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Egypt

In the past two years, Egypt has managed to overcome economic difficulties, defying those who had predicted gloom. The picture of the future is even brighter than that predicted by the most optimistic forecasters.

A report by the Intelligence Unit of the Economist foresees Egypt as the Arab world's fastest-growing market over the next five years. The report predicts that while Saudi Arabia will still be the biggest Arab market in 1992, its relative importance will have declined to make way for Egypt.

Many observers are optimistic about Egypt's chances of reaching an agreement with the International Monetary Fund that would allow a rescheduling of part of its large foreign debt. There are some positive signs that Egypt will be able to satisfy some of the IMF's conditions. It has started already to implement needed economic reforms in exchange for financial support.

A solid step has been taken toward unifying Egypt's several rates of exchange. A new commercial rate was established for many transactions, including tourism and the financing of most private-sector imports. This rate has fluctuated between 2.20 Egyptian pounds (L.E.) and 2.30 L.E. to the U.S. dollar. This reform process has resulted in a 61 percent surge in hard-currency deposits at the end of the first half of 1988.

Egypt's continuing strategic importance and its strong commitment to peace in the Middle East as well as President Hosni Mubarak's visits to Europe during the third quarter of 1988 should help secure an agreement with major international creditors for a new rescheduling of the country's debt on favorable terms.

Egypt's current five-year development plan (1987/88-1991/92) forecasts an annual growth rate of 5.8 percent. To maintain this rate, Egypt also has implemented strict measures to bring its budget deficit under control. The 1987/88 budget deficit was projected at $341 million (U.S.).

The government of Prime Minister Atef Sidki has shown fiscal responsibility in order to reduce the deficit and bring under control the growth in the money supply, which reached 17 percent in 1987. It is hoped this fiscal responsibility will check the depreciation of the Egyptian pound, which has been losing about 20 to 25 percent of its value against foreign currencies each year.

Central Bank of Egypt has been trying to put a clamp on credit as part of the government's long and hard endeavors to bring inflation under control. In 1988, the government instructed banks to limit, to 2.5 percent, increases in lending compared with their 1987 portfolios. Meanwhile banks have been required to exchange 3 percent of their foreign currency for Egyptian pounds from the Central Bank. This was in addition to the requirement that banks deposit 15 percent of their hard-currency deposits at the Central Bank. Another measure to limit credit in order to control inflation has been the requirement that letters of credit be 100 percent cash-covered.

The 1987/88 budget envisioned expenditure of $10.57 billion (U.S.), a 5.8 percent increase over the 1986/87 figure. This increase is attributable primarily to pay raises for state employees, to compensate for inflation. A recently published report by the Ministry of Planning claims that Egypt was able to reduce its fiscal deficit from 13 percent of expenditure in 1986/87 to just 11 percent in 1987/88.

Since President Mubarak came to power in 1981, development has been the focus of the government's attention.

According to Dr. Mohie El Din El Ghareib, head of the General Authority for Investment and Free Zones, Egypt has approved investment, including local investment in projects in which there is a foreign partner, of 7 billion L.E. About 72 percent of these projects are now in operation.

Egyptian investors have provided about 64 percent of the capital of these investments, and Arab investors accounted for about 18 percent. (The percentage of Arab investment is expected to rise following the restoration of relations between Egypt and the Arab world.) Eighteen percent came mainly from the U.S. and Europe. American companies have been involved in 37 joint ventures, investing a total of $310 million. This is in addition to investments in the oil industry, which account for most of the foreign investments in Egypt.

The 14 new satellite cities and industrial areas that the government is building in the desert--for example, The Tenth of Ramadan, halfway between Cairo and the Suez Canal, and Sadat City, 50 miles from Cairo on the desert road to Alexandria--are said to be attractive to domestic and foreign investors.

After the decline that took place during the first half of the 1980s, Egypt's three principal sources of foreign revenues--they are remittances from Egyptians working abroad, oil exports, and Suez Canal tolls--have shown great signs of improvement in the second half of the decade. Starting in mid-1987, Egyptian General Petroleum Corporation resumed issuing new production-concession agreements for oil and gas fields. This resumption coincided with the strengthening of the international oil market and will encourage a pickup in exploration activity.

