# Economy of Egypt

Economy of Egypt[1]
Cairo is the financial capital of Egypt
Rank 27th
Currency Egyptian Pound (EGP)
WTO
Statistics
GDP $262 billion (2013 est.) [2] GDP growth 1.8% (2013 est.) GDP per capita$6,600 (PPP) (2013 est.)
GDP by sector
agriculture: 14.5%; industry: 37.5%; services: 48% (2013 est.)
9% (2013 est.)
Population below poverty line
26.5% (2013 est.)
30.8 (2008)
Labour force
27.69 million (2013 est.)
Labour force by occupation
Agriculture (29%), Industry (24%), Services (47%) (2011 est.)
Main industries
Textiles, Food Processing, Tourism, Chemicals, Pharmaceuticals, Hydrocarbons, Construction, Cement, Metals, Light Manufactures
110th[3]
External
Exports $24.81 billion(71st; 2013 est.)[4] Export goods Crude oil and Petroleum products, Cotton, Textiles, Metal Products, Chemicals, Agricultural goods Main export partners Italy 7.9% India 6.9% United States 6.8% Saudi Arabia 6.2% Turkey 5.3% Libya 4.9% (2012 est.)[5] Imports$59.22 billion (50th; 2013 est.)[6]
Import goods
Machinery and Equipment, Foodstuffs, Chemicals, Wood products, Fuels
Main import partners
China 9.5%
United States 7.6%
Germany 6.7%
Russia 5.3%
Ukraine 5.3%
Turkey 5.1%
Italy 5.0% (2012 est.)[7]
FDI stock
$73.8 billion (31 December 2012 est.)$48.76 billion (31 December 2013 est.)
Public finances
85% of GDP (2012 est.)
Revenues $73.3 billion (2013 est.) Expenses$98.4 billion (2013 est.)
B- (Domestic)
B- (Foreign)
B- (T&C Assessment)
(Standard & Poor's)[8]
Foreign reserves
US$17.03 billion (31 December 2013) Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars. The economy of Egypt was a highly centralized planned economy under President Gamal Abdel Nasser. In the 1990s, a series of International Monetary Fund arrangements, coupled with massive external debt relief resulting from Egypt's participation in the Gulf War coalition, helped Egypt improve its macroeconomic performance. Since 2000, the pace of structural reforms, including fiscal, monetary policies, taxation. privatization and new business legislations, helped Egypt move towards a more market-oriented economy and prompted increased foreign investment. The reforms and policies have strengthened macroeconomic annual growth results which averaged 5% annually but the government largely failed to equitably share the wealth and the benefits of growth have failed to trickle down to improve economic conditions for the broader population, especially with the growing problem of unemployment and underemployment among youth under the age of 30 years. A youth protest demanding more political freedoms, fighting corruption and delivering improved living standards forced President Mubarak to step down on 11 February 2011. After the revolution Egypt’s foreign exchange reserves fell from$36 billion in December 2010 to only $16.3 billion in January 2012, also in February 2012 Standard & Poor’s rating agency lowered the Egypt’s credit rating from B+ to B in the long term.[9] In 2013, S&P lowered Egypt’s long-term credit rating from B- to CCC+, and its short-term rating from B to C on worries about the country’s ability to meet its financial targets and maintain social peace more than two years after President Hosni Mubarak was overthrown in an uprising, ushering in a new era.[10] ## Macroeconomic trend Egypt has a stable economy enjoying average growth, averaging 4%–5% in the past quarter-century. The economy embarked on various stages of development during which the public and private sectors played roles varying in relative importance as follows: • The First Republic: 1952-2012, • Import substitution and nationalization, 1952–1966, during which the first programme of industrialization in 1957 was established and led by the public sector in heavy industries such as iron and steel, chemical industries, and heavy machinery. Nationalization reduced the relative importance of the private sector. There was no stock trading to speak of, all banks and financial institutions were under the public sector, and foreign direct investment was almost banned. • Inter-War, 1967–1973, adversely affected the performance of the economy and public sector role in import substitution. • Openness Euphoria, 1974–1982 during which policies were introduced to encourage Arab and foreign investment through a series of incentives and liberalizing trade and payment; the economy expanded but this proved unsustainable and growth consequently scaled back. • External Debt Crisis, 1982–1990, the external debt crisis and Paris Club re-scheduling and debt reduction. • Economic Reform, 1991–2007, reform policies were introduced to meet the terms of international institutions, lenders and donors, including wider incentives to the role of the private sector in all economic activities. • The Post Global Financial Crisis, 2008-2011, soaring food prices, especially for grains, led to calls for the government to provide more immediate assistance to the population of more than 40% in the "poverty tunnel" and to strike a "new deal" on agriculture policy and reform. Egypt faced the long term supply- and demand-side repercussions of the global financial crisis on the national economy. Egypt's gains from annual growth rates benefited the rich and failed to trickle down and reduce the poverty which increased to about 50% in 2011 leading to socioeconomic political instability and popular revolution on 25 January 2011. • The Second Republic: 2012–Present, Egypt needs to strengthen the economy to exogenous shocks, improve productivity, competition, get out of the "informality trap," invest in human capital via social protection from a human right-based approach to correct for market failures and build good trust in governance. The biggest questions for the new president-elect and new government are how to address corruption at the level of the bureaucracy, citizens and parties; how to address the expectations of the Egyptian people; how to bring people from different backgrounds and different voices to support social accountability during economic and political transition to an active developmental state. Egyptian economy is still suffering from a severe downturn following the 2011 revolution and the government faces numerous challenges as to how to restore growth, market and investor confidence. Political and institutional uncertainty, a perception of rising insecurity and sporadic unrest continue to negatively affect economic growth.[11] ## Reform era Under comprehensive economic reforms initiated in 1991, Egypt has relaxed many price controls, reduced subsidies, reduced inflation, cut taxes, and partially liberalized trade and investment. Manufacturing had become less dominated by the public sector, especially in heavy industries. A process of public sector reform and privatization has begun to enhance opportunities for the private sector. Agriculture, mainly in private hands, has been largely deregulated, with the exception of cotton and sugar production. Construction, non-financial services, and domestic wholesale and retail trades are largely private. This has promoted a steady increase of GDP and the annual growth rate. The Government of Egypt tamed inflation bringing it down from double-digit to a single digit. Currently, GDP is rising smartly by 7% per annum due to successful diversification. Gross domestic product (GDP) per capita based on purchasing-power-parity (PPP) increased fourfold between 1981 and 2006, from US$1355 in 1981, to US$2525 in 1991, to US$3686 in 2001 and to an estimated US$4535 in 2006. Based on national currency, GDP per capita at constant 1999 prices increased from EGP 411 in 1981, to EGP 2098 in 1991, to EGP 5493 in 2001 and to EGP 8708 in 2006. Based on the current US$ prices, GDP per capita increased from US$587 in 1981, to US$869 in 1991, to US$1461 in 2001 and to an estimated US$1518 (which translates to less than US$130 per month) in 2006. According to the World Bank Country Classification, Egypt has been promoted from the low income category to lower middle income category. As of 2013, the average weekly salaries in Egypt reached LE641 (approx.$92), which grew by 20% from the previous year[12]

