Egypt

IN 2007/08 EGYPT’S ECONOMY GREW by 7.2 per cent. The prime engines of this robust growth were industry, tourism and revenues from the Suez Canal. Foreign direct investment (FDI) inflows also reached a new high of USD 13.2 billion (US dollars), more than triple the level in 2004/05. According to the World Investment Report 2008, Egypt is the top FDI recipient in North Africa and the second largest in Africa. On the demand side, growth was led by significant increases in consumption and investment. In 2007/08, implemented investments recorded real annual growth of 15.5 per cent, whereas total private and public consumption grew by 5.3 per cent. Rising oil and food prices increased inflation sharply and lowered real incomes, but boosted exports of oil and natural gas.
In the context of the global financial turbulence and the deteriorating international economic outlook, economic growth is expected to slow to 4.3 per cent in 2008/09 and to 4 per cent in 2009/10. The global recession will spill over to Egypt through decreases in exports, tourism revenues, Suez Canal revenues and workers’ remittances.

Egypt’s strong growth is the fruit of an ambitious market-oriented reform programme, with substantial price liberalisation and privatisation of state-owned enterprises. The international economic crisis may delay reforms, however. Egypt has been making tremendous efforts to reduce poverty, yet regional disparities in poverty and other social indicators remain a major concern.

Increased world prices for energy, minerals and basic food commodities in 2007/08 had mixed effects on the Egyptian economy, given that Egypt is a net exporter of oil and natural gas as well as some agricultural commodities. While export revenues rose, higher prices adversely affected much of the population, particularly lower-income groups. Real GDP growth continued its upward trend to reach a high of 7.2 per cent in 2007/08, up from 6.8 per cent in 2005/06 and 7.1 per cent in 2006/07. The main sectors contributing to this growth in 2007/08 were manufacturing, extractive industries, Suez Canal revenues and tourism.

The world financial crisis is expected to slow economic growth in Egypt to 4.3 per cent in 2008/09 and 4 per cent in 2009/10. FDI inflows are likely to decline and domestic investors to become more cautious. Tourism receipts and workers’ remittances are expected to be negatively affected as well, and Suez Canal revenues will probably fall due to lower trade, lower oil prices and pirate attacks near Somalia. Consequently, both domestic and foreign sources of demand are likely to decline. As a stimulus to economic activity, the government plans to increase expenditure on infrastructure projects, while avoiding increases in recurrent expenditure.
Industrial production has been the leading source of growth in Egypt, contributing 33 per cent of GDP in 2007/08. Manufacturing is responsible for about half of this contribution, while the rest results from extractive industries, mainly petroleum and natural gas. Manufacturing output rose by 8 per cent in 2007/08, an improvement over the previous year. Investments in manufacturing grew 3.5 per cent to EGP 43 billion (Egyptian Pounds) during 2007/08, 22 per cent of total investment. According to the Industrial Development Authority, which oversees the government’s “1 000 Factory” and “Business Market” programmes, investments of EGP 19.7 billion led to the establishment of 700 factories with an absorptive capacity of 81 000 workers from the beginning of these programmes in 2005 to June 2008. During 2007/08, EGP 6.8 billion was invested to establish and/or expand 160 factories with employment capacity of about 24 000 jobs. Statistics on industrial land show that about 13.2 million m2 were allocated for small industries in 16 cities, and another 1.6 million m2 are currently under allocation.

Extractive industries contributed 17 per cent of GDP in 2007/08. The growth rate in these industries remained at 4 per cent, led by an 8.4 per cent increase in oil refining. Egypt is both an exporter and an importer of petroleum products, with an overall surplus in this sector. In 2007/08, total production of crude oil condensates, butagas and gases grew by 3.4 per cent to reach 75.8 million tonnes. Natural gas production rose by 4 per cent to about 43 million tonnes, while that of petrochemical products rose by 7 per cent to 37.2 million tonnes. Investments in the petroleum sector amounted to 17.6 per cent of total investment in 2007/08. Consumption of petroleum products and natural gas also increased, however (by 8 per cent to a level of 29.8 million tonnes for petroleum, and by 6 per cent to 29.7 million tonnes for natural gas), leaving export volumes largely unchanged. Nevertheless, as a result of higher prices, the trade surplus in oil and natural gas increased by 70 per cent to USD 10.2 billion in 2007/08, compared to USD 6 billion in 2006/07.