More attention is being paid to encouraging exploration and production of natural gas on a commercial basis. Egypt's natural-gas reserves are estimated at about 11 trillion cubic feet.

Industry accounts for about 13 percent of Egypt's gross national product, as 75 percent of production originates from the public sector. Some plants of this sector need modernization, but funds are not available. That is why the government is looking to the private sector to help revitalize industry.

In the present five-year plan, it is projected that private enterprises should be responsible for an annual growth rate of 7.2 percent. Private-sector industrial investment has increased already from 17 percent in the first five-year plan to 38 percent in the second year of the second five-year plan.

Private consumer industries such as clothing and food processing have expanded so fast that discussion of privatization of the less-successful public sector has been inevitable. President Mubarak, however, has ruled out radical moves to sell off state enterprises while encouraging the private sector to contribute more to the revitalization of Egyptian industry.

Private-sector investing, mainly in small and midsized projects, has shown dynamic growth. During the second year of the present five-year plan, this sector accounted for around $1.7 billion (U.S.), which represented 33.1 percent of the country's total investment.

Certain industries, such as the carpet industry, are making great strides. When President Mubarak cut the ribbon at the opening of the new Opera House last October, he could not help but notice the quality and good taste of the carpets that decorated the halls of what he termed a "cultural institution."

Mubarak asked the Japanese ambassador to Egypt, whose country donated the building in appreciation of Egypt's strong commitment to peace and development in the Middle East, about the handmade carpets that lay glittering before the eyes of the attending dignitaries. An Egyptian official stepped in and said proudly, "This is Egyptian."

That came as no surprise. Economic observers and Western diplomats predict that by the year 2000, Egyptian handmade wool and silk carpets, as well as flat-woven rugs, will be two of the hottest items in the international home-furnishing market.

Last year witnessed the complete recovery of Egypt's tourism industry from the disastrous fall of 1986. The occupancy rate of Egypt's 350 hotels was 98 percent. Fouad Sultan, minister of tourism, gets more popular with every release of new figures about tourism in Egypt. Latest figures showed that the number of tourists in 1988 rose by 35 percent compared with 1987. More important was the 180 percent increase of tourist nights during 1988. Even more heartening is the fact that Egypt has regained the American tourist market, which provides it with about 200,000 visitors a year.

The unified rate of exchange introduced in 1987 killed the foreign-currency black market. This translated into many more tourist dollars being lodged with the banks instead of finding their way to the black-market dealers.

Sultan, a banker and free-enterprise-oriented businessman himself, has ambitious plans to develop tourism in Egypt. He invites foreign investors to invest, at least, in five development areas. These are the South Sinai, North Sinai, Red Sea Coast, Western Desert, and Northwest Coast.

He has repeatedly been quoted as saying that Egypt offers, apart from cultural tourism, the "four S's" of recreative tourism: sand, sea, sun, and shopping.

A recent report ranked tourism over oil revenues as the second-largest source of hard currency in Egypt, just behind remittances from Egyptians working abroad.

The summer of 1988 brought many pieces of good news.

A good rainy season in central Africa raised the level of waters in Lake Nasser. An arbitrator of an international court settled in Egypt's favor the dispute over Taba, a tourism spot on the border between Egypt and Israel.

Additionally, the best news to Egyptians came when their favorite novelist, Nageeb Mahfouz, won the 1988 Nobel Prize in literature, the second Egyptian in less than a decade to win a Nobel Prize. President Sadat had won the Nobel Prize in 1979 for his historic visit to Jerusalem.

This is the picture of Egypt's 1988, and 1989 promises even more success for the pharaohs of the 20th century.

EgyptAir: Pioneer

In The Middle East

Horus was god of the sky in ancient Egypt. His body was sometimes that of a bird and sometimes that of a man, but his head was always that of a falcon. His right eye was the sun, his left eye was the moon, and the great pharaohs were assumed to be his incarnation on earth.

Horus was the son of Osiris, god of the underworld, and Isis, queen of the gods and mother of the earth. When Seth, a disruptive force, murdered Osiris, Horus slew him in battle, but only after Horus' left eye had been injured. The symbol of the eye became a powerful amulet for warding off evil.

Horus' victory brought about the unification of upper and lower Egypt, and a period of peace and prosperity ensued. Many areas adopted Horus as their principal god.

