Egypt - PwC
EgyptProspects for Egypt were challenging even before therecent unrest and political turmoil. Major obstaclesinclude widespread poverty, rising unemployment, sloweconomic growth and a lack of investment.More than1/2of populationwith secondaryeducationFDI flows into Egypt declinedsharply after the popular uprisingin 2011 as a result of the increasein political risk and deteriorationin macroeconomic stability thatfollowed the overthrow of theMubarak regime. While theserecovered slightly in 2012, the recentuprising in 2013 will once againdecrease FDI flows into Egypt.iDespite the challenges, Egypt has anumber of key indicators supportinggrowth. The Egyptian economycan draw upon a large population,with more than 50 per cent havingfinished secondary education –which is far above the average of theAfrican peers analysed in this report.Egypt has the biggest share of stablemiddle-class population, a widelydiversified economy and the SuezCanal, the country’s greatest asset.Egypt is still waiting for a large IMFloan of US 4.8 billion. But evenbefore the removal of MohamedMorsi and his government, therewere many uncertainties as to whenthe 22-month stand-by arrangementwould be finalised.ii However, in theThese bubbles represent the cities of Egypt and the size of the bubbles indicates the population size of the cityAirportPortFuture AirportFuture PortFuture RailwayFuture RoadRailwayRoadPwC37
“COMESA is a fantastic trade agreement. And it comes as an advantage ifyou are trading between Cairo and East Africa, for example. Every productproduced in Cairo – and Cairo has some manufacturing power – if youtransport it to East Africa, it goes without duties. On top of that, the chamber ofcommerce back in Egypt will give you an incentive on the shipping as well: theysubsidise the shipping. But the problem that we have, is that these agreementsare fairly unknown.”EgyptHussein Hachem, CEO, Aramexmeantime the importance of theloan has diminished due to fundshaving been acquired from the GulfCooperation Council (GCC) andothers.The political situation, increasedlevels of uncertainty and sociopolitical tensions make definitiveforecasts difficult and also suggestthat Egypt will continue to suffer inthe aftermath of the uprising.TradePositive measures to improvethe trade environment werehalted in 2013 with theremoval of Morsi.International trade constitutes asizeable proportion of domesticGDP, with exports and importsaccounting for 21% and 25% of GDPrespectively. Petroleum and relatedproducts and natural gas constitutethe major proportion of exports.Despite the importance ofinternational trade to economicgrowth in Egypt, the country’sexternal position has deterioratedrapidly over the past two years.Egypt’s overall current accountdeficit is estimated to have widenedslightly in nominal terms during2012, while its trade deficit haswidened sharply.To help facilitate internationaltrade, Egypt is a member of severaltrade blocs including the AfricanEconomic Community (AEC),Preferential Trade Area for Easternand Southern Africa (PTA) andCommon Market for Eastern andSouthern Africa (COMESA).38Africa gearing upEgypt also signed an associationagreement with the EU and islooking to leverage its strong tieswith the US Government. Notably,Egypt has defined qualifiedindustrial zones, allowing productsmanufactured in these zoneszero-rated tariff entry in the US.Companies producing largely forexport can set up business in thesefree zones.The Government’s post-2004 reformdrive brought significant changes toEgypt’s tariff system, with a cut inthe weighted average tariff rate from14.6% to 14.1% and the slashing ofthe number of tariff bands.Further tariff reductions had beenplanned before the recent politicaldevelopments. Notably, all exporttaxes had been eliminated andaverage import tariffs were reducedfrom 9% to 7%.Although economic growthaveraged 3.0% between 2010 and2012, and was projected by theInternational Monetary Fund to riseto 4.9% between 2012 and 2017in April 2013, this is now unlikelyto be achieved. Growth forecastsfor the same period have alreadybeen reduced to 3.4% in October2013. In addition to the generalpolitical development, much-neededimprovements in economic policyhave been delayed.Egypt’s fiscal position