"Within one month our revenues had jumped over 50%."

Doing Business in Egypt

nile river

Egypt is one of the most populous countries in Africa and the Middle East, with a population over 81 million people,  as reported in a census by the Egyptian government in 2011. Most of the population lives near the banks of the Nile River, in an area of about 40,000 square kilometers, where the only arable land is found. The large areas of the Sahara Desert are sparsely inhabited. About half of Egypt’s residents live in urban areas, with most spread across the densely populated centers of greater Cairo, Alexandria and other major cities in the Nile Delta. The economy of Egypt is one of the most diversified in theMiddle East, with sectors such as tourism, agriculture, industry and service at almost equal production levels.

Egypt’s economy depends mainly on agriculture, media, petroleum exports, and tourism; there are also more than three million Egyptians working abroad, mainly in Saudi Arabia, the Persian Gulf and Europe. The completion of the Aswan High Dam in 1970 and the resultant Lake Nasser have altered the time-honored place of the Nile River in the agriculture and ecology of Egypt. A rapidly growing population, limited arable land, and dependence on the Nile all continue to overtax resources and stress the economy, as reported by LookLex Encyclopedia. The economic growth rate for Egypt was 1.8% for 2010-2011, according to Businessweek. This was largely because early 2011, Egypt underwent a revolution, which resulted in the ousting of President Hosni Mubarak after nearly 30 years in power. As a result, there was tremendous chaos and violence, which caused businesses to shut down and foreign investors to pull out. On February 11, 2011, President Mubarak resigned and fled Cairo. Vice President Omar Suleiman announced that Mubarak had stepped down and that the Egyptian military would assume control of the nation’s affairs in the short term. On February 13, 2011, the high level military command of Egypt announced that both the constitution and the parliament of Egypt had been dissolved. The parliamentary election was to be held in September. On Nov 28 2011, Egypt held its first parliamentary election since the previous regime had been in power. Turnout was high and there were no reports of irregularities or violence, although members of some parties broke the ban on campaigning at polling places by handing out pamphlets and banners, according to BBC.

Egypt now has a GDP of $231.1 Billion in nominal terms, as estimated by the IMF in 2011, while the nominal GDP per capita was estimated at $2,892. The GDP per economic sector can be broken down as agriculture: 13.5%; industry: 37.9%; services: 48.6% for 2010. Warm weather and plentiful water permit several crops a year. 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 techniques are applied to producing fruits, vegetables and flowers, in addition to cotton, for export. The banking sector has gone through many stages since the establishment of the first bank in 1856, Egypt’s banking system has undergone major reforms since the 1990s and today consumers are faced with a liberalized and modernized system which is supervised and regulated according to internationally accepted standards. In the near future, a new mortgage law will enable purchasers to take out property loans. This will open up the market considerably and create a storm of development and real estate activity in the near future. Egypt also has long been the cultural and informational centre of the Arab world, and Cairo is the region’s largest publishing and broadcasting center.

Overall, Egypt certainly has a high level of potential for economic growth. However, Egypt’s poor governance and political problems have repeatedly kept it from achieving its true potential. A report by Strategic Foresight Group has calculated the opportunity cost of conflict for Egypt since 1991 is almost $800 billion. In other words, had there been peace since 1991, on average an Egyptian citizen would be earning over $3000 instead of $1700 he or she may earn next year. It is likely that the country’s political turmoil will continue for the foreseeable period even with the current establishment of a democracy. Since, there continues to be violence and instability in Egypt even today. As a result, businesses and investors should tread cautiously if they plan on doing business or trade in Egypt.

 

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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3 Responses to “Doing Business in Egypt”

  1. April 16, 2012 at 11:26 am #

    That is uncanny!

  2. May 12, 2012 at 3:08 am #

    Trade in Egypt Pretty nice post. I just stumbled upon your weblog and wished to say that I have really enjoyed browsing your blog posts. In any case I’ll be subscribing to your rss feed and I hope you write again very soon!

  3. Rania Habib
    May 22, 2012 at 2:43 pm #

    Hello, am interested to know what is uncanny about this report. Am interested to know your pointing view Plz.

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