The Report: Egypt 2019
With a young and fast-growing population, Egypt is one of Africa’s most populous countries. It is the 30th-largest country in the world by land area. The country is home to the world’s longest river, the Nile River extends into Africa at a length of is 6850 km. For about 3000 years, up until the arrival of the Romans in 30 BCE, the Nile Valley was at the centre of the human story and civilisation. Successive pharaonic dynasties made contributions to human advancement in a number of fields, from economic organisation and legal structures, to art, architecture, mathematics, technological development and medicine.
Country Profile
Egypt gained independence in 1922 with the end of the British protectorate, but it has operated as a presidential republic since the 1952 revolution. President Abdel Fattah El Sisi is the current leader and has served since June 2014, while the current prime minister and head of government in office since June 2018 is Mostafa Madbouly. The country’s economy has struggled since the 2011 revolution and although economic growth has improved since, many challenges remain. A number of significant steps are being taken to improve economic order and stability in the country, such as to improve public finances, reduce the size of the state and to make the investment environment more attractive. Moreover, Egypt has recently oriented its focus towards increasing its investments across Africa and to boost trade with its African partners. The country has relied heavily on the US for aid and support in the past but is now build¬ing a broader network of international partnerships, including with Russia and China, both of which have entered African markets aggressively during the past decade and have continued to strengthen ties with Egypt through investments in several mega-projects. This chapter contains an interview with Abdel Fattah El Sisi, President of Egypt; a viewpoint from Christine Lagarde, Managing Director, IMF; and an interview with Jeffrey Donaldson, UK Trade Envoy to Egypt.
Explore chapterEconomy
Since the election of President Abdel Fattah El Sisi in 2014, Egypt’s economic policy has been centred on reducing public sector costs and boosting private sector growth. Five years after Egypt began to implement a comprehensive reform of its economy, the nation’s macroeco-nomic indicators are showing sustained improvement. However, while accelerating growth and a narrowing fiscal deficit have vindicated the government’s auster¬ity measures, a high inflation environment continues to place pressure on the budgets of ordinary households. Looking ahead, the IMF estimates that GDP will grow by 5.5% in 2019 and 5.9% in 2020, powered mainly by a recovery in tourism and rising natural gas output. While the macroeconomic outlook is positive, the challenge of maintaining the support of a population that has yet to feel the benefits of economic reform remains. This chapter contains interviews with Sahar Nasr, Minister of Investment and International Cooperation; and Tarek Tawfik, President, American Chamber of Commerce in Egypt.
Explore chapterBanking
Egypt has been a regional banking powerhouse for more than a century and is home to the biggest bank¬ing sector in North Africa. The industry is also one of the region’s most stable, surviving both the economic turbulence that followed the Arab Spring and a more recent foreign currency crisis that saw government auctions of US dollars and the growth of a parallel market for foreign currency. The resolution of the currency challenge through the flotation of the Egyptian pound in 2016 has helped strengthen bank profitability, and a positive economic outlook for 2019 underwrites the continuance of this trend. However, the sector also faces near-term challenges, including a looming deadline for a bold small and medium-sized enterprise lending target, the introduction of new accountancy standards and the probable implementation of a significantly revised banking law. This chapter contains interviews with Hisham Ezz Al Arab, Chairman, Federation of Egyptian Banks and Commercial International Bank; and Dante Campioni, CEO, AlexBank.
Explore chapterCapital Markets
The year of 2018 was challenging across the board for many emerging markets, and changing trends in global capital movements have brought turbulence to the Egyptian Exchange as well. After rising significantly in the first four months of 2018, the exchange’s main index, the EGX30, showed a sustained retrenchment to end the year at a level not seen since early 2017. Throughout this period, however, the authorities implemented a series of reforms that are establishing the bourse as a safer and more transparent destina¬tion for domestic and international investors. With forecasts for the country’s economy broadly positive, Egypt’s capital markets are well positioned to serve their purpose as facilitators of growth and develop-ment over the coming year. This chapter contains interviews with Mohamed Farid Saleh, Executive Chairman, Egyptian Exchange; and Hussein Choucri, Chairman and Managing Director, HC Securities & Investment.
