Ministry of Economic Development Social and Economic Development A

Ministry of Economic Development Social and Economic Development A Follow-Up Report for the Year (2006/2007) ¢ § Social and Economic Development Follow-Up Report for the Year (2006/2007) 1 Ministry of Economic Development 2 Table of Contents< Introduction ........................................................ Subject Page 4 6 9 9 11 16 18 19 22 22 23 25 27 28 29 29 30 31 32 34 35 36 37 Section One: International and Regional Economic Outlook .......... Section Two: Macroeconomic Indicators ..................................... 2/1 Economic Growth ...................................... 2/2 Investment and Finance .............................. 2/3 Monetary and Credit Policy......................... 2/4 Fiscal Policy and State Budget...................... 2/5 Foreign Trade and Balance of Payments ....... Section Three: Living Standards and Human Development ............... 3/1 Living Standards ...................................... 3/2 Education and Health Services .................... 3/3 Utilities and Housing Services ...................... 3/4 Employment and Unemployment ................ 3/5 Training .................................................. 4/1 Manufacturing ......................................... 4/2 Petroleum and Natural Gas ......................... 4/3 Agriculture and Irrigation .......................... 4/4 Electricity................................................. 4/5 Suez Canal and Maritime Transport ............. 4/6 Tourism ................................................... 4/7 Communications and Information Technology 4/8 Religious, Cultural and Youth Services ............ Appendix ................................................................... Section Four: Sectoral Indicators ................................................ 39 Social and Economic Development Follow-Up Report for the Year (2006/2007) 3 Ministry of Economic Development Introduction Year 2006/07 will remain distinct in terms of economic performance and development in Egypt. This is not only because this year has witnessed the highest economic growth rate ever achieved in recent years (7.1%), but also because of the sustainability of this high rate for the second consecutive year, after reaching 6.8% in 2005/06; which implies the possibility of sustaining the momentum of economic growth. Also, the continued escalation of the pace of development is not the only hallmark of the year 2006/07, but its accomplishment is also shaped by the leading role of the basic sectors. For instance, the industrial sector (in a broad definition) grew by 7.3 % and contributed by 30% of GDP increase; the construction and transport sectors contributed together by 16%, and agriculture by 13%. These developments ascertain the diversity and the balanced production structure that feature the Egyptian economy. The above characteristics reflect the increased effectiveness and efficiency of current economic policy in ameliorating the business climate, and raising confidence in the economic potential and prospects of the country. A sum of L.E. 155 billion of investments have been pumped into the economy, raising the investment rate from 18.7% to 21.2%. Private sector investments accounted for the largest share; amounting to about L.E. 96 billion during the year, a figure which is 45% higher than that of last year. Monetary and fiscal policies not only stimulated economic growth, but also helped in curbing inflation and ensuring exchange rate stability. These policies have been consolidated by a favorable balance of payments, reflecting the rapid integration of Egypt into the global economy: with a $ 5.3 billion increase in balance of payments surplus, and an unprecedented increment in foreign currency reserves reaching about $ 30 billion, and with foreign trade accounting for 66% of GDP. High economic growth has been an explicit goal of public policy, but not an end in itself, as the steady increase in GDP is often reflected in ample job 4 opportunities, and improved living standards. This high growth - which is more than three-fold the rate of population growth - has led to an increase in average per capita income to exceed L.E. 10 thousand in 2006/07. The analysis of GDP components reveals a 4% increase in real household consumption in 2006/07. However, the real challenge remains in seeking ways of broadening the base of beneficiaries from economic growth and consumption increase. To ensure this, the government has targeted an investment pattern assigning top priority to public services. The present report highlights positive achievements in the areas of education, health, youth and cultural services that have improved the availability and quality of public utilities (electricity, potable water, sanitation, environment, etc.) to attain steady progress in the standard of living and quality of life for all citizens. We recognize the importance of working to expedite the completion of projects in due time, as well as the allocation of adequate funds for their operation and maintenance. The dynamic features gained by the Egyptian economy during the last two years - and which have grown substantially during the fiscal year 2006/07 have contributed to the enlargement of the absorptive capacity of the labor market. However, despite the large increase in the number of employed persons and the slight reduction in unemployment rate; the most difficult challenge that is still facing policy makers is how to speed up the growth of the economy further to allow for the creation of 750 thousand jobs a year that would ensure full eradication of unemployment. In view of the positive achievements of the Egyptian economy in 2006/07 as outlined in this follow-up report, we are confident that the continuing efforts of economic and financial reform (legislatively and institutionally) will achieve the goals embraced by the election program of President Mohamed Hosni Mubarak aiming at better future for all Egyptians. Dr. Osman Mohamed Osman< Minister of Economic Development Social and Economic Development Follow-Up Report for the Year (2006/2007) 5 Ministry of Economic Development Section One International and Regional Economic Outlook The global economy expanded vigorously in 2006, growing by 5.4% compared to a lower rate (4.9%) during the previous year (2005), and global growth is expected to moderate to 4.9% in 2007. This growth was supported by the rising growth rates of global private consumption expenditure, in addition to increasing inventory in some major industrial countries. The improved performance of advanced economies was the main reason behind rising worldwide growth rates. They recorded a growth rate of 3.1% in 2006 compared to 2.5% in 2005. Region good performers were the United States, Euro area, Japan, and United Kingdom•. Concerning emerging market and developing countries, they witnessed also an increase in the growth rate reaching 7.9% in 2006, compared to 7.5% in 2005 [fig. (1/1) and (1/2)]. Figure (1/1) Development of World Real GDP Growth Rate (2001 – 2007) 6 5 4 3 2 1 0 Similarly, the volume of world trade in goods and services witnessed a significant growth during 2006 at a rate of 9.2%, compared to 7.4% in 2005, and it is expected that this rate would slightly decline during 2007 to reach 7%. Exports of advanced economies grew by 8.4% in 2006 compared to 5.6% in 2005, while growth rate of emerging market and developing countries' exports declined from 11.2% to 10.6% during the period under review. Concerning imports of goods and services, they grew by a higher rate in developing countries than in advanced economies. They rose in the former from 12.1% to 15%, while in the latter from 6.1% to 7.4% [table (1/1)]. Table (1/1) Development of World Trade Volume (2002 - 2007) [Percent change (%)] Item World Trade Exports Advanced Economies Emerging Market and Developing Countries Imports Advanced Economies Emerging Market and Developing Countries * Expected 2002 2003 2004 2005 2006 2007* 3.4 2.3 6.9 5.4 3.3 10.6 8.9 7.4 5.6 9.2 8.4 7.0 5.5 (%) 5.3 3.1 4 2.5 4.9 5.4 4.9 10.8 14.6 11.2 10.6 10.4 2001 2002 2003 2004 2005 2006 2007 2.6 6.3 4.1 9.1 6.1 7.4 4.7 Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. 10.3 16.4 12.1 15.0 12.5 Figure (1/2) Development of Growth Rates in Advanced Economies, Emerging Market and Developing Countries (2001 – 2007) 12 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 Emerging Market and Developing Countries Advanced Economices 2007 Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. (%) 6.7 5 7.7 7.5 7.9 7.5 4.3 3.3 1.2 1.6 1.9 2.5 3.1 2.5 Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. Economic growth rates reached 3.3% in the United States, 2.6% in Euro area, 2.2% in Japan, and 2.7% in United Kingdom during 2006, compared to about 3.2%, 1.4%, 1.9%, and 1.9% respectively in 2005. • As for foreign direct investment flows, they increased significantly in 2006 by 34.3% reaching $ 1230.4 billion compared to $ 916.3 billion in 2005. In the case of developed countries, FDI rose by 48% to mount to $ 800 billion in 2006, with the United States recovering its worldwide lead position as the largest single host country for FDI, followed by the United Kingdom. Similarly, FDI flows to developing countries increased, but at a lower rate (10%), totaling $ 368 billion in 2006. It is also worth noting that in Africa, FDI inflows surged to a new record of $ 38 billion, implying a growth rate of 26.5%. This is mainly a result of large investments in oil and minerals-rich economies [fig. (1/3)]. 