Egypt Pest Analysis Data Monitor May 07

COUNTRY PROFILES
Egypt
A PEST Overview
Reference Code: DMER0002 Publication Date: May 2007
OVERVIEW Catalyst
What characterizes the political, economic, social and technological environments in Egypt?
Summary
The Republic of Egypt is conceived in the constitution as a semi-presidential state; but in practice President Hosni Mubarak, who has been ruling Egypt since 1981, holds most of the power. In a constitutionally proclaimed multi-party system in Egypt, the National Democratic Party, headed by Mubarak, has been the dominant party while others have a relatively miniscule presence. The president had recently announced some reforms to establish a democratic process for elections. The 2005 presidential elections were criticized internationally for reducing the whole process to a farce through vote rigging and fraud. On the economic front, Egypts real GDP has been growing at a consistent rate for over a decade averaging 4.6% during the period 19902006. However, the economic growth rate is unable to generate enough jobs to curb the high unemployment rate in Egypt, which in 2006 stood at over 12%. The authorities are trying to address the problem by attracting more foreign investors through its privatization program and economic liberalization. These investments would primarily be in the banking, finance and tourism sectors which hold significant growth potential for the economy. There are certain impediments that would curb the economy from moving into a sustainable growth path. Foremost among them are high unemployment rates, sub-standard levels of education, poor healthcare system, gender bias, especially in the job market, regional inequalities and excessive government controls in certain heavy industries. However, appropriate macroeconomic reforms coupled with growth in business opportunities in the telecom, petroleum, banking & finance and tourism sectors have raised investor confidence in Egypt. The medium-term forecast for the compound annual growth rate for Egypt during the period 200610 stands at 4.4%.
Egypt
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DMER0002/ Published 05/2007 Page 1
Overview
TABLE OF CONTENTS
Overview Catalyst Summary KEY FACTS POLITICAL ENVIRONMENT Summary Elections and Government Make-up Political Landscape Key Policy Areas ECONOMIC ENVIRONMENT Summary Economic Performance Employment Trends Trade Prospects SOCIAL ENVIRONMENT Overview TECHNOLOGICAL ENVIRONMENT Overview APPENDIX Ask the analyst Datamonitor consulting Disclaimer 1 1 1 3 5 5 5 7 8 10 10 10 20 26 26 27 27 32 32 35 35 35 35
Egypt
KEY FACTS
KEY FACTS
Full name
Arab Republic of Egypt
Capital City
Cairo
Government Type
Republic
Head of State
President Hosni Mubarak
Head of Government
Prime Minister Ahmed Nazif
Population
80.3 million
Total area
1,001,450 sq km
Language
Arabic (official), English and French
Ethnic Composition
Egyptian 98%, Berber, Nubian, Bedouin, and Beja 1%, Greek, Armenian, other European (primarily Italian and French) 1%
Major Religions
Muslim (mostly Sunni) 90%, Coptic 9%, other Christian 1%
Life expectancy
71.6 years (total population), 69.0 years (men), 74.2 years (women)
Currency
Egyptian pound
Egypt
KEY FACTS
Main exports
Crude oil and petroleum products, cotton, textiles, metal products, chemicals
GDP per capita

$ 1626
Internet domain
.eg
Geographical location
Northern Africa, bordering the Mediterranean Sea, between Libya and the Gaza Strip, and the Red Sea north of Sudan, and includes the Asian Sinai Peninsula
Figure 1:
Map of Egypt
Source: CIA The World Factbook
DATAMONITOR
Egypt
POLITICAL ENVIRONMENT
POLITICAL ENVIRONMENT Summary
The constitution of Egypt envisages its political system as a semi-presidential republic. In this system the executive power is divided between the President and the Prime Minister. However, in practice, the president of Egypt wields much more power than the prime minister as he heads the executive branch to which the constitution grants wider powers. The presidents power in Egypt derives from his ability to appoint the prime minister in consultation with the lower house of the parliament. He also nominates one or more vice-presidents. Hosni Mubarak has been the president of the republic since 1981 and he is presently serving his fifth term in office. Egypt is a state dominated by a single party; the ruling National Democratic Party (NDP) is currently holding all the power. Other political parties are allowed by the constitution, although their chances of winning the elections are very bleak. President Mubaraks surprise announcement, in 2005, to reform the election process allowed other candidates to contest the presidential elections. Previously, there were no elections conducted for the position of the president. The reform process has paved way for greater democratic freedom in Egypt. However, concerns were raised over government interferences in the 2005 presidential elections. A new law placed severe restrictions on the filing for presidential candidacy, mainly designed with a view to obstruct popular candidates from participating in the elections. The Constitution of Egypt, which was approved by a referendum in 1970, has undergone several amendments; the last amendment was made as recently as 2007. Among other things the new amendment enhances the powers of the president to dissolve the parliament. It also ended the previous practice of judicial monitoring of the elections. The referendum was boycotted by many opposition members citing impeachment of democracy. Only 27% of the registered voters turned out and the referendum was approved with almost 76% majority. The referendum was criticized worldwide; organizations like Amnesty International described it as seriously undermining human rights.
Elections and Government Make-up

