EXPORTS RISE AS INVESTMENT IN INDUSTRY INCREASES
With over 100 state-owned companies divested so far, the privatization program is continuing as other companies are readied for sale

Investment in Egypt’s industrial sector rose to more than $1 billion in 2003, with well over half of it coming from private companies. The value of industrial production grew by 2.6%.
Egyptian exports have been increasing by an average of 20% per year for the last three years. “By 2005, we hope to achieve 30%,” says Minister of Foreign Trade Youssef Boutros-Ghali.

“Egypt is not a country with a history of exporting but we have managed to achieve an openness of mind that forces producers to start looking outside. We have streamlined the procedures for both exports and imports. The floating of the Egyptian pound last year has proven very effective in bolstering our exports.”

YOUSSEF BOUTROS-GHALI Minister of Foreign Trade

The United States is Egypt's leading single trading partner and the second most important trading bloc after the European Union. In July 1999, the two countries signed a Trade and Investment Frame-work Agreement (TIFA), and Egypt is eager to advance negotiations on a free trade agreement (FTA). “The sooner the better. We would like it to start tomorrow,” says Mr. Boutros-Ghali.

In January, the trade section of the Egypt-EU Partnership Agreement was put into effect, removing export restrictions, notably on Egyptian textile and garment exports; according to the agreement, any amount of Egyptian exports to the European market will be customs-free.

Also in January, representatives of the European Fair Trade Association (EFTA) states and Egypt met to bring their negotiations on an FTA closer to conclusion, and talks are due to start soon with Singapore.
Recent years have witnessed the private sector percentage of overall Egyptian GDP growing by around 1.5% annually, with more than 100 state-owned enterprises privatized since 1994. Around 180 state-owned export-oriented enterprises are currently being managed by holding companies while awaiting privatization.

One of the largest holding companies is the Metallurgical Industries Holding Company (MICOR), which supervises firms with operations covering a range of industrial and manufacturing activities. Among the most important in its privatization portfolio are the Egyptian Iron and Steel Company and the Aluminum Company of Egypt.

M. ADEL EL DANAF Chairman of the Metallurgical Industries Holding Company

Chairman M. Adel El Danaf says that privatization lies at the top of MICOR’s strategic agenda. In the meantime, getting the companies in the best possible shape to be sold off requires sorting out their balance sheets, settling their debts with the banks, and dealing with problems such as overstaffing.

“We have a group of companies that need to be reformed before being privatized,” Mr. El Danaf explains. “These companies need restructuring because of the policies adopted in the past decades when the centralized economy prevailed. As a result, many accumulated problems over the years.”

Concern over the possible social effects of privatization means that progress is gradual. “We studied the experiences of other countries around the world and learned from these experiences. We put considerable emphasis on minimizing the negative social impact. We have been accused of moving slowly, but we want to carry it out with the least harmful effects and I believe that we have succeeded in achieving this.”

The privatization program is, nevertheless, very flexible. Mr. El Danaf says, “We will consider any proposal coming from investors, such as leasing for a certain period with an option to buy.”

There have been a number of inquiries about MICOR companies from the United States and Europe, in particular about the aluminum and steel businesses. “Egypt has good access to the United States for our products. We export both aluminum and steel there.”