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World > Africa > Egypt > Economy (Notes)

Egypt - Economy (Notes)


ECONOMY
With the installation of the 2004 Egyptian parliament, the Government of Egypt began a new reform movement, following a stalled economic reform program begun in 1991, but moribund since the mid-1990s. In the past year, the cabinet economic team has simplified and reduced tariffs and taxes, improved the transparency of the national budget, revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt's competitiveness. Despite these achievements, the economy is still hampered by government intervention, substantial subsidies for food, housing, and energy, and bloated public sector payrolls. Moreover, the public sector still controls most heavy industry.

In sectoral terms, agriculture is mainly in private hands, and has been largely deregulated, with the exception of cotton and sugar production. Construction, non-financial services, and domestic marketing are also largely private. The Egyptian economy, however, relies heavily on tourism, oil and gas exports, and Suez Canal revenues, much of which is controlled by the public sector and is also vulnerable to outside factors. The tourism sector suffered tremendously following a terrorist attack in Luxor in October 1997. The tourism sector feared a repeat of the downturn in tourist numbers when terrorists attacked resorts in the Sinai Peninsula in 2004 and 2005. So far, however, the sector has not suffered as greatly as expected.

The U.S. has a large assistance program in Egypt and provides funding for a variety of programs in addition to some cash transfers. A portion of U.S. assistance to Egypt under the 2003 Iraq war supplemental appropriations was provided in the form of bond guarantees, which were contingent upon Egyptian compliance with a series of economic conditions. Egypt met the conditions and in September 2005 issued $1.25 billion in 10-year bonds that were fully guaranteed by the United States. To support the Middle East peace process through regional economic integration, the United States permits products to be imported from Egypt without tariffs if they have been produced in Qualified Industrial Zones and 11.7% of the inputs of these products originate from Israel.

Agriculture
Approximately one-third of Egyptian labor is engaged directly in farming, and many others work in the processing or trading of agricultural products. Nearly all of Egypt?s agricultural production takes place in some 2.5 million hectares (6 million acres) of fertile soil in the Nile Valley and Delta. Some desert lands are being developed for agriculture, including the ambitious Toshka project in Upper Egypt, but some other fertile lands in the Nile Valley and Delta are being lost to urbanization and erosion.

Warm weather and plentiful water permit several crops a year. Further improvement is possible, but land is worked intensively and yields are high. Cotton, rice, wheat, corn, sugarcane, sugar beets, onions, and beans are the principal crops. Increasingly, a few modern operations are producing fruits, vegetables and flowers, in addition to cotton, for export. While the desert hosts some large, modern farms, more common traditional farms occupy one acre each, typically in a canal-irrigated area along the banks of the Nile. Many small farmers also have cows, water buffaloes, and chicken, although larger modern farms are becoming more important.

The United States is a major supplier of wheat, corn, and soybean products to Egypt, almost all through commercial sales. Egypt is, in fact, traditionally the U.S.'s largest market for wheat sales. U.S. agricultural sales to Egypt average $1 billion annually. U.S. food assistance programs to Egypt ended in 1992 as Egypt became more prosperous. Egypt continues to receive modest food assistance through the World Food Program and from France.

'Egypt,' wrote the Greek historian Herodotus 25 centuries ago, 'is the gift of the Nile.' The land's seemingly inexhaustible resources of water and soil carried by this mighty river created in the Nile Valley and Delta the world's most extensive oasis. Without the Nile, Egypt would be little more than a desert wasteland.

The river carves a narrow, cultivated floodplain, never more than 20 kilometers wide, as it travels northward toward Cairo from Lake Nasser on the Sudanese border, behind the Aswan High Dam. Just north of Cairo, the Nile spreads out over what was once a broad estuary that has been filled by riverine deposits to form a fertile delta about 250 kilometers wide (150 mi.) at the seaward base and about 160 kilometers (96 mi.) from south to north.

Before the construction of dams on the Nile, particularly the Aswan High Dam (started in 1952, completed in 1970), the fertility of the Nile Valley was sustained by the water flow and the silt deposited by the annual flood. Sediment is now obstructed by the Aswan High Dam and retained in Lake Nasser. The interruption of yearly, natural fertilization and the increasing salinity of the soil has been a manageable problem resulting from the dam. The benefits remain impressive: more intensive farming on millions of acres of land made possible by improved irrigation, prevention of flood damage, and the generation of billions of low-cost kilowatt hours of electricity.

The Western Desert accounts for about two-thirds of the country's land area. For the most part, it is a massive sandy plateau marked by seven major depressions. One of these, Fayoum, was connected about 3,600 years ago to the Nile by canals. Today, it is an important irrigated agricultural area.

Natural Resources
In addition to the agricultural capacity of the Nile Valley and Delta, Egypt's natural resources include petroleum, natural gas, phosphates, and iron ore. Crude oil is found primarily in the Gulf of Suez and in the Western Desert. Natural gas is found mainly in the Nile Delta, off the Mediterranean seashore, and in the Western Desert. Oil and gas accounts for approximately 12% of GDP. Export of petroleum and related products (including bunker and aviation sales) amounted to $2.7 billion in fiscal year 2003-04.

