Essential role in global maritime transport
Egypt is a country located in northeastern Africa and the Sinai Peninsula in southwestern Asia, with a population of 111 million. Its location on the intersection of Africa, Asia, and Europe is a vital factor shaping Egypt’s economy. The Suez Canal, which connects the Red Sea to the Mediterranean, is a pivotal maritime route, as about 12% of the world’s goods transported by sea pass through it each year. For this reason, Egypt has a vital role in international maritime transportation, especially for ships bound for the Far East and the Persian Gulf states.
Egypt is the third largest economy on the continent after Nigeria and South Africa. It falls into the group of lower middle-income countries. In recent years, economic growth has averaged 5% per year. In 2022, GDP was $476.7 billion ($4295 per capita). In the GDP structure, industry accounts for 32.7%, services for 51.4%, and agriculture for 10.9%. As for the business environment, Egypt has 3.8 million micro, small, and medium-sized enterprises (SMEs).
However, relatively high unemployment and poverty levels continue to pose challenges. The International Monetary Fund and the World Bank support efforts to strengthen macroeconomic stability and structural reforms. The changes initiated in 2016-2017 aim to promote private sector growth and a business-friendly environment. Egypt has also pledged to reduce greenhouse gas emissions by 65% by 2030, which provides an opportunity to modernize energy, industry, and infrastructure.
Population of Egypt
Egypt has a population of 111 million people. Egyptians are the largest ethnic group (91% of the population), and the Turks, Greeks, Abazis, Bedouins, Siwis, and Nubians are the largest minorities. The largest religious groups are Muslims, mainly Sunni (90%), and Christians, mostly Copts, Catholics, and Anglicans (10%). The official language is Arabic, but the upper classes also speak English and French.
Egyptian society is young. Those aged 15-64 account for 62% of the population, while those aged 65 or older account for 5%. The labor force numbers 31.2 million people. More than 90% of the population lives in the fertile areas surrounding the Nile Delta and Nile Valley (which account for only 8% of the country’s total area). About 10 million Egyptians live abroad, mainly in Saudi Arabia, Jordan, and Kuwait.
Egypt’s demographics are characterized by high birth rates. Between 1990 and 2017, Egypt’s population grew from 57 million to 95 million. The relatively high unemployment (7.2%) remains a challenge, especially among young people aged 15-24. Nearly a third of the population lives below the poverty line. The urbanization rate is 43.1%. The largest urban areas are the capital, Cairo (22.2 million people), Alexandria (5.6 million), and Port Said (778,000).
Economy of Egypt
In the 1990s, Egypt gradually started to shift away from a centralized economic model, focusing on private sector growth and diversification. Nowadays, Egypt’s economy is based on mining, agriculture, tourism, construction, and transportation. Hydrocarbon production and trade are crucial to the economy. Egypt has proven oil reserves of 3.3 billion barrels and natural gas reserves of 63 billion cubic feet. The oil and gas sector accounts for 24% of GDP.
Agriculture employs 20% of the workforce. Egyptians mainly grow cotton, rice, corn, wheat, legumes, fruits, and vegetables. Due to the rapidly growing population, Egyptian agriculture cannot meet domestic demand, and imports are necessary. The Suez Canal has a pivotal role in the transportation sector, generating profits of about 2% of GDP. A record annual revenue of $8 billion was recorded in 2022. Tourism, on the other hand, accounts for 12% of GDP.
Economic modernization is fostered by the “Sustainable Development Strategy – Vision 2030“, which has been implemented since 2016. It addresses several socio-economic goals, the accomplishment of which is expected to base the economic model on the principles of sustainable development. The most vital elements of the strategy are the expansion of entrepreneurship, support for innovation, energy transformation, and upgrading the education system. It also includes the construction of a new capital, a mega-city now dubbed the “New Administrative Capital.”
International trade
Egypt is the world’s 40th largest economy by GDP, 56th largest exporter and 45th importer. Egypt’s exports are worth $40.7 billion, and imports are worth $73.8 billion. Egypt’s main trading partners are China, Saudi Arabia, the United States, India, Turkey, the United Arab Emirates, Italy, Germany, Spain, Russia, and Greece.
