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report by the secretariat

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IV.

    trade policies by sector

    (1) INTRODUCTION

    1. Since Egypt's last TPR, in 1999, sectoral GDP shares have decreased slightly for most subsectors, while the contribution of petroleum production has increased strongly, mainly as a result of rising oil prices (Table IV.1). Agriculture contributes just under 16% to GDP, but is important in terms of employment. Egypt remains a net food importer, although the agricultural trade deficit has been decreasing in recent years due to increasing exports. The average tariff on agricultural goods was 5.8% in January 2005. The prices of most agricultural goods are market determined. No notifications have been submitted to the WTO Committee on Agriculture since 1999. Table IV.1 aGross domestic product at factor cost, 1996/97 to 2003/04

     1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 20003/04

    Total GDP (LE million) 247,028 266,758 282,578 315,667 332,544 354,564 390,623 445,173

    (per cent)

    Total commodity sector 48.2 48.0 48.2 49.9 49.9 51.3 51.2 51.8

     Agriculture 17.0 17.1 17.3 16.7 16.6 16.5 16.7 15.8

     Industry and mining 17.6 18.3 19.5 19.4 19.1 19.1 18.8 18.4

     Petroleum and products 7.1 5.8 4.6 7.4 7.9 8.9 9.4 11.6 b Electricity 1.7 1.6 1.6 1.6 1.6 2.1 2.1 2.0

     Construction and building 4.9 5.1 5.2 4.8 4.7 4.7 4.3 4.0

    Total production services 33.6 33.4 33.1 32.2 32.1 31.5 31.6 31.3 c Transportation 9.2 9.0 9.2 8.8 9.1 9.0 9.3 9.5

     Commerce, finance, and 22.8 23.1 22.6 21.8 21.5 20.7 20.3 19.4 insurance

     Hotels and restaurants 1.6 1.2 1.3 1.6 1.6 1.8 2.0 2.3

    Total social services 18.3 18.6 18.7 17.9 18.0 17.2 17.2 16.9

     Housing and real estate 1.8 1.8 1.9 1.9 2.1 3.9 3.8 3.6

     Government services (utilities) 0.4 0.4 0.4 0.4 0.4 9.9 10.2 10.2

     Social insurance 0.1 0.1 0.1 0.1 0.1 .. .. ..

     Government social services 16.1 16.4 16.2 15.5 15.4 3.4 3.2 3.2

    .. Not available.

    a Does not include net indirect taxes. b Includes water utilities subsector. c Includes Suez Canal.

    Source: Information provided by the Ministries of Planning, and of Foreign Trade and Industry.

    2. Petroleum and natural gas contribute only around 11.6% to GDP, but account for almost 40% of the value of commodity exports. While Egypt's production levels of crude oil have declined, the natural gas sector has been expanding rapidly in recent years. Foreign companies may engage in the exploration of petroleum and natural gas only through joint-ventures with the state-owned Egyptian General Petroleum Corporation.

    3. The manufacturing sector comprises a broad range of activities; the most important are metallurgy and metallurgical products, food processing, and chemical products. The contribution of this sector to GDP has oscillated around 19% during the period under review. The average tariff on manufactured products is 27.6% (January 2005).

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    4. The services sector remains the backbone of Egypt's economy, with a share of about 49% in GDP. State participation remains important in various services subsectors including financial services, telecommunication, and air transport. The tourism industry and fees for using the Suez Canal remain Egypt's most important sources of foreign exchange. Since Egypt's last Review, a new Telecommunications Law has been adopted; it establishes that Telecom Egypt will relinquish its monopoly over domestic and international fixed-line services by January 2006. Under the GATS, Egypt has bound measures affecting commercial presence and presence of natural persons for a number of individual service categories, most notably in telecommunications services, construction and related engineering services, financial services, tourism, and transport services. Egypt accepted the Fourth and Fifth Protocols to the GATS, in June 2002 and November 1998, respectively. (2) AGRICULTURE

