Egypt State Information Service

The state laid down an ambitious strategy to establish liberalized economy that is based on market mechanisms, and determined a number of goals which are: growth, stability and balance. Seeking to achieve these goals, the state laid down a plan for the economic reform based on the following pivots:

- To convert from the central economic system that is based upon the domination of the state over the economic life, to a system that embraces the philosophy of economic liberalization and believes in the power and mechanism of the market. This represents the essential means for the economic reform. This was entrenched in the last constitutional amendments which were approved by the Egyptian people in March 2007. In accordance with these amendments, constitutional articles were amended in order to allow a freedom of movement for the Egyptian economy after deleting the provisions belonging to the socialism period which restricted the activity of this economy.

- To adopt developed economic policies which led to issue the Tax Law No. 91 of 2005, that reflects a new thought in the tax system's dealing with tax payers, rises the revenue from taxes after increasing the number of tax payers and facilitates customs procedures after issuing the executive regulation for customs law in 2006.

All procedures, instructions and explanations were collected in one document to be the only reference to deal with customs.

The state paid due attention to make the necessary amendments in the monetary policy, thus increasing the bank's resources of foreign currency.

The state also paid special attention to encouraging merge of banks in order to establish strong banking entities capable of local and world competition and to expand the establishment of investment funds according to numerous and flexible systems, in addition to applying the $ Inter-Bank System that contributed to the stability of the Egyptian pound exchange rate against the international currency and gaining strength on the short time period.

- Control cash demand and encourage savings together with increasing the state's revenues, liberate bank interest rates, prices of products and production requirments.

- Enhance and encourage the private and investment sectors while activating the Privatization Policy and continuing the liberalization and upgrade the public enterprise sector.

- Activate the money market as one of the vital pivots of reform and economic liberalization policy.

- Activate the performance of the Social Fund for Development in order to create job opportunities for Egyptians and encourage the small industries that contribute to the development process.

Improving the Egyptian economy growth rate along with accelerating the active merge with the global economy was one of the prominent features of the Egyptian economic performance indicators during 2006/07.

Gross Domestic Production in 2006/07 mounted to LE 1046.8 billion (at current prices and at production factors cost) against about LE 915.0 billion in 2005/06. The private sector contributed by about 65.9 %, thus reflecting the continuous rise in the private sector's contribution in the gross production.

GDP in 2006/07 mounted to LE 674.6 billion (at current prices and at production factors cost) at a growth rate of 7.2 % against about LE 617.7 billion in 2005/06 at a growth rate 6.9 %.

The sixth five-year plan 2007/08-2011/12 aims to achieve a growth rate of 8 % against 5.5 % in the fifth five-year plan

The following curve points to the increase and decrease of the public inflation rates starting from 2006 till June 2007.

The figures of the Central Agency for Public Mobilization and Statistics (CAP-MAS) and the Ministry of State for Economic Development show that the average of per capita share increased from LE 7693 during 2005 to LE 8661 in 2006. "Statistics of June 2007".

The figures of (CAPMAS) and the Ministry of State for Economic Development show the achieved positive figures on the levels of the "Labour force volume, number of employees and number of unemployed".

The figures show that the unemployment rate decreased during the first quarter of 2006/07 from 11.1 percent to 8.99 percent at the end of the second quarter "Statistics, June 2007". "In addition to the International Monetary Fund's Certificate, October 2007".

The figures of (CAPMAS), August 2007 points to the decrease of unemployment rate to 8.83 percent.

The Egyptian exports value in 2006/07 reached LE 83.963 billion while the value of imports reached LE 135.244 billion with a deficit amounted to LE 51.281 billion. Egypt's economic policy for the next phase is heading towards decreasing the deficit which witnessed a noticeable increase during this year despite the rise in the commodity exports rate more than the commodity imports. "

Consumption expenditure in Egypt is distributed on two main pivots: Government Consumption: which means the government expenditure in salaries, require-ments, health and population and utility services. Household consumption: which means the expenditure over the various commodities and services.

