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RESTRICTED
WORLD TRADE
WT/TPR/S/150
28 June 2005
ORGANIZATION
(05-2611)
Trade Policy Review Body
TRADE POLICY REVIEW
EGYPT
Report by the Secretariat
This report, prepared for the third Trade Policy Review of Egypt, has been
drawn up by the WTO Secretariat on its own responsibility. The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from Egypt on its trade policies and practices.
Any technical questions arising from this report may be addressed to
Mr. Arne Klau (tel:
022/739 57 06;
fax:
022/739 57 65) and
Mr. Jacques Degbelo (tel: 022/739 55 83).
Document WT/TPR/G/150 contains the policy statement submitted by Egypt.
Note: This report is subject to restricted circulation and press embargo until the end of the first
session of the meeting of the Trade Policy Review Body on Egypt.
Egypt
WT/TPR/S/150
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS
I.
II.
III.
vii
(1)
THE ECONOMIC ENVIRONMENT
vii
(2)
INSTITUTIONAL FRAMEWORK
vii
(3)
TRADE POLICY INSTRUMENTS
viii
(4)
SECTORAL POLICIES
ix
(5)
TRADE POLICY AND TRADING PARTNERS
ix
ECONOMIC ENVIRONMENT
1
(1)
MAJOR FEATURES OF THE ECONOMY
1
(2)
RECENT ECONOMIC DEVELOPMENTS
2
(3)
DEVELOPMENTS IN TRADE AND INVESTMENT
(i)
Trade in goods and services
(ii)
Investment
5
5
9
(4)
OUTLOOK
10
TRADE AND INVESTMENT REGIMES
11
(1)
INSTITUTIONAL FRAMEWORK
11
(2)
TRADE POLICY FORMULATION AND IMPLEMENTATION
12
(3)
TRADE POLICY OBJECTIVES
13
(4)
MAIN TRADE LAWS AND REGULATIONS
14
(5)
INVESTMENT REGIME
14
(6)
TRADE AGREEMENTS
(i)
World Trade Organization
(ii)
Preferential trade agreements
(iii)
Other arrangements
17
17
19
21
TRADE POLICIES AND PRACTICES BY MEASURE
23
(1)
OVERVIEW
23
(2)
MEASURES DIRECTLY AFFECTING IMPORTS
(i)
Documentation and customs procedures
(ii)
Customs valuation
(iii)
Rules of origin
(iv)
Tariffs
(v)
Other taxes and charges
(vi)
Import prohibitions, restrictions, and licensing
(vii)
Contingency trade remedies
(viii)
Standards and other technical requirements
(ix)
Other measures
23
23
24
25
26
33
34
35
37
40
(3)
MEASURES DIRECTLY AFFECTING EXPORTS
(i)
Registration, documentation, and control
(ii)
Export taxes, charges, and levies
(iii)
Export prohibitions, restrictions, and licensing
(iv)
Export subsidies, and duty and tax concessions for exports
40
40
41
41
41
WT/TPR/S/150
Page iv
Trade Policy Review
Page
(v)
(vi)
(vii)
(4)
IV.
Free zones and special economic zones
Export finance, insurance, and guarantees
Export promotion and marketing assistance
MEASURES AFFECTING PRODUCTION AND TRADE
(i)
Incentives
(ii)
Competition policy and price controls
(iii)
Government procurement
(iv)
State-owned enterprises and privatization
(v)
Local-content requirements
(vi)
Intellectual property rights
42
42
43
43
43
45
46
47
48
49
TRADE POLICIES BY SECTOR
53
(1)
INTRODUCTION
53
(2)
AGRICULTURE
(i)
Main features
(ii)
Policy developments
54
54
55
(3)
FISHING
57
(4)
MINING, PETROLEUM AND NATURAL GAS
(i)
Main features
(ii)
Policy issues
57
57
58
(5)
ELECTRICITY
59
(6)
MANUFACTURING
(i)
Main features and policy framework
(ii)
Selected manufacturing activities
60
60
62
(7)
SERVICES
(i)
Overview
(ii)
Financial services
(iii)
Telecommunication and postal services
(iv)
Transport
(v)
Tourism
63
63
66
69
70
72
REFERENCES
75
APPENDIX TABLES
77
Egypt
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Page v
CHARTS
Page
I.
ECONOMIC ENVIRONMENT
I.1
I.2
Structure of merchandise exports and imports, 1995-03
Direction of merchandise trade, 1995-03
III.
TRADE POLICIES AND PRACTICES BY MEASURES
III.1
III.2
Breakdown of applied MFN duties, 2005
Tariff escalation by ISIC 2-digit industry, 2005
IV.