 Indicator[13] 1981 1991 2001 2005 2006 GDP (PPP) per capita, (US$) 1,354.81 2,524.99 3,685.98 4,316.59 4,534.82 GDP per capita at constant prices, (EGP) 3,121.85 4,075.47 5,138.36 5,519.09 5,692.24 GDP per capita at current prices, (EGP) 411.20 2,098.71 5,493.28 7,890.65 8,707.88 GDP per capita at current prices, (US$) 587.42 869.30 1,460.98 1,315.75 1,517.85

The reform programme is a work in progress. Noteworthy that the reform record has substantially improved since Nazif government came to power. Egypt has made substantial progress in developing its legal, tax and investment infrastructure. (See Nawar 2006) Indeed, over the past five years, Egypt has passed, amended and admitted over 15 legislative pieces. The economy is expected to grow by about 4% to 6% in 2009/2010.

Surging domestic inflationary pressures from both economic growth and elevated international food prices led the Central Bank of Egypt to increase the overnight lending and deposit rates in sequential moves since February 2008. The rates stood at 11.5% and 13.5%, respectively, since 18 September 2008.

The rise of the World Global Financial Crisis led to a set of fiscal-monetary policy measures to face its repercussions on the national economy, including reducing the overnight lending and deposit rates by 1% on 12 February 2009. The rates currently stand at 10.5% and 12.5%, respectively.[14]

Reform of energy and food subsidies, privatization of the state-owned Bank of Cairo, and inflation targeting are perhaps the most controversial economic issues in 2007/2008 and 2008/2009.

Egypt Export Treemap by Product (2012) from Harvard Atlas of Economic Complexity
Egyptian exports in 2006

Egypt's trade balance marked US$10.36 billion in FY2005 compared to US$7.5 billion. Egypt's main exports consist of natural gas, and non-petroleum products such as ready-made clothes, cotton textiles, medical and petrochemical products, citrus fruits, rice and dried onion, and more recently cement, steel, and ceramics. Egypt's main imports consist of pharmaceuticals and non-petroleum products such as wheat, maize, cars and car spare parts. The current account grew from 0.7% of GDP in FY2002 to 3.3% at FY2005. Egypt's Current Account made a surplus of US$4478 million in FY2005 compared to a deficit of US$158 million in FY2004. Italy and the USA are the top export markets for Egyptian goods and services. In the Arab world, Egypt has the largest non-oil GDP as of 2005.

### The financial sector

The Central Bank of Egypt is the national reserve bank and controls and regulates the financial market and the Egyptian pound. There is a State regulatory authority for the Cairo Stock Exchange. State-owned or Nationalized banks still account for 85% of bank accounts in Egypt and around 60% of the total savings.

