99-2329 MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT 25 JUNE 1999
PRESS/TPRB/106
9 June 1999
 CONTINUED ECONOMIC REFORM CRUCIAL TO INCREASING TRADE AND
IMPROVING STANDARDS OF LIVING IN EGYPT
The economic stabilization programme initiated in the early 1990s in Egypt has improved economic
growth, and reduced inflation and, to some extent, unemployment.  A new WTO Secretariat report on
the trade policies of Egypt notes that the successful stabilization programme has been complemented
by gradual but progressive trade liberalization and domestic reform.  Egypt has removed most non-
tariff measures, decreased tariff protection, significantly liberalized foreign investment, and
deregulated and privatized public sector companies.  Although these reforms promise to introduce a
greater degree of competition in the economy, investment in the tradable sector and export growth
have remained sluggish, suggesting the need for accelerated trade and internal reform if theGovernment is to meet its ambitious growth targets for GDP and standards of living.
The new WTO report, along with a policy statem ent by the Egyptian government, will serve
as a basis for the trade policy review of Egypt in the WTO's Trade Policy Review Body on 24 and 25
June 1999.
The report concludes that Egypt would benefit from rationalizing the remaining import
prohibitions, lowering tariff peaks and escalation and narrowing the list of imports subject to
compulsory quality control inspection. Although transparency has improved, the report says, the
degree of discretion that remains in the system, including with respect to legislative change, adds anelement of unpredictability for traders. So far inve stment has mainly been in the non-tradable sectors
with the result that growth has not led to significantly improved export performance. Maintaining the
pace of reform, the report says, would improve growth and employment opportunities for Egypt's
growing labour force and help Egypt become more closely integrated into the international economy.
The report indicates that Egypt has had considerable success in implementing its trade policy
goals, which have been twofold: first, to reduce tari ffs and rationalize the tariff structure;  and second,
to reduce the number of products subject to non-tariff barriers, such as export and import prohibitions,
and to rely increasingly on tariffs as the only trade policy instrument.PRESS/TPRB/106
Page 2/3
MOREIn 1998 clothing and some poultry products were the only products still subject to import bans
and all MFN import licensing requirements appear to have been discontinued.  There has been atendency to place previously prohibited imports on to a list of imports subject to compulsory quality
control.  Tariff reform has resulted in a sign ificant reduction of most-favoured-nation (MFN) tariff
rates: the simple average MFN tariff fell to 26.8% in 1998, from 42.2% in 1991. Tariff reform has
also reduced the maximum MFN tariff from 100% in  1991 to 40% in 1998 in most sectors, notable
exceptions being alcoholic beverages, textiles and some motor vehicles. In most cases, the currentapplied tariff is considerably lower than the maximum rate bound in the WTO. However, the report
notes that in 1998 some 12% of the tariff had applied rates in excess of bound levels.
The report notes that in addition to participat ing actively in the WTO, Egypt is increasingly
focusing on preferential trading agreements as a way to improving trade flows. Egypt is a member of
regional agreements such as the Common Market for Eastern and Southern Africa (COMESA), and
the Greater Arab Free-Trade Area (GAFTA) and has also signed a number of bilateral tradeagreements to accelerate regional trade liberalization. The completion of negotiations for the Euro-
Mediterranean agreement with the European Uni on (EU) should further deepen the process of
preferential trade liberalization and may improve Egypt's access to its largest export market.
Egypt has had a long tradition of widespread state intervention in the economy. However, the
report notes that the government has complemented its macroeconomic and trade reform by domestic
regulation and liberalization. The Egyptian government reduced its pricing and distribution controls
and launched an ambitious programme of privatization of public sector companies. The privatization
programme - which has mainly focused on non-financial public sector companies - has accelerated
since 1995.  Legislation on competition policy is currently being drafted.
