Destinations > Africa > Egypt

Egypt Economy

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With the installation of the 2004 Egyptian cabinet and the 2005 presidential election, the Government of Egypt began a new reform movement, following a stalled economic reform program begun in 1991, but moribund since the mid-1990s. Since 2004, 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. The Egyptian economy experienced steady GDP growth rates around 7% between 2005 and 2008, before dropping below 5% amidst the global economic crisis. Despite Egypt’s growth, the economy is still hampered by government intervention, substantial subsidies for food, housing, and energy, and bloated public sector payrolls. Limited energy subsidy reform began in 2007 but has stalled since the 2008 global economic crisis. In sectoral terms, agriculture is mainly in private hands, and has been largely deregulated, with the exception of cotton, sugar, and rice 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. As a result of the global economic crisis, annual revenues for the Suez Canal fell sharply in 2008 and began only a partial recovery in 2009. The drop in Canal traffic and revenues has been partially offset by high international oil prices, as the shorter Suez route cuts costs for some shippers.

The U.S. has a large assistance program in Egypt and provides funding for a variety of programs. Through its Human and Economic Sector Development cash transfer program, the U.S. Agency for International Development (USAID) is supporting benchmarks that aim to stimulate the small and microenterprise sectors, improve budget transparency to increase macroeconomic stability, and improve the trade regime and business climate. 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 by factories registered in Qualified Industrial Zones and 10.5% 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 chickens, 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 one of the U.S.'s largest markets for wheat sales. U.S. agricultural sales to Egypt average $2 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 river 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 approximately $11.4 billion in fiscal year 2008-2009.

Crude oil production has been in decline for over a decade, from a high of more than 920,000 barrels per day (BPD) in 1995 to less than 550,000 BPD as of October 2009. To minimize the growing domestic demand for oil-based products, estimated in July 2009 at more than 31 million metric tons per year, Egypt is encouraging the production of natural gas. Production of natural gas doubled from 21 million metric tons in mid-2003 to 43 million metric tons in July 2008. In FY 2008-2009, natural gas production amounted to 6.4 billion cubic feet (BCF) per day. In March 2009 the Egyptian Gas Holding Company announced plans for 23 new exploration wells with total investments of $1.1 billion during fiscal year 2009-2010.

As of July 2009, crude oil and condensates reserves were estimated at 4.4 billion barrels, and proven natural gas reserves were estimated at 77 trillion cubic feet (TCF) with possible additional reserves totaling another 40-50 TCF. However, independent oil and gas experts indicated that Egypt’s proven natural gas reserves may be as high as 70 TCF, of which more than 80% (i.e., 57 TCF) is from the cone of the Nile Delta. Texas-based Apache Oil Company is the largest American investor in Egypt, with a total investment of more than $7 billion since 1995.

The Ministry of Petroleum regards expansion of the Egyptian petrochemical industry and increased exports of natural gas as significant strategic objectives. Three liquefied natural gas (LNG) trains are operating in Egypt. The first is in Damietta on the eastern side of the Nile Delta and is operated by the Spanish electric utility Union Fenosa; the second is a project located at Idku in the western Delta, with British Gas (BG) Group and the Malaysian state oil company Petronas as the major investors; and the third, the Mediterranean Gas Complex in Port Said, utilizes gas for export and domestic consumption, with the Italian company AGIP and BP as the main shareholders.

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 completed the first phase of the project by 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. The second phase was completed in 2005, connecting the pipeline to the Jordanian town of Rihab, north of the capital Amman. In 2008, a new pipeline to export gas to Syria began operations and provides about 212 million cubic feet per day. Egyptian natural gas shipments in late 2009 reached Lebanon via an extension of the Arab pipeline from Syria. Lebanon reportedly will receive about 30 million cubic feet per day. While by 2008 gas exports grew to 12.6 million metric tons of oil equivalent, the Government of Egypt may have to import natural gas within 3 to 4 years in order to meet domestic demand, particularly for producing electricity. In the wake of higher world market gas prices, the Government of Egypt in 2009 succeeded in renegotiating upward the price received under existing long-term gas export contracts with purchasers in Europe, Jordan, and Israel.

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 5,500-kilometer (3,400-mi.) railway network runs from Alexandria to Aswan and the Suez Canal. The well-maintained road network has expanded rapidly to over 47,500 kilometers (29,515 mi.), 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. As a recently-joined member of the Star Alliance, government-owned Egypt Air is expanding its air fleet and its international routes, in keeping with the Government of Egypt’s overall vision of Egypt as a growing and increasingly key regional transportation hub. The Nile River system (about 1,000 km. or 620 mi.) and the principal canals (1,600 km. almost 1,000 mi.) are important locally for transportation. The Suez Canal is a major waterway for global and regional commerce and navigation, linking the Mediterranean and Red Seas. Major ports are Alexandria, Port Said, the East Port Said container terminal and Damietta on the Mediterranean, and Ain El Sukhna, Suez and Safraga on the Red Sea, with major infrastructure and capacity modernizations and upgrades ongoing since 2008 in most of these ports.

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 10 daily newspapers with a total circulation of more than 4 million, and a number of monthly newspapers, magazines, and journals. Daily and weekly newspapers are a mix of independent, political party, and pro-government publications, and these papers conduct a lively, often highly partisan, debate on public issues.

Egyptian Radio and Television Union (ERTU) is the state-run entity that controls Egyptian TV (ETV), Nile TV, and Nile News, as well as the specialized channels (7 channels, including sports, culture, comedy, and children’s programming) and most radio frequencies in Egypt. ETV controls terrestrial (free-to-air) broadcasts throughout Egypt, broadcasting Channel 1 and Channel 2 nationwide, as well as six regional channels 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, Al Arabia, Al Jazeera, the Middle East Broadcast Company, a Saudi television station transmitting from London (MBC), Lebanese networks (Future and LBC), Arab Radio and Television (ART), and other Gulf stations as well as Western networks such as CNN, BBC, Fox News, and Al Hurra provide access to more international programs to Egyptians who own satellite receivers. NileSat, one of the three main providers of satellite TV to the region, is effectively controlled by ERTU and hosts a wide variety of channels.

Beginning in 2001, private satellite TV and radio has entered the Egyptian media marketplace. Three new private satellite-based TV stations were launched in November 2001, marking a significant change in Egyptian government policy. Dream TV 1 and 2 produce talk shows, cultural programming, broadcast contemporary video clips and films featuring Arab and international actors, as well as soap operas; another private station, Mehwar, focuses on business and general news. Other new independent TV stations include Al Hayat TV, O TV and ONTV (owned by the Orascom conglomerate), El Saa and Modern TV. These private channels also transmit on NileSat.

Radio in Egypt is almost all government-controlled and uses 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. These stations, known as Radio El Nile, include news and music.


Information by U.S. Department of State




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