There has been several favorable conditions that allowed the Central Bank of Egypt to accumulate net international reserves, which increased from US$20 billion in FY2005, to US$23 billion in FY2006, and to US$30 billion FY2007 contributing to growth in both reserve money and in broad money (M2). Credit extended to the private sector in Egypt declined significantly reaching about EGP 5 billion in FY2005. This credit crunch is due to the non-performing loans extended by the banks to business tycoons and top government officials. Lending criteria have been tightened following the passing of Money Laundry Law 80 in 2002 and Banking Law 88 in 2003. Interest rates are no longer the dominant factor in banks' lending decisions. In fact, both the inefficiency and absence of the role of the Central Bank of Egypt in qualitative and quantitative control as well as implementing banking procedures and standards was almost entirely responsible for the non-performing loans crisis. Banks steadily reduced credit from its peak of about EGP 30 billion in FY1999 and alternatively invested in more liquid no-risk securities such as treasury bills and government bonds. Improving private sector access to credit will critically depend on resolving the problem of non-performing loans with businesses and top government officials. The era of inflation targeting—i.e. maintaining inflation within a band—has perhaps begun in Egypt more recently. Country experiences show that inflation targeting is a best-practice strategy for monetary policy. While the monetary policy appears more responsive to inflationary pressures recently in Egypt, it is noted that there is no core inflation measure and the Central Bank of Egypt takes targeting decisions based on the inflation rate released by the CAPMAS consumer price index off-the-shelf.[21] 100 EGP Obverse Surging domestic inflationary pressures from both economic growth and elevated international food prices led the Central Bank of Egypt (CBE) to increase the overnight lending and deposit rates in sequential moves since 2008: it was raised by 0.25% on 10 February 2008, by 0.5% on 25 March 2008, by 0.5% on 8 May 2008, by 0.5% on 26 June 2008, by 0.5% on 7 August 2008 and most recently on 18 September 2008 for the sixth time in a year by 0.5% when it stood at 11.5% and 13.5%, respectively. However, the rise of the World Global Financial Crisis led to a set of fiscal-monetary policy measures to face its repercussions on the national economy, including reducing the overnight lending and deposit rates by 1% on 12 February 2009. The rates currently stand at 10.5% and 12.5%, respectively. The CBE is expected to further cut on interest rates over 2009, with seemingly little fear on Egyptian Pound depreciation resulting from decreased interest rates. #### Exchange rate policy The exchange rate has been linked to the US dollar since the 1950s. Several regimes were adopted including initially the conventional peg in the sixties, regular crawling peg in the seventies and the eighties and crawling bands in the nineties. Over that time period, there were several exchange rate markets including black market, parallel market and the official market. With the turn of the new millennium, Egypt introduced a managed float regime and successfully unified the Pound exchange rate vis-à-vis foreign currencies. The transition to the unified exchange rate regime was completed in December 2004. Shortly later, Egypt has notified the International Monetary Fund (IMF) that it has accepted the obligations of Article VIII, Section 2, 3, and 4 of the IMF Articles of Agreement, with effect from 2 January 2005. IMF members accepting the obligations of Article VIII undertake to refrain from imposing restrictions on the making of payments and transfers for current international transactions, or from engaging in discriminatory currency arrangements or multiple currency practices, except with IMF approval. By accepting the obligations of Article VIII, Egypt gives assurance to the international community that it will pursue economic policies that will not impose restrictions on the making of payments and transfers for current international transactions unnecessary, and will contribute to a multilateral payments system free of restrictions. In the fiscal year 2004 and over most of the fiscal year 2005, the pound depreciated against the US dollar. Since the second half of the fiscal year 2006 until the end of the fiscal year 2007, the pound gradually appreciated to EGP 5.69 per USD. While it was likely to continue appreciating in the short-term, given the skyrocketing oil prices and the weakening US economy, the advent of the global economic crisis of 2008, and resulting behavior of foreign investors exiting from the stock market in Egypt increased the dollar exchange rate against the Egyptian pound, which rose by more than 4% since Lehman Brothers declared bankruptcy. As the demand pressure from exiting foreign investors eases, the dollar exchange rate against the Egyptian pound is expected to decline. It stands at EGP 7.00 per USD as of 18 June 2013. ## Natural resources ### Land, agriculture and crops Warm weather and plentiful water have in the past produced several crops a year. However since 2009 increasing desertification has become a problem. "Egypt loses an estimated 11,736 hectares of agricultural land every year, making the nation’s 3.1 million hectares of agricultural land prone "to total destruction in the foreseeable future", said Abdel Rahman Attia, a professor of agriculture at Cairo University, to IRIN [3]. Scarcity of clean water is also a problem [4]. Land is worked intensively and yields are high. Cotton, rice, wheat, corn, sugarcane, sugar beets, onions, tobacco, and beans are the principal crops. Increasingly, a few modern techniques are applied to producing fruits, vegetables and flowers, in addition to cotton, for export. Further improvement is possible. The most common traditional farms occupy one acre (4,000 m²) each, typically in a canal-irrigated area along the banks of the Nile. Many small farmers also own cows, water buffalos, and chickens. Between 1953 and 1971, some farms were collectivised, especially in Upper Egypt and parts of the Nile Delta. Several researchers questioned the domestic (and import) policies for dealing with the so-called the "wheat game" since the former Minister of Agriculture Youssef Wali was in office. In 2006, areas planted with wheat in Egypt exceeded 400,000 acres (1,600 km2) producing approximately 6 million metric tons.[22] The domestic supply price farmers receive in Egypt is EGP 1200 ($\approx$ US$211) per ton compared to approximately EGP 1940 ($\approx$ US$340) per ton for import from the USA, Egypt's main supplier of wheat and corn. Egypt is, in fact, the U.S.'s largest market for wheat and corn sales, accounting for US$1 billion annually and about 46% of Egypt's needs from imported wheat. Other sources of imported wheat, include Kazakhstan, Canada, France, Syria, Argentina and Australia. There are plans to increase the areas planted with wheat up to nearly 3 million acres (12,000 km2) by 2017 to narrow the gap between domestic food supply and demand.[23]

However, the low amount of gluten in Egypt wheat means that foreign wheat must be mixed in to produce bread that people will want to eat.[24]

 Item[25] 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Wheat Production 6,130 6,300 6,443 7,177 8,184 8,200 7,977 8,523 7,200 8,400 8,500 Imports 6,944 6,327 7,295 8,150 7,700 7,000 9,900 10,500 10,600 11,650 8,500 Imports from US 3,547 860 3,985 1,765 1,181 1,300 1,636 366 3,866 989 0 Total Consumption 12,750 12,800 13,300 14,200 14,800 15,600 17,200 18,100 17,700 18,600 18,400 Corn Production 6,160 6,000 5,740 5,840 5,860 5,870 6,645 6,280 6,500 5,500 5,800 Imports 4,905 4,848 3,743 5,398 4,300 4,800 5,031 5,800 5,800 7,100 4,500 Imports from US 4,283 2,904 3,120 3,738 3,927 4,200 2,445 2,900 2,900 298 0 Total Consumption 11,200 10,900 9,200 11,300 10,300 10,600 11,100 12,000 12,500 11,700 11,200
Egypt Food imports as percentage of all merchandise imports [26]

Food imports to Egypt compared to other countries

The Western Desert accounts for about two-thirds of the country's land area. For the most part, it is a massive sandy plateau marked by seven major depressions. One of these, Fayoum, was connected about 3,600 years ago to the Nile by canals. Today, it is an important irrigated agricultural area.

Practically all Egyptian agriculture takes place in some 25,000 km2 (6 million acres) of fertile soil in the Nile Valley and Delta.

Some desert lands are being developed for agriculture, including the controversial but ambitious Toshka project in Upper Egypt, but some other fertile lands in the Nile Valley and Delta are being lost to urbanization and erosion. Larger modern farms are becoming more important in the desert.