Explore chapterInsurance
With the largest population in the Middle East and a relatively established insurance sector, Egypt has long been a promising market for insurers. Domestically licensed companies have shown strong growth in recent years, driven by public expenditure on capital projects and increasing private sector activity. However, the sector’s impact on the lives of ordinary Egyptians has been limited, with 1% of the population covered, compared to a global average of over 6% and an African average of nearly 3%. The low penetration rates highlight considerable potential for further expansion, into which authorities aim to tap and double the market’s premiums by 2024. A new insurance law is expected to function as a legislative platform for future growth.
Explore chapterEnergy
Aside from the member states of the Organisation of the Petroleum Exporting Coun¬tries, Egypt is Africa’s largest oil producer, as well as its third-largest producer of dry natural gas, according to the US Energy Information Administration. Despite the abundance of its natural resources, how¬ever, the country faced an energy crisis following the 2011 revolution, marked by frequent blackouts and a slowdown of foreign investment from international oil and gas interests. In response, the government has undertaken a wholesale reform of its subsidy system, licensed exploration activities in newly discovered fields and renewed its efforts to pay down its outstanding debt. These changes have permitted natural resource development that is more financially sustainable and attracted foreign direct investment to support the exploration and exploitation of new sources. This chapter contains interviews with Tarek El Molla, Minister of Petroleum and Mineral Resources; and Maria Moraeus Hanssen, CEO and Chairman, DEA Deutsche Erdoel AG.
Explore chapterIndustry & Retail
With a long-established presence of large-scale manufacturing capacity and a rapidly expanding domestic market, Egypt’s industrial sector will remain critical for job creation and regional development. Government strategies to expand production capacity into Upper Egypt are expected to improve employment options, and investment into road and railway links will also be critical to ensure that this manufacturing capacity can be developed with a close connection with logistics networks. Moreover, with a population of nearly 100m, expanding by roughly 2m every year, Egypt remains a sizable market for retailers and fast-moving consumer goods manufacturers. However, economic instability and the devaluation of the pound have brought new challenges and a need for the sector to adapt to remain competitive. Modern retail areas are nevertheless expanding, and customers are increasingly interested in interacting with retailers through new technologies, bringing new opportunities for the sector to expand in order to cater to changing consumer trends. This chapter contains an interview with Tawfeek Laham, CEO, Middle East Glass.
Explore chapterICT
With the government prioritising economic diversifi¬cation, Egypt’s digital transformation continued apace in 2018. Although the country’s mobile market appears to have already reached saturation in terms of subscribers, exponential increases in data use on the back of the 4G rollout, as well as the prospect of a sizeable fixed-line network expansion, are expected to continue to drive revenue growth for telecoms in the near future. Guided by its ICT 2030 Strategy, which aims to transform Egypt into a telecoms and tech centre on both a regional and global scale, government support remains key with infrastructure investments, tax incentives for tech parks and manufacturing projects. Private sector support for the nascent tech start-up industry offers promising prospects for the country. This chapter contains interviews with Amr Talaat, Minister of Communications and Information Technology; and Adel Hamed, CEO, Telecom Egypt.
Explore chapterConstruction & Real Estate
The construction industry is poised to remain one of the most dynamic sectors of the economy. This has been apparent in an increase in the number of large-scale projects involving transport, energy, utilities and urban development. This ongoing burst of construction activity is part of an effort to address infrastructure gaps, and improve Egypt’s standing among domestic and international investors. On the other side of the spectrum, real estate developers have been able to adapt their offers to the new needs of Egyptian buyers, and have progressed with ongoing plans for housing, office space and new retail areas. Efforts to construct new cities and the New Administrative Capital are also driving innovation within the sector. Even with a long list of construction projects in the pipeline a significant amount of attention and resources in the sector will be directed towards housing and other real estate developments in the near term. This chapter contains interviews with Hassan Allam, CEO, Hassan Allam Holding; and Ahmed Zaki Abdeen, Chairman, New Administrative Capital for Urban Development.