The system of governance in Egypt is that of a republic. The Egyptian constitution grants extensive powers to the executive branch of the government, which is headed by the president. The president appoints the prime minister and vicepresident(s) in consultation with the lower house of the parliament. Traditionally, the president is chosen from among the vice-presidents of Egypt. However, the constitution of Egypt does not deem the election of vice-president as mandatory. President Hosni Mubarak has yet to appoint a vice-president which has been a concern for many political activists in Egypt. In the presidential elections held in 2005, Hosni Mubarak, who had already served four terms as the president of Egypt, won a fifth term with over 88% of vote. The only two other candidates who gained any noteworthy share of the vote were Ayman Nour of the Tomorrow Party who won 7.3% of the total vote and the Numan Gomaa of the New Wafd Party who won 2.8% of the vote. If no candidate had won a majority in the first rounds of poll, the two major candidates would have contested for a second round of polls. Egypts largest Islamic group, the Muslim Brotherhood, was not allowed to field any candidate as it is banned due to its religious views which are prohibited by the constitution.
Egypt
The legislative branch consists of the Peoples Assembly (the lower house) and the Shura Council (the upper house). The Shura Council is only an advisory body with limited powers. In most matters of legislation, the Peoples Assembly will have the final authority in case there are any disagreements between the two houses. The members of the lower house serve terms lasting five years while the members of the upper house are elected to serve a six-year term with mid-term elections held to replace half of the elected members. At the local level, the governors and mayors are appointed by the central government and by the elected local representatives. Adult suffrage is compulsory in Egypt for all citizens above the age of 18 and failure to cast a vote could even lead to legal punishment. Presently there are 18 recognized political parties in Egypt. The constitution of Egypt prohibits political parties which are based on religion, race or other forms of discriminatory practices. The Peoples Assembly has a capacity of 454 members out of which 444 are elected directly by popular vote while 10 members can be appointed by the president. Out of the 444 elected members, 400 members are elected on proportional representation while the remaining 44 members are elected through local majority votes. Fifty percent of the elected seats to the lower house are reserved for workers and farmers as mandated by the constitution. In the parliamentary elections in 2005, the ruling National Democratic Party (NDP) maintained its majority in the Assembly by winning 311 seats. Although the party won a considerably lower majority compared to its previously held 417 seats, it still maintains the two-third majority (around 302 seats) required to propose an amendment to the constitution. Most of the seats lost by the NDP were gained by the banned Muslim Brotherhood, whose candidates stood as independents. They now have a collective strength of 88 members in the Assembly. The gains have been almost six times higher than its previous position in the Assembly. The liberal New Wafd Party is the second largest political party with six seats in the assembly. The only other parties to have gained any seats in the assembly are the socialist National Progressive Unionist Party with two seats and center-right Tomorrow Party with one seat. Huge importance is attached to the parliamentary elections in Egypt. The constitution permits only those parties with at least 5% seats in the assembly to field candidates for presidential elections. With no party having won that majority apart from the ruling National Democratic Party, the 2011 presidential elections will be little more than a modified version of the single-candidate poll as it has been in the past.
Egypt
Political Landscape
Current Political Parties and Figures National Democratic Party
The National Democratic Party (NDP) was established in 1978 by former president Anwar Sadat who was assassinated in 1981. Hosni Mubarak, the ruling president, has headed the NDP since 1981. Although it pronounces equality among citizens irrespective of their religious preferences, the NDP pins its faith on Islamic jurisprudence, which has been the basis for most of Egypts legislation till date. The NDP claims that it accepts market economy and recognizes the role of the private sector in the economic development of Egypt. However, the party maintains strong commitments to protect the interests of the country and improve the living conditions of its more vulnerable citizens. The NDP gives importance to international relations for realizing economic development and specifically highlights the importance of having close relations with other Muslim countries to maintain a cultural link with those nations it believes will help with human development. In the last legislative elections in 2005, the party won 311 out of the total 454 seats to the Assembly. Prior to that, the NDP had held 353 seats in the Peoples Assembly following the legislative elections of 2000.
Hosni Mubarak, President of Egypt

Immediately after the assassination of the then President Anwar Al Sadat by Islamic extremists, Hosni Mubarak took over as both the president of Egypt and the chairman of the National Democratic Party (NDP). Mubarak is the longest serving leader in the Arab world, having served as the president of Egypt for more than 25 years now. He is presently serving his fifth consecutive term after winning the 2005 presidential elections with 88% of the vote. As the constitution grants the president wide powers to preside over the parliament as well as the authority to appoint the prime minister and vicepresident(s), Mubarak is considered to be one of the most powerful leaders in the region. Mubarak is most likely to win another presidential term, elections to which will be held in 2011, as no other party has managed to achieve the 5% threshold in the 2005 parliamentary elections.
Egypt
Key Policy Areas