    (i) Main features

    5. The contribution of agriculture to GDP declined from 17.3% in 1998/99 to 15.8% in 12003/04. However, the sector retains a significant role in employment, accounting for about 34% of the active labour force. On a per capita basis, Egypt’s area of cultivated land at 0.05 ha per head is

    among the lowest in the world. Farms are small, with an estimated 70% of holdings less than 0.42 hectares. Due to the low rainfall, agriculture is strongly dependent on irrigation from the Nile River. The agricultural land-base amounts to about 3.3 million hectares, consisting of 3.0 million hectares lying within the Nile basin and delta, and about 80,000 hectares of oasis and rain-fed land. Of the total area in the Nile basin and delta, some 2.5 million hectares are "old" lands, and the remaining 0.72 million hectares are new reclaimed lands. An elaborate crop rotation system is followed on the old lands. Most agricultural land is used for the cultivation of wheat, rice, and maize (Table IV.2).

    Table IV.2 Land use by crop, 2003-04 a (Million feddan)

    Crop Land area

    Wheat 2.5

    Maize 1.2

    Rice 1.5

    Sugar cane 0.323

    Sugar beet 0.131

    Cotton 0.750

     a1 feddan is equivalent to 0.42 hectare.

     Source: Information provided by the Egyptian authorities.

    6. All agricultural land is privately owned. Reclaimed new land, which was owned and operated by the Government through public enterprises, has been sold gradually. Around 80% of this new

    land is now operated by the private sector. Under Law 15/1963, foreigners may not purchase agricultural land (Chapter II(5)), although they may engage in long-term leasing contracts. The authorities indicate that legislation is under discussion to allow foreigners to acquire agricultural land. 7. The main winter crops are wheat, berseem (Egyptian clover), and broad beans. Among the summer crops, maize, rice and cotton are dominant. Vegetable crops, such as tomato, potato,

     1 GDP data are based on information from the Egyptian Central Bank, and the Ministry of Foreign Trade and Industry. Trade data are based on UNSD, Comtrade database.

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    cucumber, and melon, are cultivated in three seasons. For most agricultural goods, production has been increasing in recent years (Table IV.3). In terms of employment and export value, cotton is the most important crop in Egypt. It is estimated that cotton production employs up to one million farm workers.

    Table IV.3 Agricultural output, 1997-03 (Thousand tonnes)

     1997 1998 1999 2000 2001 2002 2003

    Wheat 5,849 6,093 6,347 6,564 6,255 6,183 6,150

    Maize 5,806 6,337 6,143 6,474 6,842 6,500 6,400

    Cotton lint 342 230 233 225 330 285 280

    Sugar 1,170 1,242 1,350 1,459 1,476 1,500 1,500

    Rice, paddy 5,480 4,474 5,817 6,000 5,227 5,600 5,800 aVegetables 12,489 12,503 13,982 15,012 14,074 14,115 14,115 bFruit 6,224 6,347 6,791 6,966 7,355 7,408 7,407

    a Including melons. b Excluding melons.

    Source: FAO statistical database.

    8. The value of livestock production in Egypt amounted to LE 34,606 million in 2003, of which 95.2% was production on the old lands (LE 32,951 million) and the remainder on the new lands. The current volume of production of red meat amounts to 560,000 tonnes annually. According to the authorities, the objective is to increase annual production to 880,000 tonnes by 2017. 9. Egypt remains a net importer of agricultural products (food in particular), although the agricultural trade deficit has decreased in recent years. In 2003, Egypt exported agricultural goods (ISIC Rev.2 definition) for US$567.9 million, up from US$242.9 million in 1997. The main agricultural exports are cotton (US$366 million in 2003), fruit and vegetables (U$199 million), and grains (US$151 million). Agricultural imports amounted to US$1,529.4 million, down from US$1,671.5 million in 1997. Agricultural imports comprise grains (US$1,137 million in 2003), edible oils (US$422 million), live animals and meat (US$218 million), and fruit and vegetables (US$213 million). Wheat is the single largest import product, at US$606.5 million in 2003, of which US$257.5 million from the United States.

    10. Egypt has not received any food aid since 2001.

    (ii) Policy developments

    11. Agricultural policies are formulated by the Ministry of Agriculture and Land Reclamation. The Ministry has a long-term strategy for agriculture development for the period 1997/98 to 2016/17. The main aspects of this strategy are to: increase the annual growth rate of agricultural production to 4.1%; encourage domestic and foreign investment in the agriculture sector, especially in the newly reclaimed areas; develop animal production, particularly small ruminants, poultry, and fisheries; and intensify agricultural research.