Explore chapterTransport
Better transport networks are not only key to fulfilling the country’s ambitions to raise trade volumes with international markets; they will also be useful in properly managing the ongoing urban development taking place across many parts of the country. To reach these goals an increase in private investment participation is required. Moreover, for Egypt to maintain its position as a global maritime transport centre, ongoing improvements in port capacity are key, as well as measures to improve the competitiveness of port operations. Government plans to expand cargo movement across the Nile River will open up opportunities for multimodal transport across the country, and a clear framework to attract more involvement of the private sector in the system should boost the construction and operation of river ports in the pipeline for construction. This chapter contains an interview with Mohab Mameesh, Chairman, Suez Canal Authority; and Chairman, Suez Canal Economic Zone.
Explore chapterAgriculture
Egypt’s natural competitive advantages should allow its agriculture sector to strengthen as the economy recovers over the near term, and recent government policy has allowed for an increase in the recommended sale prices for several crops, helping sustain the livelihoods of millions of Egyptians that depend on farming. Furthermore, the establishment of clearer quality standards is already helping to drive exports to new markets in Asia. Ongoing strategies that safeguard diminishing water resources and farmland should enhance the sector’s development, while further integration of distribution channels could assist small-scale farmers in accessing export markets. Coordination between agriculture production and processing capacity also has the potential to boost revenues. This chapter contains an interview with Alaa Diab, CEO, Agriculture Group – PICO.
Explore chapterTourism
Following a turbulent period from 2011 to 2016 the Egyptian tourism sector has experienced consistent growth. The industry recorded gradual growth in arrivals and revenue in 2017 and 2018. Although visitor numbers have not yet been restored to their pre-2011 levels, occu¬pancy rates have increased across the country, with Cairo experiencing its highest occupancy levels since 2010. New source markets are continuing to grow while traditional markets are returning, raising optimism in government and among investors that the sector will flourish throughout 2019 and beyond. This chapter contains an interview with Rania Al Mashat, Minister of Tourism.
Explore chapterHealth & Education
Though the Egyptian health care system is character¬ised by a pluralistic mix of public facilities, it has been strained by rapid population growth and relatively low levels of funding. Consequently, most Egyptians opt for private facilities, fuelling high levels of out-of-pocket expenditure and increasing desire for private insurance. In response, the government has initiated several reforms aimed at improving quality and access to health care services for its population. Demand for medical equipment, pharmaceuticals and health care facilities are likely to follow, offering continued private sector growth and opportunity. In the same manner, Egypt’s burgeoning population and a high num¬ber of new entrants to Egypt’s education system have generated growing demand for facilities. However, strain on the public system has led to challenges in producing internationally competitive graduates. In an effort to improve the quality of its human capital, the government has begun to overhaul the pre-university education system and has opened the higher education segment to international universities. Additional funding and private sector support are required to assist the Egyptian government in achieving its targets. This chapter contains an interview with Mohamed El Kalla, CEO, Cairo for Investment and Real Estate Development.
Explore chapterTax
In conjunction with RSM, this chapter explores the taxation system and Egypt’s efforts to build an investor-friendly environment. It also contains a viewpoint with Cherif Hammouda, Managing Partner, RSM Egypt.
Explore chapterThe Guide
This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.
Explore chapterLegal Framework
This chapter introduces the reader to the different aspects of the legal system in Egypt, in partnership with Helmy, Hamza & Partners. It also contains a viewpoint with Mohamad Talaat, Managing Partner, Helmy, Hamza & Partners.
Explore chapterTable of Contents
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