6 Figure (1/3) Development of FDI Inflows (a) Worldwide $ Billion 1400 1200 1000 800 600 400 200 0 (5.4% - 5.3%), though it remains double the corresponding one of advanced economies. At the regional level, the inflation rate has been escalating, reaching its maximum in Africa [fig. (1/4)]. Figure (1/4) Development of Inflation Rates 1230.4 2005 2006 916.3 542.3 800.7 367.7 334.3 World Developed Countries Developing Countries 6 5 (%) (a) Worldwide 2005 3.61 3.48 2.3 2.3 5.4 5.3 $ Billion 250 (b) Developing Countries' Regions 229.9 2006 4 3 2 1 0 2005 200 200 2006 103.7 99 150 100 50 30.7 38.8 World Developed Countries Developing Countries 0 Africa Latin America and the Caribbean Asia 11 (b) Developing Countries' Regions (%) 8.4 9 9.5 Source: UNCTAD, Investment Brief, No.1, 2007 2005 2006 7.1 7.9 7 4.8 5 3.6 Regarding unemployment, its rate has been steadily declining in major industrial countries since 2003 reaching the lowest level in 2006 (5.5%) as a result of improved economic performance in developed countries, with the exception of the UK where the unemployment rate has been on the rise since 2006 [table (1/2)]. Table (1/2) Development of Unemployment Rate in Major Industrial Countries (2002 – 2007) (%) 4 5 3 1 Africa Central and Eastern Europe Asia Middle East Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. Other important worldwide developments relate to oil prices, which experienced a considerable leap since 2003 in the light of continuous political tensions and their implications on oil markets [fig. (1/5)]. Figure (1/5) Crude Oil Price Developments (2002 – 2007) 70 60 50 40 30 20 Region Developed Countries United States Euro Area Japan United Kingdom 2002 6.3 5.8 8.2 5.4 5.2 2003 6.5 6.0 8.7 5.3 5.0 2004 6.3 5.5 8.8 4.7 4.8 2005 6.0 5.1 8.6 4.4 4.8 2006 5.5 4.6 7.7 4.1 5.4 2007* 5.4 4.8 7.3 4.0 5.3 $ Billion 10 0 * Expected Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. 2002 2003 2004 2005 2006 2007* * End of March 2007 On the other hand, the inflation rate witnessed a slight decline during 2006 according to consumer price index at the global level. It reached 3.48% compared to 3.61% in 2005. In advanced economies, inflation rates were much moderate (2.3%), while in emerging market and developing countries, inflation rate was almost stagnant Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. Also, IMF non-fuel commodity index rose by 28% in 2006, ending the year at a high new record, driven by a surge in metals prices and a strengthening of agricultural prices. This index is expected to increase further in 2007 to reach 4.2% [table (1/3)]. Social and Economic Development Follow-Up Report for the Year (2006/2007) 7 Ministry of Economic Development Table (1/3) Development of Non-fuel Commodity Prices [Percent change (%)] Item Non-fuel Commodity Index Foodstuff Agricultural Raw Materials Metals 2002 1.7 3.4 1.8 -2.7 2003 6.9 5.2 3.7 12.2 2004 2005 18.5 14.3 5.5 36.1 10.3 -0.3 1.6 26.4 2006 28.4 9.9 10.1 56.5 Developments in exchange rates during 2006 revealed an increase in the US dollar nominal exchange rate against the euro, the pound sterling, and the Japanese yen. The rate reached $ 1.256 per euro (compared to $ 1.246 per euro in 2005), $ 1.83 per pound sterling (compared to 1.820), and 116.3 yen per dollar (compared to 110 in 2005). Source: IMF, World Economic and Financial Survey, World Economic Outlook, April 2007. During 2006, short term interest rate in advanced economies rose from 2.5% to 3.5% and long term rate from 3.5% to 4.1% during the reference period. 8 Macroeconomic Indicators 2/1 Economic Growth Accelerated GDP Growth Follow-up data on macro economic performance of the 2006/07 Development Plan shows that the national economy sustained its growth at accelerated rates during the year, as GDP real growth rate reached 7.1%, on average, which is the highest rate attained throughout the Fifth Five-Year Plan. This notable accomplishment comes – in general – as a manifestation of the government’s commitment to pursue economic reform programs and the private sector responsiveness to newly embraced development and investment policies. With the prevalence of this healthy environment, the development process is likely to proceed at a faster pace in the forthcoming years, as higher growth rates averaging 8% are anticipated for the Sixth FiveYear Plan [fig. (2/1)]. Figure (2/1) Development of Real GDP Annual Growth Rate (At Constant Market Prices) % 8 Section Two Considering the sources of economic growth, it is apparent that the increase of total final demand (both consumption and investment) had been the main contributing factor, particularly the surge of investment. In contrast, contribution of net exports has been negative due to the widening gap between exports and imports [table (2/1)]. Table (2/1) Sources of Economic Growth, 2006/07 (%) Item GDP at Constant Market Prices Final Consumption Investment Net Exports Growth Rate 7.1 6.0 23.8 -112.8 Contribution 7.1 5.0 4.5 -2.4 6.8 4.5 7.1 6 As illustrated in table (2/2), final consumption constitutes about 82% of GDP, and exports nearly 31.5% in 2006/07 compared to 29.9% in 2005/06. Imports' share is much larger than that of exports and has been growing faster, rising from 31.5% to 34.8% during the mentioned years. Table (2/2) Total Resources and Uses 2005/06 – 2006/07 4.1 4 3.2 2 2002/03 2003/04 2004/05 2005/06 2006/07 Item Quarterly data reveals high growth rates over the year, as GDP rose by 7.2% during the fourth quarter, compared to 7.1% in the first and third quarters, and 6.7% in the second quarter of the same year [fig. (2/2)]. Figure (2/2) Growth of GDP at Constant Prices during the Corresponding Periods of 2005/06 and 2006/07 500 450 400 350 300 250 200 150 100 50 0 Value (LE billion) (Current Prices) 2005/06 2006/07 Ratio to GDP (%) 2005/06 2006/07 Resources GDP at factor cost Net indirect taxes GDP at market prices Imports of goods & services Total Resources Uses Final household consumption 436.1 515.5 84.4 599.9 70.6 12.3 82.9 18.7 29.9 131.5 70.5 11.6 82.1 21.2 31.5 134.8 Final government consumption 75.9 Total final consumption 512 581.1 684.4 36.6 46.8 94.1 5.9 100 31.5 131.5 93.6 6.4 100 34.8 134.8 617.7 731.2 195.0 254.6 812.7 985.8 LE Billion 2005/06 2006/07 426.1 456.2 119.3 111.4 112.2 105.2 111.9 104.3 112.8 105.2 (7.1%) Investment expenditure 115.7 155.3 Exports of goods and services 185.0 230.6 (7.1%) (6.7%) (%7.3) (%7.2) Total Uses W hole Year 812.7 985.8 First Quarter Second Quarter Third Quarter Fourth Quarter Social and Economic Development Follow-Up Report for the Year (2006/2007) 9 Ministry of Economic Development In terms of sectoral contribution, manufacturing industry grew by a rate as high as 7.3 percent during 2006/07, escalating its contribution to about 1.4 percentage points in GDP real growth rate (7.1%), whereas wholesale and retail trade contributed by nearly 0.96 percentage points; transportation and Suez Canal by 0.89 percentage points; building and construction (0.73 percentage points), and agriculture (0.57 percentage points) [table (2/3)]. Table (2/3) Sectoral Contribution in GDP Real Growth Rate (*) Figure (2/3) Structure of Sectoral Contribution in GDP Growth during 2005/06 – 2006/07 Manufacturing industry, Mining & Energy 30 13.7 9.6 6.2 6.5 12.6 11.2 5.6 2.4 2.2 0 5 10 15 20 25 30 35 Wholesale &Retail trade Trans portation and Storage Building & Construction Financ ial intermediary, Insurance & Social insuranc e Agriculture Government, soc ial & personal s ervices Tourism Communic ations Real es tate ac tivities Sector Agriculture and Irrigation Petroleum and Mining - Petroleum - Gas - Others Manufacturing Industries - Petroleum Products - Others Water and Electricity Building and Construction Transportation and Storage Suez Canal Communications Wholesale and Retail Trade Financial Intermediary, Insurance and Social Insurance Restaurants and Hotels Real Estate Social and Personal Services Public Government Grand Total (*) Annual Relative Contribution Growth Weight in GDP Rate (2006/07) Growth Rate (%) 15.5 8.9 (3.9) (4.8) (0.2) 18.9 (0.7) (18.2) 2.3 4.6 5.0 3.3 2.2 11.5 8.2 3.3 3.7 3.3 9.3 100 3.7 3.9 (-0.7) (7.5) (4.7) 7.3 (-1.8) (7.6) 6.5 15.8 8.0 14.9 14.1 8.3 7.0 13.2 4.3 6.8 3.4 7.1 0.57 0.34 (-0.03) (0.36) (0.01) 1.39 (0.01) (1.38) 0.15 0.73 0.40 0.49 0.31 0.96 0.58 0.44 0.16 0.22 0.32 7.1 * Agriculture comes in the second place among commodity sectors with a contribution of nearly 13 percent in GDP increase. * Building and construction contributed by about 6.2% to GDP increase. The significance of the sector is much more apparent when its indirect effects on the development of other economic sectors are taken into account. Fostering the development of the construction sector is necessary condition for enhancing the growth of the overall economy. * The share of production services activities – which include trade, transportation, communications and financial services – rose from about 25% of GDP increase during the period (2004/05 – 2005/06) to 32% during the subsequent period (2005/06 – 2006/07). This is a favorable development as raising the efficiency of production services helps strengthening the international competitiveness of the Egyptian economy. The above-cited developments reveal two structural changes that occurred during 2006/07: First, the growing importance of production services activities as a result of the good performance of trade, transport, Suez Canal, tourism and communications; all serving in one way or another, the needs of primary and secondary sectors. GDP at factor cost and constant prices. The sectoral development of year 2006/07 highlights the following: * Industry represents the main source of economic growth. It is the main contributor to GDP growth with a share of 30% [fig. (2/3)]. 