hasdeteriorated further in recentmonths and public debt is alsoextremely high. A period of painfulfiscal and monetary tighteningwill be needed, but this appearsto be difficult to communicateto the people at this stage. TheGovernment will need to implementausterity measures such as subsidycuts and tax increases. Still, the USDollar to Egyptian Pound exchangerate and the balance of paymentshave both improved lately.Business environmentEgypt’s business environmentcontinues to bear the legacy ofyears of state domination of theeconomy. There is evidence of apublic backlash against pro-marketreforms. Anti-Western sentimentcould also make life difficult forinvestors.Egypt is rated poorly on the GlobalCompetitiveness Index and fell 26places between 2011 and 2012. Keyfactors driving this are the weakinstitutional environment, lack ofinnovation and lack of financialdevelopment.The rule of law has been unstableacross the country. Property rightsare not protected effectively andcorruption continues to erode trustin the economic system. Betweenthe time that the political upheavalbegan in 2011 and May 2013, morethan 6 000 corruption investigationsand several high-profile scandalshave tarnished the image ofbusiness.iiiBureaucracy is another major issuefor foreign companies, with legaland property transactions oftensubject to severe delays. Beforethe removal of Morsi, the unstablesocio-political climate in Egypt wasbeing fuelled by the Government’sinability to implement structuralreforms to improve the efficacy ofthe institutional framework.
80mLargest population4GWshortage ofelectricity in summerin Arab worldAs part of the economic reformplan that was sent to the IMF toclose the multi-billion-dollar loan,the Egyptian Government includedsome tax measures. These includedan increase in the corporate tax rateand sales tax rate on six productsas well as the introduction of afinancial transaction tax.one hand and creating pressure onwages on the other.LabourAn important structural problem inEgypt is its labour policies, whichare frequently cited as an obstaclein doing business since there aresignificant restrictions on the hiringand firing of workers.If the political situationsettles, Egypt could benefitfrom its large, well-educatedlabour force.With the largest population inthe Arab world – about 80 million– Egypt has a fairly large labourforce of nearly 27 million, withup to 700 000 new entrants intothe market annually. The growingsurplus of labour is increasing strainon the working population on theBy African standards the labourforce is also well educated and hasthe third-highest rate of secondaryeducation among the ten countriesin this study. Only South Africa andGhana rate higher.PowerWith its huge investments inthe energy sector, Egypt isbeginning to address risingpower demand.Key indicatorsPopulation size (million, 2012)80.7Population growth (2012-2020, avg p.a.)1.5%GDP (US billion, 2012)256.7GDP growth forecast 2012-2017 (avg, y/y rate)3.4%GDP per capita (US , 2012)3 112Global competitiveness index 2012 (global rank/144 107 (3.73)(score 1-7))Corp. Income Tax (CIT) rate25.0%Top exportsPetroleum oils and oilsobtained from bituminousminerals, crude (18.3%);Natural gas, liquefied(9.5%); Light oils andpreparations (5.5%)Logistics Performance Index 2012 (global rank/155(score 1-5))57 (2.98)Global Competitiveness Index 2012 – Infrastructure(global rank/144 (score 1-7))83 (3.61)Egypt’s mineral and energy resourcebase is made up for the most partby oil and natural gas, iron ore,phosphates and gold. Notably, crudeoil production has been in declinefor several years, but oilfields inthe Mediterranean seabed haveopened up fresh opportunities forreviving the country’s oil exportbusiness. The Government has alsobeen encouraging the exploration,production and domesticconsumption of natural gas.Rising demand and capacityconstraints in electricity supply arein danger of negatively affectingindustrial growth in Egypt. Thiscould have a knock-on effect in otherareas such as transport and logistics.A recent statement by the NationalElectricity Control Center indicatesthat the shortage of electricityreached 4GW during the summer.While the power grid is supposed togenerate 26.5GW, available capacityonly reached 22.3GW.Egypt