Although agriculture’s share in GDP was only 13 per cent in 2007/08, farming plays an important role in rural incomes and employment, as well as export revenues. The agricultural sector accounted for around 27 per cent of total employment in 2006/07, and agricultural commodities exports for 4 per cent of total exports. Production grew by 6.5 per cent in 2006/07, and land under cultivation by 4.8 per cent. During 2007/08, wheat production reached 8 million tonnes, representing between 55 and 60 per cent of domestic consumption. On 2 March 2008, the government raised fertiliser prices by 90 per cent in an initial step towards full price liberalisation. In April, a six-month ban on rice exports was instituted to divert supplies to the local market and lower domestic prices in the face of a global shortage. Rice production averages 4.6 million tonnes per year. Local consumption is about 3.2 million tonnes, leaving 1.4 million tonnes available for export. Other key agricultural exports include cotton, potatoes, citrus fruits, medicinal plants, groundnuts, onions, and preserved and dried vegetables.

Services’ contribution to GDP increased slightly from 51.6 per cent in 2005/06 to 52.4 per cent in 2007/08. Suez Canal revenues grew by 22.5 per cent to USD 5.1 billion in 2007/08 as the number of crossing vessels rose by 7.6 per cent to 5 371 and their net tonnage rose by 10.5 per cent to 226.1 million tonnes. Tourism accounts for 19.3 per cent of foreign currency earnings and 7 per cent of GDP. This sector has been booming, with its rate of growth accelerating from 13 per cent in 2006/07 to 24 per cent in 2007/08. The number of tourists increased almost 25 per cent to 12.3 million in 2007/08. The average length of stay also rose, from 9.8 nights in 2006/07 to 10.4 nights in 2007/08, so that the total number of tourist-nights increased by 32 per cent. Investments in tourism jumped 47.4 per cent in 2007/08 to EGP 5.6 billion.

The contribution of information and communication technology (ICT) to GDP was 3.9 per cent in 2007/08, with a growth rate of 14.2 per cent. Investments in ICT rose from EGP 9.6 billion in 2006/07 to EGP 14.7 billion in 2007/08, an increase of 53 per cent. In a country with a population of about 82 million people, the number of fixed-line subscribers reached 11.3 million in June 2008 and telephone capacity increased to 13.9 million lines. The number of mobile subscribers increased to 35.1 million, with a growth rate of 14 per cent during 2007/08, while Internet users rose by 39 per cent to 9.7 million. In June 2008, Egypt had 1 747 technology clubs, and there were 2 519 companies operating in the ICT sector. The sector employed a total of 164 900 people in 2007/08.

The construction sector contributed 4 per cent of GDP in 2007/08, after growing strongly by 14.8 per cent in 2007/08 and 15.8 per cent in 2006/07. This construction boom has led to increases in the prices of building materials, particularly steel and cement. In response, the government has taken several measures to contain these prices. In March 2008, export duties of EGP 160 per tonne on iron and of EGP 65 per tonne on steel products and cement were imposed. In May 2008, the government imposed another export tax of EGP 27 per tonne on cement and required steel companies to provide a weekly report on prices and quantities sold. The export duties on cement and steel were removed in October 2008.

Total investment increased in 2007/08 to almost EGP 200 billion from EGP 155 billion in the previous year, growing by 28.5 per cent in nominal terms, while the investment-to-GDP ratio rose to 22.3 per cent (20.9 per cent in 2006/07). Public investment accounted for one-third of capital formation in 2007/08 and grew by 12.7 per cent, reflecting investments in infrastructure and in human and social development. Private investment increased by 34.2 per cent in 2007/08. The commodities sector captured the largest share of implemented investments (53 per cent), followed by production services (26 per cent), and social services and public utilities (21 per cent). The distribution of investments by sector in 2007/08 was as follows: 22 per cent for manufacturing industry; 20 per cent for social services; 17 per cent for petroleum; 13 per cent for transportation and storage; 11 per cent for tourism and communications; 8 per cent for electricity and water; 4 per cent for agriculture; 3 per cent for trade and finance, and 2 per cent for building and construction. Total investment should continue to grow, but at lower levels than in 2007/08; the projected growth rates for 2008/09 and 2009/10 are 10.4 and 9.4 per cent respectively.

