Servicing a foreign debt over twice the size of the national budget is another negative factor. Under pressure from the IMF and World Bank, Egypt finally began to lift price controls,reduce subsidies and begin to relax restrictions on trade and investment. Tourism represents one of the most lucrative sectors of Egypt's economy but is highly vulnerable to internal violence and regional politics. The government remains hopeful that the oil and gas discoveries in the western desert will produce significant revenues. The Egyptian economy is dominated by the service sector, which includes public administration and accounts for almost half of GDP. Other important sectors include tourism, the Suez Canal and the agricultural sector, which is still large and accounts for about 14% of exports, mainly cotton, potatoes and rice. Petroleum and gas account for 10% of GDP and 40% of exports. Industrial exports are limited. There is currently 9% unemployment in Egypt, as estimated by official government figures. Strict labor laws, relatively high import tariffs, and high personal taxes are also features of the current economic regime in the country. The IMF is presently providing standby credits to the Egyptian government. The government's current economic policies include plans to eliminate the main energy subsidies, to privatize one of the main “big four banks”, to reduce the standard maximum tariff rate to 40%, and to remove all non tariff balriers on imports and exports by 1998. Positive feature of the Egypt economy are summarized below:
･ Privatization are progressing.
･ The government is deregulating the business environment through a Unified Investment Law, covering rules and incentives, lower trade barriers and a reduction in the budget deficit.
･ Exchange controls were liberalized in 1991, by the issue of the Ministry of Economy and International Co-operation Decree number 119.
･ Private sector investment is being encouraged through build-operate-transfer (BOT) projects, the first of which is a 700 MW thermal power plant, with two more planned. Four road projects already have authorization for BOT.
･ The budget deficit has been reduced from 20% of GDP six years ago to 0.8% and foreign debt has fallen from US$40 billion to US$31 billion.
･ Large foreign currency reserves have enabled the government to maintain a stable exchange rate despite significant capital inflows putting upward pressure on the contrary.
･ GDP growth rates have now risen to just under 5%. This compares to GDP growth rates of l% in the period 1991-1994; low growth in the 1980s, 9% in the period 1974-1994 (when oil prices were high); and 3% in the late 1960s and early 1970s. Growth rates in the period 1992 to 1996 are given bellow.
After a long period of relative stagnation in the Egyptian economy, steady growth has emerged in the last two to three years. The growth rate, however, remains below the levels of the Asian “tiger” economies, whose GDPs have been increasing at 8-10% over the last decade. Progress on privatization has been relatively slow over the last 23 years. To date, state-run operations are still almost universal in ports, shipping line and shipping agencies.