had planned to invest US 110billion in power infrastructure overthe 2010-2027 period. For the 20122017 phase, there are ambitioustargets, including an additional12GW to be added to the nationalgrid, along with 1.2 million newconnections. These targets wouldappear to be beyond reach in thecurrent circumstances and it isdoubtful that they can be met.A major problem affecting the sectoris a lack of natural gas feedstock forpower plants, a challenge that hasbecome more acute in the past year.There are suggestions that some ofEgypt’s gas export ambitions willhave to be limited in order to createsufficient supply for domestic usage.PwC39
Significantagriculturalgrowth potentialGreater size ofmiddle class augurspositively for retail& consumer sectorsEgyptAgricultureEgypt has significant agriculturalgrowth potential. Warm weatherand plentiful water permit severalcrops per year. The land is workedintensively and crop yields are high.Agriculture contributes 14% of thecountry’s GDP and employs roughly40% of the labour force. However,the agricultural sector’s contributionto GDP is declining.ServicesThe services sector is by far thelargest and fastest growing in theEgyptian economy, accounting forapproximately 50% of GDP. Tourism,trade, banking and shipping serviceson the Suez Canal all constitutethe main sources of revenue inthe sector. The current unrest istherefore likely to have the mostnegative impact on the servicessector.The greater size of the middleclass compared to its regionalpeers augurs positively for growthin Egypt’s retail and consumergoods industry. The middle classconstitutes 31.6% of the populationwith per capita GDP of US 3 112,which is projected to increase toUS 4075 by 2017.TourismTourism suffers profoundlyamid ongoing unrest.Even before the most recent politicalturmoil, the unstable socio-politicalenvironment in Egypt adverselyimpacted the country’s tourismsector, which has historically been akey driver of domestic employmentgrowth.Following the removal of Morsi,tourism numbers have nosedived,40Africa gearing upjust as they were recovering afterthe popular uprising in 2011. Thisis greatly concerning for a sectorthat makes up more than 10% ofEgypt’s economy. Although touristsare typically resilient and return toholiday destinations once calm hasbeen restored, a full recovery of thetourism sector will take some time.ivIndustryThe industrial sector is thesecond-largest economic sectorin Egypt, accounting for 37% ofGDP. Approximately 13% of thetotal labour force is employedin industrial activity, which isconcentrated in Cairo and aburgeoning construction industry.LogisticsLogistics Performance IndexCustoms543Timeliness2While customs procedures also sawsignificant improvement between2010 and 2012, they are stillrelatively inefficient.Since major investments in thecountry’s infrastructure have beenput on hold, Egypt is not likely toadvance its logistics performanceany further in the near term.InfrastructureThe good state of currentinfrastructure will not besustained as numerousprojects have been put onhold.The sheer scope of projectscurrently under consideration willrequire a huge investment driveand will be almost wholly relianton FDI. But, given the currentpolitical uncertainty, internationalinvestment is not likely to beforthcoming.InfrastructureTransport10The World Bank’s LogisticsPerformance Index shows Egypt hassignificantly improved its logisticsperformance over the past few years,with the country moving from 92ndin 2010 to 57th in 2012 and showingimprovement in all indicators.The transport sector in Egyptfaces numerous other problems aswell. Recent reports suggest fuelshortages are resulting in longqueues of cars, taxis and trucks.Most of Egypt’s territory has beenaffected, but the problems areparticularly severe in the south. Evenif the Government is able to securethe IMF loan, the Government willthen be under pressure from theIMF to phase out US 14.5 billion ayear in fuel subsidies as part of itsausterity programme.v Fuel couldtherefore become an increasinglyserious issue.Increased efficiency in internationalshipments and infrastructureimprovements rate strongly in thecountry’s logistics performance.Despite the current situation,Egypt’s transport infrastructure is inrelatively good condition, comparedto that of its African peers. TransportTrackingand tracingInternationalshipmentsLogistics quality and competenceEgyptTop performer (South Africa)Source: World Bank