In 2007/08, the overall budget deficit increased to 6.8 per cent of GDP (5.6 per cent in 2006/07), due to increases in international food and oil prices and the ensuing increases in subsidies and social expenditures to cushion the blow to middle- and low-income consumers. On average, Egyptians spend some 45 per cent of their incomes on food, with this ratio rising to 60 per cent for the lowest quintile. Egypt has sought to reduce the level of these subsidies, particularly on petroleum.

Total revenue and grants increased by 22.9 per cent to EGP 221.4 billion, with tax revenues increasing by 20 per cent to EGP 137.2 billion and non-tax revenues rising by 27.8 per cent to EGP 82.7 billion. Total expenditures increased by 27 per cent to reach EGP 282.3 billion (31.5 per cent of GDP). The cost of subsidies surged by 56 per cent to EGP 84.2 billion. The largest subsidy is for petroleum products, which rose to EGP 72.1 billion in 2007/08, an increase of 68 per cent. Other categories of expenditure also increased: wages and salaries by 20.5 per cent to EGP 62.8 billion; interest payments by 5.9 per cent to EGP 50.5 billion; and public investment by 34.1 per cent to EGP 34.2 billion.

President Mubarak announced a 30 per cent rise in basic pay1 for government employees. New compensation policies also increased the minimum salaries received by 3.4 million local government employees2, who are among the lowest-paid government workers. A 20 per cent boost in monthly pensions (to a maximum of EGP 100) was also enacted. Distribution of rice, sugar and edible oil through the ration card system was expanded to new beneficiaries. The government relaxed the eligibility rules for ration cards, making 15 million more individuals eligible. This was the first time that new cardholders were added to the ration card registry since 1988.

In an effort to maintain fiscal discipline, cost-cutting measures were introduced on 5 May 2008: energy subsidies were scaled back by EGP 7.5 billion, sales taxes on cigarettes increased, fees on vehicle licences and cement quarries raised, and some income tax exemptions eliminated. The elimination of tax exemptions covers interest on treasury bills, profits of educational institutions and profits of energy-intensive free zone companies3, such as producers of petrochemicals, fertilisers and steel, as well as companies specialising in liquid natural gas (LNG) manufacturing, liquefaction and transportation.

To counter the expected economic slowdown resulting from the global recession, the government will provide a stimulus package of EGP 15 billion to support economic growth. Government spending will increase mainly for infrastructure projects (especially water, sanitation and transport) and export subsidies.

The government remains committed to reducing the budget deficit to 3 per cent of GDP by the end of 2010/11, but this will be difficult if the world economic slowdown continues. The deficit is projected to reach 7.1 per cent of GDP in 2008/09 and 6.7 per cent in 2009/10. For 2008/09, total revenue is projected at 25 per cent of GDP, whereas expenditures are expected to be 32.1 per cent of GDP.

A new value added tax planned for 2008/09 is expected to increase government revenue by around 2 per cent of GDP annually. Tax collection should also improve if the income tax amendments designed to promote taxpayer compliance are implemented. In 2008, the parliament approved modifications to the Real Estate Tax Law which are expected to boost public revenue.

In 2007/08, gross domestic public debt amounted to EGP 537.7 billion (60 per cent of GDP), compared to EGP 493.9 billion at the end of 2006/07 (66.3 per cent of GDP). Gross external debt reached USD 33.9 billion in 2007/08, as against USD 29.9 billion in the previous year. As a percentage of GDP, gross external debt decreased from 22.8 per cent in 2006/07 to 20.1 per cent in 2007/08.

Average annual consumer price inflation edged up to 11.7 per cent in 2007/08 from 11.2 per cent a year earlier. Year-over-year inflation increased from 8.6 per cent in June 2007 to 20.2 per cent in June 2008 and a peak of 23.6 per cent in August 2008, due to pass-through of commodity price increases (especially for energy) and pressures from buoyant domestic demand.

Inflation started to decelerate in September 2008 (21.5 per cent) and declined further to 14.3 per cent in January 2009, as the deepening world recession sent commodity prices tumbling. Lower import prices coupled with slower economic growth should reduce Egypt’s inflation rate to 13 per cent by the end of 2008/09.