The agriculture objectives on the desert lands are often questioned; the desert farm lands which were offered regularly at different levels and prices were restricted to a limited group of elites selected very carefully, who later profiteered retailing the granted large desert farm land by pieces. This allegedly transforms the desert farms to tourist resorts, hits all government plans to develop and improve the conditions of the poor, and causes serious negative impact on agriculture and the overall national economy over time. One company, for example, bought over 70 hectare of large desert farm for a price as low as EGP 0.05 per square meter and now sells for EGP 300 per square meter. In numbers, 70 hectares bought for about US$6,000 in 2000 sells for over US$3.7 million in 2007. Currently, no clear solution exists to deal with these activities.

Agriculture biomass, including agricultural wastes and animal manure, produce approximately 30 million metric tons of dry material per year that could be massively and decisively used, inter alia, for generating bioenergy and improve the quality of life in rural Egypt. Unfortunately, this resource remain terribly underutilized.[27]

Since early 2008, with the world food prices soaring, especially for grains, calls for striking a "new deal" on agriculture increased. Indeed 2008 arguably marks the birth of a new national agriculture policy and reform.[28]

Acquisition and ownership of desert land in Egypt is governed by so-called "Egyptian Desert Land Law". It defines desert land as the land two kilometers outside the border of the city. Foreign partners and shareholders may be involved in ownership of the desert land, provided Egyptians own at least 51% of the capital.

### Water resources

Nile river at Aswan

"Egypt", wrote the Greek historian Herodotus 25 centuries ago, "is the gift of the Nile." The land's seemingly inexhaustible resources of water and soil carried by this mighty river created in the Nile Valley and Delta the world's most extensive oasis. Without the Nile, Egypt would be little more than a desert wasteland.

The river carves a narrow, cultivated floodplain, never more than 20 kilometers wide, as it travels northward toward Cairo from Lake Nasser on the Sudanese border, behind the Aswan High Dam. Just north of Cairo, the Nile spreads out over what was once a broad estuary that has been filled by riverine deposits to form a fertile delta about 250 kilometers (160 mi) wide at the seaward base and about 160 kilometers (99 mi) from south to north.

Before the construction of dams on the Nile, particularly the Aswan High Dam (started in 1960, completed in 1970), the fertility of the Nile Valley was sustained by the water flow and the silt deposited by the annual flood. Sediment is now obstructed by the Aswan High Dam and retained in Lake Nasser. The interruption of yearly, natural fertilization and the increasing salinity of the soil has been a manageable problem resulting from the dam. The benefits remain impressive: more intensive farming on thousands of square kilometers of land made possible by improved irrigation, prevention of flood damage, and the generation of millions of gigajoules of electricity at low cost.

### Mineral and energy resources

Main article: Energy in Egypt

Egypt's mineral and energy resources include petroleum, natural gas, phosphates, gold and iron ore. Crude oil is found primarily in the Gulf of Suez and in the Western Desert. Natural gas is found mainly in the Nile Delta, off the Mediterranean shore, and in the Western Desert. Oil and gas accounted for approximately 7% of GDP in fiscal year 2000/01.

Oil refining in Alexandria

Export of petroleum and related products amounted to $2.6 billion in the year 2000. In late 2001, Egypt's benchmark "Suez Blend" was about$16.73 per barrel ($105/m³), the lowest price since 1999. Egypt oil consumption overtaking production Crude oil production has been in decline for several years since its peak level in 1993, from 941,000 bbl/d (149,600 m3/d) in 1993 to 873,000 bbl/d (138,800 m3/d) in 1997 and to 696,000 bbl/d (110,700 m3/d) in 2005. (See Figure). At the same time, the domestic consumption of oil increased steadily (531,000 bbl/d (84,400 m3/d) and 525,000 bbl/d (83,500 m3/d) in 1997 and 2005 respectively), but in 2008, oil consumption reached to 697,000 bbl/d (110,800 m3/d). It is easy to see from the graph that a linear trend projects that domestic demand outpaced supply in (2008–2009), turning Egypt to a net importer of oil. To minimize this potential, the government of Egypt has been encouraging the exploration, production and domestic consumption of natural gas. Oil Production was 630 bbl/d (100 m3/d) in 2008, and natural gas output continued to increase and reached 48.3 billion cubic meters in 2008.[29] Egypt natural gas net exports[30] . Domestic resources meet only about 33% of Egypt's domestic demand, meaning large imports from Saudi Arabia, UAE and Iraq are necessary. Over the last 15 years, more than 180 petroleum exploration agreements have been signed and multinational oil companies spent more than$27 billion in exploration companions. These activities led to the findings of about 18 crude oil fields and 16 natural gas fields in FY 2001. The total number of findings rose to 49 in FY 2005. As a result of these findings, crude oil reserves as of 2009 are estimated at 3.7 billion barrels (590,000,000 m3), and proven natural gas reserves are 1.656 trillion cubic meters with a likely additional discoveries with more exploration campaigns. In August 2007, it was announced that signs of oil reserves in Kom Ombo basin, about 28 miles (45 km) north of Aswan, was found and a concession agreement was signed with Centorion Energy International for drilling. The main natural gas producer in Egypt is the International Egyptian Oilfield Company (IEOC), a branch of Italian Eni. Other companies like BP, BG, Texas-based Apache Corp. and Shell carry out activities of exploration and production by means of concessions granted for a period of generally ample time (often 20 years) and in different geographic zones of oil and gas deposits in the country.

Gold mining is more recently a fast-growing industry with vast untapped gold reserves in the Eastern Desert. To develop this nascent sector the Egyptian government took a first step by awarding mineral concessions, in what was considered the first international bid round. Two miners who have produced encouraging technical results include AngloGold Ashanti and Alexander Nubia International.[31][32] Gold production facilities are now reality from the Sukari Hills, located close to Marsa Alam in the Eastern Desert. The concession of the mine was granted to Centamin, an Australian joint stock company, with a gold exploitation lease for a 160-square-kilometer area. Sami El-Raghy, Centamin Chairman, has repeatedly stated that he believes Egypt's yearly revenues from gold in the future could exceed the total revenues from the Suez Canal, tourism and the petroleum industry .[33]

The Ministry of Petroleum and Mineral Resources has established expanding the Egyptian petrochemical industry and increasing exports of natural gas as its most significant strategic objectives and in 2009 about 38% of local gas production was exported.

