremely safe and tourist friendly destination, considered to be among the safest in the region. Despite tension in neighboring Israel, the Palestinian Territories and Iraq, tourists continue to visit. The good nature and hospitality of Egyptians is a source of national pride, and it continues to attract visitors year after year.