The 2005 tax law amendments aims at simplifying tax payment procedures and reducing the overall tax rates in order to widen the tax base and thereby increase revenues. The corporate tax rate was reduced from 42% to 20% and the highest individual income tax rate was reduced to 20% from the previous rate of 40%, though critics say this move is highly biased in favor of the rich tax payers. Largely as a consequence of these changes, tax revenues increased by almost 28% in the fiscal year 200506, which according to the OECD estimates stood at 12.8% of GDP. Reforms in the banking system have been undertaken over the last few years to spruce up the financial capability of Egypt. Several major public sector banks were put up for sale and the proceeds from these were channeled towards the financial rectification of other stumbling public sector companies and for the paying off the state debts. In 2006, the government finalized an agreement with the World Bank for a $1 billion loan which would be used to support two large state-owned banks through capital increases. Several smaller banks were merged into large entities with the number of banks reduced from 65 in 2005 to 40 in 2006. The target over 2007 is to reduce this number even further down to 34. In 2003, a law was passed to allow the Central Bank of Egypt (CBE) full authority to make necessary changes to monetary policy. Subsequently, the bank has increased its foreign reserves from $11 billion in 2003 to about $28 billion in 200607. Inflation levels have eased since 2004 when it soared above 16% as a result of the depreciation in exchange rates, while in 2006 inflation stood at a relatively moderate 5.6% despite upward pressure due to robust economic activity and a reduction in fuel subsidies. One of the goals set by the government in 200607 is to increase the investment rate to about 20% of the GDP. Out of these, some 55% of the investments will be directed towards basic development projects by the state, 31% to projects implemented by the governorates and 14% towards services projects. The plan envisages regional development through clear demarcation of investments going into various regions. Almost 25% of the total investment will be in the Greater Cairo region, 22% in the upper Egypt region, 21% in Alexandria, 19% for developing the Suez canal and roughly 13% for the Delta regions. As a part of the infrastructure development drive under the national economy competitiveness strategy, the government has decided to upgrade the railway system in Egypt. It has signed a contract with China to jointly develop the railway system while the government has decided to grant $865 million towards this purpose. On the regional/rural development front, the World Bank approved $200 million for development of the upper Egypt region. The project will be implemented over a period of five years from 2008, in cooperation with the Egyptian Ministry of Economic Development. Other regional infrastructure related investments include a program for modernizing the potable water provision facilities and the waste drainage systems, especially in the upper Egypt region with an estimated investment of $346 million while an additional $173 million is earmarked for developing the regions other infrastructural amenities. In its quest to increase natural gas production, the petroleum ministry is hoping to increase crude oil production by 100,000 barrels per day (bpd) by 2008 and is encouraging companies to speed up explorations in the Gulf of Suez and the Western Desert region. Egypts peak production till date stood at 870,000 bpd in 1999. As of 2005, the production has sharply fell to levels of around 700,000 bpd.
Egypt
Despite a rise in government expenditure, the fiscal deficit of Egypt stood at an estimated 8.6% of GDP in FY200506; the deficit has decreased from 9.6% in the previous fiscal year. The decrease is mainly due to receipts from the privatization process and payment of tax arrears long due from the Egyptian General Petroleum Corporation. Recently, the authorities reclassified budget accounting procedures to bring them up to par with international standards. With regards to foreign policy, Egypt continues to emphasize the need for an effective and influential role for itself at both the regional and international levels. The authorities believe in having important synergies in the economic and political realms with the different countries of the Arab World. Relations have been strong with the EU owing to an exhaustive trade link with the various countries of the EU. Egypt also gives special importance to the emerging nations of the Asian continent, at the diplomatic level, as it is emerging as the second biggest commercial partner of Egypt. Egypt has been an outspoken supporter of the establishment of a Palestinian state. Egypt has also backed the efforts of the Sudanese government in Khartoum.
Egypt
ECONOMIC ENVIRONMENT
ECONOMIC ENVIRONMENT Summary