As of 2009, most Egyptian gas exports (approximately 70%) are delivered in the form of liquefied natural gas (LNG) by ship to Europe and the United States. Egypt and Jordan agreed to construct the Arab Gas Pipeline from Al Arish to Aqaba to export natural gas to Jordan; with its completion in July 2003, Egypt began to export 1.1 billion cubic feet (31,000,000 m3) of gas per year via pipeline as well. Total investment in this project is about $220 million. In 2003, Egypt, Jordan and Syria reached an agreement to extend this pipeline to Syria, which paves the way for a future connection with Turkey, Lebanon and Cyprus by 2010. As of 2009, Egypt began to export to Syria 32.9 billion cubic feet (930,000,000 m3) of gas per year, accounting for 20% of total consumption in Syria.[34] In addition, the East Mediterranean Gas (EMG), a joint company established in 2000 and owned by Egyptian General Petroleum Corporation (EGPC) (68.4%), the private Israeli company Merhav (25%) as well as Ampal-American Israel Corp. (6.6%), has been granted the rights to export natural gas from Egypt to Israel and other locations in the region via underwater pipelines from Al 'Arish to Ashkelon which will provide Israel Electric Corporation (IEC) 170 million cubic feet (4.8×106 m3) of gas per day. Gas supply started experimentally in the second half of 2007. As of 2008, Egypt produces about 6.3 billion cubic feet (180×106 m3), from which Israel imports of 170 million cubic feet (4.8×106 m3) account for about 2.7% of Egypt's total production of natural gas. According to a statement released on 24 March 2008, Merhav and Ampal's director, Nimrod Novik, said that the natural gas pipeline from Egypt to Israel can carry up to 9 billion cubic meters annually which sufficiently meet rising demand in Israel in the coming years.[35] According to a memorandum of understanding, the commitment of Egypt is 680 million cubic feet (19×106 m3) contracted for 15 years at a price below$3 per million of British thermal unit, though this was renegotiated at a higher price in 2009 (to between $4 and$5 per million BTU), while the amounts of gas supplied were increased. Exporting natural gas to Israel faces broad popular opposition in Egypt.[36] Nevertheless, agreements between Egypt and Israel allow for Israeli entities to purchase up to 7 billion cubic meters of Egyptian gas annually, making Israel one of Egypt's largest natural gas export markets. The decision to export of natural gas to Israel was passed in 1993 at the time when Dr. Hamdy Al-Bambi was Minister of Petroleum and when Mr. Amr Moussa was Minister of Foreign Affairs. The mandate to sign of the Memorandum of Understanding (MoU) to delegate to the Ministry of Petroleum represented by the Egyptian General Petroleum Company (EGPC) to contract with EMG Company was approved by the former Prime Minister Dr. Atef Ebeid in the Cabinet’s meeting No. 68 on 5 July 2004 when he served as the acting "President of the Republic" when President Hosni Mubarak was receiving medical treatment in Germany.

On 24 September 2006, the National Telecommunication Regulatory Authority (NTRA) announced a license award to Egyptian-Arab private sector consortium of companies to extend a maritime cable for international traffic. The US$120 million cable project will serve the Gulf region and south Europe. The construction of the cable should decrease the currently high international call costs and increase domestic demand on internet broadband services, in importantly increase exports of international telecommunication services of Egyptian companies, mostly in the Smart Village. It is expected that NTRA will award two licenses for international gateways using open technology and deploy WiMax technology enabling the delivery of last-mile wireless broadband access as an alternative to ADSL. The main barrier to growth for Egypt's ICT sector is the monopoly of telecommunication corporations and quarreling workforce. ## Largest companies In 2009, 3 Egyptian companies were listed in the Forbes Global 2000 list - an annual ranking of the top 2000 public companies in the world by Forbes magazine. These companies were: World Rank Company Industry Revenue (billion$)
Profits
(billion $) Assets (billion$)
Market Value
(billion $) 785 Orascom Construction Industries Construction 2.42 1.83 17.21 4.16 846 Orascom Telecom Telecommunications Services 4.83 2.08 11.42 3.15 1384 Telecom Egypt Telecommunications Services 1.80 0.43 6.19 4.51 ## Investment The stock market capitalisation of listed companies in Egypt was valued at$79.672 billion in 2005 by the World Bank.[46]

### Investment climate

The Egyptian equity market is one of the most developed in the region with more than 633 listed companies. Market capitalization on the exchange doubled in 2005 from USD 47.2 billion to USD 93.5 billion, with turnover surging from USD 1.16 billion in January 2005 to USD 6 billion in January 2006.[47]

Private equity has not been widely used in Egypt in the past as a source of funding for businesses. The government, however, has instituted a number of policy changes and reforms specifically intended to develop internal private equity funds and to attract private equity funding from international sources.

The major industries include textiles, hydrocarbon and chemical production, and generic pharmaceutical production. Unemployment is high at about 10.5%.[48]

Until 2003, the Egyptian economy suffered from shortages in foreign currency and excessively elevated interest rates. A series of budget reforms were conducted in order to redress weaknesses in Egypt's economic environment and to boost private sector involvement and confidence in the economy.

Major fiscal reforms were introduced in 2005 in order to tackle the informal sector which according to estimates represents somewhere between 30% to 60% of GDP. Significant tax cuts for corporations were introduced for the first time in Egyptian history. The new Income tax Law No 91 for 2005 reduced the tax rate from 40% to 20%. According to government figures, tax filing by individuals and corporations increased by 100%.

Many changes were made to cut trade tariffs. Among the legislators' goals were tackling the black market, reducing bureaucracy and pushing through trade liberalization measures. Amendments to Investment and Company law were introduced in order to attract foreign investors. For example, the number of days required for establishing a company was dramatically reduced.

Significant improvement to the domestic economic environment increased investors' confidence in Egypt. The Cairo & Alexandria Stock Exchange is considered among the best ten emerging markets in the world. The changes to the policy also attracted increased levels of foreign direct investment in Egypt. According to the UN Conference on Trade and Development's World Investment Report, Egypt was ranked the second largest country in attracting foreign investment in Africa.