    12. The applied average tariff on agricultural goods (ISIC Rev.2 definition) was 5.8% in January 2005. Applied tariffs are relatively high on meat and edible meat offal (21.2%), and edible fruits and nuts (14.4%). The highest agricultural tariff of 40% is charged on various fruits (apples, apricots, bananas, and pears). Lower tariffs are charged on oilseeds and oleaginous fruits, at an average rate of 2.9%, and on cereals at 3.3%. Egypt does not maintain tariff quotas.

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    13. Bound rates on agricultural products remain well above applied duties for most products. The average bound rate is 27.0% (92.2% according to the WTO definition). Bound rates are highest on animals and products thereof (45.0%), and fruit and vegetables (40.2%). For two agricultural product 2groups, applied tariffs exceed bindings (Table III.3). Egypt left two agricultural tariff lines unbound.

    14. The Government has been actively encouraging private sector participation in agriculture. Investment in the sector is eligible for benefits provided by the Investment Guarantees and Incentives Law (8/1997). A programme to encourage the use of local cotton was terminated in 2003 (Chapter III(4)(i)). Financial assistance to the agriculture sector is provided in the form of subsidized electricity and water, the latter being provided almost free of charge to farmers. The Government subsidizes a number of food products for low-income groups, most notably bread, sugar, and oil. Outlays amounted to LE 8.2 billion in 2004, up from LE 4.1 billion in 2003. In May 2004, the Government reintroduced vouchers for basic foodstuffs following strong prices increases over the previous two years. Subsidies for fertilizers and pesticides were removed in the mid 1990s. Egypt's last notifications to the Committee on Agriculture, on domestic support and export subsidies, date 3 from May 1999.

    15. The General Authority of Supply Commodities plays an important role in the importation of basic food products for low-income groups. In 2004, the Authority imported 5,420,000 tonnes of wheat. 277,000 tonnes of oil, 60,000 tonnes of palm oil, 10,000 tonnes of tea, 75,000 tonnes of lentils, and 54,000 tonnes of beans. The Authority has no monopolistic privileges; its imports are subject to the normal customs duties.

    16. The Principal Bank for Development and Agricultural Credit is Egypt's main agricultural bank. It offers credits for farmers and rural development projects. The Bank's conditions for ordinary loans are market-based; however, on behalf of the Government or international development agencies, it also offers small soft loans to various target groups such as young people and women. For example, since 1992, the Bank has received LE 41.3 million from the Ministry of Finance and the Social Fund for Development for a loan programme for young people. Funding agreements concluded with international development agencies (International Fund for Agricultural Development, African Development Bank, African Development Fund) amount to US$60 million.

    17. The Agricultural Research Center, affiliated to the Ministry of Agriculture and Land Reclamation, is Egypt's principal public agency for agricultural research and technology transfer. The Center disposes of 16 research institutes, six central laboratories, and 16 experimental research stations.

    18. Depending on the type of product, compliance with SPS regulations is verified by the Food Control Agency, the Agriculture Quarantine Body, and the Animal Quarantine Body

    (Chapter III(2)(viii)(c)). In addition to SPS regulations, a number of agricultural goods must fulfil quality controls upon importation (Chapter III(2)(viii)(b)). Agricultural goods subject to mandatory quality control include live animals, meat, dairy products, vegetables, grains, and edible oils. Furthermore, radiation inspection is mandatory for foodstuffs, edible oils, live animals, seeds, animal fodders, milk substitutes, and tobacco. A number of raw or processed agricultural products, such as juices, citrus fruit, and various types of vegetable, are also subject to quality control when being exported.

    19. An import prohibition currently applies to edible poultry offal (including liver).

     2 Applied rates exceed bound rates for fats and oils derived from milk, other than butter; prepared or preserved chicken meat; and prepared or preserved pork meat. 3 WTO documents G/AG/EGY/1 and 2, 7 May 1999.