10 Second, the change in the industrial structure in favor of manufacturing industries, particularly non-petroleum. This shift is highly appreciated as it helps reducing heavy reliance on exhaustible resources and high risks resulting from demand and price fluctuations in international markets, in addition to enlarging the absorptive capacity of the economy because of the high labor intensity of agriculture and manufacturing activities in comparison with extractive industries. Figure (2/5) Development of Total Investments During The Fifth Five-Year Plan 34% increase during 2006/07 170 150 130 110 90 70 50 30 LE billion 155.3 115.7 96.8 70.5 82.2 2/2 Investment and Finance 10 2002/03 2003/04 2004/05 2005/06 2006/07 • Investments As a percentage of GDP, the overall investment escalated from nearly 17% during the first year of the Fifth Five-Year Plan to 18.7% during the fourth year, then to 21.2% in its last year. This upward trend can be depicted from fig. (2/6). Figure (2/6) Development of Investment Rate during the Fifth Five-Year Plan 24 22 20 18 16 14 12 10 Steady Increase in Investment Total implemented investments reached about LE 51 billion during the fourth quarter of 2006/07, compared to LE 37.7 billion in the corresponding quarter of last year. The recorded growth rate (35.3%) is the highest one achieved throughout the corresponding quarters of the Fifth Five-Year Plan's years [fig. (2/4)]. Figure (2/4) Development of Investments during the Fourth Quarters of the Fifth Five-Year Plan's Years 35% increase during the fourth quarter of 2006/07 60 50 40 30 20 10 0 (%) 21.2 16.9 16.9 18.0 18.7 2002/03 2003/04 2004/05 2005/06 2006/07 LE billion 51 32.6 37.7 Intensive Orientation towards Industrial Investment The sectoral distribution of implemented investments reveals that five sectors captured 85% of total investments. The industrial sector comes at the top with investments reaching an unprecedented level of about LE 42 billion, which account for approximately 27% of total investments. This latter figure would rise to 42% when adding petroleum and natural gas. Infrastructure services including transportation occupy second position, with a share of 27%, followed by social services (14%) [fig. (2/7)]. 29.3 22.3 2002/03 2003/04 2004/05 2005/06 2006/07 As a consequence, total implemented investments rose to LE 155.3 billion during 2006/07 compared to LE 115.7 billion during the previous year, registering an unprecedented growth rate of 34.2% [fig. (2/5)]. In real terms, total investments augmented by about 23.8%. Social and Economic Development Follow-Up Report for the Year (2006/2007) 11 Ministry of Economic Development Figure (2/9) Sectoral Structure of Public Economic Authorities Investments during 2006/07 Manufacturing Industry 26.9% Transportation 50.7% Communications 4.0% Water & Sanittaion 10.0% Other 11.2% Figure (2/7) Sectoral Structure of Investments, 2006/07 Petroleum & Natural Gas 15.3% Social Serv ices 14.2% Transportation & Storage 13.2% Infrastructure Serv ices 14.0% Education and Health 3.0% Suez Canal 4.7% Water, Sanitation, and Human Development Projects Capture 62% of Total Government Investments Implemented government investments reached LE 25.6 billion during 2006/07, accounting for 16.5% of total implemented investments, of which LE 15.8 billion (61.8%) were directed towards basic infrastructure and social services. The sanitation sector received top priority with an investment amount of LE 4.5 billion, followed by the potable water sector (LE 3.2 billion), then educational services (LE 2.5 billion), health services (LE 1.2 billion), and electricity (LE 820 million). This pattern of investment allocation displays the government's commitment to upgrade basic services for the well-being of Egyptian citizens, particularly the low-income groups [fig. (2/8)]. Figure (2/8) Sectoral Structure of Government Investments Other Activities Communications Electricity 21.0% Focus of Public Companies' Investments in Transportation and Petroleum Public companies executed investments amounted to LE 27.2 billon during 2006/07, recording a growth rate of 47% compared to previous year's investments (LE 18.5 billion) [fig. (2/10)]. Figure (2/10) Development of Public Companies' Sectoral Investments during 2005/06 – 2006/07 LE billion 9 8 7 6 5 8.6 7.3 2005/06 2006/07 4.7 4.7 3.1 1.1 1.8 4.7 4.8 4.9 Agriculture 2.3% 15.0% 8.1% Transportation 4 3 2 1 0 12.9% Petroleum & Gas Manufacturing Industry Electricity Transportation Other Water, Sanitation & Water Human Development 33.1% 28.6% Concentration of Economic Authorities' Investments in Transportation and Electricity Sectors Investments executed by public economic authorities reached about LE 6.4 billion, representing 4.1% of total implemented investments. What is worth-noting is the significance of transportation and electricity activities which captured together the largest share of these investments accounting for 71.2% of the total [fig. (2/9)]. The main sectors which captured the lion's share of public companies' investments were transportation (32%) and petroleum (26%), with a total share of 58%. This is almost a onethird increase in their previous total share in 2005/06 which did not surpass 43.5% [fig. (2/11)]. Such developments are normal outcome of the expansion projects implemented in the air and maritime transportation sectors, in addition to the road upgrading schemes executed during the year. Also of particular importance are the large investments amounting to LE 3.3 billion that were allocated for research and exploration of oil and natural gas. 12 Figure (2/11) Sectoral Structure of Public Companies' Investments during 2005/06 and 2006/07 (2005/06) Transportation Other Petroleum & Gas (b) Public Economic Authorities (%) Source of Finance 2003/04 2004/05 2005/06 2006/07 Self-Financing National Bank of Investment's Loans Foreign Loans and Facilities Grants, Foreign and Domestic Aids 21.3 63.1 16.2 0.4 34.8 58.4 4.3 2.5 35.0 58.8 3.2 3.0 48.1 41.9 6.5 3.5 26.5% 5.9% 16.8% Electricity Manufacturing Industry 25.4% 25.4% Total 100 100 100 100 Transportation 31.8% (2006/07) Other 5.5% Steady Growth Investments in Private Sector's Electricity 17.6% Manufacturing Industry 19.2% Petroleum & Gas 25.9% Increasing Reliance on Self-Financing Resources for Public Projects The financing structure of public investments reflects the increasing dependence on selffinancing resources and the retreat of the National Bank of Investment's funding role, especially for public economic authorities. This is quite obvious during 2006/07, as the Bank's loans contributed by about 42% compared to 59% in the previous year, whereas the share of self-financing jumped from 35% to 48% due to increasing provision of additional resources such as the proceeds from the sale of public assets which were partly used for upgrading existing infrastructure and raising the efficiency of public enterprises and consolidating their financial position [table (2/4)]. Table (2/4) Development of Financing Structure of Public Investments (a) Government Body Private Investments reached about LE 96.1 billon during 2006/07, growing by 45% compared to the previous year. The observed increase in private investments augmented their share in total investments to 62% in contrast to 57% in 2005/06 and 48% in the year before [fig. (2/12)] Figure (2/12) Development of Private Investment and its Relative Importance to Total Investments 70 65 60 55 50 45 40 35 30 % 57 48 62 2004/05 2005/06 2006/07 Relative Importance of Private Investment to Total Investments 110 100 90 80 70 60 50 40 30 LE Billion 96.1 66.3 46.4 (43%) (45%) (%) Source of 2003/04 2004/05 Finance Self-Financing 4.4 5.1 National Bank of 86.0 85.1 Investment's Loans Foreign Loans 4.7 4.8 and Facilities Grants, Foreign and 4.9 5.0 Domestic Aids Total 100 100 2005/06 5.2 84.9 4.9 5.0 2006/07 7.8 83.9 3.6 4.7 2004/05 2005/06 2006/07 Development of Private Investment 100 100 One indication that reflects the growing role of the private sector relates to the development of investment companies during 2006/07. As shown in fig. (2/13), the number of established companies rose by 52% and that of expanding firms by 26%. The accompanied rate of increase in the companies' total capital (new and expansion) reached 78%. Social and Economic Development Follow-Up Report for the Year (2006/2007) 13 Ministry of Economic Development Figure (2/13) Development of Investment Companies' Activity Number of Companies Number 7500 6500 5500 4500 5958 2005/06 2006/07 4858 7142 The sectoral distribution for the fiscal year 2006/07 indicates that communications constituted about 28% of companies' total investments surpassing that of the industrial sector (25%) [fig. (2/15)]. Figure (2/15) Sectoral Distribution of Companies' Total Investments during 2006/07 12 LE Billion 10 3915 3500 2500 1500 500 943 1184 10.2 9.1 New LE Billion T ourism Expansion Capital Inflows Total 8 6 5.7 6.1 Finance 4 2.7 1.7 1.3 22.9% 11.1% S ervices 2 18.4% 0 Industry Agriculture Construction Tourism Services Financing Services Communications Jan. - June 2007 C om m unications 0.5% C onstruction (25) (5) (4) (15) (16) (7) (28) 3.9% Industry Relative Importance (%) Source: General Authority for Investment and Free Zones. 34.4% Agriculture Source: General Authority for Investment and Free Zones. 