Given the large number of amendments to laws and regulations, Egypt has succeeded to a certain extent in conforming to international standards. Very recently the Cairo & Alexandria Stock Exchange (CASE) was welcomed with full membership into the World Federation of Exchanges (WFE)—the first Arab country to be invited.

Enforcement of these newly adopted regulatory frameworks remain, sometime problematic. Problems like corruption hamper economic development in Egypt. Many scandals involving bribery were reported during the past years. "In 2002 alone, as many as 48 high-ranking officials—including former cabinet ministers, provincial governors and MPs were convicted of influence peddling, profiteering and embezzlement. Maintaining good relations with politicians is sometimes a key to business success in Egypt. Based on the 2006 Corruption Perception Index developed by Transparency International (where the higher the ranking the greater the level of corruption), Egypt ranked 70 out of 163. On a scale from 0 to 10 (with 0 being highly corrupt), Egypt scored a 3.3 .

According to a study by the International Organization for Migration, 20% of Egyptian remittance-receiving households interviewed channelled the remittances towards various forms of investment, while the large majority (80%) was more concerned about utilizing remittances for meeting the daily needs of their families including spending on health care and education. Among the 20% of households that decided to invest, 39% invested in real estate, 22% invested in small businesses employing fewer than five people and the smallest proportions of investors (6%) invested in medium private business employing no more than 20 people. According to Egypt’s Human Development Report 2008, despite representing approximately 5% of GDP, remittances provided the initial capital for only 1.4% of newly established small and medium enterprises in Egypt in 2003-2004.[15]

## Response to the global financial crisis

The challenges of the global food crisis followed by challenges of the global financial crisis made room for more integrated policy reforms. Considering the massive economic measures that have been taken over the past 12 months or so, Egyptian economic policymakers score high based on the inside lag, i.e. the lapse of time between the moment that the shock began to affect the economy and the moment that economic (monetary and fiscal) policy as well as the regulatory policy are altered and put into effect in response to the shock to various markets: goods market (real GDP), the labor market (unemployment rate), money market (interest rate and inflation), and the financial (stock and bond) market. Indeed, moderate financial panic occurred driven—at least partially—by the fear that other investors are about to panic and sell. There were falls in stock and bond market prices, and rises in nominal interest rates.

Egypt has a population of about 83 million, with the population concentrated within a region 20 miles (32 km) on either side of the Nile River. The majority of the population is employed in the services sector, followed by agriculture and industrial production. Approximately one-third of Egyptian labour is engaged directly in farming, and many others work in the processing or trading of agricultural products.

Unemployment rate increased from 10.3% in FY2004 to 11.2% in 2005. The average rate of growth of employment in the publicly owned enterprises sector was -2% per year between FY1998 and FY2005 as a result of aggressive privatization program. On the other hand, private sector employment grew at an average rate of 3% over that period. In addition, the government sector employment grew by almost double the rate of the private sector over the same period.

In general, the average weekly wage in the private sector is, in many instances, higher than that of the public sector. In some other instances, e.g. whole sale and retail trades, the weekly wage is lower by half of that in the public sector.

As a result of the weakness role of the Ministry of Manpower and Trade Unions to create a balance between the rights of workers and the interests of owners of companies in the private sector, privatization has led to worsening employment problems and deterioration in their working environment and health, and many workers have recently resorted to strike and picketing.

In an effort to quell discontent over rising food prices, Egypt offered government and public sector workers a pay rise of up to 30%, and urged the private sector to keep up with the pay rise. The offer came on the May day speech delivered by President Mubarak to the Egyptian General Federation of Trade Unions.

"We must go in dealing with the current global (food) crisis, on two basic tracks (1) we must strengthen the food security of our low-income people, (2) we must achieve a balance between wages and prices." President Mubarak said.

The pay rise originally proposed in the government budget ranged between 15%–20%, but the decision to double it was given on heightened worries that widespread anger over prices could lead to a social explosion. The pay rise is initiated immediately, rather than waiting for the start of the new fiscal year on 1 July 2008 and is to be financed from real resources.

While the headline CPI inflation rate was 15.8% (17.6% in rural areas, 14.4% in urban areas) in March 2008, the overall food price inflation rate was 23.7% (26.9% in rural areas, 20.5% in urban areas). Moreover, in April 2008 in urban areas, the headline CPI inflation rate reached 16.4% while food price inflation rate was 22.0%. This underlines the statement in Nawar (2008) that "the inflation rate as measured by the headline CPI does not concern the poor and low-income people, who are the majority of people in rural and urban Egypt, since they spend most of their income on food." Approximately 55 million poor and low-income citizens, representing about 75% of the population, are currently enrolled in food ration cards.

In April 2009 it was reported that Egypt feared the return of 500,000 Egyptian laborers working in the Gulf states.[49]

## Poverty and income distribution

Even though there are spots with a facade of affluence, Egypt is actually facing high levels of unemployment and immense poverty. The majority of its younger population is struggling with unemployment and destitution, and heightening food prices in Cairo.[50]

According to an Associated Press report, nearly half of all Egyptians live under or just above the poverty line. More than 15 million Egyptians live on less than \$1 a day, and the figure is steadily increasing.[50] The Minister of Economic Development, Othman Mohamed Othman, once mentioned that the poverty rate in Egypt had risen from 19 percent of the population in 2005 to 21 percent in 2009.[51] In 2010/2011, the poverty rate in Egypt had risen to 25% of the population.[52]

Various statistical databases show that Egypt has:[50]

• A population of 80 million, with 33 percent who are 14 years and below; and 20 percent of the population living below the poverty line.
• A labor force of 26 million, with 32 percent working in agriculture, 17 percent in industry, and 51 percent in the service sector.
• An unemployment rate of 9.7 percent.
• A literacy rate of above 71 percent, with males at 83 percent and females at 59.4 percent

