Egypt Pest Analysis Data Monitor May 07

Egypt DMER0002/ Published 05/2007

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

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, Egypt’s real GDP has been growing at a consistent rate for over a decade averaging 4.6% during

the period 1990–2006. 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 2006–10 stands at 4.4%.

COUNTRY PROFILES

Egypt A PEST Overview

Reference Code: DMER0002

Publication Date: May 2007

Overview



TABLE OF CONTENTS

Overview 1 Catalyst 1 Summary 1

KEY FACTS 3 POLITICAL ENVIRONMENT 5

Summary 5 Elections and Government Make-up 5 Political Landscape 7 Key Policy Areas 8

ECONOMIC ENVIRONMENT 10 Summary 10 Economic Performance 10 Employment Trends 20 Trade 26 Prospects 26

SOCIAL ENVIRONMENT 27 Overview 27

TECHNOLOGICAL ENVIRONMENT 32 Overview 32

APPENDIX 35 Ask the analyst 35 Datamonitor consulting 35 Disclaimer 35

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

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 D A T A M O N I T O R

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

president’s 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 Mubarak’s 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 vice-

president(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. Egypt’s 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.




The legislative branch consists of the People’s 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 People’s 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 People’s 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.




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 Egypt’s 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 People’s 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 vice-

president(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.




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 2005–06, 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 2006–07.

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 2006–07 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 region’s 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. Egypt’s 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.




Despite a rise in government expenditure, the fiscal deficit of Egypt stood at an estimated 8.6% of GDP in FY2005–06; 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.

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 1990–2002, and growth has remained at similar levels in the last five years. Although President Hosni Mubarak’s

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 2005–06 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 country’s 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

Egypt’s economy has been witnessing steady growth since the early 1990’s 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 1990’s 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.




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 Egypt’s major revenue earner with contributions to the tune of $5.5 million

everyday. On an average, 8% of the world’s 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 Egypt’s 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 Egypt’s land area can be cultivated.

The industrial sector in Egypt contributes a significant 35.5% of Egypt’s 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.




Table 1: Real GDP (US$ billion) 1990-2006

Year Real GDP (US$ billion) Growth (%)

1990 62.5

1991 65.3 4.5

1992 68.6 5.1

1993 71.3 3.9

1994 74.6 4.6

1995 78.4 5.1

1996 82.7 5.5

1997 86.0 4.0

1998 91.3 6.1

1999 96.2 5.4

2000 99.6 3.5

2001 102.8 3.2

2002 107.0 4.1

2003 111.4 4.1

2004 117.0 5.0

2005 122.8 5.0

2006 128.2 4.4

Source: Datamonitor D A T A M O N I T O R




Figure 2: Real GDP (US$ billion) 1990-2006

0

20

40

60

80

100

120

140

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Year

Rea

l GD

P 19

90-2

006

(US$

bill

ion)

0

1

2

3

4

5

6

7

Real G

DP grow

th (%)

Real GDP 1990-2006 (US$ billion) Real GDP growth (%)

'





Table 2: Real GDP Forecast (US$ billion) 2006-2010

Year Real GDP (US$ billion) Growth (%)

2006 128.2

2007 133.9 4.4

2008 139.8 4.4

2009 145.9 4.4

2010 152.3 4.4


Figure 3: Real GDP Forecast (US$ billion) 2006-2010

115

120

125

130

135

140

145

150

155

2006 2007 2008 2009 2010

Year

Rea

l GD

P fo

reca

st 2

006-

2010

(US$

bi

llion

)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Real G

DP forecast grow

th (%)

Real GDP forecast 2006-2010 (US$ billion) Real GDP forecast growth (%)





Table 3: Real GDP, Population and Per Capita GDP Comparison, 2006

Countries Real GDP (US$ billion) 2006 Population (million) Per capita GDP (US$)

Egypt 128.2 78.9 1,626

Saudi Arabia 236.9 27.0 8,768

United Arab Emirates 100.7 2.6 38,688

Qatar 27.4 0.9 30,931

Jordan 11.6 5.9 1,966


Table 4: Real GDP CAGR 2002-2006 and Forecast CAGR 2006-2010 Comparison

Countries CAGR 2002-2006 CAGR 2006-2010

Egypt 4.6 4.4

Saudi Arabia 5.7 4.1

United Arab Emirates 7.9 7.1

Qatar 7.8 8.1

Jordan 5.4 4.8





Figure 4: Per Capita GDP, Real GDP CAGR 2002-2006 and Forecast CAGR 2006-2010 Comparison