TRADE POLICIES BY SECTORS
IV.1
Tariff protection in the industrial sector, 2005
7
8
28
30
61
TABLES
I.
ECONOMIC ENVIRONMENT
I.1
I.2
I.3
I.4
I.5
Egypt in figures, 1998/99 to 2003/04
Basic macroeconomic indicators, 1998/99 to 2003/04
Fiscal operations, 1998/99 to 2003/04
Balance of payments, 1998/99 to 03/04
Foreign direct investment, by country of origin, 1999/00 to 2003/04
II.
TRADE AND INVESTMENT REGIMES
II.1
II.2
II.4
Ministerial responsibility for trade-related issues
Main trade-related laws
Areas eligible for incentives under the Investment Guarantees and Incentives Law
Egypt's notifications under the WTO Agreements, August 2004
III.
TRADE POLICIES AND PRACTICES BY MEASURES
III.1
III.2
III.3
III.4
III.5
III.6
III.7
III.8
III.9
III.10
III.11
Structure of MFN tariffs, 1998 and 2005
Summary analysis of the MFN tariff, 2005
Tariff lines with applied rates higher than the corresponding bound duties, 2005
Tariff exemptions and concessions, 2005
General sales tax rates, 2005
Definitive anti-dumping duties in force, 2005
Egypt's major free zones, 2004
Privatized companies, 1993-04
Value of companies and productive units privatized, 1997-04
Tariff concessions subject to local-content requirement in assembled products, 2005
Overview of IPR protection, 2005
IV.
TRADE POLICIES BY SECTORS
IV.1
IV.2
IV.3
IV.4
Gross domestic product at factor cost, 1996/97 to 2003/04
Land use by crop, 2003-04
Agricultural output, 1997-03
Fisheries sector, 1999-04
II.3
1
3
4
5
9
13
14
15
18
27
28
31
32
33
36
42
47
48
49
50
53
54
55
57
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Trade Policy Review
Page
IV.5
IV.6
IV.7
IV.8
IV.9
IV.10
IV.11
IV.12
IV.13
IV.14
IV.15
IV.16
Petroleum and gas production, 1996-00
Basic data on electricity, 1997-04
Manufacturing output by activity, 1996-04
Summary of Egypt's specific commitments in individual service sectors
Summary of Article II (MFN) exemptions listed by Egypt
Stock market indicators, 1996-04
Telecommunication services, 1998-04
Suez Canal traffic, 1996-04
Legislation applied to the maritime sector, 2005
Tourism industry, 1998/99 to 2003/04
Legislation applied to the tourism subsector, 2005
Investment incentives in the tourism industry, 2005
58
59
60
64
65
68
69
71
71
73
73
74
APPENDIX TABLES
I.
ECONOMIC ENVIRONMENT
AI.1
AI.2
AI.3
AI.4
Structure of exports, 1995-03
Structure of imports, 1995-03
Origin of imports, 1995-03
Destination of exports, 1995-03
79
80
81
82
Egypt
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SUMMARY OBSERVATIONS
(1)
THE ECONOMIC ENVIRONMENT
1.
Since its last Trade Policy Review
(TPR) in 1999, Egypt's GDP has grown at an
average rate of 3.9% a year. Per capita GDP
is now some US$1,120. Monetary discipline
has helped to contain inflation at below 5%.
After a decade of being pegged to the
U.S. dollar, the Egyptian pound has been
floating since January 2003. Egypt has
accepted the obligations of Article VIII of the
IMF Agreement effective from January 2005.
Egypt's current account has posted growing
surpluses since 2000/01 (after years of deficit),
mainly a result of strong increases in
merchandise exports. Nevertheless, the fiscal
deficit has fluctuated around 6% of GDP in
recent years.
Unemployment remains
relatively high, at between 8% and 10%, and
the poverty index is about 20%.
2.
Trade plays an important role in
Egypt's economy; exports of goods and
services have been a motor for the current
economic recovery. Egypt has traditionally
been a net service exporter, with service
receipts substantially exceeding merchandise
exports. Important services sources of foreign
exchange are tourism and the Suez Canal.
Remittances from Egyptians working abroad
are also an important source of foreign
exchange receipts. Egypt's most important
merchandise exports are fuel products, which
accounted for about 43% of commodity
exports in 2003; this share, however, has
fluctuated considerably over the years due to
price variations. Manufactures account for
about 30% of merchandise exports, while the
share of agricultural products is about 15%;
cotton is the single most important
agricultural export. The share of textiles in
Egypt's merchandise exports has declined
gradually, from 16.6% in 1995 to 4.5%
in 2003.
3.