The economy of Egypt is presently in a transition phase; the economy was highly centralized before becoming receptive to market-administered forces. The Egyptian economy has been growing at a consistent average rate of 4.6% over a period from 19902002, and growth has remained at similar levels in the last five years. Although President Hosni Mubaraks government has emphasized the need for privatization and liberalization of the economy, social policies such as subsidies on food, energy and other essential commodities has kept the budget deficit at high levels. But, the budget deficit for the financial year 200506 has decreased to 8.6% from its previous level of 9.6%; although it mainly involves gains from the short-run privatization process rather than any fiscal improvement. Despite a consistent growth in the economy there is a steady rise in the number of unemployed people in Egypt. As of 2006 the total number of unemployed persons was 3.1 million people, and this rate is growing at an average rate of about 8%. High unemployment levels coupled with low public sector wages along with a rise in inflation have put considerable pressure on the poor. According to the Doing Business Survey of 2006, conducted by the World Bank, Egypt is better-off than other countries in the region in facilitating business. However, when compared to OECD countries, it has yet to make a significant impact. The introduction of a unified tax rate of 20% in 2005 on all corporate and personal incomes has drastically reduced the tax burden by about 50%. These reforms have augured well for the countrys business community. In spite of these reforms, several structural problems remain. Corruption is also high in Egypt with a rank of 70 among the 163 countries.
Economic Performance
Egypts economy has been witnessing steady growth since the early 1990s as a result of a series of macroeconomic reforms and assistance from the International Monetary Fund. The economy grew at a compound annual growth rate (CAGR) of 4.6% over the period 1990-2006, while the CAGR remained the same during the last five-year period as well. The Egyptian economy is continuing to attract new investments lured by the privatization and reform programs of the government. In 2006, the economy grew at 4.4% mainly due to the continuing privatization program and reforms, especially in the finance and trade sectors. The amount of net FDI inflows reached $5.4 billion in 2005, up from just $510 million in 2001. The authorities in Egypt had anticipation of a further rise in FDI of about 20% in 2006. Though inflation rose to 5.6% in 2006, up from 4.9% observed during the previous year, it remained relatively under control as compared to the 16% and above rates recorded in 2004. The services sector in Egypt is the largest sector and accounts for almost 50% of GDP and employs over 50% of the labor force. The major contributors to the services sector are the banking and finance and tourism sectors. Liberalization reforms in the 1990s saw the banking sector evolve into one comparable to international standards. In recent years, the financial sector has also undergone major restructuring with the consolidation of many small banks. In 2006 alone, the consolidation drive saw the total number of banks fall from 65 in 2005 to 40. This restructuring is likely to continue and the authorities expect the total number banks to come down to almost 34 in 2007. The tourism sector in Egypt is the largest in Africa and Egypt attracted almost 9 million foreign visitors in 2006, a rise of about 5.5% from 8.7 million visitors in 2005.
Egypt
One of the major sources of revenue for Egypt is the Suez canal link which is used as an international merchant trade route. The canal helps to cut the sailing duration of ships by almost 40% thereby saving cost and duration of transport between East Asia and Europe. The canal is Egypts major revenue earner with contributions to the tune of $5.5 million everyday. On an average, 8% of the worlds shipping traffic passes through this route. Egypt is self-sufficient in meeting its food requirements and the agricultural sector is a major export revenue generator for the economy. The sector employs 30% of the labor force and in 2006, contributed around 14.8% of GDP and accounted for 30% of Egypts commodity exports. Rice has remained a largest export crop since 2001 and in 2005 export values had more than doubled to $293 million from about $134 million in 2001. Other major agricultural commodities are cotton, potatoes and oranges. Agricultural activity in Egypt is possible only along the Nile river stretch as most other parts are barren. As of 2006, only 3.5% of Egypts land area can be cultivated. The industrial sector in Egypt contributes a significant 35.5% of Egypts GDP and comprises mainly of textiles, foodstuffs and beverages, furniture, mining, chemicals and metallurgy. In 2005, the foodstuff, beverage and tobacco segment contributed almost 33% of the total value of industrial production. This was followed by the chemical industry which accounted for 15% and textile, clothing and leather segments which added another 10%. The petroleum sector in Egypt is also huge and the authorities pin their hopes on this sector to help Egypt achieve self-sufficiency in meeting fuel requirements. The industry provides employment to almost 17% of the total Egyptian labor force. Most of the heavy industries in Egypt fall under the direct purview of the government as they fall under the public sector category.
Egypt
Table 1:
Real GDP (US$ billion) 1990-2006
Year
Real GDP (US$ billion)
Growth (%)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
62.5 65.3 68.6 71.3 74.6 78.4 82.7 86.0 91.3 96.2 99.6 102.8 107.0 111.4 117.0 122.8 128.2 4.5 5.1 3.9 4.6 5.1 5.5 4.0 6.1 5.4 3.5 3.2 4.1 4.1 5.0 5.0 4.4
Source: Datamonitor
DATAMONITOR
Egypt
Figure 2:
Real GDP (US$ billion) 1990-2006
140 120 Real GDP 1990-2006 (US$ billion) 100 80 60