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20. In the ongoing agricultural negotiations, Egypt, as part of the G-20, has communicated its 4strong reservations against the use of the "blended formula". It is of the view that the use of this

    formula would fail to deliver substantial improvements in market access, especially for products protected by tariff peaks. Moreover, its application would lead to inequitable results on the different tariff structures of developed and developing countries.

    (3) FISHING

    21. Egypt's total catch amounted to 876,000 tonnes in 2003, including 445,000 tonnes of farmed fish (Table IV.4). The bulk of the catch is for domestic consumption; exports of fish and fishery products were only US$3 million in 2003. Commercial fishing is concentrated on the Mediterranean Sea. The applied average tariff on fishing products (ISIC Rev.2 definition) is 6.1%. Imports of fish and fishery products amounted to US$98 million in 2003.

    Table IV.4 Fisheries sector, 1999-04

    Year 1998 1999 2000 2001 2002 2003 2004

    Employment .. .. .. .. .. 252,953 ..

    Fishing vessels 50,966 39,797 45,065 44,910 44,191 46,307 ..

    Catch ('000 tonnes) 546 649 724 772 801 876 900

    Imports ('000 tonnes) 176.3 193.16 213.63 261.43 154.39 163.01 ..

    Exports ('000 tonnes) 2.14 0.69 0.96 1.22 2.56 3.13 ..

    .. Not available.

    Source: Information provided by the General Authority for Fish Resources Development (GAFRD).

    22. The General Authority for Fish Resources Development (GAFRD), in the Ministry of Agriculture and Land Reclamation, is the state agency responsible for the management and control of the Egyptian fisheries. The Government is becoming increasingly aware of the fundamental role that fisheries and related activities can play in Egypt's economy. Its main goals are to increase annual catch to 1,500,000 tonnes by 2017, to encourage exports of fish and fishery products, to expand fish-farming at various inland lakes, and to enlarge and modernize offshore fishing in the Egyptian economic zone and international waters.

    23. Law 124/1983 and its Executive Regulations are the legal basis for the management of Egypt's fisheries resources. The Law stipulates mesh sizes for different fishing methods and minimum sizes for target species, especially for inland fisheries. Seasonal fishing prohibitions have been imposed in a number of years in the Gulf of Suez, the Mediterranean Sea, and various inland lakes.

    (4) MINING, PETROLEUM, AND NATURAL GAS

    (i) Main features

    24. The contribution of petroleum and natural gas production to Egypt's GDP increased from 4.6% in 1998/99 to 11.6% in 2003/04; the increase has mainly been due to rising oil prices. Output has increasingly shifted from crude oil production to natural gas (Table IV.5). The contribution of other mining activities to GDP is only about 0.3%.

     4 WTO document TN/AG/GEN/9, 7 May 2004.

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     Table IV.5 Petroleum and gas production, 1996-00 (Million tonnes)

     1996 1997 1998 1999 2000

    Total production 55.45 54.26 54.00 54.56 55.29

    Crude oil 42.69 41.17 40.29 38.38 34.82

    Natural gas 10.37 10.47 11.01 13.19 16.46

    Liquefied petroleum gas 0.97 0.99 0.99 1.04 1.10

    Condensates 1.41 1.64 1.64 1.94 2.88

    Source: Information provided by the Ministry of Petroleum.

    25. Exports of petroleum and natural gas constitute a major source of foreign exchange earnings. Petroleum exports, however, have been decreasing as domestic consumption increases and production at mature oilfields decreases. Exports of petroleum amounted to US$2,451.1 million in 2003, accounting for 39.8% of Egypt's commodity exports. Egypt's exports of other mineral products amounted to US$768.8 million in 2003; phosphate, iron, and coal are Egypt's most important non-fuel minerals.

    26. Egypt's current level of oil reserves is estimated at 3.7 billion barrels. About 75% of crude oil production comes from the Gulf of Suez and some 16% from the Western Desert; the remainder is drawn from the Eastern Desert and the Sinai Peninsula. Crude oil production averages around 760,000 barrels a day. Around 73.5% of oil production is refined domestically.