Merchandise imports fell by over 22%
between 2000 and 2003, mainly due to the
depreciation of the Egyptian pound.
Agricultural products and manufactured goods
account for about 30% and 48% of imports
respectively; about 14% of imports originate
in Egypt's free zones and have not been
classified by product category. Egypt's main
trading partners are, in descending order, the
United States, Italy, Germany, and China.
(2)
INSTITUTIONAL FRAMEWORK
4.
Since its last Review, Egypt has
maintained broadly unchanged its overall
institutional framework for trade policy
formulation; the Ministerial Economic Group
has responsibility in this regard. Trade policy
is implemented by the Ministry of Foreign
Trade and Industry, established in November
2004 through a merger of the Ministry of
Foreign Trade and the Ministry of Industry
and Technological Development.
Recent
changes in trade legislation have been driven
mainly by a combination of autonomous policy
initiatives and compliance with multilateral
rules.
5.
A contracting party to the GATT since
1970 and a WTO Member since June 1995,
Egypt is an active participant in the
multilateral trading system (MTS). Egypt
accords at least MFN treatment to all WTO
Members. It is seeking to liberalize its trade
regime on a multilateral, regional, and
unilateral basis. In the current multilateral
trade negotiations, Egypt supports meaningful
liberalization of the agriculture sector. It also
seeks improved market access for nonagricultural goods, but believes that concerns
for infant industries in developing countries
should be accommodated. In the services
sector, Egypt supports greater multilateral
trade liberalization, most notably with respect
to supply through the movement of natural
persons (mode 4). Egypt considers issues such
as implementation, special and differential
treatment, and rules as essential to the
integration of developing countries into the
MTS. Since its last Review, Egypt has been a
defendant in one dispute relating to definitive
anti-dumping measures, and reserved its third
party rights in another.
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6.
Preferential
agreements
are
increasingly important for Egypt's trade
relations. In the period under review, it has
concluded agreements with the European
Union, Jordan, Morocco, and Tunisia. It is
also a member of the Greater Arab Free Trade
Area and the Common Market for Eastern and
Southern Africa. In addition, it has concluded
a trade protocol with Israel and a trade
framework agreement with the United States.
7.
While Egypt has no specific law on
foreign direct investment, most foreign
investment takes place under the 1997
Investment Guarantees and Incentives Law,
which defines incentives for investment in
certain activities. The incentives include tax
advantages, reduced tariffs for imported
inputs, and guarantees against confiscation.
Foreign investment is managed by the General
Authority for Foreign Investment and Free
Zones (GAFI), whose role has gradually
shifted from investment regulation to
investment promotion and facilitation.
(3)
Trade Policy Review
improve customs procedures. In September
2004, Egypt eliminated all customs service
fees and charges of up to 5% on imports. A
general sales tax, at rates between 5% and
45%, applies equally to imported and domestic
goods. Import prohibitions on most textile and
clothing products were lifted in 2004, but
remain in place for poultry offal. Egypt does
not maintain tariff quotas. However, a wide
range of imported products are subject to
mandatory quality controls. In December
2004, Egypt embarked on a programme to
ensure that all its standards comply with
international standards; the programme is to
be completed in early 2006. Since its last
TPR, Egypt has submitted no notifications to
the WTO on sanitary and phytosanitary (SPS)
measures or on technical barriers to trade
(TBT). It has imposed 14 definitive antidumping duties and two safeguard measures.
Most of the anti-dumping measures were on
electric lamps and tyres; safeguard measures
were imposed on common fluorescent lamps
and powdered milk. No countervailing duties
were imposed.
TRADE POLICY INSTRUMENTS
8.
Egypt has bound over 98% of its tariff
lines, at rates averaging 37.5% in 2005, down
from 45% in 1998. Egypt's present applied
MFN tariff structure was implemented in
September 2004, with significant across-theboard cuts and a reduction in the number of
tariff bands to twelve. As a result, the average
applied MFN tariff has fallen from 26.8% in
1998 to 20%. Nevertheless, Egypt's tariff
system remains complex, with numerous
exemptions, and concessions. Peaks, of up to
3,000%, apply to alcoholic beverages and
spirits. For 19 tariff lines, the applied tariff
exceeds,
sometimes
substantially,
the
corresponding bound rate; imports from WTO
Members are alleged to carry the bound or the
applied tariff rate, whichever is lower.
Moreover, in aggregate, the tariff displays
positive escalation, i.e. high effective
protection.
9.
Egypt has been implementing the
WTO Agreement on Customs Valuation since
July 2001. It has also increased efforts to
10.