Sectoral reform has been significant although unequal across sectors. Agriculture has received
closer attention than manufacturing and some services are only being liberalized gradually. Reform in
agriculture, which began in the 1980s, has reduced government control over production, pricing and
distribution.  As a result there appear to be no ma jor remaining restrictions on annual production and
most agricultural products appear to be freely tradeable.
The petroleum sector, despite a decline in production, makes an important contribution to the
Egyptian economy.  Reform in the sector include a reduction in price controls and an opening of the
distribution sector to private investment.  Similar reform has taken place in natural gas productionwhich the Government hopes will compensate for declining oil reserves.
While reforms in the manufacturing sector have continued, they have not been as rapid. All
import and export bans and quotas have been abolished with the exception of a ban on imports of
clothing, which will be removed in 2002.  The combination of high tariffs and liberalized investment,
moreover, may have resulted in significant tariff-jumping investment in the motor vehicles industry.
The report suggests that the relatively good performance of some sectors such as food processingpoints to the desirability of widening the scope of trade and internal reform to other important sectors
such as textiles and clothing.
The Egyptian government has made significant h eadway in financial sector reforms, which it
recently opened to foreign investment. It is gradually opening the telecommunications sector tocompetition, notably in mobile telephony and value added services. In addition, since the mid 1980s,
the government has opened to the private sector a number of infrastructure services, such as port
services, and energy generation and distribution networks. The report notes that deregulation of key
services activities should continue.PRESS/TPRB/106
Page 4
MORENotes to Editors
The WTO's Secretariat report, together with a policy statement prepared by Egypt, will be
discussed by the WTO Trade Policy Review Body (TPRB) on 24 and 25 June 1999. The WTO's
TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO
member at regular intervals and monitors significant trends and developments which may have an
impact on the global trading system. The Secretariat report covers the development of all aspects ofeach of Egypt's trade policies, including domestic laws and regulations, the institutional framework,
trade policies by measure and by sector. Since the WTO came into force, the areas of services and
trade-related aspects of intellectual property rights are also covered.
To this press release are attached the summary observations from the Secretariat report and a
summary of the government report. The full Secretariat and governments reports are available for
journalists from WTO Secretariat on request (call 41 22 739 5019). They are also available for the
press in the newsroom of the WTO internet site (www.wto.org). The Secretariat report, together with
the government policy statement, a report of the TPRB's discussion and the Chairman's summing up,
will be published in hardback in due course and will be available from the Secretariat, Centre William
Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992 & 1999),
Australia (1989, 1994 & 1998), Austria (1992), Bang ladesh (1992), Benin (1997), Bolivia (1993),
Botswana (1998), Brazil (1992 & 1996), Came roon (1995), Canada (1990, 1992, 1994, 1996 & 1998),
Chile (1991 & 1997), Colombia (1990 & 1996), Cost a Rica (1995), Côte d'Ivoire (1995), Cyprus
(1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador(1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana
(1992), Guinea (1999), Hong Kong (1990, 1994 & 1998), Hungary (1991 & 1998), Iceland (1994),
India (1993 & 1998), Indonesia (1991,1994 & 1998),  Israel (1994), Japa n (1990, 1992, 1995 & 1998),
Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau (1994), Malaysia (1993 &
1997), Mauritius (1995), Mexico (1993 & 1997),  Morocco (1989 & 1996), New Zealand (1990 &
1996), Namibia (1998), Nigeria (1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay
(1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994),
Singapore (1992 & 1996), Slovak Republic (1995), the Solomon Islands (1998), South Africa (1993
& 1998, Sri Lanka(1995), Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996),
Thailand (1991 & 1995), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 &1998), the United States (1989, 1992, 1994 & 1996),  Uganda (1995), Uruguay (1992 & 1998),
Venezuela (1996), Zambia (1996) and Zimbabwe (1994).PRESS/TRPB/106
Page 5
MORETRADE POLICY REVIEW BODY
EGYPT
Report by the Secretariat - Summary Observations
Introduction
Egypt's economic stabilization programme launched in 1990/91 has resulted in a significant
improvement in most macroeconomic and trade indicators since Egypt's previous Trade Policy
Review in 1992.  Much progress has been made in reducing trade barriers:  most non-tariff measures
have been removed and tariff protection has been sharply reduced.  MFN duties currently average
about 27% compared to 42% in 1991.  The removal of export bans and reduced domestic restrictions
on pricing and distribution has also reduced the anti-export bias in the economy.  More liberal
investment policies and a programme to reform and privatize public sector companies have widened
the choice of sectors for domestic and foreign private investors in Egypt.
