Egyptian Economy and Investment Climate
The Egyptian equity market is among the most developed in the region with over 633 listed companies. Market capitalization on the exchange doubled in 2005 from اﻟﺠﻨﻴﻪ اﻟﻤﺼﺮي ﻣﻘﺎﺑﻞ اﻟﺪوﻻر 47.2 اﻻﻣﺮﻳbillion to USD 93.5 billion in 2006, peaking at USD 139 billion in 2007. Subsequently, it has fallen to USD 58 billion in 2012, with turnover from USD 1.16 billion in January 2005 to USD 6 billion in January 2006. Private equity hasn't been widely used in Egypt from the past as a source of funding for companies. The authorities, however, has instituted several policy changes and reforms specifically intended to create internal private equity funds and to attract private equity financing from international sources. The significant industries include textiles, hydrocarbon and chemical manufacturing, and generic pharmaceutical production. Unemployment is high at approximately 10.5%. Until 2003, the Egyptian market suffered from shortages in foreign currency and excessively elevated interest rates. A string of budget reforms were conducted as a way to fix flaws in Egypt's financial environment and to boost private sector participation and confidence in the economy. Major monetary reforms were introduced in 2005 so as to attack the informal sector that according to quotes signifies somewhere between 30% to 60% of GDP. Tax cuts for corporations have been introduced for the first time in history. The new revenue tax Law No 91 for 2005 reduced the tax rate from 40% to 20 percent. According to government figures, tax filing by individuals and corporations increased by 100%. Lots of changes were made to reduce trade tariffs. Among the legislators' goals were handling the black economy, reducing bureaucracy and pushing trade liberalization measures. Amendments to Investment and Company law were introduced in order to attract foreign investors. By way of example, the number of times needed for establishing a business was dramatically reduced. Significant improvement to the national financial environment increased shareholders' confidence in Egypt. The Cairo & Alexandria Stock Exchange is considered among the greatest ten emerging markets on earth. The changes to the coverage also attracted increased amounts of foreign direct investment in Egypt. According to the UN Conference on Trade and Development's World Investment Report, Egypt was rated the second biggest nation in bringing foreign investment in Africa. Given the high number of amendments to legislation and regulations, Egypt has succeeded to a certain extent in adapting to global standards. Lately the Cairo & Alexandria Stock Exchange (CASE) was welcomed with complete membership into the World Federation of Exchanges (WFE)--the first
Arab country to be invited. Enforcement of those recently adopted regulatory frameworks stay, sometime debatable. Issues like corruption hamper economic growth in Egypt. Many scandals involving bribery were reported during the previous decades. "In 2002 alone, as many as 48 high-ranking officials--including former cabinet ministers, provincial governors and MPs were convicted of influence peddling, profiteering and embezzlement. Maintaining good relations with politicians is sometimes a key to business success in Egypt. According to the 2006 Corruption Perception Index developed by Transparency International (in which the higher the ranking the larger the amount of corruption), Egypt ranked 70 out of 163. On a scale from 0 to 10 (with 0 being highly corrupt), Egypt scored a 3.3 . According to a research from the International Organization for Migration, 20% of Egyptian remittance-receiving families interviewed channeled the remittances towards various forms of investment, while the huge majority (80 percent) was more concerned about utilizing remittances for meeting the daily needs of their families such as spending on healthcare and schooling. One of the 20 percent of households that decided to spend, 39% spent in property, 22% invested in small businesses employing fewer than five people and also the smallest percentages of investors (6%) spent in medium private company using no more than 20 individuals. According to Egypt's Human Development Report 2008, even though representing roughly 5 percent of GDP, remittances provided the first capital for just 1.4 percent of recently established small and medium enterprises in Egypt in 2003-2004. The Stock Exchange capitalisation of listed Firms in Egypt was valued at اﻟﺠﻨﻴﻪ اﻟﻤﺼﺮي ﻣﻘﺎﺑﻞ اﻟﺪوﻻر 79.672 اﻻﻣﺮﻳbillion in 2005 from the World Bank Falling to $58 billion in 2012