International Trade in Egypt

News Related to International Trade in Egypt

Business outline for Egypt

Main Industry Sectors

Agriculture contributes around 13% of the GDP and employs about a third of the active population. The warm climate and the abundant Nile water allows for several annual harvests. The main crops are cereals, cotton, sugar cane and beets.

Egypts remains a country with little industry. With its diverse natural reserves (gold, minerals, iron, oil and gas), oil and gas-related activities and the secondary sector account for just over a third of the GDP. Egypt is the world's sixth largest exporter of natural gas.

Finally, the tertiary sector represents around 50 % of the Egyptian GDP. It is largely dominated by revenues from telecommunications (which grew by 11% during the first quarter of 2010) and from tourism (the tourist industry brings about 11b in annual revenues. For example Cairo received 14m of visitors in 2010).

In spite of its economy's diversification, the country still depends for a large part of its income on the Suez Canal (380m during the first quarter of 2010).

Economic Overview

With the establishment of a new government in July 2004, Egypt launched an economic reforms program, including a large stimulus plan in 2008. Consequently, tariffs and taxes were lowered and simplified. The transparency of the national budget was reinforced and many privatizations were initiated. This new policy bore its fruits as growth reached a level of more than 5% in 2009 and 2010, especially thanks to the resumption of private and public consumption. The construction, communications, wholesale and retail sectors, catering and hospitality, as well as manufacturing contributed to the development of economic growth. However, the year 2010 was marked by an under-performance of the sectors which most strongly contribute to the country's GDP, namely agriculture and mining. The IMF growth estimates for 2011 are between 5.5% and 5.8%, counting on the increase in consumption, recovery of foreign growth (tourism and the Suez Canal) and a resumption of investments.

Although the Egyptian economy has entered into a cycle of progressive growth, its level of growth remains insufficient to maintain employment and reduce the share of population living below the poverty of line (18%). In addition, the country faces a high rate of inflation (about 10%). Foreign accounts, weakened during the crisis by a decline in foreign exchange earnings and net capital flows, have recovered and the trade balance returned to surplus in 2010.

FDI in Figures

With the rapid influx of new investments since 2005, Egypt became the first recipient of FDIs in the Middle East, and 3rd in the Arab world after Saudi Arabia and United Arab Emirates.

The dynamic growth of the Egyptian economy (around 7% in the recent years), the strategic geographical position of the country, its low labor costs and skilled workforce, a unique tourist potential, substantial energy reserves, large domestic market and the success of reforms undertaken by the authorities since 2004 (including many privatizations) are all factors that may explain the sharp rise of FDI.

The regional context should also be taken into account, as Egypt has benefited from abundant liquidity coming from the Gulf countries, as a direct result of the increase in revenues generated by oil exports.

However, because of the economic crisis, FDI flows, which had been slowing down since the summer of 2008, halved in the two last years: a decrease in 40% in 2008-2009, with 8.1 billion dollars and a decrease of 17% in 2009-2010, with 6.8 billion dollars.

FDI comes mainly from the European Union, the United States and the Arab countries. The United States, for a long time the number one investor in Egypt, have now been exceeded by the European Union.

Investments focus primarily on tourism, construction, telecommunications, financial services, energy, and healthcare.

FDI Government Measures

Since September 2004, the General Authority for Investment and Free Zones (GAFI) has established an economic program to attract foreign investors, together with an average reduction of 35% customs duty and tariff simplification. Though all the economic sectors are open to domestic and foreign investors, there are some that are especially targeted by the Law, which expressly provides the possibility to execute projects under the BOT (Build, Operate, Transfer) form, in the agricultural, industry, mining, tourism and hospitality, air travel, off-shore shipping transport, goods transport services, oil prospection and drilling, infrastructures more specifically for drinking water conveyance, roads, housing and used water recycling sectors. Other sectors are added to this list depending on needs (leasing, venture capital, creation of computer programs and software, etc.). Privatization programs are also open to foreign investors. Some sectors are considered strategic and hence subject to specific legislations: aerospatial, defence, newspaper publishing.

Country Strong Points

The country is in a geographically strategic location. Moreover, it offers a cheap and relatively qualified labor force. Its growing population constitutes a non-negligeable market in the region. Its energy resources are attractive and in addition, the country has in recent years, launched a public works policy (construction of the third metro line, expansion of the port of Sokhna and improvement and renovation of the rail network), which offers many investment opportunities to foreign companies. Finally, the government policy for large scale liberalization and improving the appeal to foreign investors are encouraging signs for foreign investment.

Country Weak Points

Despite privatizations, the inefficient and loss-making public sector remains ubiquitous in some sectors. In addition, the rapid population growth continues to curtail the improvement of the standard of living for Egyptians. In fact, the country registers a delay in its infrastructures in which current investments are not able to make up for.

Foreign Trade Overview

The Egyptian market is gradually opening up, especially after signing an agreement with the European Free Trade Association (EFTA) in 2006, and a free trade treaty with the United States. Its three primary export partners are the European Union, which represents more than a third of the trade, United States and Syria. The EU and the USA absorb almost 60% of egyptian exports. Egypt mainly exports mineral fuels and oil, cotton, iron and steel. It imports mainly consumer electronic goods and capital goods, nuclear reactors and nuclear-powered boilers, cereals, food products and chemical products. Import volume has doubled and is twice the export volume, a fact which contributed to the deterioration of the country's trade balance, now a deficit (USD 25.1b in 2010)