Egypt's economic growth has been achieved in the presence of external shocks and despite a
relatively uneven programme of structural reform which, although clearly positive overall, has
allowed the persistence of some distortions rooted in past inward-looking economic policies and a
long tradition of widespread state intervention in the economy. Reduced border protection has broughtout more clearly the potential benefits of rationalizing the remaining import prohibitions, lowering
tariff peaks and escalation, and narrowing the list of imports subject to compulsory quality control
inspection.  Tariffs on a number of products are applied in excess of WTO bound rates.  Although
transparency has clearly improved, the degree of discretion that remains in the system, including with
respect to legislative change, adds an element of unpredictability for traders.  Thus far investmentappears mainly to have taken place in the non-tradab le sectors with the result that growth has not led
to significantly improved export performance.
Egypt's reform strategy reflects the need to maintain social concensus around reform but it
may be the case that further economic gains could be secured by stepping up the pace of internalreform both to forge a more uniform, predictable set of economic incentives, and to achieve the faster
growth that the Government seeks.  The Governme nt believes that the key factors in improving
growth are an increased level of investment and an acceleration in export growth to at least 10%
annually.  This would require further trade reform, especially through a more uniform tariff structure
and continued duty reductions, including for the sectors currently excluded from the tariff reformprogramme.  Continued reform could also help to at tract more investment, particularly to the tradable
sector, thus allowing trade to play a greater role in fostering Egypt's economic development.
Other factors that may also need to be addressed include industrial restructuring, especially of
important export industries such as textiles and clothing, and continued deregulation, especially of key
service activities. Maintaining the pace of reform would thus complement the stabilization programme
and allow Egypt to improve growth and employmen t opportunities for its growing labour force and
help it to become more closely integrated into the international economy.
Trade policy framework
Egypt's trade and structural reforms have been carried out within the framework of a stable
political and institutional environment, with only a few changes in the policy-making structure since
the previous Review.  New and amended legislation requires passage though the People's Assembly,
although the President and Ministers enjoy discretionary powers to issue amendments that have the
force of law.  Frequent modifications to trade-related legislation, including recent changes that require
imports to be shipped directly from the country of origin, reduce predictability in government policyand may create uncertainty among traders.  Enhanced transparency with respect to laws andPRESS/TPRB/106
Page 6
MOREregulations would help consolidate the considerable gains achieved in this respect since the previous
Review.
Egypt has notified the WTO of new legislation on anti-dumping, countervailing and safeguard
measures that it adopted in 1998.  New laws are being introduced to ensure compliance with the WTO
Agreement on Trade-Related Aspects of Intellectual Property Rights);  Egypt already provides a
mailbox facility for patent applications as required under the Agreement.  Legislative amendments inother trade and related areas, including preferential rules of origin, have not yet been notified to the
WTO.
Under the General Agreement on Trade In Services (GATS), Egypt made commitments in
construction and related engineering services, financial services, tourism and transport services.  In
some cases, notably financial services, recent liberalization goes beyond Egypt's GATS commitments
but in general Egypt's GATS commitments focus on binding the current policy framework.
Trade and trade-related reforms
Since its last Review, Egypt's trade policy goal s have been twofold:  to reduce the number of
products subject to non-tariff barriers, such as export or import bans, and thus to rely increasingly onthe tariff as the only trade policy instrument;  and to reduce tariffs and rationalize the tariff structure.