40seaports5internationalairportsRailroutes in Egypt are mainly focusedon Cairo and also follow settlementpatterns along the Nile. The roadtransport network is supplementedby good inland water connectionsalong the Nile as well as a good railnetwork.Ports and Suez CanalEgypt owns the SuezCanal and a broad portinfrastructure.Egypt’s geographical location lendsan important aspect to the maritimetransport sector as it overlooks boththe Mediterranean and Red Seas,linked by the Suez Canal. The SuezCanal will remain a huge asset asit is the main trade route betweenEurope and Asia, accounting forroughly 7.5% of world sea trade.Despite being Egypt’s greatest asset,the Suez Canal could also become ahuge liability though. Any disruptionon the narrow passage could causemajor delays and cause a spike intransport costs.Most importantly, the Suez Canalis one of the world’s five ‘strategicchokepoints’, defined as narrowsea passages or straits, throughwhich the overwhelming majorityof the world’s oil flows. In light ofits strategic importance, the threatof maritime terrorism at the SuezCanal cannot be ruled out.viEgypt has 40 sea ports, ofwhich 12 are commercial ports;six mining ports; six fishingports; five marinas; and 10 oilshipping ports. Among the mostimportant ports are Alexandria,the biggest port in Egypt, and thePort of Dekheila, which is a naturalextension to the Port of Alexandria.Damietta Port has the largestcontainer terminal and the mostsophisticated equipment in theMiddle East, while Port Said andPort Suez occupy strategic positionsat each end of the Suez Canal.In addition to the sea ports, anetwork of river transport acrossthe Nile Delta and its tributariesfacilitates the transport of goods andcommodities.Air transportEgypt’s airport developmentplans are driven by longterm tourism opportunities.Egypt has 73 airports withpaved runways, five of whichare international airports. Thelargest and most active airport isin Cairo, being the second-busiestairport in Africa after O R Tamboin Johannesburg. There are nonstop flights from most majorAfrican, Asian, North American andEuropean cities.Despite current setbacks resultingfrom the political situation, tourismis a long-term growth industryin Egypt, and airports need to beimproved to keep up with increaseddemand. One step in meeting thisneed is the extension of HurghadaInternational Airport, where a newairfield is to be built. The airport hasalso undergone massive renovationsto accommodate a dramatic rise inleisure traffic.The international market is wellserved by numerous European andMiddle Eastern carriers, while abouta dozen local airlines compete inthe domestic market.vii There arefrequent flights within the countryand improvements to the airinfrastructure will increase handlingcapacity and efficiency, which willbenefit the transport and logisticssector.Up to 85% of rolling stockis long past its replacementdate.viiiEgypt has a fairly reliable staterun railway system. The railwayconnects Cairo and Alexandria withthe main towns in the north of thecountry, all the large towns in theNile Basin down to Aswan, andSafaga on the Red Sea coast.The rail network essentially followsthe Nile settlement patterns withhigh network coverage in the northeast of the country and followingthe Nile through the length of thecountry. Egypt’s rail sector can bedescribed as adequate in its abilityto handle the country’s needs,although its operational capacity isstretched to the limit.The rail system is not safe andaccidents are common. In January2013, the Ministry of Transportationconfirmed that 82% of track relieson outdated mechanical systems andthat there are an average of 12 railcrashes per month in Egypt.ixConsiderable work is required toupgrade the system and improve thesafety record.RoadsRoad density followseconomic activity at thecoast and along the NileRiver.Egypt’s roads carry the largestshare of freight (53%), whichincreases the country’s dependenceon the maintenance of the roadinfrastructure. Until now, the qualityof Egypt’s road network has beenconsidered good, with 92% beingpaved. Roads in Egypt are mainlyPwC41