Egypt promotes exports through
marketing assistance, and official credit and
guarantee schemes. Free zones are in place to
promote export-oriented investment, and
employment. A new Export Promotion Law
was adopted in 2002. Some 50 raw and
processed agricultural products are subject to
mandatory quality control upon export. Egypt
does not apply any export taxes, charges or
levies.
11.
State ownership remains extensive in
the Egyptian economy, although there is an
ongoing privatization programme. Between
1999 and 2004, 97 companies were privatized,
generating
divestiture
receipts
of
LE 7.1 billion. The privatization programme
had lost some of its momentum at the
beginning of the millennium, but an ambitious
plan to revitalize it was presented to the
Cabinet in early 2004. It envisages the
privatization of 125 of the remaining
178 state-owned enterprises.
Egypt
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Page ix
12.
Egypt's
first
comprehensive
competition legislation was adopted by the
People's Assembly in February 2005. The
Competition Law prohibits price collusion,
production-restricting agreements, market
sharing, and abuse of a dominant market
position. Government procurement legislation
grants a 15% price preference to Egyptian
bidders. Tariff reductions on imported inputs
for certain assembly industries are contingent
on
local-content
requirements.
The
Government views the promotion of small and
micro enterprises as an important way to
adjust to structural problems and to modernize
the economy. In 2002, Egypt adopted new
intellectual property legislation covering all
major areas of the TRIPS Agreement.
(4)
SECTORAL POLICIES
13.
The contribution of agriculture to
GDP in Egypt has been declining gradually
and was just below 16% in 2003/04. However,
the sector retains a significant role in
employment (about 34% of the labour force).
Egypt remains a net importer of agricultural
products, although its agricultural trade
deficit has decreased in recent years.
Financial assistance to the sector is provided
in the form of subsidized electricity and water,
the latter being provided almost free of charge
to farmers. The Government also subsidizes
various food products, most notably bread,
sugar, and oil, for low-income groups. Since
1999, Egypt has not submitted any
notifications to the WTO Committee on
Agriculture.
14.
The share of petroleum and natural
gas production in Egypt's GDP increased from
4.6% in 1998/99 to 11.6% in 2003/04, mainly
as a result of rising oil prices. Output has
increasingly shifted from crude oil production
to natural gas as production at mature
oilfields decreases. To engage in the
exploration of petroleum and natural gas,
foreign companies must enter into a
joint-venture with the state-owned Egyptian
General Petroleum Corporation.
15.
The manufacturing sector contributes
about 19% of Egypt's GDP. It comprises a
broad range of activities, the most important
being metallurgy and metallurgical products,
food processing, and chemical products.
However, Egypt's escalatory tariff structure
does
not
encourage
export-oriented
manufacturing.
A key objective of the
Government is to increase the competitiveness
of private enterprises in the sector. To this
end, it has launched the Industrial
Modernization Programme for capacity
development.
16.
With a share of about 48% in GDP,
the services sector is vital to Egypt's economy.
The tourism industry and fees for using the
Suez Canal remain Egypt's most important
sources of foreign exchange. Egypt's tourism
industry has continued to perform well since
1999, despite a slump in 2001/02; however,
recent security-related events may affect its
growth prospects. Financial services reforms
are planned for the near future; they include
the privatization of state-owned banks and
insurance companies, and the establishment of
a deposit insurance scheme.
The
Telecommunications Law stipulates that
Telecom Egypt will relinquish its monopoly
status as domestic and international fixed-line
operator by 31 December 2005.
17.
Egypt's
Schedule
of
Specific
Commitments under the GATS includes
commitments on commercial presence and the
presence of natural persons for the supply of a
number of individual service categories, most
notably in telecommunications, construction
and related engineering services, financial
services, tourism, and transport. Egypt's
initial offer in the ongoing multilateral
services negotiations provides for an
expansion of its schedule of horizontal as well
as sector-specific commitments.
(5)
TRADE POLICY
PARTNERS
AND
TRADING
18.
Since its last TPR, Egypt has taken
steps towards the liberalization of its trade
regime. The reforms reflect its commitment to
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Page x
the multilateral trading system, in which it
participates actively. As a proponent for
issues of interest to developing countries, it
has been instrumental in advancing the Doha
Development Agenda by tabling proposals in
several areas. Nonetheless, Egypt's recent
macroeconomic performance has been mixed.
19.
Continued structural and trade
reforms, particularly further privatization,
Trade Policy Review
tariff reductions, and reducing in the gap
between bound and applied tariff rates, would
contribute to better resource allocation,
enhance predictability and transparency of the
trade regime, contain the need for incentives,
and help to put the economy on a higher
growth path. Trading partners could help by
providing increased market access for
products and services of interest to Egypt.