Since 1992 Egypt has removed export bans and reduced the products subject to import bans to
clothing and some poultry products;  it has also re moved whole poultry and textiles from the list of
products subject to import bans as committed to under the Uruguay Round;  the former was tariffied
at 80% and the latter at 54%.  All MFN impor t licensing requirements appear to have been
discontinued.  Products removed from the list of banned imports have tended to be placed on a list of
imports subject to quality control requirements.  As a result, the list of products subject to quality
control inspection on entry into Egypt grew from 69 at the time of the previous Review to 182 in
1998.
In 1994 Egypt adopted the Harmonized System  of Tariff Classification.  An ongoing
programme of tariff reductions has resulted in a significant reduction in MFN tariff rates;  the simple
average MFN tariff has fallen to 26.8% (30.2% with a surcharge and customs service fee) in 1998,
from 42.2% in 1991.  Tariff reform has also reduced the maximum MFN tariff from 100% in 1991 to
40% in 1998.  Thus the overall degree of protection granted to the Egyptian economy, through tariffand non-tariff barriers, has declined significantly since Egypt's last Review.  There has also been a
decline in tariff escalation as duty reductions have introduced a greater degree of tariff uniformity
across sectors.  However, overall tariff dispersion has increased, in part due to the reduced average
tariff highlighting tariff peaks in key sectors not subject to tariff reductions, including some motor
vehicles, textiles and alcoholic beverages from tariff reductions.  Tariff dispersion is reinforced by a
number of temporary exemptions for imports of inputs and capital goods and for goods imported by
assembly industries.
As a result of the Uruguay Round, Egypt bound over 98% of its tariff, compared to an
average of 73% for developing countries.  The overall average bound tariff was 45% in 1998, well in
excess of the current average applied tariff, and is expected to decline to 37% by the end of the
implementation period in 2005.  In most cases the curr ent applied tariff is considerably lower than the
bound rate.  However, in 1998, some 12% of the tariff had applied rates in excess of their bound
levels, and almost 2% of the tariff had applied rates in excess of their initial Uruguay Round base
rates.PRESS/TRPB/106
Page 7
MOREOther measures affecting trade
Macroeconomic and trade reform has been complemented by domestic deregulation and
liberalization, which has concentrated mainly on reducing government intervention in the economy.
The process has been gradual mainly to allow economic agents to adjust to reduced state intervention
and to adapt to market signals.
Domestic reform has mainly consisted of reduced state intervention, through a reduction of
pricing and distribution controls and through an ambitious programme of privatization of public sector
companies.  Since Egypt's previous Review in 1992, price controls have been lifted on all but a few
industrial products such as pharmaceuticals, sugar and edible oil, and there appear to be no restrictions
on distribution.
The privatization programme has accelerated since 1995, with almost 200 out of an initially
selected 314 companies expected to be fully or partially privatized by the end of 1999.  The
programme has focused, in the main, on non-financial public sector companies which account for
around a quarter of total government and public sector output;  most of the remaining entities in the
public sector are not being considered for privatization at the present time.  The Government has also
taken action to reform and restructure public sector companies in the services sector, notably inbanking, insurance and telecommunications.  Privatization to date has been largely through the stock
market and, thus, has generated increased foreign portfolio investment.
In an attempt to raise private investment both by Egyptians and by foreign companies, the
Government provides a number of mainly tax and tariff incentives in certain sectors.  Since itsprevious Review, Egypt has considerably liberalized its investment regime, first by reducing the
negative list of sectors in which private investment was discouraged, and then by replacing it with a
positive list of sectors in which investment is encouraged.  The new Law of Investment Guarantees
and Incentives passed in 1997 is likely to increase foreign direct investment in the coming years.
Efforts are also being made to bring greater competition into the economy through the introduction ofcompetition policy, for which legislation is presently being drafted.