Volume of government and household expenditure in 2006/07 reached about LE 584 billion (at fixed prices), of which LE 85 billion as government consumption and about LE 499 billion as household consumption i.e. 80 % of the GDP, with a real growth rate of 7 %. In this context the per capita share of the GDP reached LE 9865 annually during the year, also the average of per capita expenditure rose to about LE 6677, 00 during the same year.

The following diagram points to the positive indicators achieved by the pioneering sectors which are considered the main pillars for the Egyptian economy, as for real growth rate during 2006/07 on a quarterly period:

	Suez Canal	Tourism	Building and Reconstruction	Communication	Manufacturing Industries	Petroleum and Natural Gas
January-March 2007 October-December 2007	17.90% 15.80%	16.40% 15.30%	16.20% 14.50%	15% 13.90%	7.70% 7%	5.40% 1%

"Statistics, June 2007"

Source: Ministry of State for Economic Development

Suez Canal as a Model of Increasing the Sector Growth Rate "Value- US million"

Central Bank of Egypt was established according to a Presidential decree issued in 1961 as an independent entity and it represents the official bank for the Egyptian government. It's responsibilities are as follows:

- Issuing the local currency which is the Egyptian pound with all its denomina-tions.

- Drafting the monetary policy, determining its tools which we can make use of and the performance of fulfillment.

The figures of the Central Bank of Egypt point to an ascending positive results for deposits in the banking system reached LE 610.5 billion in March 2007, whereas, the local credit volume reached LE 522.5 billion. The domestic liquidity reached LE 610.5 billion and the net international reserves reached $ 27.08 billion. The following diagram shows the deposits volume in the banking system excluding the central bank of Egypt and the local credit volume during the period (June 2006 to March 2007)

The International Monetary Fund's report issued in October 2007 asserted that the monetary reserves from the foreign currencies at the Central Bank of Egypt reached $ 30 billion by the end of August 2007. The governmental statement clarified in December 30,2007 that the reserve rose to reach $ 31 billion.

The figures of the local debt show a negative increase during 2006/07 according to the Central Bank of Egypt's statistics in June 2007, while the figures of the external debt witnessed a noticeable stability as shown in the following table:

This table represents the due debt from the government, economic authorities, net debt of the National Investment Bank. The resources of the National Investment Bank, subtracted its claims towards the government and the economic authorities.

Egyptian Stock Exchange... The First Arab Stock Exchange in the World Stock Exchange Union

Cairo and Alexandria Stock Exchange was established from more than hundred years, as the Alexandria stock exchange was established in 1883 and Cairo stock exchange in 1903.

The Egyptian stock exchange is the first Arab stock exchange to join the world stock exchange union in a new step to settle its existence in the securities market. It was chosen among the top ten emerging bourses in the world according to the "News Week" evaluation in 2005, as it lately witnessed a successive chain of development and modernization on all levels, salient of which are:

- Performing a comprehensive development of the rules and criteria of circulation so as to be more efficient and effective via issuing new rules for registration and governance of companies.

- Applying the system of electronic clearance and launching "Dow Jones case Egypt Titans 20 Index".

- Attracting new Egyptian, foreign and Arab investors to invest in the Egyptian market by increasing the activity of the stock exchange through floating a number of public companies to subscription which was the most significant thing to activate the privatization policy.

- The indicators which observe the Egyptian stock exchange during the third quarter of 2006/07 increased to about 4.18 %. The public orientation was progressively increasing according to the stock exchange index (CASE 30) and money index (CAM 1) where the prices attracted the investors. The international deposit certificate index listed in London Stock Exchange increased during the third quarter of 2006/07, where its index GDR 1-10 achieved a positive revenue that amounted to about 9.5 %.

- Total deposits in domestic and foreign currencies rose to about LE 569 billion during the same year.