## Causes of poverty

### High population growth

Fertility rates have declined since the 1960s but are still high[53] and Egypt's population grew from 44 million in 1981 to more than 80 million today. Egypt's youth experience massive unemployment, with an estimated 7.7 million youths (aged 15–24) jobless in 2010.[54]

### High unemployment

Egypt’s unemployment rate reached 30% percent in the second quarter of 2011, down from 11.9 percent in the first quarter (although higher than last year’s 8.96 percent).[55] Egypt’s high fertility rate hence gave rise to significant socioeconomic burdens - economic development is delayed and there is reduced access to jobs and education.[56]

### Ineffective policies

Despite plentiful resources, the country lacks sustainable pragmatic policies to combat poverty.[57] Hania Sholkamy, an economist for the Social Research Center at the American University in Cairo, disclosed that although the government had subsidized 270 million loaves of bread/day at 19 Piasters/piece, 29 percent of the children in Egypt remained malnourished.[57] Although these policies were adopted in an attempt to reduce economic burdens on the poor, they benefited the rich more. In fact, 83 percent of food subsidy, 76 percent of electricity subsidy, 87 percent of petroleum subsidy and 76 percent of the social safety net subsidy went to the non-poor instead of the poor.[57]

## Statistics

According to the 2005 Household Income, Expenditure and Consumption Survey (HIECS), estimated per capita poverty lines vary across the regions. Data from a World Bank and Ministry of Economic Development poverty assessment based on comparisons between actual expenditures (and the cost of a consumption basket securing 2470 calories per day per person), shows that individual Egyptians who spent less than EGP 995 per year in 2005 are considered extreme poor, those who spent less than EGP 1423 per year are poor and those who spent less than EGP 1853 per year are near poor.

Overall about 44.4% of the Egyptian population are in the range of extreme poor to near poor:[58]

• 21% of the Egyptian population was near poor, meaning that about 14.6 million Egyptians can obtain their basic food requirements in addition to some basic services.
• 19.6% of the Egyptian population was poor, meaning that about 13.6 million Egyptians (one out of every five) had consumption expenditure below the poverty line and could not therefore obtain their basic food and non-food needs.
• 3.8% of the Egyptian population was extreme poor, meaning that about 2.6 million of the Egyptian poor could not obtain their basic food requirements even if they spent all their expenditure on food.

Poverty has a strong regional dimension in Egypt and concentrates in Upper Egypt region, both urban (18.6%) and rural( 39.1), while metropolitan areas are the least poor (5.7%). The government is currently employing recently completed poverty map as tool for geographic targeting of public resources.

 Basic Data Fiscal Year 1 July – 30 June Currency Egyptian pound (EGP) = 100 piasters Land Area $\approx$ 1 million km2

To be completed soon:

 Economic Statistics 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Nominal GNP (EGP bn) 373.6 393.2 432.1 502.8 563.3 649.4 773.8 897.0 Nominal GDP (EGP bn) 358.7 378.9 417.5 485.3 536.6 618 730 847 1008 1181 Real GDP Growth 3.5 3.2 3.1 4.1 5.0 6.9 7.1 7.2 5.2 Inflation 2.4 2.4 3.2 10.3 11.4 4.4 7.62 12 Current Account Balance (USD m) -33 614 1943 3418 2911 1752 2696 Development Assistance (USD bn) 1.3[59] Population (m) 65.3 66.6 68.0 69.3 70.7 72.1 73.5 75.0 80.0 Labor Force 19.3 19.9 20.4 20.9 21.8 21.8 22.9 23.6 * Unemployment (%) 9.2 10.2 11.0 10.3 11.2 10.3 Population below Poverty Line (%) Merchandise Imports (fob: USD m) 16441 14637 14821 18286 24193 30441 37834 Merchandise Exports (fob: USD m) 7078 7121 8205 10453 13833 18455 22018 Net Foreign Direct Investment (FDI: USD m) 509.4 428.2 700.6 2107.2 3901.6 6111.4 GDP Composition -- Agriculture 14 16 17 15 14 15 -- Industry[60] 30 32 33 31 33 36 -- Services 56 53 50 54 53 49 Subsidies (EGP m) 18,050.9 20,649.2 24,751.7 29,706.0 68,897.0 51,844.0 64,465.0 Fiscal Balance, (-) Deficit (% of GDP) -10.2% -10.5% -9.5% -9.6% -8.2% -6.7% -6.9% Electricity Generation (GW·h) 18.5 19.7 21.3 Per Pound USD Exchange Rate 4.49 4.50 6.15 6.13 5.73 5.71 5.54 5.30[61] IMF Voting Power 0.45%[62]