Although not a member of the WTO Agreement on Government Procurement, Egypt
introduced a new Tenders Law in 1998 which introduces greater transparency in the process of public
procurement;  the new Law, while allowing price preferences for Egyptian suppliers, is likely to leadto improvements in procurement practices in Egypt.
Sectoral policies
Sectoral reform has made significant strides in some areas, while in others it has lagged,
reflecting the difficulty of overcoming decades of government intervention in the economy.
Agriculture has received closer attention than manufacturing, while some services are only graduallybeing liberalized. Reform in agriculture, which began in the 1980s, has concentrated on reducing the
degree of government control over production, pricing and distribution.  As a result, there appear to be
no major remaining restrictions on annual production and most agricultural products are freely
tradeable and may be sold directly to private sector traders.
Despite a decline in production, petroleum exports still make an important contribution to the
economy.  Production is undertaken through production sharing agreements between the state-owned
Egyptian General Petroleum Company (EGPC) and a number of foreign companies.  Reforms in the
sector since Egypt's last Review include a reduction in price controls and an opening of the oil
distribution sector to private investment.  Natural gas, whose production has been rising, is mainlyused for domestic consumption, although the Government expects it to substitute for oil exports in thePRESS/TPRB/106
Page 8
MOREfuture.  As for petroleum, the Government has reduced price regulation for natural gas, and gas
distribution has been opened for private sector investment.
Reform in the manufacturing sector has continued although not as rapidly as in other
activities.  All import and export bans and quotas have now been abolished with the exception of a
ban on imports of clothing, which will be removed in 2002. There are no foreign investment
restrictions and investment incentives are provided for manufacturing activities, under the newInvestment Law.  Tariff reductions and exemptio ns have been concentrated in intermediate and
capital goods as a result of which tariff escalation remains high in industries such as food, beverages
and tobacco, and textiles and leather.   Continued protection for finished products and tariff
concessions for assembly industries such as motor vehicles, in combination with a liberal investment
environment, has led to tariff jumping foreign investment.  The good performance of industries such
as food processing (excluding alcoholic beverages) suggests the desirability of widening the scope of
trade and internal reform to other key sectors such as textiles and clothing.
With the need for higher economic and export growth, the Government seeks to eliminate
bottlenecks created by a number of service activities.  For example, significant headway has been
made in reforming the financial sector, which has recently been completely opened to foreign
investment;  the telecommunications sector is gradually being opened to competition, notably inmobile telephony and value added services.  In addition, since the mid 1990s, the Government has
opened to the private sector a number of infrastructure services, such as port services, and energy
generation and distribution networks.  In general, although the Government retains control of the
existing services infrastructure, most new projects are run as build-own-operate-transfer (BOOT)
schemes and are likely to help producers and exporters.
Trade Policies and Trading Partners
Trade policy reform has been pursued mainly under an autonomous programme of trade
liberalization.  An active member of the WTO, Egypt is also committed to meeting its UruguayRound requirements, utilizing in many cases the permitted implementation period for developing
countries.  Concurrently, Egypt has focused on preferential trading agreements as a means for
increasing trade flows, joining regional agreemen ts such as the Common Market for Eastern and
Southern Africa (COMESA) and the Greater Arab Free-Trade Area (GAFTA).  It has also signed a
number of bilateral trade agreements to accelerate regional trade liberalization.  The completion ofnegotiations for the Euro-Mediterranean agreement w ith the European Union (EU) will further deepen
the process of preferential trade liberalization and should improve Egypt's access to its largest export
market;  as in similar cases, the agreement raises questions about possible trade diversion.PRESS/TRPB/106
Page 9
MORETRADE POLICY REVIEW BODY
EGYPT
Report by the Government - Parts I and II
INTRODUCTION
1. The first half of the 1980s witnessed the upgrading of the national infrastructure in electricity,
roads, ports, telecommunications and basic services.  Today, Egypt enjoys a modern and efficientinfrastructure network covering most of the country – a fundamental pre-requisite for increased
foreign and domestic investment.