    27. As at October 2002, the Government's revised estimate of proven natural gas reserves was 1.7 trillion cubic meters; probable reserves were estimated to be 3.4 trillion cubic meters. Several major discoveries of natural gas have been made offshore from the Nile delta and the Western Desert since active exploration in these areas started in the early 1990s. As a result, the natural gas subsector has been expanding rapidly, and increasingly replacing oil in domestic consumption, industrial usage, and power generation.

    28. The first stage of the Arab Gas Pipeline project was inaugurated in July 2003, transporting Egyptian natural gas across 245 kilometres of the Sinai peninsula and 15 kilometres undersea to Jordan's Red Sea port of Aqaba. In January 2004, the Governments of Egypt, Jordan, Lebanon, and Syria signed an agreement to implement the second stage of the project, a 393 kilometre section stretching from Aqaba to the Rihab power station close to Jordan's border with Syria. The pipeline will then extend to the Syrian port of Banias where it will link into a Syrian-Lebanese pipeline currently under construction and the Zahrani power plant in Lebanon.

    (ii) Policy issues

    29. The Ministry of Petroleum is responsible for all issues relating to the exploration, exploitation, and distribution of petroleum and natural gas in Egypt. The Ministry of Mineral Resources, through the Egyptian Geological Survey and Mining Authority (EGSMA), is responsible for regulating and controlling exploration, prospection, and exploitation of all other mineral deposits. The main laws governing the mining, petroleum, and natural gas industries are the Mining and Petroleum Law (Law 66/1953), and Laws 151/1956 and 86/1965.

    30. Petroleum production is dominated by one state-owned company, the Egyptian General Petroleum Corporation (EGPC), formed as the General Petroleum Authority (GPA) in 1956. The activities of EGPC, itself under the jurisdiction of the Ministry of Petroleum, include the supervision of all oil exploration and production in Egypt, as well as its own exploration and production activities.

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    31. The average applied tariff on petroleum products is 6.1% (January 2005). The average applied tariff on mining and quarrying products (ISIC Rev.2 definition) is 3.0%. Imports of gasoil may only be carried out by the EGPC and the Egyptian Gas Holding Company (EGAS). All other

    petroleum products may be imported by the private sector. The Government grants tariff concessions on imports of capital goods for the construction of oil wells for the duration of production. 32. The Government's policy of encouraging foreign investment in the petroleum sector is implemented in the context of a 1963 decision requiring all foreign oil companies to work with the EGPC on a 50-50% joint-venture basis; for example, Egypt's largest oil producing company, the Gulf of Suez Petroleum Company (GUPCO), is a joint venture of EGPC and Amoco. Production-sharing agreements (PSAs) are signed between the EGPC and foreign companies; the first 42% of the oil produced is to be retained by the company to cover its costs and as profits (30 percentage points as cost recovery and 12 as profits from production); the remainder is split between the foreign company and the EGPC in proportions ranging from 60/40 to 90/10 in favour of the EGPC. PSAs of this nature can only take effect after approval by the Ministry of Petroleum, the Council of Ministers, the People's Assembly, and the President. There are currently 26 joint-venture production companies, all of them foreign-owned.

    (5) ELECTRICITY

    33. Over the past decade, electricity coverage has been extended to all parts of Egypt. Almost the entire population has access to electricity. Installed capacity was 18.1 GW in 2004, up from 12.3 GW in 1993 (Table IV.6). About 86% of Egypt's generating capacity is thermal; the remainder is hydroelectric, mostly from the Aswan High Dam. To keep up with growing demand, the installation of an additional 13.4 GW by 2012 is foreseen, mainly through additional thermal power plants. The contribution of the electricity sector to GDP was 1.5% in 2003/04.

    Table IV.6 Basic data on electricity, 1997-04 (GWh)

     1997 1998 1999 2000 2001 2002 2003 2004

    Generated electricity energy 59,800 65,500 70,700 73,300 77,000 83,000 89,400 94,400

    Total installed capacity (GW) 13.3 13.3 14.0 14.6 15.3 16.6 17.7 18.1

    Exports of electric energy 0 0 0 016 160 256 869 914

    Source: Information and Decision Support Center (2004), Energy and Electricity. Available at: http://www.eip.gov.eg/

     English/MainIssues/MainIssue.asp?issue_id=90.