- The value of listed shares and bonds which had been circulated during the third quarter of 2006/07 reached about LE 59.49 billion and the volume of shares and bonds circulation increased to 2326.7 securities. The earning multiplier recorded about 22.96 by the end of March 2006.

- The marketing capital increased to LE 547.85 billion by the end of March 2007 against LE 449.48 billion at the end of March 2006 with an increase of 22 %. Thus, the marketing capital percentage to the Gross Domestic Product reached about 88.69 % by the end of March 2007 against 72.77 % by the end of March 2006.

The following diagram shows the value of the public index of money market and Case 30 Index during the period (June 2006 to May 2007):

The governmental policies adopted some strategies that led to simplifying the procedures of investment and making it more efficient. In addition to removing the bureaucracy obstacles and liberalizing the atmosphere of business climate, where some investment laws and governmental legislations were enacted to contribute to facilitating the international trade movement and decreasing the obstacles which hinder investment in Egypt.

It also increased competition through attracting the Arab and foreign investments in Egypt, in addition to furthering competitive of the Egyptian business to face the international standards and support the capability on competition in the international markets. As a result of the international trade agreements, Egypt entered many markets in North America, China, Europe, North Africa and Middle East thanks to its distinguished location in the heart of the region which links between Asia, Africa and Europe.

Egypt possesses several physical and natural components that render her capable of attracting foreign and domestic investments. The most significant components are: Geographical location, political and economic stability, smooth transportation and human wealth estimated at about 73 million including labour force of about 20 million.

Egypt's unique geographic location made it a centre to boost trade ties between Europe and the Middle Eastern and African countries. Egypt is the land and air passage to transfer commodities and contact different countries allover the world. This enhances chances of the success of investment projects between Egypt and the Arab, African, and Asian markets, in addition to the European markets.

Egypt wins a political and economic stability through providing objective becoming circumstances to realize that stability.

Salient effective factor in the success of investment projects is the facility of transport. Egypt owns an internal and external transport network by air and land that link it to the whole world, in addition to tens of bridges allover Egypt to facilitate transportation movement. Moreover, maritime transport sector in Egypt enjoys the existence of a salient world trade vein in the world; the Suez Canal that links the east to the west. In addition, there is Mubarak/as-Salam mega bridge that lies over the Suez Canal and links both Asia and Africa; the matter that contributes to the flow of more investments.

Egypt owns a human wealth at a rate of about 73 million individuals of which more than 20 individuals who work for the labour force. Currently, the state exerts huge efforts in various fields of education and training in a way the leads to graduating promising and active force that is trained in various technical and application fields at suitable wages.

Egypt is keen on coping with world development in the field of information and communication technology. And in this concern, Egypt launched three Egyptian satellites; Nilesat (101, 102, 103) that contributed to the Egyptian media existence worldwide, thus leading to propagating Egyptian investment projects abroad. Moreover, lately the State marched towards activating the e-government action as a developed method to raise the efficiency and quality of the administrative system in governmental bodies and economic institution. This is to serve investment and investors in Egypt.

The first Ministry of Investment in Egypt was established in 2004 to remove all investment obstacles and mobilize all exerted efforts to provide the various required services. The new Ministry is responsible for increasing Arab and foreign investments through enhancing the investment awareness and promotion to attract more investment for financing various projects. The Ministry also plays an important role in monitoring and developing the legislative and legal framework that regulates investment climate in Egypt so as to overcome obstacles.

Allover the Egyptian governorates, there are several elements and potentials that represent an attracting factor for several investment projects, thus came the significance of drafting the investment map. This map clarifies the available natural resources, infrastructure, and services in governorates, in addition to the potentials they have that form attracting factors for the investment projects that are proposed for establishment.

Within the same orientation, the investment propagating plan in Egypt offers investors information on all the maga strategic projects and infrastructure projects in Egypt in addition to full studies on the promising investment sectors in fields of tourism, petrochemicals, cement, spinning and weaving, food and pharmaceutical industries in addition to health and financial services.