Crude oil production has been in decline for several years, from a high of more than 920,000 barrels per day (BPD) in 1995 to less than 662,000 BPD as of April 2006. To minimize the growing domestic demand of petroleum products, currently estimated at 25 million metric tons per year, Egypt is encouraging the production of natural gas. Over a 5-year period, production of natural gas increased by approximately 75% to reach about 3.3 billion cubic feet per day (BCFD) by the end of FY 2003/04. Currently, gas accounts for almost 50% of all hydrocarbon usage in Egypt.

Over the last 22 years, more than 230 oil and gas exploration agreements have been signed and multinational oil companies spent more than $27 billion in exploration companions. As of September 2003, crude oil reserves were estimated at 2.8 billion barrels, and proven natural gas reserves were estimated at 62 trillion cubic feet (TCF) with probable additional reserves totaling another 40-60 TCF. Texas-based Apache Oil Company is the largest American investor in Egypt, with a total investment of more than $2.8 billion since 1996.

Egypt's excess of natural gas will more than meet its domestic demand for many years to come. The Ministry of Petroleum has determined that expanding the Egyptian petrochemical industry and increasing exports of natural gas as its most significant strategic objectives. As of September 2005, three liquefied natural gas (LNG) trains had been in operation. The first is in Damietta on the eastern side of the Delta and started exporting in early 2005. It is headed by the Spanish electric utility, Union Fenosa. The second LNG project is located at Idku on the western side of the Delta and started exporting in 2005. The first train started in April 2005, and the second in September. British Gas (BG) Group and the Malaysian state oil company Petronas are the major investors. Another project that will utilize gas for export and domestic consumption is the Mediterranean Gas Complex in Port Said where the Italian company AGIP and BP are the main shareholders. This facility will have a total cost of about $315 million and went on line in late 2004.

Egypt and Jordan established the Eastern Gas Company to export natural gas to Jordan, and then later to Syria and Lebanon. In summer 2003 Egypt began exporting gas to Jordan via a new pipeline from El Arish on Egypt?s north Sinai cost to Taba on the Gulf of Aqaba, and then underwater to the Jordanian city of Aqaba. Gas exports to Jordan generated gross revenues of approximately $60 million in 2003/04 and are currently reaching $85-100 million.

Transport and Communication
Transportation facilities in Egypt are centered in Cairo and largely follow the pattern of settlement along the Nile. The main line of the nation's 4,800-kilometer (2,800-mi.) railway network runs from Alexandria to Aswan. The well-maintained road network has expanded rapidly to over 21,000 miles, covering the Nile Valley and Delta, Mediterranean and Red Sea coasts, the Sinai, and the Western oases.

Egypt Air provides reliable domestic air service to major tourist destinations from its Cairo hub, in addition to overseas routes. The Nile River system (about 1,600 km. or 1,000 mi.) and the principal canals (1,600 km.) are important locally for transportation. The Suez Canal is a major waterway of international commerce and navigation, linking the Mediterranean and Red Seas. Major ports are Alexandria, Port Said, and Damietta on the Mediterranean, and Suez and Safraga on the Red Sea.

Egypt has long been the cultural and informational center of the Arab world, and Cairo is the region's largest publishing and broadcasting center. There are eight daily newspapers with a total circulation of more than 2 million, and a number of monthly newspapers, magazines, and journals. The majority of political parties have their own newspapers, and these papers conduct a lively, often highly partisan, debate on public issues.

Egyptian ground-broadcast television (ETV) is government controlled and depends heavily on commercial revenue. ETV sells its specially produced programs and soap operas to the entire Arab world. In addition to Egyptian programming, the Middle East Broadcast Company, a Saudi television station transmitting from London (MBC), Arab Radio and Television (ART), Al-Jazeera television, and other Gulf stations as well as Western networks such as CNN and BBC, provide access to more international programs to Egyptians who own satellite receivers.

ETV has two main channels, six regional channels, and three satellite channels. Of the two main channels, Channel I uses mainly Arabic, while Channel II is dedicated to foreigners and more cultured viewers, broadcasting news in English and French as well as Arabic.

Egyptian Satellite channels broadcast to the Middle East, Europe, and the U.S. East Coast. In April 1998, Egypt launched its own satellite known as NileSat 101. Seven specialized channels cover news, culture, sports, education, entertainment, health, and drama. A second, digital satellite, Nilesat 102, was launched in August 2000. Many of its channels are rented to other stations.

Three new private satellite-based TV stations were launched in November 2001, marking a great change in Egyptian government policy. Dream TV 1 and 2 produce cultural programming, broadcast contemporary video clips and films featuring Arab and international actors, as well as soap operas; another private station focuses on business and general news. Both private channels transmit on NileSat.

Radio in Egypt almost all government controlled, using 44 short-wave frequencies, 18 medium-wave stations, and four FM stations. There are seven regional radio stations covering the country. Egyptian Radio transmits 60 hours daily overseas in 33 languages and three hundred hours daily within Egypt. In 2000, Radio Cairo introduced new specialized (thematic) channels on its FM station. So far, they include news, music, and sports. Radio enjoys more freedom than TV in its news programs, talk shows and analysis.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions
Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



Facts at a Glance
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Government
Economy
Communications
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Notes and Commentary
People
Economy
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Foreign Relations
Relations with U.S.





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