The group of most imported goods are oil and mineral fuels (14.1%), industrial machinery (8.38%), motor vehicles and parts (6.75%), cereals (6.69%), electrical machinery (6.62%), plastics (5.55%), pharmaceuticals (4.83%), iron and steel (4.76%), oil seeds (3.32%), organic chemicals (2.58%), and wood (1.97%). Other goods include fats and oils, iron and steel articles, meat, ores, copper, paper, and precision instruments.
In turn, the group of most exported goods includes oil and mineral fuels (32.3%), plastics (6.55%), electrical machinery (5.85%), iron and steel (4.23%), fruits and nuts (4.08%), fertilizers (3.61%), clothing (3.11%), precious stones and metals (2.84%), vegetables (2.62%), aluminum (1.92%), natural minerals and stone (1.74%). Other goods include glass, inorganic chemicals, cotton, iron and steel articles, cosmetics, and prepared foods.
Trade agreements
Egypt has entered into 115 bilateral investment treaties (BITs) with China, India, and the United States, for example. Of these, 72 are currently in force. In addition, Egypt has signed a free trade agreement with Turkey. Cooperation with other countries also takes place under multilateral agreements, such as the Global System of Trade Preferences (GSTP).
Agreements with associations of countries:
African Continental Free Trade Area (AfCFTA)
Common Market for Eastern and Southern Africa (COMESA)
Greater Arab Free Trade Area (GAFTA)
Organization of Islamic Cooperation (OIC)
Southern Common Market (Mercosur)
European Union (EU)
European Free Trade Association (EFTA)
Egypt-European Union relations
Egypt and the European Union share a strong relationship. The Association Agreement was signed in 2001 and came into force on June 1, 2004. Together with the 2010 agreement, it established a free trade zone for industrial and agricultural products. In turn, the European Neighborhood Policy provides Egypt with funds for economic modernization, sustainable energy development, environmental protection, social programs, and strengthening democracy.
Egypt and the EU also engage in joint activities in science and technology. The first agreement in this area, signed in 2005, included energy, agriculture, health care, and cultural heritage cooperation. These joint efforts continue under the Horizon Europe initiative. Since 2017, both sides have also been cooperating under The Partnership on Research and Innovation in the Mediterranean Area (PRIMA).
Egypt is currently the EU’s 29th largest trading partner. For Egypt, the EU is the largest partner. In 2022, the value of trade in goods was €37.2 billion. The EU mainly imports fuels, mining products, chemicals, food, and clothing. Egypt imports machinery, transportation equipment, chemicals, and food from the EU. In turn, trade in services amounted to €9.4 billion. The EU mainly exports business services, while it imports tourism and transportation services.
Opportunities and challenges
Developments in Egypt make the country a prospective market for foreign entrepreneurs. Its market attractiveness is boosted by its geographic location and incentives for investors. Egypt offers the following types of preferential investment arrangements for foreign companies: free zones, special economic zones, investment zones, and Qualified Industrial Zones. Nonetheless, it is necessary to be aware of the difficulties arising from the different cultures, legal differences, and extensive bureaucracy.
Egypt applies diverse customs duties. Since 2016, authorities have been lowering them and simplifying procedures to promote foreign investment, streamline administrative operations, and reduce shipping delivery time. Customs duties range from 0% to 60%, with a 100% rate for luxury goods. Authorities have increased rates on some goods to protect domestic manufacturing. Some products must be registered with the General Organization for Export and Import Control (GOEIC) before being exported.
Restrictions on access to the Egyptian market may face companies in the agricultural sector (barriers related to sanitary and phytosanitary requirements). Meat exporters are required to sell meat that complies with halal standards. Considering recent trends in the Egyptian market, the most promising areas of cooperation for foreign entrepreneurs are the oil and gas sector, transportation, food industry, automotive, construction, and education.