The public sector reform represents the distinguishing characteristic of govern-mental performance since 2004. Activity was restored to transactions of selling assets and shares owned to public and joint companies. Moreover, the implementation of a programme for restructuring individual companies and the group companies for selling them is underway.

Furthermore, the government gives due attention to restructuring companies' administrative structures through retraining administrative cadres with the aim of applying principles of managing companies in a way that copes with world criteria management system. On the other hand the labour force benefits from programme of increasing production. And in this concern, a programme for early pension has been applied, and programmes for retraining young workers have been implement for those who wish to change their careers.

The implementation of those projects lead to give way to the Egypt's workers' skills, and the results were promising. For example, ceramics industrialists in Europe transferred a big part of their production to Egypt, stressing that the final production with all its details is no less than the product of England, in addition, it is cheaper in transferring it to markets. Owners of those factories say that the quality of the product, low wages, costs of land and energy, and the quick transport of final products through the new ports in Egypt are all factors that help their companies on existence within the heated world competition.

Free Zones in Egypt are a distinguished investment pattern. They represent an important mechanism for increasing exports and domestic product and generating new job opportunities. These zones enjoy numerous privileges, the most important of which are direct connection with the outside world and the availability of land plots completely supplied with utilities and infrastructure in addition to special customs, import and monetary treatment, among others that are related to the ingress and egress of goods, thus allowing a great deal of freedom of transaction. These all serve as magnets to investments.

Investment in free zones enjoys many privileges and incentives such as lack of restrictions on the nationality of the capital, freedom of selecting the legal form of projects and of setting the prices of products and the rate of profits. In addition, capital assets, production requirements, imports and exports are exempted from tax duties, sales and other taxes and duties. Furthermore, projects operating in free zones are given a number of guarantees, notably inadmissibility of nationalization, confiscation and sequestration or expropriation of property except of judicial procedures.

There are seven public free zones in Egypt equipped with utilities and infrastructures for receiving investment projects: Nasr City Free Zone, Alexandria Public Free Zone, Port Said Public Free Zone, Suez Public Free Zone, Ismailia Public Free Zone, Damietta public Free Zone and 6th of October Public Media production Free Zone.

Investment activities can be conducted inside Egyptian private free zones under certain conditions, the most important of which is that the investment project should affect or help develop new urban communities and should not pollute the surrounding area.

Any investment project may by converted to the free-zone system, provided that it complies with rules specified in the statutes, and that it must have started its business already with exports of not less than 50 % of its production.

During 2006, Public and Private Free Zones in Egypt witnessed the establishment of 138 new companies with capital of about $ 560 million, against 122 companies with capitals of about $ 460.6 million during 2005.

During the third quarter of 2006/07, Free Zones witnessed the establishment of about 27 new companies with capitals that reached $ 245.2 million. The industrial zones witnessed the establishment of 79 new companies with capitals that reached LE 50.54 million.

The increase in capital accumulation and volume of investments is inevitable to raise the GDP growth rates, and to give the private and cooperative sector a bigger role in pushing the wheel of economic development forward through increasing its investments, in the state socio-economic development plan.

The figures point out that the private sector contribution in the total implemented investments reached about 66 % in 2006/07. This reflects the continuous improvement in the investment climate and the state's encouragement to the special initiatives in all economic activities. In this context, the encouragement of foreign invest-ments in Egypt has achieved a great effect in raising the value of these investments to reach about $ 7.6 during the same year.

The volume of direct foreign investment was multiplied to reach $ 11.1 billion in 2006/07 compared to $ 500 million at the beginning of this year, and compared to about $ 2 billion in 2003/04. Most of this increase was the outcome of the direct foreign investment influxes into the procissing industries sector.

The following diagram shows the number of companies established under law no. 159, the value of their capitals including the expansions.

