Sherine Nasr reviews the latest publication on Egypt's economic performance during 2006 Investors, businessmen and multinational companies who consider coming to Egypt for investment purposes can now investigate the economic climate of the country in a simple way. The new edition of Emerging Egypt 2007, issued by the Oxford Business Group (OBG) has been released this month. The publication provides in- depth analysis of the political, macro-economic and sector-related developments of Egypt, including banking, capital markets, energy, infrastructure, industry and insurance. The 200-page annual not only has the largest circulation of an English-language publication on the country, but also has some very welcome news about investing in Egypt. "Economic miracles [won't] happen overnight, but Egypt has taken strides into the right path. What is different is that a sincere commitment to the reform process is more obvious now than ever before," said Andrew Jeffreys, editor-in- chief of the OBG, in an exclusive interview with Al-Ahram. The UK-based OBG is a publishing, research and consultancy services organisation which has for the eighth year in succession conducted an in-depth study of the Egyptian political, economic and social developmental spheres through its team of analysts. "Our analysts tour the country for six months every year. Their mission is to conduct ground interviews to get first-hand information about each sector the review is covering," said Jeffreys, who added that the OBG team speaks to private individuals, big companies, banks, brokerage companies, and other private sector entities, as well as government officials. Emerging Egypt 2007 underlined diversifying business and trade for Egypt's export market as a priority in 2006. According to the publication, this priority has been "demonstrated by Egypt's efforts to nurture relations with Beijing". A six-day trade mission by Rachid Mohamed Rachid, minister of foreign trade and industry, to China last September secured contracts of joint Egyptian- Chinese ventures worth a total of $2.7 billion. This year, all of the headlining Egyptian investment projects were Gulf-backed. "Tourist numbers from the region are on the rise and Gulf investments are pouring into the country," stated the review, adding that this year saw the UAE's Emaar involved in two multi- million-dollar projects on the North Coast to add to its 2005 Cairo residential project. "Kuwait's Kharafi group is expanding the airport at the Red Sea coast of Marsa Alam to meet growing tourist demand. A consortium of UAE and Bahraini companies established a $1 billion holding company to upgrade Egypt's transport infrastructure. "The Emirati company Etisalat won a $2.9 billion bid for a third mobile licence, and the Saudi group Anwal purchased the Omar Effendi retail chain for $114 million," stated the review. Regarding the flow of Foreign Direct Investment (FDI) to Egypt during 2006, Prime Minister Ahmed Nazif remarked, "the kind of reforms that have been put in place since 2004 resulted in a surge in FDI into Egypt." He further underlined the reform of the banking system, reform in the mortgage and insurance sectors, the establishment of the Industrial Development Agency and the reduction of taxes as among the main initiatives aimed at improving the business climate in Egypt. As a result, Emerging Egypt 2007 registers strong growth rates for the second consecutive year in Egypt. "The balance of payments continues to provide surpluses, bolstering Egypt's international reserves. Official figures for the first nine months of 2005-2006 show the economy rising by a further 5.8 per cent year-on-year, and we expect the year-end GDP figure to come in at 5.7 per cent," the review stated. According to Jeffreys, the main growth sectors of the economy in 2005-2006 were natural gas, as a result of new fields coming on stream, followed by the construction sector led by infrastructure, tourism and retail construction. The review underlines an increase of the revenues from the Suez Canal transit fees by 9.3 per cent, the result of "increasing global trade"; and the communications sector by 8.2 per cent year-on-year, led by further GSM and Internet market penetration. However, the review added that most of these sectors are not major employers (except for construction). "Other sectors such as agriculture, manufacturing, retail and services registered more modest growth in the range of three-five per cent." A debate about how Egypt's gas is best put to use has been going on during the year. "With oil prices soaring worldwide over the past several years, energy has become a significant source of foreign cash. Revenues from oil and gas exports reached $6.7 billion in 2004- 2005, and was projected to increase 4.5 per cent to $7 billion in 2005-2006," stated the review, adding that the sector, including petrochemical products, accounted for some 55 per cent of total exports during the first half of 2005-2006. This year has also been characterised by an influx of non-traditional tourists mainly from countries such as Bulgaria, Estonia, Ireland, Latvia, Lithuania and the Ukraine. "With the problems in Iraq, Palestine and Lebanon, tourism thrived in Egypt. The tourism sector is increasingly becoming a stronger and more diversified sector," noted Jeffreys. In addition, the review stated that a record number of Arab tourists visited the country this year. With regard to financial reform, Jeffreys noted the reduction in tax has had an interesting effect in Egypt, "we have seen a 100 per cent increase in registered tax payers for this year compared to a much lower degree of compliance in other countries such as Turkey, Morocco and Malaysia," he said. In June 2005, a new income tax law was introduced. "The top marginal income tax rate was reduced from 32 per cent to 20 per cent while the corporate tax rate was reduced to the same level from 40 per cent." According to Youssef Boutros-Ghali, minister of finance and social insurance, "2.3 million tax returns were filed at the end of the tax year in March 2006, an increase of over 100 per cent compared to 2005." He added that revenues from personal taxes in the fiscal year 2005-2006 were up to LE1 billion compared to LE400 million in the previous year. "Corporate tax revenues are also up by some LE3 billion," said Boutros-Ghali. The review highlighted major industries in Egypt and their development during the year. In the cement sector, global leaders are opening up new plants as well as investing in existing facilities. Fertilisers play a crucial role in the Egyptian economy which is increasing its focus on the sector. The petrochemicals market totalled about $1.76 billion in 2005. Success stories in the industrial sector can largely be attributed to the country's plentiful reserves of natural gas. The 200-page annual also provides an insight into construction, health, cinema sectors, banking and the Capital Market. "Our readers realise that we understand Egypt now. Although 2006 was a good year in many aspects, a lot remains to be done," said Jeffreys who explained that overcoming bureaucracy, creating new job opportunities and upgrading the educational system in Egypt remain major challenges for the government to tackle.