8.9% Industry has accounted for one third of companies' investments during the period (Jan. – June 2007), followed by tourism (23%), then services activities (18%), finance (11%), and agriculture (9%). The predominance of industrial and tourism activities in the structure of investment has been intensified in 2006/07 as their combined share reached 57%, in contrast to 47 % in the previous year [fig. (2/14)]. Figure (2/14) Sectoral Structure of Investment Companies' Total Capital Inflows during the Period (Jan. - June 2007) Compared to the Corresponding Period of 2006 Finance Services In terms of nationality of investors, the contribution of nationals accounted for nearly 64% of total investments, while the participation of Arab and foreign investors constituted approximately 25% and 11% respectively. It is notable that the contribution of Egyptians and Arabs increased considerably while that of foreigners declined from 25% to 11% during the period Jan. - June 2007 compared with the counter period of the previous year [fig. (2/16)]. Figure (2/16) Capital Structure by Nationality of Investors during the Period (Jan. - June 2007) Jan. - June 2006 Foreigners 25.0% 18.4% 21.0% Communications Jan. - June 2006 2.7% Construction 8.7% Tourism Agriculture 18.5% 2.4% Industry Egyptians 62.0% Arabs 13.0% 28.3% Tourism 22.9% Finance 11.1% Services 18.3% Jan. - June 2007 Foreigners 11% Jan. - Jun 2007 Communications 0.50% Egyptians Construction 3.90% Industry 34.4% 64% Arabs 25% Agriculture 8.90% Source: General Authority for Investment and Free Zones. Source: General Authority for Investment and Free Zones. 14 A Great Leap in Foreign Direct Investments Regarding foreign direct investment (FDI), the fiscal year 2006/07 experienced a notable increase in FDI inflows, as an escalation of last two years' trend. The economy has attracted US $ 11.1 billion worth of FDI inflows in 2006/07, compared with US $ 6.1 in 2005/06, signaling a growth rate as high as 82 percent [fig. (2/17)]. In consequence, Egypt has been ranked in the World Investment Report (2006) published by UNCTAD as the lead FDI recipient country in North Africa and the second in the African Continent. Figure (2/17) Development of Foreign Direct Investments 12 Figure (2/19) Investment/Saving Rates and Domestic Resources Gap 30 25 20 15 10 5 0 -5 -10 (%) of GDP 16.3 18.7 21.2 17 -2.4 2005/06 2006/07 Inv estment Rate -4.2 Sav ing Rate Domestic Resources Gap LE Billion 11.1 10 It is also noteworthy that there has been a shift in the foreign investment pattern in favor of non-petroleum sectors, as their share ranged between 47% and 55% in the past two years compared to only 24% in 2004/05 [fig. (2/20)]. Figure (2/20) Foreign Direct Investments Structure during the Period 2004/05 – 2006/07 70 60 8 6.1 6 3.9 4 2.1 2 0.7 65 55 47 30 28 2004/05 2005/06 2006/07 0 2002/03 2003/04 2004/05 2005/06 2006/07 50 40 30 Source: General Authority for Investment and Free Zones. 24 11 15 25 In relation to GDP, the ratio of FDI increased from 0.9% during the first year of the Plan to 9.3% during 2006/07 [fig. (2/18)]. This increase is due to several factors, of which the most important are:(i) the notable improvement in the investment climate; (ii) the strong commitment to good governance practices emphasizing transparency, accountability and information disclosure; and (iii) the pursuance of stable and stimulating economic policies. Figure (2/18) Development of FDI/GDP Ratio (2002/03 – 2006/07) 12 20 10 0 Petroleum Sectors Non-petroleum Sectors Privatization Proceeds Source: Ministry of Investment. In absolute terms, foreign investments in nonpetroleum sectors reached about $ 5.2 billion in 2006/07 compared to nearly $ 3.1 billion in the petroleum sector, and $ 2.8 billion proceeds from the management of stateowned assets. Notable Achievements in the Stock Market The stock market performance displayed continuous improvement in 2006/07. This is attributable to a number of factors, of which the most important are the effectuation of the banking and financial sector reform program with commitment to apply good governance rules, the increased tendency towards merger and acquisition in the banking sector, and the offering for sale of a number of companies in the field of communications and information technology. These developments were reflected in the continuous rise of CMAI from 1697 points in June 2006 to 2733.7 points in June 2007. Other stock market indicators manifest the improvement in the performance of the (%) 9.3 10 8 6.1 6 4.6 2.8 0.9 4 2 0 2002/03 2003/04 2004/05 2005/06 2006/07 The large influx of foreign investments has played a significant role in securing external funding for development projects, and accordingly, in achieving high investment rate (21.2%), filling the domestic resources gap [fig. (2/19)]. Social and Economic Development Follow-Up Report for the Year (2006/2007) 15 Ministry of Economic Development Egyptian Stock Exchange. Case 30 index, for instance, approached from breaking the 8000point barrier to close at a level of 7803.4 points in June 2007. Also, the upward trend of the Dow Jones-Egypt Titans (20) moved up to reach 1681.5 points in June 2007, compared with 1078 points in June 2006 [fig. (2/21)]. Figure (2/21) Evolution of the CMAI, Case 30 and Dow Jones – Egypt Titans Indices (June 2006 – June 2007) (Points) 9000 8000 7000 6000 5000 4000 3000 2000 1000 1697 1922 2114 covering government budget deficit, and the remaining amount was directed to financing other sectors' investments. Alternatively put, the household sector financed about 45.5% of total local investment during 2006/07 compared to 42.5% in 2005/06. Meanwhile, foreign savings contributed by about 12% in contrast to 15% in the previous year [table (2/5)]. Table (2/5) Investment Finance Matrix (A) 2006/07 (LE billion) 7770 7192 6348 5674 6233 4773 2280 2381 2280 2461 2483 2557 2744 2734 6561 6973 6610 6676 7165 7428 7803 Item Household Sector Private Business Sector Public Business Sector Economic Authorities Public Government External Sector Net Borrowing Executed Investment Private Sector Household Private Business Public Business Public Sector Economic Authorities Public Government Net Saving Lending 90.8 111.4 45.3 20.6 30.2 45.3 9.2 3.6 47.8 2240 2257 1078 0 1276 1394 1437 1422 1446 1532 1449 1554 1549 1579 1651 1682 18 2.8 40.618.4 30.2 20.6 75.5 9.2 27.2 3.6 6.4 66.2 25.6 18.4 109.2 18 2.8 40.618.4 June 2006 July A ug. Sep. Oct. Nov. Dec. Jan. 2007 Feb. Mar. Apr. May June CMAI Source: Capital Market Authority Case30 Dow Jones Titans 20 The sound performance of the stock market during 2006/07 is reflected in the marked increase in the transactions value, which rose by 170% over the year, causing a dramatic increase in the market capitalization value of the companies traded on the Stock Exchange from LE 377.1 billion in June 2006 to LE 601.8 billion in June 2007, with a growth rate of about 60%, and a ratio of 88% to GDP [fig. (2/22)]. Figure (2/22) Evolution of the Value of Traded Securities and Market Capitalization (June 2006 – June 2007) 700 600 500 400 300 200 100 0 155.3 (B) 2005/06 (LE Billion) Item Household Sector Private Business Sector Public Business Sector Economic Authorities Public Government External Sector Net Borrowing Executed Investment Private Sector Household Private Business Public Business Public Sector Economic Authorities Public Government Net Saving Lending 92.1 105.7 28.6 13.6 24.1 28.6 5.3 2.3 60.4 13.2 7.4 56.517.3 24.1 13.6 52.7 5.3 18.5 2.3 9.7 77.7 21.2 17.3 109.4 13.2 7.4 56.517.3 115.7 446 377 461 453 496 504 534 504 538 548 555 596 602 2/3 Monetary and Credit Policy Stability of Monetary Policy 30.1 32.6 12.4 18.5 34.0 15.4 16.5 23.9 31.5 18.8 20 Jan. 2007 Feb. 25.2 Mar. 17.7 Apr. June July Aug. Sep. 2006 Oct. Nov. Dec. May June Value of T raded Securities Market Capitalization The Central Bank of Egypt pursued its balanced monetary policy during 2006/07 targeting the stimulation of market transactions and enticing investments while controlling inflation and stabilizing the exchange rate. Among supporting evidence are the following: Stability of the discount rate at 9%. Fixing overnight inter-bank interest rate in a way that prevents wide variations among banks operations' return [fig.(2/23)]. • Finance A Significant Increase in Household Savings' Financing of Executed Investments. The investment finance matrix shows that household savings reached LE 111.4 billion, of which LE 20.6 billion were directed to financing its direct investments representing about 18.5%, and a sum of LE 47.8 billion for 16 Figure (2/23) Development in CBE Lending and Deposit Rates during 2006/07 22.00 20.00 Accelerated Growth in Banking Deposits Banking deposits soared during 2006/07 recording an increase of about LE 87 billion, and implying a growth rate exceeding 15%[fig. (2/26)]. Figure (2/26) Development of Banking Deposits (June 2006 – June 2007) 700 680 660 640 620 600 580 560 540 520 500 8.75 8.00 8.00 8.50 8.00 8.75 8.75 8.75 8.75 18.00 16.00 14.00 12.00 10.00 10.00 8.00 10.00 10.00 10.50 Oct. Nov. 10.75 10.75 Dec. Feb. 07 10.75 10.75 March May 10.75 June 06 August July 07 LE Billion 658.2 Overnight lending rates Overnight deposit rates Source: Central Bank of Egypt 571.5 Matching domestic liquidity increase with market requirements and economic growth [fig.