Travel

egypt flagEgypt Country Brief – January 2008

Introduction

Australia has friendly and positive relations with Egypt. Diplomatic relations were established in 1950. Trade, particularly in wheat, has long been an important aspect of the bilateral relationship. Australia works constructively with Egypt on international security issues including counter-terrorism, disarmament and the prevention of the proliferation of weapons of mass destruction.

Political Overview

Egypt has a bicameral parliament, comprising the People’s Assembly and the Advisory Council. The Advisory Council functions only in a consultative capacity. The ruling National Democratic Party (NDP) has a decisive majority in the People’s Assembly.

The President holds executive authority and has the power to appoint and remove ministers and senior officials. President Hosni Mubarak has been in office since 1981. He has been reinstated as president four times in referendums. President Mubarak announced in February 2005 that the constitution would be amended to permit multi-candidate presidential elections and won Egypt’s first contested presidential election in September 2005.

Egypt has undertaken political and economic reforms to boost economic performance. The Government has reformed foreign investment rules, subsidies, customs duties and fiscal policy. It has also begun the restructure and privatisation of state enterprises. Challenges remain over the impact of implementing such structural adjustment.

High population growth leads to over 500,000 Egyptian job-seekers entering the labour market every year. GDP growth needs to be sustained at over 4per cent per annum to absorb job seekers.

Internal security remains a high priority for the government. Authorities maintain tight control over the Muslim Brotherhood movement, which has been an underlying opposition force in Egypt for almost 80 years. Authorities are particularly concerned to prevent Islamic extremism and militancy.

Foreign Policy

Egypt plays an active role in regional politics and takes a prominent position as a mediator on important issues. It was the first Arab nation to make peace with Israel in 1979. It is an important country in the Middle East Peace Process and wider Middle East issues, and has a role in addressing the situation in Sudan.

Egypt is a leading member of the Movement of Non-Aligned States (NAM) and belongs to numerous international organisations, including the United Nations, the World Bank, International Monetary Fund, the League of Arab States and the African Union. The permanent headquarters of the League of Arab States is in Cairo.

Economic Overview

Egypt is the most populous country in the Arab world and has the second highest population in Africa after Nigeria (76.48 million according to the 2006 census). It has the third largest economy in the Arab world after Saudi Arabia and the UAE, with GDP estimated at US$107.4 billion in 2006. Egypt's principal sources of foreign exchange are Suez Canal tolls, tourism, expatriate remittances and petroleum exports. Services contribute half of GDP. Agriculture has declined in recent decades and now contributes less than 20 per cent of GDP. Manufacturing industry accounts for the remainder.

Bilateral Relations

Australia’s relations with Egypt have a long history. For almost a century, the main traffic between Australia and Europe passed through the Suez Canal. Cairo was the main air link from London and Australia for many years.

In the two World Wars, Australian forces were stationed in Egypt. From 1976 to 1979, the Royal Australian Air Force was stationed at Ismalia on the Suez Canal as part of the United Nations Emergency Force (UNEF) for disengagement between Egypt and Israel. Since the Israeli withdrawal from the Sinai in 1982, Australia has contributed to the Multinational Force and Observers (MFO) in the Sinai.

In recent years, there has been a steady two-way flow of bilateral ministerial and official visits. The Governor General Major-General Jeffery visited Egypt in April 2006 as part of the Rededication of the Memorial to the Ninth Division, 2nd AIF at the Commonwealth War Graves Cemetery, El Alamein. The Egyptian Minister of Supply and Internal Trade, Dr Hassan Khedr, visited Australia in May 2004.

In Australia, Egyptian-Australians are a well-established community in Australia. Most reside in New South Wales and Victoria.

Bilateral Economic and Trade Relationship

Egypt is Australia’s 37th largest merchandise export destination and third largest merchandise export market in the Middle East. Two-way merchandise trade was $354 million in 2006-07. Australian merchandise exports were $337 million, comprising mainly wheat, coal and copper. Merchandise imports from Egypt were $17 million, consisting mainly of floor coverings, textiles and aluminium. There is scope to strengthen and diversify bilateral trade and investment relations.

Egypt’s economic reform program should deliver new opportunities for Australian business. Egypt is increasingly becoming a destination for Australian investment in the mining and resource processing sectors.

Bilateral legal instruments to expand economic relations include an Agreement on Trade (1988), an Investment Promotion and Protection Agreement (2001), a Memorandum of Understanding on Mutual Cooperation on Trade Promotion (1998) and a Memorandum of Understanding on Consultations (1998)   A Memorandum of Understanding on the Live Animal Trade and on the Slaughtering and Handling of Australian Live Animals (2006) seeks to address animal welfare concerns through the application of international standards. Australia and Egypt are members of the World Organisation for Animal Health.

Export Opportunities

Australian products sold to Egypt in recent years include lead, specialised machinery, cereal preparations, food processing machines, animal feed, crustaceans, chocolate, metal fasteners, food products, measuring and controlling instruments, and pigments, paints and varnishes.

Broader opportunities for Australian merchandise exporters include agribusiness, education services, niche consumer items, oil and gas, and ICT.

Services trade is a promising sector. Egypt’s tourism sector is expected to grow strongly and should offer opportunities for Australian companies. There is potential to develop education links at technical and university levels. E-commerce is developing slowly but may provide opportunities.

Changes to Egypt’s Trade and Investment Conditions

In February 2007, Egypt announced a significant reduction in import duties on a wide range of manufactured goods and raw materials. The decree encompasses white goods and home appliances; medication and medial equipment; garments; food products; raw plastics; and livestock feed, among other items.

The average import tariff dropped from 25 per cent to 6.5 per cent. This is a positive move to stimulate trade, since almost 90 per cent of the customs tariffs charged on the 1,114 products included in the reforms are now in the 15 per cent or less import duty bracket.

According to the decree, some imported food products such as meat, fish, beans and cooking oil are among 176 items which enjoy zero tariffs. The decree also aims at balancing out custom duties on raw materials and components, semi-produced goods and final products.

Government approval is required for all foreign direct investment (FDI) in Egypt. The General Authority for Investment (GAFI) supervises and licenses projects incorporated under the Investment Guarantees and Incentives Law. The law allows up to 100 per cent foreign ownership and secures the right to repatriate income earned in Egypt.

Encouraged by ongoing economic and regulatory reform, FDI in Egypt has risen over the past few years, totalling US$ 11.1 billion in 2006-07. Much of this investment has been in the real estate, petroleum, telecommunications, banking and tourism sectors.

Austrade has a Senior Trade Commissioner in Cairo to assist Australian exporters. Austrade’s website has information on doing business in Egypt, market profiles on priority sectors and information on major initiatives, including trade exhibitions.

Trade and Investment Successes

TradeWatch Contacts

If you would like more information on the trade and economic conditions in Egypt, please email the Department of Foreign Affairs and Trade.