	March 2006	June 2006	September 2006	December 2006	March 2007
Number of Companies	998	1119	1205	1216	1700
Capitals in LE (billion)	10.8	16.2	22.4	26.5	16.8

Year 2007 witnessed the issuance of many international certificates of Merit which positively dealt with the indicators achieved by the Egyptian economy in all sectors, analyzed economic, finance and investment policies and asserted that the atmosphere of the political stability in Egypt was noticeable thus contributed to achieving these positive results.

This year also witnessed the participation of the Egyptian officials in many economic conferences i.e the Euromoney Conference hosted by Egypt during September 2007 , the visit made by the officials in the economic ministerial group to many effective international countries to promote for the product and the fine indicators achieved at the Egyptian economic level, to attract many investments. In its report issued on August 2007, the Euromoney organization chose Dr. Farouk El Okdah the governor and Chairman of the Board of the Central Bank of Egypt (CBE) as the best governor for a Central Bank in the Middle East.

* Standard and Poor's Foundation for Credit Classification declared on December 9, 2007 that its annual evaluation of sovereign credit competence of Egypt is stable. It affirmed the given evaluation "BB" and "BBB" for long-term foreign and local currency respectively, and "B-A-3" for short-term local and foreign currency anticipating stable evaluations.

The foundation indicated that the credit evaluation given to Egypt is based on the comprehensive structural reform programme implemented by the Egyptian government, as well as, the continuous improvement of the economic and financial management of the country, leading to the growing rise of the economic growth, the increase of the achieved surplus of the foreign transactions balance, and the steady improvement of the general financial indicators.

* Mr. Robert Zoellick, President of the World Bank affirmed during his visit to Egypt on 16 November, 2007 that the economic reform process and the procedures undertaken by Egypt in order to translate the results of this reform in the social field, have raised the Egyptian economic level to more progressive and advanced horizons.

Therefore the World Bank is obliged to redraw its strategy of cooperation with Egypt, in order to upgrade its content to the new level achieved by the Egyptian economy and provide its more complicated requirements.

He added that the economic reform process in Egypt is considered an example to be followed by the developing countries programmes for economic reform. The World Bank considered Egypt the best among other countries which achieved pro-gress during the past year.

He clarified that the dealings between the Bank and Egypt allow to provide $ 2 billion for Egypt, $ 1.2 billion of which have been utilized and $ 800 million are available. In addition to $ 500 million are available for the Egyptian private sector through the International Finance Foundation, and there is a chance of increasing its volume.

* The International Monetary Fund (IMF) declared on October 29, 2007 that the bold reforms realized by Egypt have turned its economy into one of the fastest growing economies in the region. He described it as a rising successful story. IMF report stated that the Egyptian economy has realized 7% growth rate during the last two years, preceding similar economies in the region. This rate will increase the next year. The report added that the economic growth has contributed in decreasing the unemployment problem. IMF report on prospects of economic growth of 2008 in the Middle East and Central Asia has described the Egyptian stock market as one of the best markets in the region in terms of performance. The report indicated that the flow of big capitals was mostly in the form direct foreign investments.

- According to the International Report issued in October 2007 by the United Na-tion's Conference on trade and Development (UNCTAD), Egypt progressed to the first rank in Africa and to the second in the Arab world as to attracting direct investments where she advanced 35 positions from the previous year to occupy the 33rd rank in the Foreign Direct Investment Index.

- The World Bank announced at the end of September 2007, that Egypt ranked first among the best countries under reform all over the world, according to its annual report "Doing Business". This report praised Egypt's deep and comprehensive reforms in many fields which were monitored by the report especially in the field of companies establishment, decreasing the fees of property registration and launching one-stop shop to serve the exporters and importers at the Egyptian ports, cutting the time import and export to 5-7 days. The report asserted on the government's success to precisely recognize the bureaucracy problems and obstacles of investment in Egypt, which helped in adopting many important and comprehensive reform procedures.