(2/24)], stabilizing liquidity ratio to GDP at 91%. Figure (2/24) Development in Domestic Liquidity during 2006/07 680 660 640 620 600 580 560 540 520 500 June 2006 Source: Central Bank of Egypt June 2007 Expansion of Loans Household Sectors to Private and LE Billion 662.5 601.3 582.2 560.4 610.5 June 06 Sept. Dec. March 07 June Source: Central Bank of Egypt Domestic credit increased from about LE 509.5 billion in June 2006 to reach LE 527 billion in June 2007. This spurt is attributable to the growth in credit to both private sector and household sectors (LE 29.3 and LE 6.8 billion respectively), with a growth rate of 12.3%, whereas the claims on the government declined by LE 9.6 billion, and on public business sector by about LE 8.5 billion, implying a negative growth rate of 8.3% [fig. (2/27)]. Figure (2/27) Developments of Domestic Credit to Private, Household and Government Sectors (June 2006 – June 2007) 600 500 400 300 200 100 0 Slight appreciation of the Egyptian pound's value as the exchange rate declined from LE 5.75 per dollar in July 2006 to LE 5.70 per dollar in July 2007. Figure (2/25) Exchange Rate Developments (June 2006 – July 2007) 600 509.5 328.6 217 199 527.6 292.5 Piaster/Dollar 590 580 574.9 574.4 575.3 574 573.7 571.6 571.2 June (2006) 570.4 570.1 569.2 569.6 569 570 June (2007) Government & Public Business Total 570 560 Household & Private Source: Central Bank of Egypt 550 06 7 n. 0 t. ug us t ch il Ju ne ov . ec . ly Ju ne Se p M ay ct . Ju pr M ar Ja Ju O N D A ly Source: Central Bank of Egypt Stability of interest rates on deposits for 6 months/year at 6.9%, and on loans (for one year and more) at 12.5% - 12.7%. Accordingly, the credit given to private and household sectors rose from 57.4% to 62.3% during 2006/07, whereas the corresponding domestic credit to government entities dropped to 4.6% compared to 6.5% in the previous year [fig.(2/28)]. Social and Economic Development Follow-Up Report for the Year (2006/2007) A 17 Ministry of Economic Development Figure (2/28) Development in Domestic Credit Structure during 2005/06 and 2006/07 household sector Wages and Commodity Subsidy Capture more than 50% of Public Outlay The increase in public expenditure reached about LE 9.9 billion during 2006/07, growing by 4.8%. Wages and employees' compensation captured about LE 4.8 billion of this increase representing 49%. This increment is in line with the state policy seeking improvement of workers' conditions and in accordance with the Presidential Election Program which includes, among other things, the raise of employees' salaries. Similarly, subsidies, grants and social benefits reached about LE 58.4 billion, representing 27% of total public expenditure. This means that both items of wages and subsidies accounted for more than 50% of total public expenditures [fig.(2/30)]. Figure (2/30) Public Expenditures Structure 2006/07 LE 16.0 billion Purchases of goods & services 7% 2005/06 Government 10.4% 36.1% Private business sector Public Business sector 47.0% 6.5% 2006/07 Household Sector Government 11.4% 33.1% Private Business sector Public Business sector 50.9% Source: Central Bank of Egypt 4.6% 2/4 Fiscal Policy and State Budget Positive Implications of Financial Reform LE 20.3 billion Others 9% LE 58.4 billion Subsidy, grants &benefits 27% The State budget witnessed positive developments as a result of the financial reform programs and policies pursued during 2006/07, seeking the consolidation of economic growth on the one hand and the support of equity considerations by resorting to public resources' reallocation in favor of lowincome population segments, on the other hand. An Increase of LE 26 Billion in Public Revenues during 2006/07 Investments 11% LE 23.8 billion Wages and workers' Interests 22% compensations 24% LE 47.7 billion LE 51.5 billion Source: Ministry of Finance The Ministry of Finance data showed an increase in public revenues of about LE 25.8 billion recording a growth rate of 17.1%, of which LE 16.6 billion were tax revenues [fig.(2/29)]. Figure (2/29) Developments of Public and Tax Revenues during 2006/07 Compared to 2005/06 Public Revenues It is worth mentioning that the increase in nominal wages reached about 64% during the Fifth Five-Year Plan, as it rose from LE 115 billion to 2001/02 to LE 189 billion in 2006/07. In real terms, the corresponding growth rate stands for 17.5%. Also, it is notable that the government and public authorities' employees decreased – as a share of total employment - from 46.9% and 8.8% consequently in 2001/02 to 41.9% and 6.7% during the last year of the Plan (2006/07). A Decline in Cash and Overall Deficit Ratio to GDP The growth of revenues at a rate greater than expenditures led to a decrease in cash deficit during 2006/07 by 28.1% (from LE 56.5 billion to LE 40.6 billion). Also, its ratio to GDP declined from 9.2% in 2005/06 to 5.6% in 2006/07. Tax Revenues 130 LE Billion 180 175 170 165 160 155 150 145 140 135 2005/06 177.1 LE Billion 120 114.4 110 97.8 100 151.3 90 80 70 60 2006/07 2005/06 2006/07 Source: Ministry of Finance 18 As for the overall fiscal deficit, its absolute amount rose from LE 50.4 billion in 2005/06 to about LE 53.7 billion in 2006/07; whereas – as a percentage of GDP – it decreased from 8.2% to 7.4% [fig.(2/31)]. Figure (2/31) Ratio of State Budget Deficit to GDP Cash Deficit 12 Figure (2/33) Development of Merchandise Exports Structure (2005/06 – 2006/07) 2006/07 Nonpetroleum 2005/06 N on Petroleum 54% 44% Overall deficit 12 10 8 6 4 2 0 Petroleum 9.2 10 8 6 4 2 0 8.2 Petroleum 56% 7.4 46% Commodity Exports Structure 14 12 10 8 6 4 5.6 US $ Billion 8.2 11.9 10.2 10.1 2005/06 2006/07 2005/06 2006/07 2 0 Source: Ministry of Finance 2005/06 Non-petroleum exports 2006/07 Petroleum exports 2/5 Foreign Trade and Balance of Payments Rapid Growth of Merchandise Exports Commodity exports rose from about US $ 18.5 billion in 2005/06 to US $ 22 billion in 2006/07, recording a growth rate of about 19.3% [fig. (2/32)]. Figure (2/32) Commodity Exports' Proceeds (2005/06 – 2006/07) 26 24 22 20 18 16 14 12 10 Source: Central Bank of Egypt As for the geographical distribution of exports, the fiscal year 2006/07 witnessed a positive trend towards targeting new promising markets in the Asian region for the purpose of diversifying exports' markets, in addition to expanding exportation to Arab countries [fig.(2/34)]. Figure (2/34) Geographical Distribution of Merchandise Exports Other regions Europe US $ Billion 22.0 18.5 19.3 % 14% 4% Asian Countries 39% Other regions Europe 5% Asian countries 44% 10% 2005/06 Source: Central Bank of Egypt 2006/07 Arab countries 13% U.S.A Arab countries 11% 30% This exports leap is attributable to nonpetroleum exports which jumped from US $ 8.2 billion to about US $ 12 billion during the reference period, at a growth rate of 45%. In contrast, petroleum exports stabilized at US $ 10.1 billion. The ratio of non-petroleum exports to merchandise exports increased from 44% to 54% pinpointing the effectiveness of policies aiming at diversifying the country's exports structure to reduce heavy dependence on petroleum and natural gas exports [fig.(2/33)]. U.S.A 30% July 2006 – March 2007 Source: Central Bank of Egypt July 2005 – March 2006 The ratio of non-petroleum exports to GDP (excluding petroleum value added) rose from 9.5% in 2005/06 to 12% in 2006/07 [fig. (2/35)]. This development ascertains the importance of export promotion in stimulating economic growth, and the need for effectuating current export-oriented schemes. Social and Economic Development Follow-Up Report for the Year (2006/2007) 19 Ministry of Economic Development Figure (2/35) Ratio of Non-Petroleum Exports to GDP 14 13 12 11 10 9 8 7 6 5 (*) (%) 12.0 9.5 Although there is a need to curtail the import bill, one should not ignore the import needs of production sectors. The structure of imports displays the importance of such imports as investment and intermediate commodities account for 52% of total imports, and if fuel and raw materials imports are added, the ratio will rise to 75% [fig.(2/38)]. Figure (2/38) Commodity Imports Structure 2006/07(*) undistributed imports consumption commodities 13.5% 11.5% Fuel & raw materials 22.9% 2005/06 (*) 2006/07 Excluding Petroleum contribution to GDP. Increased Deficit in the Trade Balance Despite the significant performance of exports in 2006/07, the trade balance deficit has been growing, reaching US $ 15.7 billion compared to US $ 12 billion last year, implying a negative growth rate of nearly 30% [fig.(2/36)]. Figure (2/36) Evolution of Trade Balance Deficit (2005/06 & 2006/07) 20 18 16 14 12 10 8 6 4 2 0 Inv estment commodities 25.1% (*) nine months period (July 2006 – March 2007) Source: Central Bank of Egypt Intermediate commodities 27% US $ Billion 15.7 12 Growth Rate 31% Accordingly, imports increase could be justified on the ground of meeting production sectors' needs, and hence, stimulating economic growth. Even the surge of consumption imports could be acceptable to the extent that they fill market gaps and satisfy basic needs. Growing Surplus in the Current Account Balance Despite the Increasing Deficit in Trade Balance The Central Bank data indicates a significant increase in the current account balance (including transfers), at a rate of 56%, from US $ 1.75 billion to US $ 2.8 billion in 2006/07 [fig.(2/39)]. Figure (2/39) Current Account Balance Surplus (2005/06 – 2006/07) 5 4 3 2005/06 Source: Central Bank of Egypt 2006/07 This development is due to the accelerating growth of non-petroleum imports which jumped from US $ 25.1 billion to US $ 33.7 billion, at a growth rate of 34%, with an absolute increase exceeding US $ 8.5 billion in one year. Meanwhile, petroleum imports declined from US $ 5.4 billion to US $ 4 billion during the same period [fig.