    34. Egypt's electricity grid is connected to Jordan, Libya, and Syria (through Jordan). There are plans for a transmission line between Egypt and Congo, through which Egypt would have access to the excess capacity generated by Congo's Inga Dam. Electricity supply enters Egypt duty free. Egypt

    is a net exporter of electricity; in 2002/03 net exports amounted to 780 GWh.

    35. Policies for the electricity subsector are formulated by the Ministry of Electricity and Energy. The state-owned Egyptian Electrical Holding Company (EEHC) is responsible for the generation, transmission, and distribution of electrical energy. It also owns and operates Egypt's electricity grid. According to the authorities, there are no plans to privatize EEHC. Subsidies to the electricity subsector amounted to LE 2.4 billion in 2004, up from LE 1.3 billion in 2000. More than 95% of the payments went to residential consumers with a monthly consumption of less than 850 KWh. 36. Until 1996, the generation, transmission and distribution of electricity were entirely in the hands of the State. Law 100/1996 allowed the private sector to build, own, operate, and transfer (BOOT) electrical power generation plants. Accordingly, private companies sell electricity to EEHC

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    for twenty years and, at the end of the operating period, transfer the assets of the facility to EEHC. Since the adoption of the Law, private investment in the electricity subsector has increased strongly, from LE 120 million to LE 5,030 million. The share of private generating companies in total installed capacity was just under 8% in 2003.

    37. In sum, electricity generation has been liberalized, while its transmission and distribution, as well as the management of the grid, remain under EEHC monopoly. Electricity prices vary according to the type of end-user (private, commercial, public) and have remained unchanged since 1992. The price for household usage, for example, ranges from LE 0.05 to LE 0.25 per kWh.

    (6) MANUFACTURING

    (i) Main features and policy framework

    38. The contribution of the manufacturing sector (including mining, but excluding petroleum and natural gas) to Egypt's GDP has been around 19% since 1999. The most important subsectors are metallurgy and metallurgical products, food processing, and chemical products (Table IV.7). Table IV.7 Manufacturing output by activity, 1996-04 (LE million)

    Industry 1996 1997 1998 1999 2000 2001 2002 2003 2004

    12,031 13,225 Building materials 8,803 9,290 9,439 10,207 10,555 11,162 11,885 industries

    1,308 1,420 1,434 Wood products 857 904 929 1,081 1,1177 1,258

    5,778 6,019 6,496 Paper products 4,016 4,154 4,250 1,509 4,986 5,439

    28,112 29,116 33,023 Chemical products 18,200 19,379 20,524 21,270 23,803 25,351

    16,544 19,890 19,078 Metallurgy 7,870 8,596 9,397 13,440 14,119 15,770

    58,177 59,911 62,650 Metallurgical products 37,317 42,365 46,061 50,114 52,843 55,280

    21,575 21,915 23,151 Spinning and weaving 17,551 18,000 18,453 18,457 19,687 20,212 industries

    222 226 371 Mining and petroleum 228 229 229 215 222 222 refining

    44,908 46,015 52,466 Food industries 31,405 35,495 39,329 39,459 41,034 43,176

    7,042 7,552 8,073 Other industries 240 351 797 778 5,461 6,368

    195,551 204,095 219,966 Total 126,487 138,763 147,408 159,531 173,887 184,238

    Source: Information provided by the Egyptian authorities.

    39. The average applied tariff on manufactured goods (ISIC Rev.2 definition) is 27.6%, but tariff dispersion between the subsectors is considerable (Chart IV.1). About 3% of Egypt's industrial tariffs are unbound; these include rubber and rubber articles, machinery and mechanical appliances, and electrical equipment. Egypt has an escalatory tariff structure, thereby providing high effective rates of protection to the processing stages (Chart III.2). Average tariffs are 4.8% on raw materials, 10.6% on semi-processed goods, and 28.2% on fully processed goods.