'
7 6 5 4 3 2 1 0
19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06
Real GDP growth (%)
40 20 0
19 90
Year Real GDP 1990-2006 (US$ billion) Real GDP growth (%)
Source: Datamonitor
DATAMONITOR
Egypt
Table 2:
Real GDP Forecast (US$ billion) 2006-2010
Year
Real GDP (US$ billion)
Growth (%)
2006 2007 2008 2009 2010
128.2 133.9 139.8 145.9 152.3 4.4 4.4 4.4 4.4
Source: Datamonitor
DATAMONITOR
Figure 3:
Real GDP Forecast (US$ billion) 2006-2010
155 150 Real GDP forecast 2006-2010 (US$ billion) 145
5.0 4.5 4.0 3.5 Real GDP forecast growth (%)
140 135 130 125
3.0 2.5 2.0 1.5 1.0
120 115 2006 2007 2008 Year Real GDP forecast 2006-2010 (US$ billion) Real GDP forecast growth (%) 2009 2010
0.5 0.0
Source: Datamonitor
DATAMONITOR
Egypt
Table 3:
Real GDP, Population and Per Capita GDP Comparison, 2006
Countries
Real GDP (US$ billion) 2006
Population (million)
Per capita GDP (US$)
Egypt Saudi Arabia United Arab Emirates Qatar Jordan
128.2 236.9 100.7 27.4 11.6
78.9 27.0 2.6 0.9 5.9
1,626 8,768 38,688 30,931 1,966
Source: Datamonitor
DATAMONITOR
Table 4:
Real GDP CAGR 2002-2006 and Forecast CAGR 2006-2010 Comparison
Countries
CAGR 2002-2006
CAGR 2006-2010
Egypt Saudi Arabia United Arab Emirates Qatar Jordan
4.6 5.7 7.9 7.8 5.4
4.4 4.1 7.1 8.1 4.8
Source: Datamonitor
DATAMONITOR
Egypt
Figure 4:
Per Capita GDP, Real GDP CAGR 2002-2006 and Forecast CAGR 2006-2010 Comparison
10.0 9.0 8.0 7.0 CAGR 2006-2010 6.0 5.0 Egypt 4.0 3.0 2.0 1.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 CAGR 2002-2006 Bubble Size: Real GDP per capita 2006 (US$) Jordan Saudi Arabia UAE Qatar
Source: Datamonitor
DATAMONITOR
Egypt
Table 5:
Consumer Price Index Inflation 2002-2006
Year
CPI inflation (%)
2002 2003 2004 2005 2006
2.7 4.2 16.3 4.9 5.6
Source: Datamonitor
DATAMONITOR
Figure 5:
Consumer Price Index Inflation 2002-2006
18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2002 2003 2004 Year CPI inflation (%) 2005 2006
Source: Datamonitor
CPI inflation (%)
DATAMONITOR
Egypt
Table 6:
Annual average exchange rate - Local currency per US dollars 2002-2006
Year
Exchange rate
2002 2003 2004 2005 2006
4.64 5.89 6.22 5.81 5.78
Source: Datamonitor
DATAMONITOR
Figure 6:
Annual average exchange rate - Local currency per US dollars 2002-2006
6 Egypt-US exchange rate
0 2002 2003 2004 Year Annual average exchange rate 2005 2006
Source: Datamonitor
DATAMONITOR
Egypt
Table 7:
Foreign Direct Investment Net Inflows (US$ million) 2001-2005
Year
Net FDI inflow (US$ million)
Growth (%)
2001 2002 2003 2004 2005
510 647 237 2,154 5,367 26.9 -63.4 808.8 149.2
Source: Datamonitor
DATAMONITOR
Figure 7:
Foreign Direct Investment Net Inflows (US$ million) 2001-2005
6,000
900 800
5,000 Net FDI inflows (US$ million)
700 FDI net inflows growth (%) 600
4,000
500 400
3,000 300 2,000 200 100 1,000 0 -100 0 2001 2002 2003 Year Net FDI inflows (US$ million) FDI net inflows growth (%) 2004 2005 -200
Source: Datamonitor
DATAMONITOR
Egypt
Employment Trends
The total labor force in Egypt stood at 24.8 million in 2006 out of which almost 3.1 million people are unemployed. The unemployment rate, which stood at 12.5% in 2006, has remained high in Egypt averaging more than 10% over the last 10 years. The government has taken notice of the high unemployment levels and aims to provide close to 4.5 million jobs in the coming few years so as to reduce the unemployment rate. The target for the financial year 200607 is to generate approximately 650,000 jobs. The number of employees in the state administrative departments increased from 2.2 million in the 1980s to about 56 million in 200506. Consequently, the wage bill has increased from about 260 million in the 1980s to reach $7.9 billion in 200506. An increasing number of Egyptians are seeking employment abroad and by mid-2006, the number of people going abroad for work reached 7.8 million. Approximately 3.5 million people among those who went abroad received their work permit for the first time while the remaining had renewed their license. Gender bias in the Egyptian job market is high with only 22% of the labor force consisting of women. In 2006, the total female labor force in Egypt stood at 5.3 million, showing a marginal rise from the 5.2 million in 2005. However, the percentage of females in the total labor force has been on the decline since 2004.
Egypt
Table 8:
Employed Population 2002-2006
Year
Employed population
Growth (%)
2002 2003 2004 2005 2006
19,834,861 20,250,019 20,816,195 21,290,691 21,749,798 2.1 2.8 2.3 2.2
Source: Datamonitor
DATAMONITOR
Figure 8:
Employed Population 2002-2006
22,000,000
3.0
21,500,000
2.5 Employed population growth (%)
Employed population
21,000,000 2.0 20,500,000 1.5 20,000,000 1.0 19,500,000 0.5
19,000,000
18,500,000 2002 2003 2004 Year Employed population Employed population growth (%) 2005 2006
0.0
Source: Datamonitor
DATAMONITOR
Egypt
Table 9:
Unemployed Population 2002-2006
Year
Unemployed population
Growth (%)
2002 2003 2004 2005 2006
2,272,652 2,548,921 2,670,429 2,878,558 3,098,594 12.2 4.8 7.8 7.6
Source: Datamonitor
DATAMONITOR
Figure 9:
Unemployed Population 2002-2006
3500000
14
3000000
12 Unemployed population growth (%)
Unemployed population
2500000
10
2000000
1500000
1000000
500000
0 2002 2003 2004 Year Unemployed population Unemployed population growth (%) 2005 2006
Source: Datamonitor
DATAMONITOR
Egypt
Table 10:
Unemployment Rate 2002-2006
Year
Percentage unemployed
2002 2003 2004 2005 2006
10.3 11.2 11.4 11.9 12.5
Source: Datamonitor
DATAMONITOR
Figure 10:
Unemployment Rate 2002-2006
14.0
12.0
Unemployment rate (%)
10.0
8.0
6.0
4.0
2.0
0.0 2002 2003 2004 Year Unemployment rate (%) 2005 2006
Source: Datamonitor
DATAMONITOR
Egypt
Table 11:
Female Labor Force 2002-2006
Year
Female labor force
Growth (%)
2002 2003 2004 2005 2006
4,941,462 5,171,295 5,114,158 5,254,233 5,380,918 4.7 -1.1 2.7 2.4
Source: Datamonitor
DATAMONITOR
Figure 11:
Female Labor Force 2002-2006
5,500,000 5,400,000 5,300,000 Female labor force 5,200,000
4 Female labor force growth (%)
2 5,100,000 1 5,000,000 4,900,000 4,800,000 4,700,000 2002 2003 2004 Year Female labor force Female labor force growth (%) 2005 2006 0
-1
-2
Source: Datamonitor
DATAMONITOR
Egypt
Table 12:
Percentage of Labor Force that is Female 2002-2006
Year
Labor force that is female (%)
2002 2003 2004 2005 2006
22.35 22.68 21.77 21.74 21.65
Source: Datamonitor
DATAMONITOR
Figure 12:
Percentage of Labor Force that is Female 2002-2006
22.8 22.6 22.4 22.2 22.0 21.8 21.6 21.4 21.2 21.0 2002 2003 2004 Year Percentage of labor force that is female 2005 2006
Source: Datamonitor
Percentage of labor force that is female
DATAMONITOR
Egypt
Trade
The total exports of Egypt rose from $13.8 billion in 200405 to $18 billion in 200506 and it is expected to rise further to $24.5 billion in the next fiscal year. Imports have been higher than exports for the last five years with the total import bill standing at $30.4 billion in 200506. The authorities expected the total imports to rise to $38 billion in the fiscal year 2006 07. Egypts major exports during 200506 comprised of fuel (56.5% of total imports), finished goods (28%), semi-manufactured goods (6.4%), and cotton (almost 1%). Commodities that were imported the most included machineries and equipments (26% of total imports), semi-finished goods (27.7%), raw materials (17%), consumption goods (11.6%), and fuel (8.5%) among others. Egypt has maintained good trade relations with the European Union (EU) nations, which are its largest export and import partners. In 200506, Egypt imported almost 37% of its total imports and exported 37.7% of its total exports to the EU. The US comes next having supplied 18.8% of the total Egyptian imports while it consumed 30.6% of its total exports in 2005 06. Compared to the Arab nations, whose share stood at 9%, Asian countries (excluding Arab countries) have a greater share in the total imports of Egypt at 14.6%.
Prospects
Egypts economy has grown at a compound annual growth rate (CAGR) of 4.6% from 200206 shedding light on the governments macroeconomic reforms and the increase in business confidence of investors. This has raised the expectations of the FDI coming into Egypt in 2006, which according to the authorities estimates would increase by about 20% over $5.4 billion it received in 2005. The authorities have maintained good trade relations with the EU, which is its largest trade partner, while simultaneously prioritizing the need to strengthen ties with the other emerging Asian economies. The rising share of emerging economies in global trade would help Egypt in enhancing its trade prospects. Although Egypt has been incurring trade deficits, its imports largely comprises of investment capital comprising of machineries and equipment, which constitute 26% of its total imports. The imports of these capital goods will help Egypt to produce more in the future while reducing the cost of production. Many smaller banks in Egypt have been merged to form larger entities, which enhances their financial capability. More of such consolidation is planned for the current financial year by the authorities in order to further strengthen Egypts financial sector, which is crucial for economic development. Despite apprehensions about terrorism, especially after the backlash against Islamic countries post September 11 terrorist attacks in 2001, the tourism sector is fast growing and tourist arrivals in Egypt witnessed a 5.5% increase in 2006. Tourism sector in Egypt is fast emerging as a major source of revenue. The government must however immediately iron out some of the most pressing problems: unemployment levels of over 12%; subsidies that put increased pressure on the budget deficit which stands high at 8.6% as of 200506; and government regulation on heavy industries. Over the medium-term, from 200610, the CAGR forecasted for Egypt is at 4.4% which is consistent with its overall growth in the past.
Egypt
SOCIAL ENVIRONMENT
SOCIAL ENVIRONMENT Overview

