Economic reform in Egypt started in 1974 with the open door policy which attempted to convert our mode of production from one based on import substitution in an economy characterized by a huge public sector to an economy that is more private sector friendly with export oriented policies at its core.
Since 2004, the scope and depth of reform have vastly expanded and took root. The economy witnessed a clear transformation from the private sector friendly environment prevalent during the 1970s, 80's and 90's to a private sector reliant economic system.
Since implementing relevant pro-business economic reforms, the modern Egyptian economy has become one of the fastest growing among emerging markets. In contrast to a low of 3.2 percent in the 2002-2003 fiscal years, Egypt experienced GDP growth of 7.2 percent for the third year in a row till the first quarter of 2009.
Growth has been broad-based across manufacturing, the hydrocarbon sector, construction, services, tourism and agriculture, with the main drivers being private consumption and investment supported by relatively large inflows of FDI.
Since 2005, Egypt's annual GDP growth rates have outpaced averages for the newly industrialized Asian economies and the entire Middle East. Projections for 2009 beyond indicate that modern Egypt will sustain its position as one of the world's fastest growing economies.
Egypt was named the top regional reformer for 2009 and in the top ten globally in the annual World Bank publication Doing Business. This is the third year in a row that Egypt has been named the top regional reformer.
H.E. Mahmoud Mohieldin, the Minister of Investment in Egypt since 2004, was nominated a Young Global Leader of the World Economic Forum and a member of the Commission on Growth and Development in 2005.
The Central Bank of Egypt began a financial sector reform program in 2005 which has now entered its second stage. Smart decision making and carefully regulated liquidity levels during the initial reform period insured that Egyptian banks were insulated from the current global financial crisis. In addition, 65 percent of the modern Egyptian banking sector has been privatized.
Egypt's work force - at 24.8 million people - is the largest among Arab countries and the third largest in the Middle East and North African region.
Egypt's economic liberalization policies have led to a significant increase in investments, which has brought down unemployment in Egypt from 11.8 percent in 2005 to 8.6 percent in 2008.
The Minister of Trade and Industry, Rashid Mohamed Rashid, has taken an active role in encouraging export-oriented manufacturing. Under his watch, export revenues have increased by 50 percent.
In the past five years, the government has negotiated free-trade agreements and preferential trading arrangements with Arab States (Pan Arab Free Trade Area), COMESA (East and Southern Africa), the EU (Partnership Agreement) and Turkey.
In 2004, the Egyptian government negotiated a free trade agreement with Israel and the United States. The agreement created three Qualified Industrial Zones in Egypt; in Greater Cairo, Alexandria, and Port Said. According to the agreement, products that contain at least 11 percent Israeli components are granted duty-free access to markets in the United States.
Modern Egypt has an open and flourishing stock market that ranks number two in the entire Middle East region, second only to Bahrain.
Egypt continues to receive significant levels of foreign direct investment (FDI). Its FDI reached nearly $20 billion in 2008, a 40 percent increase over the previous year.
The Socio-Economic Returns of Reform
Rising Human Development
- Between 1980 and 2007 Egypt’s Human Development Index (HDI) rose 42%. The HDI is a measure of development progress based on health, education and income. This level of growth is among the tenth largest worldwide tied with Pakistan.
- Egypt’s average annual HDI growth was 10th fastest worldwide and almost double the global average.
Improved Economic Performance
- Since the launch of the Economic Reform program in 2005, Egypt has sustained and broad based growth in all sectors of the economy; achievements that have been recognized by the international community most notably in the World Bank’s Annual Doing business report where Egypt has been designated as a top global reformer for the fourth year in a row.
- This sustained economic development has allowed the Government to increase tax revenues by 67% while reducing overall tax rates by half.
- This increase in tax revenue has also allowe the governent to nearly double social spening in the national budget in the same period
- Most importantly, the Egyptian economy has been able to create 3.4 Million jobs between 2005/2006 & 2008/2009
Reducing Poverty and Inequality
- The Government of Egypt’s reform program has paid off for all Egyptians. Between 2005 & 2008 Poverty, as defined by those living under $2/day, fell over 11%
- The reform program has not achieved growth at the expense of a growing gap between rich and poor in Egypt. In fact the Gini Index, the international measure of wealth inequality, actually fell 7% between 1999 & 2007.
- Further evidence of this, is that the share of the poorest 10% in national income rose 5% and the share of richest 10% feel 6% in the same period. The ratio of the wealth of the richest to the poorest 10% also fell 10%. All of which indicates a more just distribution of wealth.
- Nonetheless, the Government is committed enhancing the social returns of reform through improved targeting of social programs