## Notes

1. ^ CIA World Fact Book - Egypt's Economy
2. ^ "The World Factbook". CIA. Retrieved 18 June 2013.
3. ^ "Doing Business in Egypt 2012". World Bank. Retrieved 21 November 2011.
4. ^ "2012 Exports figures of Egypt". CIA World Factbook. 2012 est. Retrieved 2013-06-14. Check date values in: |date= (help)
5. ^ "Export Partners of Egypt". CIA World Factbook. 2012. Retrieved 2013-07-22.
6. ^ "2012 Imports figures of Egypt". CIA World Factbook. 2012 est. Retrieved 2013-06-14. Check date values in: |date= (help)
7. ^ "Import Partners of Egypt". CIA World Factbook. 2012. Retrieved 2013-07-22.
8. ^ "Sovereigns rating list". Standard & Poor's. Retrieved 18 June 2013.
10. ^ Daragahi, Borzou. (2013-05-09) S&P cuts Egypt’s credit rating again amid fiscal health fears. FT.com. Retrieved on 2013-07-29.
11. ^ Egypt Overview worldbank.org, April 2013
12. ^ Data from the Egypt's statistics body, CAPMAS.
13. ^ Source: IMF WEO Online database
14. ^ Central Bank of Egypt, MPC Press Releases
15. ^ a b http://www.egypt.iom.int/Doc/IOM%20Migration%20and%20Development%20in%20Egypt%20Facts%20and%20Figures%20(English).pdf
16. ^ These remarks on fiscal conduct and corruption were made in a recent report presented by the head of the Central Agency of Auditing, Gawdat El-Malat, and discussed by the Egyptian Parliament on 14–15 January 2008.
17. ^ Source:, Ministry of Finance and Figures for 2008 and 2009, 2013 are budget estimates
18. ^ a b http://www.mof.gov.eg/MOFGallerySource/English/Budget2013-2014/Financial-statement2013-2014.pdf
19. ^ Source:, Ministry of Finance and Central Bank of Egypt, as analyzed in Nawar, Abdel-Hameed (2008) "Anti-Inflation Policy Array in Egypt available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1115642"
20. ^ a b [1], Strategic Foresight Group report: Cost of Conflict in the Middle East 2009
21. ^ Nawar, Abdel-Hameed (2008) "PPI and Measuring Inflation in Business Transactions in Egypt", Cairo University, manuscript, March. Available at SSRN: http://ssrn.com/abstract=
22. ^ Sowing the right seedsAl-Ahram Weekly, 6 August 2009
23. ^ EGYPT CLONES A NILEEGYPT CLONES A NILE, Source: U.S. News & World Report, 19 May 1997, Vol. 122 Issue 19, p33, 3p.
24. ^ Imported Wheat Stocks Dwindle Amid Egypt's Currency Crisis. Cnbc.com (2013-07-03). Retrieved on 2013-07-29.
25. ^ Source: USDA, Foreign Agricultural Service
26. ^ World Bank data portal http://databank.worldbank.org/data/views/reports/chart.aspx
27. ^ It is noteworthy that this point is emphasized in the context of the production of natural gas from biogas in Nawar, Abdel-Hameed (2005). "The Emerging Landscape of the Natural Gas in Egypt". Cairo University, manuscript. Natural gas can be mainly produced with crude oil from the same reservoir, i.e. associated, or from a natural gas reservoir, i.e. non-associated.
28. ^ Using what we haveAl-Ahram Weekly,29 October 2008
29. ^ CIA Factbook, Egyptian Economy
30. ^ http://www.eia.gov/countries/country-data.cfm?fips=eg#ng
31. ^ Mariaan, Webb (20 April 2011). "AngloGold and JV partner to accelerate exploration in Egypt". Mining Weekly. Retrieved 7 September 2012.
32. ^ Balashov, Sergei (20 June 2012). "Northland says Alexander Nubia's Hamama project has significant potential". Proactive Investors. Retrieved 7 September 2012.
33. ^
34. ^
35. ^ BRIEF: Merhav exec insists gas pipeline is sufficient: "The pipeline was designed, built, and tested by the top companies in their fields." Lior Baron. McClatchy - Tribune Business News. Washington: 24 March 2008.
36. ^ Nawar, Abdel-Hameed (2005). "The Emerging Landscape of the Natural Gas in Egypt". Cairo University, manuscript.
37. ^ Cairo sources said Israelis will dig for oil in Sinai
38. ^ The gas conundrumAl-Ahram Weekly, 26 November 2008
39. ^ [2] Wall st Journal article in Egypt's gas
40. ^ EuroMonitor Report Retrieved 08/24/2012
41. ^ SGS SafeGuard Bulletin Retrieved 08/24/2012
42. ^ ﻿Egypt's Tourism Industry﻿ (Report). Bank of Alexandria. October 2010. p. 7. Retrieved 2012-10-31.
43. ^ Kotb, Ahmed (2012-10-24). "Tourism Tips". Al-Ahram. Retrieved 2012-10-31.
44. ^ Neil Hollingsworth (5 July 2012). "EGYPTIAN TOURISM FIGURE IMPRESSES INTERNATIONAL INVESTORS". Rivermead Global Property. Retrieved 5 July 2012.
45. ^ Gratowski, J. Thomas (17 February 2014). "Is Egypt Breaking Apart?". International Affairs Review. Retrieved 18 February 2014.
46. ^ Data - Finance
47. ^ "Egypt: privatization Troubles Peak". Thomaswhite.com. 9 July 2010. Retrieved 1 May 2013.
48. ^ Private Equity in Pakistan, Israel, and Egypt, by Sethi, Arjun November 2007.
49. ^ Egypt fears return of 500,000 workers from Gulf
50. ^ a b c Henry, J. Reske. "Egypt's Poverty, Unemployment, Push Youths to Breaking Point". Retrieved 10 February 2012.
51. ^ Saleh, Amirah (10 October 2009). "Govt: Poverty rate up 2%". Retrieved 1 May 2013.
52. ^ Farid, Doaa (2 November 2013). "Government launches ‘Egypt 2022’ economic development plan". Daily News Egypt. Retrieved 18 February 2014. "Long term developmental vision aims at achieving a “sustainable and containment growth”, was unveiled by the Ministry of Planning."
53. ^ Khalifa, Mona; Julie DaVanzo; David M. Adamson. 2000. Population Growth in Egypt - A Continuing Policy Challenge. Rand Corporation Issue Paper IP-183. Accessed 10 February 2012
54. ^ Nasir, Sudirman. "Egypt has a population crisis as well as a democracy crisis". Retrieved 10 February 2012.
55. ^ ., Daily News Egypt. "Daily News Egypt: Egypt unemployment rate reaches 11.8 pct". Retrieved 10 February 2012.
56. ^ Guzzardi, Joe. "Egypt faces huge problems of overpopulation, poverty". Retrieved 10 February 2012.
57. ^ a b c Sayed, Attia. "Poverty Eradication in Egypt". Retrieved 10 February 2012.
58. ^ Nawar, Abdel-Hameed (2007) "From Marina to Kom-Ombo: A Note on Poverty in Egypt", Cairo University, manuscript, August
59. ^ World Bank Country Data Profile.
60. ^ Includes energy, mining, and manufacturing.
61. ^ Current figure for exchange rate as of 19 July 2008.
62. ^ As of 16 June 2006. See IMF (2006) "IMF in Focus", A Supplement to the IMF Survey, Vol. 35, August, 2006, p. 15.