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Chart IV.1

    Tariff protection in the industrial sector, 2005

    Per cent

    2,300.0100.0

    2,105%2,200.090.0

    2,0252,100.080.0%

    414%400.070.0

    60.0

    50.0

    Average 40.027.6%

    30.0

    20.0

    10.0

    0.0313233343536373839

    ISIC groups

    31Manufacture of food products, beverages and tobacco36Manufacture of non-metallic, except petroleum and coal32Textile, clothing and leather industries37Basic metal industries33Wood and wood products industry, including furniture38Fabricated metal products, machinery and equipment34Paper and paper products; printing and publishing39Other manufacturing industries35Manufacture of chemicals etc.

     WTO Secretariat calculation, based on data provided by the Egyptian authorities.Source:

    40. According to the authorities, the private sector contributed about 77% of manufacturing output in 2003: currently, 95 manufacturing companies remain state-owned; they are grouped in six holding companies for pharmaceuticals, food industries, chemical industries, metallurgical industries, spinning and weaving, and transport. The Government plans to privatize these enterprises. 41. In 1997, the Government launched an Industrial Modernization Programme with a view to increasing the competitiveness of private enterprises in the sector. The specific objectives of the programme are to assist private enterprises in their development, to strengthen business associations and the Ministry responsible for Industry, and to improve the policy framework for the industrial sector. Training activities have been provided for 287 organizations and 2,005 specific service requests from 1,187 companies or organizations have been satisfied. The total cost of the programme is ? 430 million: ? 250 million from the EU (the largest EU-funded project in the developing world); ? 106 million from the Egyptian Government; and ? 74 million in cost-sharing contributions from

    private sector beneficiaries.

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42. Egypt seeks to increase exports of and foreign investment in non-traditional products. The 5targeted industries include furniture, leather, chemicals, glass, paper, and vessel and ship building.

    Incentives to these industries, as well as to other industries in the manufacturing sector, are provided under the Investment Guarantees and Incentives Law (Chapter II(5)).

    43. A long list of manufactured imports are subject to quality inspections, carried out by the General Organization for Export and Import Control (GOEIC) (Chapter III(2)(vii)(b)). The list includes electronic products, spare parts, consumer products, washing machines, electrical equipment, motor vehicle parts, steam boilers, and textiles.

    (ii) Selected manufacturing activities

    (a) Food processing

    44. The main activities of the food processing industry include wheat milling and bread making; edible oil production; and production of soft drinks and alcoholic beverages. Egypt's main exports of food products are milled grain products, canned vegetables and fruit, and sugar products. 45. Average applied tariffs on imports of food, beverages and tobacco range from 15.3% and 23.2% on food products (ISIC 311 and 312) to 1,545.3% on beverages (ISIC 313). For religious reasons, Egypt maintains prohibitive tariffs of up to 3,000% on imports of alcoholic beverages. However, the tariff on alcoholic beverages imported under a licence issued by the Ministry of Tourism is 300%. Tobacco products are subject to specific tariffs ranging from LE 6.1 to LE 9 per kg. 46. Foreign investment in the production of alcoholic beverages is not included in the general provisions of Law 8/1997, and is only allowed through joint-ventures with Egyptian companies. Foreign investment in food processing has been mainly in confectionery and the processing of vegetables and fruit, where there are no specific restrictions.

    (b) Textiles and clothing

    47. Egypt's exports of textiles and clothing products amounted to US$515.7 million in 2003, while imports were US$279.1 million. The development of textiles and clothing owes much to the abundant production of high-quality cotton in Egypt; traditional exports are also high-quality raw cotton and yarn. The average applied tariff on textiles (ISIC 321) is 22.2% and the average for clothing except footwear (ISIC 3220) is 35.6%. Import prohibitions on a large number of textile and clothing products were in place until 2004. Double fumigation is required for imported cotton. 48. As at April 2005, 33 enterprises in the textiles and clothing subsector remained state-owned. These companies are mostly engaged in spinning and weaving activities, and grouped under the Holding Company for Spinning and Weaving. Representatives of the private textiles and clothing industries have expressed concerns about access to relevant inputs due to various barriers. 49. Egypt notified the Textiles Monitoring Body of the state of integration under the Agreement 6on Textiles and Clothing in 2002. In total, Egypt integrated 19,140 tonnes of tops and yarns, fabrics, clothing, and made-up textile products.

     5 Ministry of Foreign Trade (2004a). 6 WTO document G/TMB/N/435, 14 March 2002.

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