As of 2006, Egypts total population stood at 78.8 million. Out of this approximately 90% are Muslims (predominantly Sunni) while the remaining are Christians (predominantly native Egyptian Christians known as Copts). Most of the population inhabits the arable land area near the Nile River and almost half of Egypts population is urban, living in the densely populated cities such as Cairo and Alexandria. One of Egypts biggest socio-economic problems is the high unemployment rate which has been growing over the years. The unemployment rate, which has averaged more than 10% over a decade, increased to over 12% in 200506. With the population growing at 1.8% per annum, the economic growth of 4.4% is not enough to curb the spiraling unemployment rate. While the average growth in employed population during the last five-year period (20022006) stood at 2.3%, the rise in unemployed population has been much higher during the same period averaging around 8%. The high rates of unemployment and population growth coupled with meager wages in most of the public sector companies contribute to the poverty levels, with close to 20% of Egypts population below the poverty line. A big challenge for Egypt in the near future will be to create jobs, as the population within the 2045 age-group constitutes around 65% of the total population. The education indicators of Egypt project a poor image of the education system. Only about 58% of the population is literate and there is a stark difference in the literacy rates for males and females. Male literacy rate is around 68%, while female literacy rate is just about 47%, indicative of gender disparity. The National Council for Women (NCW), a nodal government agency that works for the welfare of women in Egypt, aims to completely eradicate illiteracy among females by 2015. The healthcare system in Egypt is underdeveloped with only around 29% of the population covered by governmental health insurance. Egypts public healthcare system is under-funded, with the government committing only around $1 billion in 200506 for upgrading the healthcare sector, which represents a meager 2.7% of the total state budget. The ministry of health is the largest institutional financier providing free healthcare services in Egypt but its reach is limited. Almost 65% of the Egyptian people pay for their own insurance through private and other health insurance organizations. The total spending on healthcare in Egypt is only about 4% of its GDP and according to the US department of Commerce, per capita health expenditure in Egypt stood at $48 per annum in 2006.
Egypt
Table 13:
Total Population and Percentage that is Male and Female 2002-2006
Year
Total Population
Male population (%)
Female population (%)
2002 2003 2004 2005 2006
73,312,559 74,718,797 76,117,421 77,505,756 78,887,007
50.46 50.46 50.45 50.44 50.43
49.54 49.54 49.55 49.56 49.57
Source: Datamonitor
DATAMONITOR
Table 14:
Total Number of Doctors and Doctors per 1000 Population 2002-2006
Year
Number of doctors
Doctors per 1000 population
2002 2003 2004 2005 2006
33,872 38,485 44,291 26,946 28,870
0.46 0.52 0.58 0.35 0.37
Source: Datamonitor
DATAMONITOR
Egypt
Table 15:
Population by Age and Gender (thousands) 2006
Age
Male
Female
Male (%)
Female (%)
0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+
4,475 4,492 4,206 4,049 3,734 3,438 3,139 2,730 2,226 1,899 1,626 1,310 952 685 457 244 125
4,264 4,278 4,006 3,856 3,622 3,329 2,867 2,531 2,240 1,957 1,678 1,387 1,053 806 589 365 273
51.2 51.2 51.2 51.2 50.8 50.8 52.3 51.9 49.8 49.2 49.2 48.6 47.5 45.9 43.7 40.0 31.4
48.8 48.8 48.8 48.8 49.2 49.2 47.7 48.1 50.2 50.8 50.8 51.4 52.5 54.1 56.3 60.0 68.6
Source: Datamonitor
DATAMONITOR
Egypt
Figure 13:
Population by Age and Gender (as a percentage of age-group) 2006
80+ 75-79 70-74 65-69 60-64 55-59 50-54
Age groups
45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4
Male
Female
Source: Datamonitor
DATAMONITOR
Egypt
Table 16:
Fertility Rates 1997-2006
Year
Fertility rates (%)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
3.55 3.53 3.39 3.24 3.17 3.10 3.02 2.95 2.88 2.83
Source: Datamonitor
DATAMONITOR
Figure 14:
Fertility Rates 1997-2006
4.00 3.50 3.00 Fertility rate (%) 2.50 2.00 1.50 1.00 0.50 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year Fertility rate (%)
Source: Datamonitor
DATAMONITOR
Egypt
TECHNOLOGICAL ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT Overview