The Central Bank of Egypt (CBE) tightened monetary policy during 2007/08. Beginning in February 2008, the CBE raised its overnight deposit and lending rates six times, by 50 basis points each time, to reach 11.5 per cent and 13.5 per cent respectively in September 2008. In November its rates were left unchanged, but following the observable decline in inflation to 14.3 per cent in January 2009, the CBE decided in February 2009 to adopt a less restrictive monetary policy and cut the overnight deposit rate by 100 basis points to 10.5 per cent.

In 2007/08 the overall balance of payments recorded a surplus of USD 5.4 billion, up from USD 5.3 billion in the previous year, due to a net inflow of USD 7.1 billion on the capital and financial account and a current account surplus of USD 0.9 billion. Although the trade deficit increased, a current account surplus was achieved due to positive balances in services and net unrequited transfers. The trade deficit grew by 43.7 per cent in 2007/08 to reach USD 23.4 billion. Merchandise exports rose by 33 per cent to USD 29.4 billion, with increases of 43.2 per cent in oil exports and 25 per cent in non-oil exports (mainly finished goods and raw materials). Merchandise imports grew by 37.8 per cent, to USD 52.8 billion, with oil imports more than doubling to USD 9.6 billion.

The surplus on services trade rose to USD 15 billion in 2007/08 from USD 11.5 billion in 2006/07. Services receipts rose by 33 per cent, with tourism revenues up 32.3 per cent to USD 10.8 billion and Suez Canal proceeds rising 23.6 per cent to USD 5.2 billion.

Net transfers grew by 32.2 per cent in 2007/08 to reach USD 9.3 billion. Net private transfers (remittances) increased by 33.8 per cent to USD 8.3 billion and official transfers by 20 per cent to USD 1 billion.
According to the United Nations Commission on Trade and Development’s World Investment Report 2008, Egypt is the largest FDI recipient in North Africa and the second-largest in Africa. FDI inflows increased to 8.5 per cent of GDP over the last two years, reaching USD 13.2 billion in 2007/08, with the petroleum sector accounting for USD 4.1 billion (31.1 per cent). Greenfield FDI totalled USD 6.4 billion (48.5 per cent of net inflows), acquisitions USD 2.3 billion (17.4 per cent) and purchases of real estate USD 0.4 billion (3 per cent).

Looking ahead, the external current account balance is expected to move from a small surplus in 2007/08 to a deficit in 2009/10 and 2010/11 as exports decline due to the world economic slowdown. FDI inflows are unlikely to prevent a moderate decline in international reserves. Considering the volatility of the financial markets, there is also a risk of further capital outflows.
The import coverage of international reserves decreased to 7.9 months during 2007/08 (8.9 months in 2006/07), as the increase in the import bill outpaced that of reserves. Net international reserves increased from USD 28.6 billion in 2006/07 to USD 34.6 billion in 2007/08 (up 21 per cent), while imports rose from USD 38.3 billion to USD 52.7 billion (an increase of 38 per cent).

Egypt has used a floating exchange rate system since 29 January 2003. In 2007/08, the Egyptian pound appreciated by 5 per cent against the US dollar from EGP 5.68 in July 2007 to EGP 5.35 in June 2008. The appreciation was larger in real terms, given Egypt’s relatively high inflation.

Foreign public debt increased by 13.4 per cent to reach USD 33.9 billion in June 2008 (20.1 per cent of GDP), compared to USD 29.9 billion (22.8 per cent of GDP) a year earlier. Only 7.4 per cent of total foreign debt is composed of liabilities with short-term maturity. Gross external public debt accounted for 63.9 per cent of total foreign debt by end of June 2008.

The government has sought to reduce barriers to business formation by lowering the paid-in minimum capital requirement by over 80 per cent and automating the tax registration system. In addition, the parliament approved the creation of economic courts in the fourth quarter of 2007/08. These courts are intended to resolve investment and commercial disputes rapidly. In May 2008 the insurance law was amended to strengthen the role of the Egyptian Insurance Supervisory Authority, to allow for banks’ involvement in marketing of insurance products and to require companies to specialise in either life insurance or property insurance.

