Sherine Nasr reviews Emerging Egypt 2008, giving an insight into the country's macroeconomics For the second successive year, the Oxford Business Group's (OBG) recently published report Emerging Egypt 2008 hailed the concrete measures taken by the government to streamline business and attract more foreign investments. As one of the most authoritative guides to Egypt's economic performance, the report underlined the country's recovery cycle in 2006 and 2007, as GDP growth hit above seven per cent in two years in a row. According to Minister of Investment Mahmoud Mohieldin, this was sustained by strong inflows of foreign direct investment (FDI) of $11.1 billion. Notably, Egypt is receiving greenfield investments from member countries of the Organisation for Cooperation and Development (OECD), including the US and EU, Gulf countries as well as new comers such as China, India and Turkey. In the 2007 World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD), Egypt was the lead FDI recipient country in Africa and the second among Arab countries. Pressed on whether the privatisation process will be accelerated during 2008, Mohieldin said that it is not a question of getting the highest proceeds from privatisation, but that this process has been a top reform policy over the past three years. New sectors, such as insurance and container handling companies, are now being privatised, and private business is now welcome to venture into sectors which were previously mainly controlled and utilised by the state. These include infrastructure, healthcare and the construction of new schools. The OBG report refers to the IT and telecommunications sector as among the fastest growing in the country. According to Minister of Communications and IT Tareq Kamel, Egypt's export of IT-enabled, offshore and outsource services is expected to rise to $1.1 billion in 2010. "We are approaching $400 million in exports from software development as well as IT-enabled services," revealed Kamel. He added that other areas of outsourcing growth include medical transcription specialists, accounting and financial services. On the telecommunication service, Emerging Egypt 2008 focussed on the two major market players, namely Orascom Telecom (OT) and Telecom Egypt (TE). In less than seven years, OT has grown into a regional cellular powerhouse with operations in five emerging markets -- it is the market leader in most of them, according to the report. Meanwhile, TE -- the country's sole fixed-line operator -- now provides voice- based fixed-line telephony, Internet and data services, as well as wholesale services to other operators via Egypt's only backbone network and international gateway. "In 2006, TE achieved year-on-year subscriber growth of four per cent to reach 10.8 subscribers, implying a fixed-line penetration rate of 15 per cent," noted the report. "Growth in both subscribers and average revenue per line [ARPL] helped revenue increase by 11.3 per cent in 2006 to LE9.52 billion." Notably, a second fixed-line licence will be issued during the year. After years of stagnation, the insurance sector is strongly on the map for reform as the People's Assembly is considering a new law to govern the industry. The report cited major impediments that were removed, including the reduction of stamp taxes, lowering and simplifying import tariffs and a 50 per cent cut in income tax, which eventually encouraged a number of private players to enter the market. "Several areas of necessary reform, however, have become stuck in executive branch politics or otherwise needed new legislation to remove stipulations," criticised the report. At the same time, it added, some laws have helped private sector companies to become more selective in choosing clients, leaving the public sector with the majority of the risk. Special attention was given by the report to the Suez Canal, one of the world's three vital trade conduits, and the Egyptian economy's third largest source of revenue. "Revenues from ships transiting the canal reached $3.8 billion in 2006," it stated. "Monthly revenues are running at around $320 million. An increase in transit fees announced during early 2007 means that revenues are set to jump again." Contrary to the flourishing image of many economic sectors given by the report, the railway system, in particular, has not fared very well. The report indicated the state of the locomotives, rolling stock, station and service facilities are less than desirable. "Decades of underinvestment inevitably meant that the railways fell into decline with tragic results," it said. Lack of maintenance or repair, the need for spare parts to put ageing locomotives in shape and extremely low fares are part of the problem. "Upgrading the century-old Egyptian National Railways will be quite a task," warned the report. Although OBG's report came out in a new format, its content remained as extensive, accurate and independent as it has always been. According to OBG Chairman Michael Benson Colpi, Emerging Market Series titles have contributed greatly to growth and development in the countries which they have covered over the past 12 years. "But it's a simple fact that, in 2007, many of those countries can no longer fairly be described as 'emerging'," stated Colpi. "These countries have come a long way and so have we, so we decided to launch our new 'reports' to more effectively describe the countries we already cover."