To create more jobs for the youth, the state supports the development of communication and information services by encouraging foreign and local investors to invest in these services. The companies that operated in the Information, Communication and Technology sector (ICT) in Egypt have increased substantially from 266 in 1999 to about 1817 by mid2006. In order to bridge the gap between rural and urban connectivity, a comprehensive service fund for providing telephone services was established in mid-2006. The telephone density in Egypt has increased to about 15% in 2006 while the total telephone exchange capacity increased to 12.9 million lines in 2006 compared to 6.4 million lines in 1999. The total number of telephone subscribers in Egypt in 2006 stood at around 12.1 million; a rise from 10.7 million in the previous year. The average growth rate of fixed-line telephone subscribers in Egypt during the period 200206 stood at 11.9%. The national project for technology development held in 1999 aimed at making Egypt a main base for the information industry and a producer of sophisticated technological components. It also laid out plans to promote usage of computers and internet services throughout the country. Companies that operate in the internet space in Egypt have gone up from 20 in 1999 to almost 85 in 2006. There has been a remarkable rise in the number of broadband subscribers over the last few years with annual average growth in subscribers of about 236.9% during the period 20022006. The number of broadband subscribers in Egypt in 2006 stood at 237,720.
Table 17:
Fixed-line telephones 2002-2006
Year
Number of fixed line telephones
Population per fixed line telephone
2002 2003 2004 2005 2006
7,737,275 8,736,250 9,464,540 10,706,551 12,104,609
9.5 8.6 8.0 7.2 6.5
Source: Datamonitor
DATAMONITOR
Egypt
Table 18:
Broadband Internet Subscribers 2002-2006
Year
Subscribers
Growth (%)
2002 2003 2004 2005 2006
2,943 4,850 29,307 69,816 237,720 64.8 504.3 138.2 240.5
Source: Datamonitor
DATAMONITOR
Figure 15:
Broadband Internet Subscribers 2002-2006
250000
600
Broadband inetrnet subscribers growth (%)
Broadband internet subscribers
200000
500
400 150000 300 100000 200 50000
100
0 2002 2003 2004 Year Broadband internet subscribers Broadband internet subscribers growth (%) 2005 2006
Source: Datamonitor
DATAMONITOR
Egypt
Table 19:
Mobile Phones per 100 Population 2002-2006
Year
Mobile phones per 100 population
Growth (%)
2002 2003 2004 2005 2006
6.1 7.8 10.0 17.6 24.6 26.6 29.4 75.1 40.0
Source: Datamonitor
DATAMONITOR
Figure 16:
Mobile Phones per 100 Population 2002-2006
30.0
80 Mobile phones per 100 population growth (%) 70
Mobile phones per 100 population
25.0 60 20.0 50 15.0 40 30 10.0 20 5.0 10 0.0 2002 2003 2004 Year Mobile phones per 100 population Mobile phones per 100 population growth (%) 2005 2006 0
Source: Datamonitor
DATAMONITOR
Egypt
APPENDIX
APPENDIX Ask the analyst