During the last four years, Egypt has pursued banking reforms aimed at encouraging mergers and acquisitions, restructuring state-owned banks, addressing the problem of non-performing loans and developing the CBE’s regulatory and supervisory role. Significant progress has been achieved in divestiture of public ownership in banks and consolidation of the banking system; the number of banks decreased from 57 in 2004 to 33 in 2008. In 2006, the government sold its majority stake in Bank of Alexandria, previously one of the four main state-owned banks. In 2007, it announced that Banque du Caire, another state-owned bank, would be sold, but the auction of up to 67 per cent of its shares was cancelled in June 2008, as bids were too low. At the time of writing, the global financial crisis has had only a limited impact on the Egyptian banking system. The equity market, in contrast, has suffered great volatility and, like other emerging markets, dropped sharply in 2008 (-31.7 per cent).

Egypt’s strong economic growth is partly due to bold liberalisation of the economy, including privatisation and reduction of subsidies. Several measures have been taken in recent years to reduce energy subsidies. In September 2007, fuel oil prices were doubled to EGP 1 000 per tonne, and the price of natural gas for energy-intensive industries was adjusted to international levels over three phases ending in 2009, while subsidies for non-energy-intensive industries are to continue until 2013. The government has decided to keep energy prices (natural gas and electricity) unchanged for most industrial users until the end of 2009. For energy-intensive industries (fertilisers, cement, steel, aluminium and ceramics manufacturing), however, electricity prices were raised in July 2008 as follows: by 22 per cent for extra-high voltage users to EGP 0.217 per kilowatt hour (kWh), by 18 per cent for high-voltage consumers to EGP 0.255 per kWh and by 13 per cent for medium-voltage users to EGP 0.334 per kWh.

Targeting of food subsidies has not been very effective: the bottom quintile receives only 17 per cent of the total food subsidy, while as much as 21 per cent accrues to the top quintile. The government intends to improve targeting of subsidies to low-income groups, introduce automatic adjustment mechanisms for administered prices and strengthen transfer programmes to assist the most vulnerable groups.

 

Egypt uses state-of-the-art technology in its telecommunications infrastructure. For the fixed-line network, the technologies include copper network, fibre-optic synchronous digital hierarchy (SDH) and dense wavelength division multiplexing (DWDM), and submarine cables. The mobile networks use global system for mobile communication (GSM), third-generation (3G), WiFi, wireless local loop (WLL) and satellite technologies. For Internet, very small aperture terminal (VSAT), asynchronous digital subscriber line (ADSL), cable, fibre-optic and WiFi technologies are all being used. The fixed-line incumbent, Telecom Egypt (TE), is required to share infrastructure with other licensed operators through leases and interconnection agreements. TE is 80 per cent owned by the government.
TE had 11.3 million fixed-line subscribers as of June 2008. The number of mobile subscribers shot up from 7 million in 2005 to 35.1 million in 2008, with a penetration rate of 47 per cent. Egypt’s Free Internet Initiative and broadband connectivity programmes have helped make Internet access easier and more affordable. As a result, the number of users increased from 0.65 million in 2000 to 11.3 million in June 2008, while Internet penetration rose from 1 to 15 per cent over the same period. Broadband is increasingly replacing dial-up connections, with a monthly cost of USD 8 for ADSL. The number of ADSL subscribers reached 536 290 with 3.8 million users in June 2008. The country’s international Internet bandwidth grew by 107 per cent during the year, reaching 24 522 megabytes per second by the end of June.

Since the late 1990s, the government has made the deregulation and development of the telecommunications sector a priority. Liberalisation of mobile services in 2006 led to the establishment of two mobile operators, and a third was licensed in 2007. Three 3G licenses have also been granted, and 3G services were introduced in 2007, based on high-speed packet access (HSPA) technology offering speeds surpassing those of conventional ADSL services. A law on data protection, privacy and cybercrime has been drafted and may soon be considered by the legislature.

In 2007, the Ministry of Communications and Information Technology (MCIT) announced that it would auction a second fixed-line licence that includes the provision of international services, but the auction has been postponed due to the global financial crisis. In the cellular digital segment there are three operators: Vodafone, Mobinil and Etisalat. TE owns 44.95 per cent of Vodafone Egypt.

The National Telecom Regulatory Authority (NTRA) was established by the Telecom Regulation Law in 2003. In March 2005, NTRA set up a universal service fund with an initial budget of EGP 50 million. The aim of the fund is to compensate telecommunications operators and service providers for “price differences between the approved economical price for a service and that which may be determined by the government in favour of the user” and to fund universal service provision in under-served areas. NTRA aims to increase the average penetration rate of fixed-line telephony from the current 15.1 per cent to 20 per cent across the 26 governorates.