2. The second half of the 1980s witnessed the prelude to a major financial and economic reform.
The comprehensive reform measures, undertaken since January 1991, are expected to usher in a new
era of efficient economic management, financial discipline, and the framework for a dynamic, high-
growth economy.
3. The first half of the 1990s consolidated the success of the reforms during the previous decade into
a fully fledged, market based, liberal, privately led economy, that has the means, the institutions and
the capacity to face global competition in the twenty-first century.
4. Today, the economy of Egypt is poised to reap the benefits of these reforms with its acquired
experience in dealing with the world and its sound and conscientious understanding of its variables.
5. Egypt has entered a new era of its economic development.  It has accepted the principles of
market forces as the main arbiter of economic ac tivity, and has empowered the private sector to lead
our economy into the twenty-first century.  It ha s changed the nature of its Government into a
government of mediators, an instrument of change and a vehicle for progress.
6. Foreign investment is essential to the continued growth of our economy.  For this purpose, foreign
investors, along with Egyptian investors, are active ly encouraged to participate in the implementation
of the ongoing reforms in our economy.  Indeed, foreign investment is given the lead in expanding
infrastructure in Egypt.
I. KEY DEVELOPMENTS IN TRADE AND ECONOMIC POLICY SINCE THE LAST 
REVIEW
B. T
HE EGYPTIAN ECONOMY IN THE SPOTLIGHT
7. Since the beginning of the reform programme in 1991/92, the private sector has played an
increasingly dominant role in the growth process.  Private-sector activities contributed well above
60% of total GDP.  This figure is scheduled to increase to over 85% by the end of the decade.  It has
the lead in agriculture and irrigation, industry and mining, construction, transportation, trade, hotels
and restaurants and housing.
8. In 1995/96, private investment exceeded 50% of total investments in Egypt, reflecting the
Government's commitment to withdraw from investment activities, while at the same time facilitating
increased private-sector participation in the economy.
9. At present, private investment in the industrial and mining sector stands at 92% of the total
sector's investment.
10. The Government further encourages businessmen a nd multinationals to invest in non-traditional
areas, specifically in financial services such as insurance as well as utilities and infrastructure.PRESS/TPRB/106
Page 10
MOREC. TRADE
11. Egypt has been the centre of trade and enterprise in the Middle East for centuries, and its location
between the continents of Africa and Asia makes it  the crossroads between the east and the west.
12. With a population of over 60 million, Egypt has the largest domestic market in the region.
13. Europe and the United States account for almost three quarters of Egypt's exports.  In addition,
almost 70% of all imports originate from the same two sources;  by far the largest source of Egyptian
imports is Europe.
14. Machinery, transportation equipment, and foodstuffs form half of Egypt's total imports.
15. While cotton contributes 40% of agricultural exports, industrial commodities are Egypt's major
export contributors, with the petroleum industry constituting 42% and the spinning and weaving
industry contributing 16%.
16. The export growth rate of engineering industries over the reform period has exceeded all
expectations reaching 296%, followed by a strong upward shift in pharmaceutical exports achieving a
150% growth rate.
17. The Government has furnished a detailed export promotion programme aimed at increasing
commodity exports five-fold by the end of the decade.  To this end, measures have been taken to
further liberalize trade, remove tariff and non-tariff barriers, reduce operating costs, enhance
transparency of the trade regime, provide incentives and upgrade port services, ease customs
procedures, quality control and product standards.
18. It should be noted also that the Government of E gypt was able to bring down its tariff distortion to
the range of 5-40% (with minor exceptions), remove all export quotas and import bans and prior
approvals, eliminate virtually all bureaucratic barriers, streamline the administration of the drawback
and temporary admission systems and amend the tariff schedule to cope with the international
community by adopting the harmonized system of classification.