DATAMONITORs Country Analysis Practice consists of a team of economists, analysts and researchers, all with expertise in their given fields. For any questions or comments about this report you can contact the author directly. Author: Suvishesh Valsan E-mail: countryanalysis@datamonitor.com
Datamonitor consulting
We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you have further requirements, Datamonitors consulting team may be able to help you. For more information about Datamonitors consulting capabilities, please contact us directly at consulting@datamonitor.com.
Disclaimer
All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.
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COUNTRY PROFILES

DMER0002/ Published 05/2007 Page 1

DMER0002/ Published 05/2007 Page 2

DMER0002/ Published 05/2007 Page 3

GDP per capita

Source: CIA The World Factbook

DMER0002/ Published 05/2007 Page 4

Elections and Government Make-up

DMER0002/ Published 05/2007 Page 5

DMER0002/ Published 05/2007 Page 6

Hosni Mubarak, President of Egypt

DMER0002/ Published 05/2007 Page 7

Key Policy Areas

DMER0002/ Published 05/2007 Page 8

DMER0002/ Published 05/2007 Page 9

ECONOMIC ENVIRONMENT Summary

DMER0002/ Published 05/2007 Page 10

DMER0002/ Published 05/2007 Page 11

Real GDP (US$ billion) 1990-2006

Real GDP (US$ billion)

DMER0002/ Published 05/2007 Page 12

Real GDP (US$ billion) 1990-2006

140 120 Real GDP 1990-2006 (US$ billion) 100 80 60

Real GDP growth (%)

DMER0002/ Published 05/2007 Page 13

Real GDP Forecast (US$ billion) 2006-2010

Real GDP (US$ billion)

2006 2007 2008 2009 2010

128.2 133.9 139.8 145.9 152.3 4.4 4.4 4.4 4.4

Real GDP Forecast (US$ billion) 2006-2010

155 150 Real GDP forecast 2006-2010 (US$ billion) 145

5.0 4.5 4.0 3.5 Real GDP forecast growth (%)

140 135 130 125

3.0 2.5 2.0 1.5 1.0

DMER0002/ Published 05/2007 Page 14

Real GDP, Population and Per Capita GDP Comparison, 2006

Real GDP (US$ billion) 2006

Per capita GDP (US$)

Egypt Saudi Arabia United Arab Emirates Qatar Jordan

128.2 236.9 100.7 27.4 11.6

78.9 27.0 2.6 0.9 5.9

1,626 8,768 38,688 30,931 1,966

Real GDP CAGR 2002-2006 and Forecast CAGR 2006-2010 Comparison

Egypt Saudi Arabia United Arab Emirates Qatar Jordan

4.6 5.7 7.9 7.8 5.4

4.4 4.1 7.1 8.1 4.8

DMER0002/ Published 05/2007 Page 15

DMER0002/ Published 05/2007 Page 16

Consumer Price Index Inflation 2002-2006

CPI inflation (%)

2002 2003 2004 2005 2006

2.7 4.2 16.3 4.9 5.6

Consumer Price Index Inflation 2002-2006

CPI inflation (%)

DMER0002/ Published 05/2007 Page 17

Annual average exchange rate - Local currency per US dollars 2002-2006

2002 2003 2004 2005 2006

4.64 5.89 6.22 5.81 5.78

Annual average exchange rate - Local currency per US dollars 2002-2006

6 Egypt-US exchange rate

DMER0002/ Published 05/2007 Page 18

Foreign Direct Investment Net Inflows (US$ million) 2001-2005

Net FDI inflow (US$ million)