The information and communication technology (ICT) policy also aims to increase the number of households having broadband Internet connections to 1.5 million and raise the mobile penetration rate to 70 per cent by the end of 2011. It also seeks to attract USD 1 billion in ICT investments annually and to achieve an annual growth rate of 15 per cent in the number of companies operating in the ICT sector.

MCIT aims to foster technological upgrading in the areas of regional and international connectivity, broadband technologies, convergence of media and cybersecurity through expansion of the Smart Village and the establishment of other technology parks in Damietta and Maadi.

The “PC 2010-Nation Online” initiative provides low-cost PCs, payable in instalments starting from USD 7 per month, to households and educational institutions. The initiative’s main target is to raise the proportion of households with computers to 25 per cent. The government is also promoting information technology clubs in partnership with local NGOs to serve as training and ICT access centres in outlying areas, particularly for women. There were 1 747 such clubs around the country as of June 2008.

A.T. Kearney’s 2007 Global Service Index rated Egypt 13th out of 40 countries in terms of offshore business service provision. In 2008, Egypt won the annual award of the British National Outsourcing Association as offshoring destination of the year. A 2008 Global Services-Tholons study ranked Cairo seventh among the top 50 emerging global outsourcing cities.

In July 2008, the fees for installing a new landline were cut by 50 per cent for residential and commercial users. The tariff for calls between landlines and mobile phones was reduced by 33 per cent. Inter-province fixed-line rates (i.e. for long-distance calls between governorates) during peak time were decreased by 20 per cent. Fixed-line rates are set by TE and are gradually becoming cost-based due to competition from mobile providers. Mobile tariffs are set by the operators and approved by NTRA.

In 2007, MCIT fully implemented its commitments under the World Trade Organization to abolish customs tariffs on ICT products. As a result, the capital costs of rolling out new wireless infrastructure were reduced by almost 30 per cent compared to 2004.

A number of innovative ICT applications have been launched in education, health and other government services.

The Egyptian Education Initiative (EEI) comprises four tracks: pre-university, higher education, lifelong learning and ICT industry development. A key objective of the EEI is to ensure that all preparatory schools are connected to broadband by 2012 and that teachers are trained in integrating ICT into education. EEI has assisted 2 000 schools, notably those in the Smart Schools network, and upgraded the Egyptian university network, providing high-speed connectivity to many of these institutions. The programmes benefit more than 80 000 learners at different levels. The ICT for Illiteracy Eradication programme introduced electronic content for teaching basic Arabic and elementary mathematics. The National Telecom Institute, the Information Technology Institute and the e-Learning Competence Centre are developing specialised training programmes in ICT. MCIT championed the establishment of Nile University, a not-for-profit R&D institution providing general management training for middle to senior managers. The Egyptian Information, Telecommunications, Electronics and Software Alliance focuses on collaboration between academia and the ICT industry, helping young talents to develop practical and industrial skills within educational programmes. The ICT Trust Fund, a partnership between MCIT and the United Nations Development Programme, aims to raise awareness of the developmental potential of ICT while helping to make it more accessible to Egyptian citizens. ICT Trust Fund programmes include the Mobile IT Club, the KenanaOnline development portal and the utilisation of ICT in eradicating illiteracy.

The government has launched a series of successful e-health initiatives for reaching under-served areas, including the Telemedicine Network, the Health Informatics Programme and medical emergency call centres.

The Arabic e-Content Initiative launched by MCIT is creating a portal that will put 2 000 books and 300 software programs online in its first phase and is involved in several other projects such as the egynews.net portal, in an alliance with the Egyptian Radio and Television Union. The Centre for Documentation of Cultural and Natural Heritage is documenting Egypt’s heritage using the latest technologies.

In the area of e-government, a number of projects are under way to digitise all land maps in Egypt, with the objective of simplifying land registration procedures. MCIT will be facilitating co-operation among the government agencies responsible for transport and trade (aviation, transport, finance and investment), the Customs Authority, Egypt Post, private operators and other stakeholders to create the first postal free zone in the region.