Jordan

EgyptSaudi Arabia

Qatar

UAE

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

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$)

CA

GR

200

6-20

10





Table 5: Consumer Price Index Inflation 2002-2006

Year CPI inflation (%)

2002 2.7

2003 4.2

2004 16.3

2005 4.9

2006 5.6


Figure 5: Consumer Price Index Inflation 2002-2006

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2002 2003 2004 2005 2006

Year

CPI

infla

tion

(%)

CPI inflation (%)





Table 6: Annual average exchange rate - Local currency per US dollars 2002-2006

Year Exchange rate

2002 4.64

2003 5.89

2004 6.22

2005 5.81

2006 5.78


Figure 6: Annual average exchange rate - Local currency per US dollars 2002-2006

0

1

2

3

4

5

6

7

2002 2003 2004 2005 2006

Year

Egyp

t-US

exch

ange

rate

Annual average exchange rate





Table 7: Foreign Direct Investment Net Inflows (US$ million) 2001-2005

Year Net FDI inflow (US$ million) Growth (%)

2001 510

2002 647 26.9

2003 237 -63.4

2004 2,154 808.8

2005 5,367 149.2


Figure 7: Foreign Direct Investment Net Inflows (US$ million) 2001-2005

0

1,000

2,000

3,000

4,000

5,000

6,000

2001 2002 2003 2004 2005

Year

Net

FD

I inf

low

s (U

S$ m

illio

n)

-200

-100

0

100

200

300

400

500

600

700

800

900

FDI net inflow

s growth (%

)

Net FDI inflows (US$ million) FDI net inflows growth (%)





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 2006–07 is to generate

approximately 650,000 jobs. The number of employees in the state administrative departments increased from 2.2 million in

the 1980’s to about 56 million in 2005–06. Consequently, the wage bill has increased from about 260 million in the 1980s to

reach $7.9 billion in 2005–06.

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.




Table 8: Employed Population 2002-2006

Year Employed population Growth (%)

2002 19,834,861

2003 20,250,019 2.1

2004 20,816,195 2.8

2005 21,290,691 2.3

2006 21,749,798 2.2


Figure 8: Employed Population 2002-2006

18,500,000

19,000,000

19,500,000

20,000,000

20,500,000

21,000,000

21,500,000

22,000,000

2002 2003 2004 2005 2006

Year

Empl

oyed

pop

ulat

ion

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Employed population grow

th (%)

Employed population Employed population growth (%)





Table 9: Unemployed Population 2002-2006

Year Unemployed population Growth (%)

2002 2,272,652

2003 2,548,921 12.2

2004 2,670,429 4.8

2005 2,878,558 7.8

2006 3,098,594 7.6


Figure 9: Unemployed Population 2002-2006

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

2002 2003 2004 2005 2006

Year

Une

mpl

oyed

pop

ulat

ion

0

2

4

6

8

10

12

14

Unem

ployed population growth (%

)

Unemployed population Unemployed population growth (%)





Table 10: Unemployment Rate 2002-2006

Year Percentage unemployed

2002 10.3

2003 11.2

2004 11.4

2005 11.9

2006 12.5


Figure 10: Unemployment Rate 2002-2006

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2002 2003 2004 2005 2006

Year

Une

mpl

oym

ent r

ate

(%)

Unemployment rate (%)





Table 11: Female Labor Force 2002-2006

Year Female labor force Growth (%)

2002 4,941,462

2003 5,171,295 4.7

2004 5,114,158 -1.1

2005 5,254,233 2.7

2006 5,380,918 2.4


Figure 11: Female Labor Force 2002-2006

4,700,000

4,800,000

4,900,000

5,000,000

5,100,000

5,200,000

5,300,000

5,400,000

5,500,000

2002 2003 2004 2005 2006

Year

Fem

ale

labo

r for

ce

-2

-1

0

1

2

3

4

5

Female labor force grow

th (%)

Female labor force Female labor force growth (%)





Table 12: Percentage of Labor Force that is Female 2002-2006

Year Labor force that is female (%)

2002 22.35

2003 22.68

2004 21.77

2005 21.74

2006 21.65


Figure 12: Percentage of Labor Force that is Female 2002-2006

21.0

21.2

21.4

21.6

21.8

22.0

22.2

22.4

22.6

22.8

2002 2003 2004 2005 2006

Year

Perc

enta

ge o

f lab

or fo

rce

that

is fe

mal

e

Percentage of labor force that is female





Trade

The total exports of Egypt rose from $13.8 billion in 2004–05 to $18 billion in 2005–06 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 2005–06. The authorities expected the total imports to rise to $38 billion in the fiscal year 2006–

07.