D. INFRASTRUCTURE
19. Realizing that the private sector is the loco motive for growth in the Egyptian economy, the
Government of Egypt has, since the beginning of the economic reform programme in 1992, focused
on investing in areas that would support private-s ector activities, rather than those which would
compete with it.
20. As such, infrastructure was given top priority with the commencement of the reform programme.
21. Recently, the Egyptian Government has been revi ewing its traditional involvement in investment
directed towards infrastructure and utilities to include the private sector.
22. New legislation issued in 1996 and 1997 contain provisions for the private sector to invest in
infrastructure and telecommunications using schemes which provide for an active participation of thedomestic and international private sectors in infrastructure development in Egypt.PRESS/TRPB/106
Page 11
MOREE. TELECOMMUNICATIONS
23. Law No. 19/1998 transferred the national communications authority from the direct control of the
Ministry of Telecommunications to a joint-stock company, and a regulatory body for
telecommunications has already been established.
24. Licences were granted for the establishment of two private-sector companies for providing mobile
telephone services.
25. Internet services are currently offered by more than 30 service providers from the private sector,
and VSAT services were introduced in October 1996 to provide its services to major organizations
and companies.
F. TOURISM
26. Egyptian tourism, which is largely private-sector dominated, is experiencing a significant
breakthrough that can be perceived on a multidirectional scale.  Currently, the Government of Egypt
is working to stimulate the tourism sector, which is a significant component of the Egyptian economy.
27. The sector continues to be a principal source of foreign currency for the country, playing an
important role in the balance of payments;  this industry currently ranks second among Egypt's major
sources of foreign currency.
G. INVESTMENT
28. Egypt is keen on attracting foreign direct investment for several reasons, including its desire to
acquire new technology, management and marketing capabilities.  More importantly perhaps, FDI isneeded to enable the country to grow much faster (7 -8%) in order to create jobs for new entrants into
the labour market and to reduce the current unemployment rate.  The high-growth scenario requires
that the ratio of investment to GDP be increased to 25-27%.
29. In order to facilitate investment in Egypt and to provide more incentives and guarantees, Law No.
230 of 1989, which provides certain incentives and guarantees for foreign investors who carry outactivities in Egypt in accordance with its provisions, was repealed by a unified Investment Guarantees
and Incentives Law (Law No. 8 of 1997).
30. Investment activities carried out by foreign companies in Egypt are to be conducted within the
vast areas of investment permitted under the investment law, namely, land reclamation, housing,
industry, tourism, agricultural projects, oil services and transportation services, infrastructure fordrinking water, waste water, electricity, roads and communications, financial leasing, projects
financed by the social fund, underwriting and venture capital activities, air transport, overseas
maritime transport, hospital and medical treatment centres, production of computer software and
systems, and any other areas approved by the Council of Ministers.
31. Egyptian and foreign investors have the right to act separately or together in activities falling
under any of the fields of investment outlined under the Law.
32. Foreign investors can also carry out projects in Egyptian free zones, which are regulated by the
investment law and considered, for a number of purposes, as being located offshore.
33. Both capital and profits could be repatriated freely after the liberalization of the exchange market
in 1991.PRESS/TPRB/106
Page 12
MORE34. In addition, all regulatory obstacles to market entry and business operations have been revised
over the past few years.  Licensing for local and international investment is automatic and open toprivate business.
H. P
ORTS AND MARITIME TRANSPORT
35. The Government of Egypt has undertaken great strides allowing private-sector companies and
individuals to engage in maritime transportation, own any kind of vessels and undertake any maritime
services.  In addition, measures have been taken to streamline and reduce procedures.
36. The commercial code is also being revised and brought in line with modern international practice.
I. PRIVATIZATION
37. The privatization programme is a fundamental component of the economic reform programme.
The Egyptian Government is fully committed to it.  This reflects a significant change in government
policy away from state management and control towards a reliance on market mechanisms and the
private sector.