Virtual R&D centres of excellence have also been established. A business incubation facility was set up at the Smart Village technology park, clustering start-up companies, multinationals and Egyptian expatriates. Research centres have been created in key niche areas such as data mining and wireless technologies, and a private venture capital fund has been established to encourage the transfer of knowledge and technology from universities and research centres to companies. In addition, there are programmes aiming to increase small and medium-sized enterprises’ use of ICT.

 

President Hosni Mubarak, currently serving his fifth term, is the leader of the National Democratic Party (NDP), which dominates the parliament. The NDP remains the most powerful party, while opposition parties are weak. No major political reforms were undertaken in 2008. In 2007, however, 34 constitutional changes were approved by parliament, some of which outlined a new process by which opposition parties can nominate candidates for president. Candidates must now be endorsed by 250 elected officials from parliament or local councils. However, there is still no limit on the number of terms a president may serve. The new reforms also barred the creation of any political parties based on religious divisions. The next multi-candidate presidential elections are planned for 2011.

Egypt has already achieved the Millennium Development Goal (MDG) of halving the proportion of the population living in extreme poverty, but regional disparities remain a key challenge. The overall percentage of Egyptians living below the national poverty line increased from 16.7 per cent in 2000 to 19.6 per cent in 2005. The highest concentrations of poor are found in rural Upper Egypt (39.1 per cent) and urban Upper Egypt (18.6 per cent), and the lowest in metropolitan Lower Egypt (5.7 per cent). The poorest 100 villages are all located in Upper Egypt. According to the 2004/05 Household Income, Expenditure and Consumption Survey, 3.4 per cent of Egyptians were living on less than USD 1 per day in 2005, compared to 8.2 per cent in 1990. If the USD 2 per day poverty measure is used, however, poverty increased from 39.4 per cent in 1990 to 42.8 per cent in 2005.

The government’s five-year plan (2007-12) aims to reduce poverty to 15 per cent by 2011/12 and to narrow the disparities between Lower and Upper Egypt and between rural and urban areas. To this end, a “poverty map” has recently been drawn up to determine the most vulnerable areas and groups. Based on this map, the government has adopted two innovative programmes to direct resources to the villages and people in greatest need: “geographic targeting” and “supporting the most vulnerable families”. The economic growth recorded in 2007/08 has probably had little positive impact on poverty owing to the increases in food and energy prices.

The net enrolment ratio in primary education increased from 91 per cent in 2000/01 to 94 per cent in 2005/06. The literacy rate for 15-24 year olds increased from 73 per cent in 1996 to 87 per cent in 2005. The 2007-12 five-year plan aims to increase enrolment rates, increase the number of schools, reduce class density and support early childhood development.

Egypt has succeeded in eliminating gender disparities in general secondary education and is set to do so for primary education, but this MDG target may not be met in technical education. Women’s share in wage employment in the non-agricultural sector is quite low (17.7 per cent in 2005). Women are also under-represented in the political arena: only 1.8 per cent in the People’s Assembly in 2005 and 7 per cent in the Shura Council in 2008. Thus, despite the inclusion of gender targets in the current socio-economic plan (for the first time in Egypt) and the establishment of the National Council for Women in 2000, there is clearly a need to promote greater female participation in the formal economy and in politics.

Infant and under-five child mortality declined by almost 50 per cent between 1990 and 2006, and noticeable progress was made in measles immunisation. However, disparities in infant and child mortality by region, social class and gender remain a key challenge. Maternal mortality declined from 174 maternal deaths per 100 000 live births in 1992 to 84 in 2000, which means that this MDG has already been achieved.

HIV prevalence in Egypt is low, at less than 1 per cent of the population in 2007. Egypt has succeeded in controlling malaria, and both tuberculosis and schistosomiasis are regressing. Hepatitis B and C, however, constitute major health threats. They are the leading causes of severe liver damage, hepatocellular carcinoma and death in Egypt. The Ministry of Health and Population plans to reform the health insurance system as part of a nationwide health-care reform strategy, with the objective of achieving universal coverage by 2012. At present, only 52 per cent of the population has health insurance coverage via the local health insurance authority.

In 2006/07 and 2007/08, employment grew by 3.1 per cent to 22 million, exceeding the growth rate of the labour force (2.3 per cent). As a result, the unemployment rate declined from 9.5 per cent in 2005/06 to 8.4 per cent in 2007/08. Unemployment remains highest among women and new entrants to the labour force. The failure of the educational system to provide skills that are in demand on the labour market remains a key concern.