Now, Horus is EgyptAir's logo.

EgyptAir, the pioneer national Egyptian air carrier, was the first airline in the Middle East and the seventh worldwide. It also was one of the founding members of the International Air Transport Association.

The airline was established jointly with the British on May 7, 1932, by leading Egyptian economist Talaat Harb. Its first name was MISR Airwork, and its main objective was to promote the spirit of aviation and air-mindedness among Egyptian youth. Using Gypsy Moth airplanes, the company taught in its flying school the art and science of flight and aeronautical engineering.

For 15 months, MISR Airwork officials worked diligently to establish a service network and market its routes inside the country and throughout the region. In August, 1933, MISR Airwork commenced commercial operations, flying a Sparan Cruiser.

This all-metal aircraft with three piston engines was leased from its British partner, Airwork, Ltd. This plane was returned the same year, when the company purchased two four-seat aircraft, made by De Havilland. In 1935, MISR Airwork added six De Havilland 895s to its fleet. Later that year, the airline took a big step forward when it placed in service four De Havilland 86 Express aircraft, each of which seated 14 passengers.

After World War II, the Egyptian government took over the airline, and its name was changed to MISR Airlines. In 1946, the airlines' name was changed again, to MISRAir, and 10 Beechcraft D1855 aircraft were purchased--the first American planes in the fleet.

While the airline has expanded steadily throughout its life, its big leap forward came after World War II, when air travel gained rapid and widespread acceptance. In 1949, MISRAir bought 10 Vickers Vikings, and the following year it put in service a French aircraft, the Languedoc.

After the July 23 revolution in 1952, the Egyptian government made considerably greater resources available to the airline, enabling it to upgrade its aircraft, equipment, workshops, and training facilities to the standards of other international airlines.

MISRAir became one of the airlines to fly the turboprop Vickers Viscount, in 1956. In 1958, it purchased five McDonnell Douglas DC-3 Dakotas to serve domestic routes and changed its name to United Arab Airlines.

In 1960, UAA introduced a fleet of Comet 4-C jets, enabling it to extend its network to more capital cities and large towns. Then, in 1968, to cope with the ever-growing international traffic and to operate longer-range routes, UAA introduced the Boeing 707-320C.

This new aircraft enabled UAA to fly to all parts of the Middle East and major cities in Europe, Asia, Africa, and the Far East.

The airline changed its name again, in October, 1971, to EgyptAir. Later, as part of a policy of improving and consolidating its domestic and regional service, EgyptAir introduced seven twin-engine, short-haul Boeing 737 aircraft into its fleet.

Throughout the 1970s, EgyptAir faced difficult economic and social conditions prevailing in the country and in all of the Third World. It struggled with the challenge of financing renovation of its fleet, which consisted mostly of obsolete aircraft. It sought to regain the glamour it enjoyed in its early days and shed criticism by the media.

In the Early 1980s, EgyptAir pressed forward with its ambitious plan to update its fleet, which by then consisted of seven Boeing 707s and seven Boeing 737s.

Between September, 1980, and the start of 1981, EgyptAir purchased eight Airbus 320 aircraft, and it bought five more Airbuses during 1982-83. In 1984, the airline bought three Boeing 767 extended-range jets.

Within seven years--not more--and depending only on self-financing, EgyptAir had become an airline consisting of these aircraft:

* Airbus 320--eight.

* Boeing 767--three.

* Fokker 27--three.

* Boeing 737--seven.

* Boeing 707--three.

* Boeing 707 freighters--three.

* Boeing 747/300 freighter/passenger combination--two.

* Boeing 747 (leased)--one.

These acquisitions have allowed EgyptAir to stand up to international competition and regain the glamour of its name.

During the coming years, EgyptAir will continue updating its fleet with aircraft that last longer, carry more passengers, and are more economical to operate.

More specifically, the airline hopes to replace soon its Fokkers and Boeing 737s with aircraft that carry about 150 passengers and more cargo. It also hopes to replace its Airbus 320s and with 600 series airplanes manufactured by Airbus Industries, which carry many more passengers. Finally, in June, EgyptAir will add to its fleet two additional Boeing 747/300 jumbo jets.

COPYRIGHT 1989 U.S. Chamber of Commerce
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