The country's economic status: recent reforms begin to pay off More promises Egypt's foreign investment ranking surges, Mona El-Fiqi reports A clear improvement of economic indicators led Egypt to be placed second among Mediterranean and North Africa (MENA) countries for foreign investments at the Economist conference held in Cairo last week. Three years ago Egypt was not even listed in the top twenty countries. The Economist conference was the fifth business roundtable with the government of Egypt. The main topic of the conference was Egypt's high growth rate, attained as government reforms gradually change the business environment and attract the interest of foreign investors. But the realities of doing business on the ground are still clouded by red tape, weak human resources and low living standards. Will the next stage of reforms tackle these weaknesses, turning Egypt into a priority market for international business? According to Prime Minister Ahmed Nazif, the reform programme has succeeded in improving the country's economic indicators, but there are still some challenges that the government will have to contend with in the coming period. "Our economy is now built-in and locally supported," said Nazif. Over the past two years, Nazif said, foreign direct investment has increased, rising from $6 billion in 2006 to $9.4 billion during the first three quarters of 2007. Fiscal reform is underway, and the government has gained the confidence of businesses, especially after it started to implement a new and reformed system of customs and taxation. In a bid to lure more investors, the government is also preparing a new law on settling business disputes, scheduled to be introduced before the end of this year. "The government is also trying to reduce the inflation rate from 12 per cent, to six per cent," said Nazif. Nazif explained that the reasons behind the inflation were primarily the bird flu affliction which spread in some provinces, as well as the change in energy prices last July. The government's programme aims at attaining social equity in a country where low-income groups need to be supported, as reform is implemented. The subsidy system has not been efficient according to Nazif, since it results in subsidising the rich as well as the poor, with 40 per cent of the subsidy budget allocated to energy sector. Nazif said that the government is trying to help limited income families improve their ability to earn a living through education and improvement of their skills. He cited furniture production as one sector that holds promising potential. An additional challenge that government policies must grapple with, according to Nazif, is the fact that a large sector of the Egyptian economy is informal. The prime minister predicted that the economy will, however, become more formalised as a result of the government's policies bolstered by the extensive application of information technology. Emphasis will also be given to the upgrading of transportation, healthcare, education, and creating partnership with the private sector. A Partnership Unit was recently established at the Ministry of Finance, with the aim of cooperating with businessmen in building schools, heathcare units, airports, railways, and low- income housing. "Real opportunities are available today for private investors, with the government guaranteeing their investments in joint-projects," Nazif said.