- The International Economist Group's report issued in September 2007 asserted that Egypt possesses 45 % of the foreign investments volume in North Africa. The report attributed this progress in to the remarkable improvement in many significant factors, the most important of which are: the influence of the Egyptian Political system in putting policies and implementing it, improving the total economic indicators as a result of the decrease of the Budgetary deficit, decreasing the public debt volume, the stability in exchange rate, in addition to the increase of the achieved surplus in the current balance. The report also attributed the improvement of investment climate in Egypt to the improvement of market opportunities with the increase of economic growth rate to 6.9 % and 7.1 %, in addition to the increase in the imports and exports annual growth rate and the earning of companies. Besides reducing the tariff and non-tariff obstacles for trade and tax reductions which were introduced during the last few years and the development of tax administration.

- IMF declared that it observed some positive indicators that assert the improve-ment of Egyptian economic performance during the fiscal year 2006/07. This was reflected in maintaining the high growth rate and achieving a significant progress on the level of decreasing inflation and increasing job opportunities. The report which contains an evaluation for the Egyptian economic performance pointed out that Egypt was able to contain the negative results in the economy caused by the Bird Flu crisis that led to the increase of inflation pressures, besides the rise in fuel prices last year. The economic policy applied by the government succeeded in decreasing the balance sheet deficit to 7.5 %. This was realized thanks to some procedures i.e. the current structural reforms, the improvements recorded in tax policies and the system of pricing energy and wages. IMF hailed the continuous structural reforms which encourage the private sector to perform a leading role in the economic development. At the same time, IMF set aside the possibility that the Egyptian economy could stand any great crisis during the coming period due to the diversity of foreign flows resources from Europe, Gulf Area and North of America, in addition to the existence of great cash reserve of hard currency at the Central Bank of Egypt.

- Capital Intelligence Institutions, a leading international emerging-market rating agency changed the credit rating given to the Egyptian economy from a risk to an investment rating. The statement of the Capital Intelligence in September 2007 pointed out that the change in the foreign currency rating evaluation in Egypt refers to many positive factors, namely, the remarkable improvement in the external financial liquidity over the past few years, the fact that asserts the ability of satisfaction of the debts and increasing the flexibility and ability to face any external changes. The improvement of evaluation reflects the Capital Intelligence Establishment's expectation that the surplus of the Balance of payments over the short and medium terms will continue. The Institution praised the continuous achieved surplus in the current balance for six consecutive years and till 2007.

- A report issued by the IMF in September 2007 clarified that the Egyptian econ-omy achieved more accelerated growth rates that reached 7.1 percent in 2006/07. IMF also confirmed that growth was stable among different sectors including the agriculture and manufacturing sectors which are considered a densely busy employment sectors. The total additional job opportunities provided by the economy reached about 2.4 million since the beginning of this generation of reforms which started in the second half of 2004. Such job opportunities led to a decrease in the unemployment rates from 10.5 % to 9 %. IMF also praised the state budget result which points out to the decline of deficit percentage to 7.6 % in 2006/07 against 9 % as an average during the previous years.

- Oxford Business Organization confirmed that Egypt's, being the first Arab and African country to accede to Declaration of the International Cooperation and Development Organization on Investment, asserts the progress of the public climate for investment in Egypt, where the direct foreign investment doubled 12 times from 2001 to 2006 and rose from $ 500 million to $ 1.6 billion with the diversity of investments in sectors other than oil and natural gas.

- The United National Development Programme's (UNDP) resident representa-tive confirmed in June 2007 that President Hosni Mubarak's platform and last constitutional amendments put the citizen and the citizenship in the heart of the development process. It is a message which must be put in a suggested framework to activate development through the citizen's participation in decision- making.

- An economic report issued by the European Commissariat in June 2007 con-firmed that the main results of the reforms performed by the Egyptian government in 2005 started to bear its fruits, pointing out to the unified law for taxes and individuals, a comprehensive revision for custom systems, decreasing the tariff and facilitating the custom procedures.

- A Report by Oxford Business Group in Britain, January 2007, confirmed that the steps taken by Egypt to attract foreign investment, keep it in a constant development and that the investor is gaining his confidence in commercial relationship under the recent governmental administration.