(2/37)]. Figure (2/37) Development of Commodity Imports (2005/06 – 2006/07) 40 35 30 25 20 15 10 5 0 US $ Billion 33.7 30.5 25.1 37.7 US $ Billion 2.80 1.75 2 5.4 4.0 1 0 Increase Rate 56% Petroleum imports Non-petroleum imports 2006/07 Total 2005/06 Source: Central Bank of Egypt 2006/07 2005/06 Source: Central Bank of Egypt 20 This growing surplus is due to two developments: First: the increase in the service balance by about US $ 3.3 billion, with the growth of transportation and tourism revenues. Second: the increase in net transfers by about US $ 1.5 billion during the reference period. Table (2/6) illustrates the development of current account balance during 2006/07 and its fourth quarter compared to corresponding periods last year. Table (2/6) Current Account Balance during the Fourth Quarter, 2005/06 & 2006/07 Fourth Quarter Item 2005/06 2006/07 Rate of Change (%) A Surplus of US $ 5.3 billion in the Balance of Payments The surplus in balance of payment reached about US $ 5.3 billion in 2006/07, with an increase of about US $ 2 billion compared to last year, at a growth rate of 63% [fig.(2/41)]. Figure (2/41) Development of Balance of Payments Surplus (2005/06 – 2006/07) 8 7 6 5 4 3 2 1 0 US $ Billion 5.28 3.25 An increase in the balance of payments surplus amounting to US $ ٢ billion Fiscal Year 2005/06 2006/07 Rate of Change (%) 2005/06 Source: Central Bank of Egypt 2006/07 Trade -3.7 Balance Service 2.17 Balance Transfers 1.43 Current account -13.0 Balance Source: Central Bank of Egypt -5.33 2.8 2.05 -0.47 34.1 29.4 44.0 261.6 -11.99 -15.72 8.19 5.55 1.75 11.45 7.06 2.8 31.1 39.8 27.3 59.6 Rapid Accumulation of International Reserves Due to the stable monetary policies and the steady improvement in the balance of payments, the net international reserves of foreign currency increased – for the first time – to about US$ 30 billion in June 2007 compared to US $ 26 billion in January 2007 and US $ 22.9 billion in June 2006. Figure (2/42) Development of Net International Reserves 30 28 26 24 ٍSteady Increase in the Remittances of Egyptians Working Abroad These remittances reached about US $ 6.3 billion in 2006/07 with an absolute increase of US $ 1.3 billion compared to 2005/06, at a growth rate of 26% in contrast to 14% in the previous year 2004/05 [fig.(2/40)]. Figure (2/40) Development of Remittances of Egyptians Working Abroad US $ Billion 8 7 6 5 4 3 2 1 0 $ Billion Billion US $ 29.6 26.0 22.9 4.4 5.0 6.3 22 An increase of US$ 1.3 billion during 2006/07 26% 20 June (2006) Source: Central Bank of Egypt Jan. (2007) July (2007) 14% 2004/05 2005/06 2006/07 Source: Central Bank of Egypt Social and Economic Development Follow-Up Report for the Year (2006/2007) 21 Ministry of Economic Development Section Three Standard of Living and Human Development High economic growth rate can impact the standard of living and the quality of life for the citizens, through different interrelated channels. On one hand, it enables the economy to secure adequate job opportunities and income to the workforce; and on the other hand, it allows greater government spending on public utilities and services, and hence increasing people's access to such facilities, not to mention the embracement of social solidarity schemes to expand safety nets. 3/1 Standard of Living The economic and social efforts aim at improving citizen's standard of living through the provision of ample job opportunities with adequate income levels, in addition to high quality public services. Therefore, it is necessary to monitor real income and consumption developments, as well as public services delivery in order to assess actual achievements and the impact of sustained economic growth on the living standards of the population. A Continuous Increase in Per Capita Income and Real Consumption Average per capita income has increased by 16 percent in 2006/07 reaching slightly more than LE 10 thousand, implying a real growth rate of 5 % [fig. (3/1)]. Figure (3/1) Development of Nominal and Real Per Capita Income during the Fifth Five-Year Plan 11000 10000 9000 8000 By computing the share of household final consumption in GDP, average per capita real consumption experienced an increase of 3.6% during 2006/07, and an increase of 21 % for the Five-Year Development Plan as a whole [fig. (3/2)]. Figure (3/2) Developments of Real Household Consumption During the Fifth Five-Year Plan 400 380 360 340 320 300 280 260 240 LE Billion 325 306 280 286 292 339 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Curbing Inflation Rates The inflation rate witnessed a continuous decline during the last quarter of 2006/07, to reach 8% in July 2007 and 8.5% in August 2007, after its peak level in March 2006 (12.8%) [fig.(3/3)]. This trend is a positive indicator of the government efforts to curb inflation and to maintain its level within the range of 7-8 percent a year, hoping to cut it down further by the end of the Sixth Development Plan to 6 percent. Figure (3/3) Annual Inflation Rate (June 2006-August 2007) 14 (% ) 12.4 12 12.6 12.4 12.8 11.7 11.8 12.2 10 8.9 7.3 9.6 8.4 10.0 8.5 8.5 8.0 8 6 Ju ne 20 06 De c Ja n. 20 07 Au gu st No v O ct Ap ri l y Ju ne Fe b y Ju l LE Source : CAPMAS 10059 Current prices 8658 7693 Constant prices 7069 7000 6000 5000 2001/02 5742 6202 5809 2002/03 5929 2003/04 6075 2004/05 6367 6688 2005/06 2006/07 Nominal & Real Per Capita Income Although the marked decline in inflation rate is a result of improving the economic performance during 2006/07, with the stability of monetary and exchange rate policies, one can not ignore the fact that robust economic activity generates demand pressures feeding inflation. Also, the inflationary effects of supply shocks of 2006/07 (averaging 11%) are likely to dissipate over time [fig. (3/4)]. 22 M Au g. Se p ar ch Ju l M ay Figure (3/4) Annual Average Inflation Rate During the Fifth Five-Year Development Plan 14 12 10 8 6 4 2 0 Table (3/2) Price Developments for Some Selected Items Item April 88.8 60 82 39.7 88.2 8.2 20.٩ 1.8 24.0 27.5 (% ) May 11.9 36.5 55.2 25.4 71.8 7.9 20.9 1.8 24.0 27.5 June July August 5.3 26.6 13.7 53.0 12.7 6.6 23.6 0.0 0.0 0.0 12.9 10.9 8.8 4.2 3.2 2002/03 2003/04 2004/05 2005/06 2006/07 Source : CAPMAS The marked decline of the inflation rate during the fourth quarter of year 2006/07 is a reflection of price stability or slowdown of price movement of several commodities and services during the referred period. For instance, in the case of food and beverages, the rate of inflation dropped from 16.4% in April to 9.6% in July; whereas in the case of water, electricity and health care, the inflation rate was almost stagnant. However, the month of August registered a slight increase in the inflation rate from 8% to 9%, with notable variations among commodity and services groups [table (3/1)]. Table (3/1) Inflation Rate By Main Groups (April - August 2007) Goods & Services Groups All Items Food & Beverages Tobacco & Cigarettes Clothes & Textiles Water & Housing & Electricity Furniture & Household Appliances Health Care Transportation Communications Culture & Entertainment Education Restaurant & Hotels Miscellaneous Source : CAPMAS Eggs Potatoes Onions Tomato Poultry Meat Fresh Rice Refrigerators Newspapers & Magazines Fuel Source: CAPMAS 11.4 - 11.4 53.6 45.1 35.9 26.3 17.8 31.0 12.0 13.0 6.6 6.6 30.5 30.5 1.8 0.0 21.1 27.5 0.0 27.5 3/2 Education and Health Services • Education Services Continuous Improvement in the Educational Services Education represents one of the most important issues that receive great attention owing to its positive impact on citizen's quality of life. Recognizing the importance of education, investments in this field grew by 70 percent during 2006/07, reaching about LE 4.6 billion, in contrast to LE 3.7 billion during year 2005/06 [fig.(3/5)]. Out of total investments, 56% were implemented by the government and the remaining percentage by the private sector. Figure (3/5) Investments in Educational Services (2005/06 & 2006/07) 6 5 4 3 2 1 0 April May June July August 11.7 16.4 7.4 4.9 5.7 4.9 3.2 9.8 1.2 19.5 11.1 8.5 12.4 10.0 12.6 7.4 4.9 5.7 4.9 3.2 9.8 1.2 8.5 9.6 0.0 4.9 5.7 4.9 3.2 9.8 1.2 8.0 10.1 0.0 6.8 5.7 4.8 2.2 9.4 0.0 9.3 11.1 5.6 8.8 8.5 12.4 0.0 6.8 2.0 8.2 2.2 1.9 0.0 9.3 11.1 5.6 8.8 LE Billion 4.6 3.7 Growth rate (24.3%) 2005/06 2006/07 19.5 19.5 11.1 11.1 8.5 8.5 11.7 11.6 Table (3/2) depicts price developments for some selected items for the period (April-Aug. 2007). Among the main achievements realized in 2006/07 are the following: • Reaching full enrollment of all children at age of primary education. • Increasing the number of enrolled students in pre-university education by 245 thousand students, to reach a total of 17.5 million students in 2006/07. • Increasing the female/male ratio in preuniversity education to 68% [fig.(3/6)]. Social and Economic Development Follow-Up Report for the Year (2006/2007) 23 Ministry of Economic Development Figure (3/6) Development of Female/ Male Ratio in Pre-University Education During the Fifth Five-Year Plan 70 68 66 64 62 60 58 56 54 • Health Services Positive Indicators for Health Improvement The State health care policy aims at securing comprehensive health care to all citizens to ensure a healthy psychological and physical environment that would enable them to work, produce and attain development goals and enjoy better standard of living. In this context and in conformity with the Presidential Election Program, a large sum of LE 2.7 billion has been invested in the health sector during the fiscal year 2006/07, of which LE 1.3 billion were public investments and the rest has been undertaken by the private sector. Accomplishments in 2006/07 • Establishing 10 public and central hospitals to reach a total of 350 units. • Adding 230 rural heath units totaling 45000 units by the end of the year. • Increasing the number of rural hospitals from 840 to 920. • Increasing the number of beds by 15 thousand (from 170 thousand to 185 thousand beds). The developments that took place in the health sector have contributed to further health improvements as illustrated by the following indicators: • Decline of infant mortality rate (per thousand of born child) from 20 to 18. 