Egypt has entered a new era of opportunity. Political, economic and social reforms have brightened up the economic climate, encouraging private enterprise and a surge of new investment, increasingly from abroad.
At the same time, the globalization of manufacturing and services, particularly Information Technology (IT) has benefited Egypt substantially. Located at the crossroads of Europe, Asia and Africa, Egypt’s ports are strategically positioned to assist world trade, particularly shipping and the transshipment of cargoes from Asia to Europe.
The focus has been to increase production and take advantage of low cost distribution, attracting companies to outsource their activities from the USA, Europe and Asia to a lower cost environment and to develop Egyptian companies to sell more products and services, partly by expanding their markets in the Middle East and Africa.
Egypt’s business sectors have risen to the challenge. They are restructuring to compete aggressively for domestic market share and expansion in the global marketplace. Their competitiveness has been growing rapidly, fed by trade openness and exposure to international standards. Cheap, skilled labour is available as are essential raw materials. Oil and gas production has benefited from world demand and the exploitation of new energy fields.
The Egyptian economy has improved as reflected by a real growth rate of 4.9 per cent in GDP during the FY 2004/05 (up from 4.2 per cent in 2003/04). GDP reached EGP 558 billion, up from EGP 485 billion in 2003/04.
Fiscal year 2004/05 is expected to record Egypt’s largest ever balance of payments (BOP) surplus. During the first three quarters of 2004/05, BOP has been on an upward curve, recording an overall balance of USD 2,681.6 million in Q3 2004/05, compared with a deficit of USD 410.6 million recorded in the same quarter for the previous year. The positive balance during Q3 of 2004/05 was attributed mainly to a noticeable improvement in the capital and financial accounts, and a small increase in the balances in current accounts.
During the third quarter of fiscal year 2004/05, the Capital Account Balance realised a surplus of USD 1,815.4 million compared with a deficit of USD 1,090.4 million in the same quarter of the previous year. The shift from a negative to a positive balance in the capital and financial accounts was mainly due to two factors: an increase in direct and portfolio investments and an increase in assets held by the CBE and other banks in Egypt. During the 12 months from Q3 of 2003/04 and Q3 of 2004/05, direct and portfolio investments went up from USD 95.1 million to USD 980 million and from USD 19 million to USD 500.9 million respectively. Other assets and liabilities also improved, up from a negative balance of USD 1,497.4 million to a positive balance of USD 100 million.
The Current Account Balance rose to USD 822.9 million in Q3 2004/05, compared with USD 554.4 million in Q3 of the previous year. The Current Account increase was caused by an increase in private and official transfers that more than compensated for the deterioration in the trade balance, and net services. The trade balance was impacted by higher imports of USD 5,573.8 million in Q3 2004/05, compared with USD 4,807.8 million for the corresponding quarter last year while exports increased in Q3 2004/05 to reach USD 3,374.1 million, in contrast with USD 2,890 million achieved during the same quarter of the previous year. Net services were supported mainly by an increase in Suez Canal dues and tourism receipts, which increased by USD 157 million and USD 7.1 million between Q3 2003/04 and Q3 2004/05 respectively.
Egyptians have responded positively. The 22 million workers in the labour force are adjusting well to new industries and working practices. Some 3.5 million young people are graduating from universities and colleges annually, well-taught and anxious to make their mark.
The transfer of publicly-held companies into the private sector has embraced small and large concerns: manufacturers in numerous heavy industries, such as iron and steel and fertilizer production; traditional industries such as textiles and to offerings in financial and telecommunications.
The pace of change has quickened considerably since a new government was formed in July, 2004, realizing $5.6 billion in the pasty 12 months, which is more than double the amount raised in the past four years.