EgyptLargest share offreight carried byroadfocused on Cairo and – just likerailway lines and the country’sinfrastructure in general – followsettlement patterns along the Nile.Highway along the Mediterranean Coast, and second, the Cairo-Cape TownHighway, running north to south.The densest network of roads is inthe north-east of the country andconnects Cairo to the ports as wellas to the rest of the Middle Eastthrough the Sinai Peninsula. Incontrast to the reasonably extensivenetwork in the north-east and alongthe Nile, connections within thesouth of the country are sparser andneed to be expanded.Based on our analysis, we have assessed the investment potential for Egypt’stransportation and logistics sector as shown in the graphic below.Plans to build a 32km bridgeconnecting Saudi Arabia and Egyptacross the Gulf of Aqaba wererecently revived following thechange of political leadership inEgypt, but now appear to be a longway off. The bridge would be builtto handle both rail and road traffic,and would use tolls to recoup thecost of construction, estimated to bein the region of US 3 billion.Before President Morsi was ousted,the Government had recognised theimportance of the road network tothe national economy and outlinedUS 5.46 billion in investments toimprove the road transport systemto facilitate the more efficientmovement of goods. However, thecurrent circumstances increasethe risk of deterioration in roadquality and congestion whilemaking development of new roadinfrastructure more unlikely.With levels of car ownership havingincreased substantially, it is clearthat the continual expansion of theroad network and the creation offreight corridors will be a vital stepin helping to ease congestion anddrive economic development. At themoment Egypt is the starting pointfor two major trans-African highwaycorridors: first, the Cairo-Dakar42Africa gearing upConclusionEgypt – Investment potential assessment1. Demographics and resources2. Economics3. Business environment4. Trade and logistics5. Transport infrastructureKey:AttractiveStrong improvement expectedAverageSome improvement expectedUnattractiveStagnation/marginal change expectedEnd notesiAmira Salah-Ahmed, “Foreign capital becomes refugee from crisis-afflicted Egypt”, TheBRICS Post, estors/#.UjBee-waJMsii“IMF Reaches Staff-Level Agreement with Egypt on a US 4.8 Billion Stand-By Arrangement”,International Monetary Fund, .htmiiiHafez Ghanem, “Can Egypt’s Transition and Economy Be Saved?” Brookings aren Fredrickson, “Egypt: Tourism Industry In Economic Decline Due to Political Unrest”,Travelers Today, http://www.travelerstoday.com/articl
Labour If the political situation settles, Egypt could benefit from its large, well-educated labour force. With the largest population in the Arab world – about 80 million – Egypt has a fairly large labour force of nearly 27 million, with up to 700 000 new entrants into the market annually. The growin
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Ahmed Abdel Ahad Donia Egypt Samer Moustafa Mohamed El Sayed Egypt Ahmed Mohammed Ibrahim Obaid Egypt Yasser Elsaadawy Egypt Ahmed Salah Behiry Dr. Egypt Zakaria Ahmed Rashad Mohamed Eqypt Amira Salah Hassan Said Egypt Aleykutty Shaji India Ayman Ibrahim Alnwehi Egypt Annamma Anandamadam Othman India
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Egypt was a grassland. Nomads traveled in search of food King Menes united Upper & Lower Egypt. Established capital at Memphis. Age of Pyramids. First man made mummies Romans take control of Egypt. Egypt never rises to greatness again. Alexander the Great conquers Egypt. Cleopatra is the last Phar
The first pharaoh of Egypt was Narmer, who united Lower Egypt and Upper Egypt. Egypt was once divided into two kingdoms. The kingdom in Lower Egypt was called the red crown and the one in Upper Egypt was known as the white crown. Around 3100 B.C. Narmer, the pharaoh of the north, conquered the south a
Around 3100 BC, there were two separate kingdoms in Egypt, Upper Egypt and Lower Egypt. Soon aerwards, King Narmer (from Upper Egypt) united the t wo kingdoms. When the unificaon happened, it became the world ’s first ever na†on -state. King Narmer was the first king of Egypt ’s
