Egyptian Economy and Investment Climate
The Egyptian equity market is among the most developed in the area with over 633 listed firms. Market capitalization on the market doubled in 2005 from 47.2 اﻟﺠﻨﻴﻪ اﻟﻤﺼﺮي ﻣﻘﺎﺑﻞ اﻟﺪوﻻر اﻻﻣﺮﻳbillion to USD 93.5 billion in 2006, peaking at USD 139 billion in 2007. Afterward, it has dropped to USD 58 billion in 2012, with turnover surging from USD 1.16 billion in January 2005 to USD 6 billion in January 2006. Private equity has not been widely utilized in Egypt in the past for a source of financing for companies. The government, however, has staged a number of policy changes and reforms specifically meant to develop internal private equity capital and also to attract private equity funding from global sources. The significant industries include textiles, hydrocarbon and chemical manufacturing, and generic pharmaceutical production. Unemployment is high at about 10.5%. Until 2003, the Egyptian economy suffered from shortages in foreign currency and excessively elevated interest rates. A string of budget reforms were conducted in order to fix flaws in Egypt's financial environment and also to boost private sector participation and confidence in the market. Major fiscal reforms were released in 2005 in order to tackle the informal sector which according to quotes signifies somewhere between 30% to 60 percent of GDP. Significant tax cuts for corporations were introduced for the very first time in Egyptian history. The new revenue tax Law No 91 for 2005 reduced the tax rate from 40% to 20 percent. According to government statistics, tax filing by individuals and corporations increased by 100%. Many changes were made to reduce trade tariffs. Among the legislators' goals were handling the black market, reducing bureaucracy and pushing through trade liberalization measures. Amendments to Investment and Company legislation were introduced in order to attract foreign investors. For instance, the number of days required for establishing a business was dramatically reduced. Substantial improvement to the national economic environment improved shareholders' confidence in Egypt. The Cairo & Alexandria Stock Exchange is regarded among the best ten emerging markets on earth. The changes to the coverage also brought increased amounts of foreign direct investment in Egypt. According to the UN Conference on Trade and Development's World Investment Report, Egypt was ranked the second largest country in attracting foreign investment in Africa. Given the large number of amendments to laws and regulations, Egypt has succeeded to a certain scope in adapting to global standards. Very recently the Cairo & Alexandria Stock Exchange (CASE) was welcomed with full membership into the World Federation of Exchanges (WFE)--the first Arab country to be invited.
Enforcement of those newly adopted regulatory frameworks stay, sometime problematic. Issues like corruption hamper economic development 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 level 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 study from the International Organization for Migration, 20% of Egyptian remittancereceiving families interviewed channeled the remittances towards various kinds of investment, while the large majority (80%) was more worried about utilizing remittances for meeting the everyday needs of their families such as spending on healthcare and education. Among the 20 percent of households that decided to invest, 39% spent in real estate, 22% spent in tiny businesses employing fewer than five people and the tiniest proportions 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 approximately 5 percent of GDP, remittances given the first capital for only 1.4% of recently established small and medium enterprises in Egypt in 2003-2004. The stock market capitalisation of listed Firms in Egypt was valued at اﻟﺠﻨﻴﻪ اﻟﻤﺼﺮي ﻣﻘﺎﺑﻞ اﻟﺪوﻻر اﻻﻣﺮﻳ 79.672 billion in 2005 by the World Bank Falling to $58 billion in 2012