Egypt’s major exports during 2005–06 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 2005–06, 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

Egypt’s economy has grown at a compound annual growth rate (CAGR) of 4.6% from 2002–06 shedding light on the

government’s 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 Egypt’s 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 2005–06; and government

regulation on heavy industries. Over the medium-term, from 2006–10, the CAGR forecasted for Egypt is at 4.4% which is

consistent with its overall growth in the past.

SOCIAL ENVIRONMENT



SOCIAL ENVIRONMENT

Overview

As of 2006, Egypt’s 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 Egypt’s population is urban, living in the densely

populated cities such as Cairo and Alexandria.

One of Egypt’s 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 2005–06. 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 (2002–2006) 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 Egypt’s population below the poverty line. A big challenge for Egypt in the near future

will be to create jobs, as the population within the 20–45 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. Egypt’s public healthcare system is under-funded, with the government committing only around $1 billion in

2005–06 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.



Table 13: Total Population and Percentage that is Male and Female 2002-2006

Year Total Population Male population (%) Female population (%)

2002 73,312,559 50.46 49.54

2003 74,718,797 50.46 49.54

2004 76,117,421 50.45 49.55

2005 77,505,756 50.44 49.56

2006 78,887,007 50.43 49.57


Table 14: Total Number of Doctors and Doctors per 1000 Population 2002-2006

Year Number of doctors Doctors per 1000 population

2002 33,872 0.46

2003 38,485 0.52

2004 44,291 0.58

2005 26,946 0.35

2006 28,870 0.37




Table 15: Population by Age and Gender (thousands) 2006

Age Male Female Male (%) Female (%)

0-4 4,475 4,264 51.2 48.8

5-9 4,492 4,278 51.2 48.8

10-14 4,206 4,006 51.2 48.8

15-19 4,049 3,856 51.2 48.8

20-24 3,734 3,622 50.8 49.2

25-29 3,438 3,329 50.8 49.2

30-34 3,139 2,867 52.3 47.7

35-39 2,730 2,531 51.9 48.1

40-44 2,226 2,240 49.8 50.2

45-49 1,899 1,957 49.2 50.8

50-54 1,626 1,678 49.2 50.8

55-59 1,310 1,387 48.6 51.4

60-64 952 1,053 47.5 52.5

65-69 685 806 45.9 54.1

70-74 457 589 43.7 56.3

75-79 244 365 40.0 60.0

80+ 125 273 31.4 68.6




Figure 13: Population by Age and Gender (as a percentage of age-group) 2006

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+

Age

gro

ups

Male Female




Table 16: Fertility Rates 1997-2006

Year Fertility rates (%)

1997 3.55

1998 3.53

1999 3.39

2000 3.24

2001 3.17

2002 3.10

2003 3.02

2004 2.95

2005 2.88

2006 2.83


Figure 14: Fertility Rates 1997-2006

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Fert

ility

rate

(%)

Fertility rate (%)


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 mid-

2006. 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 2002–06 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 2002–2006. 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 7,737,275 9.5

2003 8,736,250 8.6

2004 9,464,540 8.0

2005 10,706,551 7.2

2006 12,104,609 6.5




Table 18: Broadband Internet Subscribers 2002-2006

Year Subscribers Growth (%)

2002 2,943

2003 4,850 64.8

2004 29,307 504.3

2005 69,816 138.2

2006 237,720 240.5


Figure 15: Broadband Internet Subscribers 2002-2006

0

50000

100000

150000

200000

250000

2002 2003 2004 2005 2006

Year

Bro

adba

nd in

tern

et s

ubsc

riber

s

0

100

200

300

400

500

600

Broadband inetrnet subscribers grow

th (%

)

Broadband internet subscribers Broadband internet subscribers growth (%)




Table 19: Mobile Phones per 100 Population 2002-2006

Year Mobile phones per 100 population Growth (%)

2002 6.1

2003 7.8 26.6

2004 10.0 29.4

2005 17.6 75.1

2006 24.6 40.0


Figure 16: Mobile Phones per 100 Population 2002-2006

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2002 2003 2004 2005 2006

Year

Mob

ile p

hone

s pe

r 100

pop

ulat

ion

0

10

20

30

40

50

60

70

80

Mobile phones per 100 population grow

th (%

)

Mobile phones per 100 population Mobile phones per 100 population growth (%)


APPENDIX



APPENDIX

Ask the analyst

DATAMONITOR’s 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: [email protected]

Datamonitor consulting

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Documents

Egypt Pest Analysis Data Monitor May 07