How the Egyptian economy is diversifying

El Alamein, Egypt (Photo by Shutterstock)

Egypt's huge projects has ensured the country's economic growth, despite global economic turmoil, writes Ahmad Abdel-Rahman.

Mega projects, bold legislation, and raising the efficiency of infrastructure in Egypt has helped to ensure positive growth during the first phase of the Covid-19 pandemic. Positive growth continued despite the uncertainty that has prevailed in the global economy.

Over the last three years, Egypt has taken many decisions to resuscitate its economy and put it back on the right track. Egypt has implemented huge infrastructure projects, most notably the construction of the new administrative capital, about 35 km from Cairo, to which most government agencies will move within two years. The government has also implemented an improvement of road, bridge and water networks in most Egyptian cities. This is in addition to updating all legislation and laws regulating the investment climate and striving to build institutions capable of activating these laws.

This assessment was in a report published by the "Oxford Business Group", which praised the performance of the Egyptian economy over the past year. The report stated that demographic expansion led to the need for infrastructure, which has created a strong demand for roads, railways, and utilities, as well as for new housing and government facilities.

At the same time, Information and Communication Technology (ICT) infrastructure has become increasingly important to ensure connectivity in all areas of the Egyptian economy, which is witnessing significant digitisation. For example, President Abdel Fattah El-Sisi witnessed, on July 6, the inauguration of a number of "Digital Egypt" projects for the Ministry of Communications and Information Technology, including the launch of the Digital Egypt platform. This platform provides services in an unprecedented way. It is the first time during which government services have become possible.

The report noted that since early 2022, the consequences of the Russian war in Ukraine have led to an increased focus on food and energy security, both of which will be enhanced by major agriculture and energy projects underway. At their core, lies innovation and development designed to enhance short-term resilience in the broader economy and support long-term growth.

The report continued: "Egypt implemented various economic reform programs, the last of which ran from 2016 to 2019 to correct market imbalances and distortions. This process, backed by a USD12 billion loan from the International Monetary Fund (IMF), began with a shift to exchange rate liberalisation, a development that reduced the debt burden."

Subsequently, the government moved to reduce the budget deficit, which reached 10 per cent of GDP in 2019 In 2017, a new investment law was implemented that included guarantees for private companies, such as equal treatment of foreign and Egyptian investors, protection against nationalization or seizure of funds without a court order, and the right to transfer profits abroad. The government has also sought to enhance the country's reputation as an investment destination.

The Egyptian government has also focused on infrastructure and construction as an engine for growth and financial stability since the country embarked on an IMF-supported economic reform programme in 2016. Egypt's road network, energy production capacity, and port infrastructure have expanded rapidly—driven by population growth, a desire to increase exports, and efforts to take advantage of the country's strategic location for trade and travel.

With construction considered a priority sector for long-term economic growth, the Egyptian economy maintained a positive trajectory during the period from 2020 to 2022 despite the challenges associated with the Covid-19 pandemic. While construction is set to continue to show positive growth in 2022 the government has sought to improve regulatory conditions to enhance transparency and simplify registration and application procedures for foreign investment.

Egypt's strategic maritime location, which links the Mediterranean and the Red Sea via the Suez Canal, has also boosted the economy significantly. The Suez Canalis a major enabler of regional trade. The government's long-term strategy for maritime activity relies on raising the efficiency and competitiveness of ports. Despite the pandemic and subsequent disruptions in the supply chain globally, the marine sector has grown steadily over the years.

At the same time, the authorities in Cairo are working to address the city's main constraints - congestion and a lack of public spaces - through several projects, one of which is the "People of Egypt Walk". Thie first phase of this project has has been opened and will include 54 kilometers of developed area on the eastern and western banks of Cairo and Giza.

Egypt is also adopting a policy of building "fourth generation cities", the second of which is the new city of El Alamein. Scheduled to be completed by 2025, it will accommodate 3 million people. New Alamein aims to be a tourist destination; this project has been allocated EGP 25 billion by the New Urban Communities Authority.

Along the Mediterranean coast is the New Mansoura City, which is an EGP 60 billion investment that will accommodate up to 1.5 million people. This fourth-generation city is being built in four phases alongside tourist accommodation, which takes advantage of its location on the Mediterranean Sea. Medical tourism is also set to be a major economic activity in the city, combining a strong planned health sector with its potential for leisure tourism.

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Sunday, 25 September 2022