38. The privatization programme in Egypt consists of two basic parts:
(i) the first and largest involves divestment of public-sector holdings in
production and manufacturing companies.
(ii) the second part of the privatization programme is the encouragement of
private-sector investment in sectors historically controlled and operated by
the public sector, including electricity, roads, airports, maritime ports and oiland gas transmission.
39. The Public Business Enterprise Law 203 of 1991 governs the restructuring of 314 public-sector
enterprises and removed all government control over public-sector companies, restructuring them as
affiliates under 16 financially autonomous holding companies.
40. Within the context of the Government's programm e, privatization may take any of the following
forms:
(i) the transfer of ownership and control of state-owned enterprises to the private
sector through a partial or full public share flotation on both the domestic or
foreign stock exchanges.
(ii) direct sale of a controlling interest to domestic and/or foreign investors.
(iii) direct sale of a controlling interest to employees.
(iv) sale or lease of company assets, unlimited sale of government-owned shares,
or liquidation.
J. B
ANKING
41. The banking system in Egypt is large and well developed with Egypt showing steady progress
towards becoming an emerging market;  this sector is showing staggering prospects for expansion and
diversification.PRESS/TRPB/106
Page 13
MORE42. The liberalization of financial services and exchange systems has benefited banking allowing it to
become more efficient.
K. CAPITAL MARKET
43. Law No. 95 of 1992 and its amendments streamlined all pre-existing capital market regulations
and aims at ensuring a fair and organized market, enhancing investment and privatization, as well as
revitalizing the stock and bond market.
L. INSURANCE MARKET
44. The Government of Egypt is currently carrying out major undertakings to restructure the
insurance sector.  A new law was issued in 1998 in order to remove restrictions on private and foreign
ownership and to encourage international fi rms to participate in the Egyptian market.
II. EGYPT'S ECONOMIC PERFORMANCE
45. Since the early 1990s, the Government of Egypt has been intensifying its efforts to raise standards
of living, reduce unemployment and bring down inflation, leading to a market-based economy and
implementing a consistent economic policy mix.  GDP grew at some 5% over the past two years, up
from an average of 3.5% over the previous three years, giving a clear signal of the success of the
Government's reform policies.
46. In response to the continued favourable macroeconomic environment and institutional reforms,
national savings and investment started to pick up after a slow-down during early phases of the
programme.  The increase in public savings that resulted mainly from the reduction of budgetary andcurrent transfers is indicative of the strength of the stabilization programme.  On the fiscal side, the
budget deficit has been reduced significantly to 0.9% of GDP in 1996/97 down from 20% prior to the
reform programme, with revenue maximizing effo rts and significant expenditure, restructuring and
reduction achieved through downsizing the Government's activities and implementing lasting
structural improvements.
47. On the monetary side, liquidity growth has fall en significantly from 40% to between 9% and 10%
annually.  A tightened monetary policy focused on reducing the growth rate of money supply and
providing credit to the private sectors to promote investment.  At present, the budget deficit is mainly
financed by the non-banking sector.  Treasury bill auctions were introduced during the early phases.
The Central Bank's international reserves now exceed US$20 billion  (17 months of imports) up from
US$1.5 billion (two months of imports) prior to the reform programme.
48. The Government is currently targeting:
(i) An annual growth rate of 6-7% by the end of the century and maintaining the
current low inflation rate at 4%.
(ii) The budget deficit will continue its gradual decline to remain below 1% of
GDP.
(iii) The nominal interest rate will decline further to reach 7%.
(iv) The current account (including official transfers) as a percentage of GDP will
be maintained at the same level despite exogenous factors.PRESS/TPRB/106
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END(v) The external debt ratio as a percentage of current account receipts will
decline to almost 8% down from 9% in 1996/97 and 1997/98.
(vi) The external debt will decline to almost 20% of GDP down from 33% in
1997/98.