2006/07 (% ) 68.1 63.0 59.1 60.0 63.1 2002/03 2003/04 2004/05 2005/06 2006/07 • Augmenting the number of enrolled students in university education by 200 thousand, totaling 2.9 million students (male & female) in 2006/07 [fig. (3/7)]. Figure (3/7) Developments of Enrollment Rates in University Education 30 28 26 24 22 20 (% ) 28 25 26 27 24 2002/03 2003/04 2004/05 2005/06 2006/07 • Eradicate illiteracy of about 500 thousand individuals during 2006/07 [fig. (3/8)]. Figure (3/8) Number of Beneficiaries from Illiteracy Eradication Programs During 2006/07 550 500 450 400 350 300 Thousand 500 448.3 Growth rate (11.6%) 2005/06 It should be stressed, however, that given the importance of eradicating illiteracy, there is a pressing need to effectuate the efforts of current programs targeting the reduction of illiteracy. To quote the Millennium Development Report (Egypt 2004), the illiteracy rate (15 year or more) is still high in the order of 24.3 percent with wide variation among males and females (17.4% and 31.6%, respectively). • Decline of birth rate from 25.49 thousand in 2005/06 to 25.18 thousand in 2006/07, and death rate from 6.38 thousand to 6.27 thousand, with the result of slight decrease in population growth rate from 1.91% to 1.89% during the reference period. • Increase in average life expectancy at birth from 72.8 and 68.4 years for females and males respectively in 2005/06 to 73.6 and 69.2 years respectively in 2006/07 [ table (3/3)]. 24 Table (3/3) Development of Demographic Indicators During 2005/06 and 2006/07 Items Population (million) Natural increase (million) Birth Rate(per thousand) Death Rate(per thousand) Population Growth Rate (%) Average Life Expectancy at Birth (years): Males Females 3/3 Utilities and Housing Services Continuous expansion and development of public utilities and housing The fiscal year 2006/07 witnessed a significant concern for upgrading public utilities services such as potable water, sanitation, electricity and roads, in addition to the development of slum areas. This concern is well reflected in the unprecedented investments allocated for improving public facilities during the referred year. Total executed investments in the field of housing, potable water and sanitation reached about LE 8.5 billion, of which LE 5.2 billion were directed for upgrading sanitation services, accounting for more than 60% of total public investments in these fields. Main Accomplishments: 2005/06 71.35 1.35 25.49 6.38 1.91 68.4 72.8 2006/07 72.70 1.35 25.18 6.28 1.89 69.2 73.6 • Improvement in average per capita health services: Increase in bed coefficient from one bed for 420 persons in 2005/06 to one bed for 395 persons in 2006/07; and in physician coefficient from one physician to every 443 persons to one for every 440 persons during the reference period [fig. (3/9)]. Figure (3/9) Health Services Indicators in 2005/06 and 2006/07 (Persons/Physician, Persons/Bed) Person 460 440 • Potable Water Finishing 19 projects for potable water with a total cost of LE 1.9 billion. Increasing current production capacity of water stations from 17.6 million m3/day in 2001/02 to 21.9 million m3/day. 2005/06 420 2006/07 443 440 420 395 400 380 360 These projects resulted in increasing per capita production capacity from about 267 liters/day in 2001/02 to 307 liters/day in 2006/07. Persons/Bed Source: Information and Decision Support Center Persons/Physician • Sanitation Completing 60 sanitation projects with a total cost of about LE 3.6 billion. Extending sanitation networks with a length of 450 km. Replacing and renewing current networks with a length of 50 km. Extending and installing sanitation networks with a length of 635 km (336 km in 2005/06 and 299 km in 2006/07). Increasing current capacity of wastewater lifting stations from 10.3 million m3/day in 2001/02 to 14.9 million m3/day in 2006/07. Increasing available capacity of purification stations from 8.1 million m3/day in 2001/02 to 12.5 million m3/day in 2006/07. Decrease in the number of the population served by nursing staff from 356 to 353 persons per nurse during 2006/07 [fig. (3/10)]. Fig (3/10) Number of Persons Served By Nursing Staff During the Fifth Five-Year Plan Person 380 375 370 365 360 355 350 345 340 335 2002/03 2003/04 2004/05 2005/06 2006/07 370 362 360 356 353 Source: Information and Decision Support Center Social and Economic Development Follow-Up Report for the Year (2006/2007) 25 Ministry of Economic Development Extending lengths of sanitation networks from 19.8 thousands km in 2001/02 to 23.6 thousands km in 2006/07. It is worth-mentioning that the last population census of 2006 indicated that the number of beneficiaries from water services has increased by about 6 million families and from sanitation services by nearly 3 million families during the period 1996 – 2006. Accordingly, the percentage of those beneficiaries to total families rose from 83% to 96% in the case of potable water services, and from 45% to 51% in the case of sanitation services. In addition to the above-cited public investments, local administration has invested a sum exceeding LE 3.3 billion in year 2006/07, of which about LE 1 billion for the provision and upgrading of potable water and sanitation [fig. (3/11)]. Figure (3/11) Local Administration Investments by Sector During 2006/07 Other Utilities The statistical appendix illustrates the main executed projects in the field of potable water and sanitation in 2006/07 by the National Authority of Potable Water and Sanitation and the Executive bodies. The Appendix also includes the number of mother villages and their affiliates which were connected to potable water pipelines within the National Project of Supporting Deprived Villages till 30/6/2007. • Roads The main accomplishments in the field of roads and bridges during 2006/07 comprise the following: Upgrading networks of main and highway roads with a total length of 150 km. Constructing roads of 382 km length and double-lining roads with a length of 454 km. Constructing 5 bridges crossing the Nile River and 9 new upper bridges. Paving 1020 km of local roads, and entrances of cities, villages and slum areas. Constructing 46 pedestrians' connecting centers and villages. bridges 270 LE million Services 252 597 423 532 Electricity Replacing, renewing and completing 37 pedestrians' bridges. Sanitations Potable water • 1255 800 1000 1200 1400 Housing Transportation 0 200 400 600 Services Other Utilities Transportation 7% 8% 38% During 2006/07, 139 thousand additional units were constructed, implying a growth rate of 19.3% compared to last year. The private sector's contribution in housing construction reached about 90%. In support to low-income groups, the housing subsidy has reached LE 451 million during 2006/07. Also, this year witnessed an expansion in housing loans provided by local administration, in soft loans' programs designated for poor families, as well as in the Ministry of Housing's schemes directed towards subsidizing youth housing. Moreover, throughout the year, the role of the Real Estate Financing Authority has been effectuated, with the provision of a subsidy of about LE 20 million for 2250 units through the Real Estate Financing Fund. Within the framework of the Presidential Election Program which aims at constructing 500 thousand housing units for low-income Electricity 18% Sanitation Potable Water 13% 16% Main Achievements of Local Administration: Extending and providing pipes and networks for potable water with a length of 2177 km during 2005/06 and 2006/07. Connecting potable water to 108 villages in different governorates. 26 groups and youth along six years, the "Build Your Home" project is being implemented, where an area of 150 m2 is provided at a price of LE 70 / m2 with 10% down-payment, one year grace period, seven years maturity period, and with a grant of LE 15 thousand per unit. In the first phase, 20 thousand housing areas in 13 new towns are made available within this scheme. In this context too, nearly 100 thousand units are to be constructed for youth accommodation on a rental basis, in mutual cooperation between the Ministries of Housing, Agriculture, Local Development, and 'Awqaf', and along the same terms and conditions of the Housing National Program. 3/4 Employment and Unemployment A Notable Increase in the Labor Market Absorption Capacity and a Slight Decline in the Unemployment Rate The rapid economic growth of 2006/07 has led to a considerable expansion of the labor market capacity. About 600 thousand new job opportunities were provided in the referred year. As a result, employment grew by 3% exceeding by far the corresponding growth rate of the labor force (2.3%), leading thereby to a decline in the unemployment rate from 9.5% to 9.1% [fig. (3/12)]. Figure (3/12) Development of Labor Market During 2005/06 and 2006/07 25 20 15 10 5 0 employment creation, of which the most important are the micro and small enterprises development schemes as well as the industrial development programs designated for smallsize establishments. Such concern with employment comes in conformity with the government's commitment to implement the Presidential Election Program, which includes the provision of approximately 4.5 million job opportunities within six years. The data of the Ministry of Manpower and Emigration indicates that about 1.1 million job opportunities were provided during the period from 1/9/2005 to 30/6/2007, distributed by employment sources as illustrated in fig. (3/13). Figure (3/13) Job Opportunities Provided During the Period from 1/9/2005 till 30/6/2007 (Distributed By Employment Sources) Thousand 1200 1100 1000 900 800 700 600 500 400 300 200 100 Total Self Employment Recruitment Office Internal Recruitment Companies 1099 551 422 126 Source: Ministry of Manpower and Emigration 21.6 22.1 19.5 20.1 2.1 2.0 2005/06 2006/07 The “Social Fund for Development” programs are considered one of the main employment schemes, as it provided 287 thousand jobs during 2006/07, in which 297 thousand were secured last year. Loans granted to micro and small enterprises have reached about LE 904 million, and one LE billion, respectively [fig. (3/14)]. Figure (3/14) Activities of Social Fund for Development During 2005/06 and 2006/07 Labor Force Employees Unemployed Million persons 10 9.8 9.6 9.4 9.2 9 8.8 8.6 900 9.5 Thousand 9.1 1100 1070.6 899.8 2005/06 2006/07 2005/06 2006/07 700 Unemployment Rate (%) 500 Increasing employment is a result of high economic growth rate (7.1%) and accelerated investments; in addition to the execution of certain public programs directly targeting 297.1 300 286.7 167.7 174.5 100 Ganted Loans (L.E. million) Job Opportunities (Thousand) Number of Projects (Thousand) Source: Social Fund for Development Social and Economic Development Follow-Up Report for the Year (2006/2007) 27 Ministry of Economic Development 3/5 Training In the frame of enhancing the vocational skills of the labor force; the Ministry of Manpower and Emigration – through its affiliated vocational training centers at the governorates – has trained about 18 thousand individuals working in 37 crafts throughout the period from 1/9/2005 till 30/6/2007 [fig. (3/15)]. During the same period, work standards and specifications were set to measure the skills level of about 40 thousand workers in 25 professions. Figure (3/15) Traning Programs and Number of Trainees During the Period (1/9/2005 - 30/6/2007) 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Indicators show that the number of training opportunities provided during 2006 is almost close to 60 thousand. Till June 2007, about 113 thousand training opportunities were offered, of which 38 thousand were in the field of vocational training and 75 thousands in the field of professional training. It is targeted to raise the number of trainees to reach 281 thousand by the end of 2007. Figure (3/16) shows the relative distribution of training opportunities - both sectoral and spatially – during the period extending from January to June 2007. Figure (3/16) Distribution of Training Opportunities by Economic Sector June 2007 No. 18160 10150 5100 Ministry of EducationTechnology Center Others Shipping 10% 2% Institutions 24% 1490 1100 1% 320 Main training Vocational hirarchy Total Construction & Building Materials Transfer training Quick training Vocational upgrading 4% Agriculture Source: Ministry of Manpower and Emigration 7% Medicine 3% On the other hand, the Ministry of Trade and Industry is paying special attention to the development of technical and vocational training systems. Hence, the Industrial Training Council was established to handle the training responsibilities taking into account the regional balance of training needs. Food - processing Chemical 13% 5% Architectural 10% Individual 7% Clothes & Textiles 14% Source: Ministry of Trade and Industry, Industrial Training Council. 28 Section Four Sectoral Indicators 4/1 Manufacturing The performance of the manufacturing industry during 2006/07 comes in the frame of an ambitious program targeting an industrial boom, whether in the fields of investment, production, export or employment. This is in conformity with the government commitment to the Presidential Election Program which includes installing one thousand large factories, establishing and expanding about two thousand medium-sized factories, in addition to developing and supporting micro and small enterprises. The industrial growth rate is planned to reach 10% by the year 2011. About 1.5 million new job opportunities would be provided and industrial exports are likely to reach LE 100 billion, through the escalation of industrial investments up to LE 175 billion. In 2006/07, the real growth rate of manufacturing was 7.3%, and that of nonpetroleum manufacturing reached 7.6% compared to 5.8% and 5.9% respectively in the previous year [fig. (4/1)]. Figure (4/1) Development of Annual Real Growth Rates of Industrial Products 8 7 6 5 4 3 2 1 0 A sum of LE 42 billion was invested in manufacturing industries during 2006/07, registering an increase of more than twice and half last year investments (LE 15 billion). Data indicates the addition of 178 factories in new urban communities to reach 3887 factories by the end of year 2006/07, in comparison to about 3000 factories at the beginning of the Fifth Five-Year Plan. Currently, more than 300 factories have been added to those under construction totaling 2145 factories [fig. (4/3)]. Figure (4/3) Number of Factories Established in New Urban Communities 4000 Factory 3418 3194 3059 3709 3887 3600 3200 2800 2400 2000 2002/03 2003/04 2004/05 2005/06 2006/07 ( %) 7.3 (in operation) 2145 5.1 3.6 2.3 5.8 2200 2100 2000 1900 1800 1700 1600 Factory 1837 1709 1647 1762 2002/03 2003/04 2004/05 2005/06 2006/07 1500 2002/03 2003/04 2004/05 2005/06 2006/07 Similarly, non-petroleum exports amounted to LE 11.9 billion in 2006/07 increasing by 45%. This achievement highlights the increase of Egypt's international competitiveness [fig. (4/2)] Figure (4/2) Development of Non-Petroleum Industrial Exports During the Fifth Five-Year Plan 14 12 10 8 (Under Construction) Source: Information Decision Support Center. $ Billion 11.9 8.5 6.5 8.2 The General Authority for Industrial Development has allocated an area of 13 million m2 for industrial projects till the end of 2007. Investments reached LE 17.2 billion, with an estimated employment of 167 thousand persons [table (4/1)]. 5 6 4 2 0 30% 30.5% -3.5% 45% 2002/03 2003/04 Source: Central Bank of Egypt 2004/05 2005/06 2006/07 Social and Economic Development Follow-Up Report for the Year (2006/2007) 29 Ministry of Economic Development Table (4/1) Land Allocations for Industrial Projects – During 2006 Item No. of Projects Investment Total Area Expected Costs (Thousand Labor (LE Billion) m2) (Thousand) Table (4/3) New Industrial Zones – Private Sector City 10 of Ramadan th 6 of October th Sadat / 6 of October Borg el Arab Others th Total Area 2 (Million m ) 4 6 9 8 1 Industrial Projects and Warehouses 999 * Industrial Projects and Warehouses 337 ** Industrial Projects 1484 for Youth Investment Cost (LE million) 1420 2120 2900 2850 350 Expected Labor (Thousand) 170 230 210 200 40 11.9 4.7 0.8 10400 2100 500 79 23 65 Total 17.2 13000 167 28 61390 850 Total * ** 2820 Source: General Authority for Industrial Development – June 2007. Allocated by the General Authority of Industrial Development Allocated by Governorates Source: General Authority for Industrial Development – June 2007. The Plan of the General Authority for Industrial Development targets the completion of new specialized industrial clusters of a total area of 973 feddans, with an investment cost of LE 4.5 billion, and estimated employment of about 48.5 thousand workers [table (4/2)]. Table (4/2) New Specialized Industrial Clusters City Al Roubiky / Badr Al-Safa / Qaliubya Borg El Arab The implementation of “One Thousand Factory” and “Business Market” programs indicate that more than one thousand factories of different sizes have been established, with a total investment of LE 12.4 billion. The programs have provided nearly 90 thousand new job opportunities by the end of May 2007 [table (4/4)]. Table (4/4) Factories (New & Expanded) Established Since the Beginning of the Program till May 2007 Item “One Thousand Factory” Program – Large (LE 15 million or more) “Business Market” Program – Medium (LE 5 – 15 million) “Business Market” Program – Small (LE 5 – 0.5 million) Total No. of Factories Total Investment (LE Billion) Job Opportunities (Thousand) Expansion Factories of Existing in Operation Factories 124 66 252 95 62 408 Total Activity Leather Foundries Total Investment Expected area Cost Labor (feddan) (LE million) (Thousand) 110 142 60 500 596 420 6.5 7.3 4.6 219 128 660 Clothes textiles Furniture manufacturing Damiettea & wood products (currently) Mahalla ElTextile Kobra Car feeding th 6 of industries October (under study) 150 378 4.3 442 6.77 45.7 565 5.58 43.6 1007 12.36 89.3 35 476 249 2400 1.8 24.0 Source : General Authority for Industrial Development – June 2007 Total 973 4543 48.5 4/2 Oil and Natural Gas New investments in the field of research and development reached approximately $ 3.3 billion during 2006/07. A number of (39) discovery were achieved, of which (27) relate to crude oil and (12) to natural gas. In addition, 22 agreements were signed (16 new and 6 amendments) for the Egyptian General Petroleum Cooperation, Egyptian Holding Company for Natural Gases, and the South Valley Holding Company. Source: General Authority for Industrial Development – June 2007. In addition to the above, it is targeted to establish new industrial zones, managed by the private sector in some new cities over an area of 28 million m2, with total investments amounting to LE 61.4 billion and employment generating capacity of 850 thousand workers [table (4/3)]. 30 Total production of crude oil, condensates, butagas and gases from joint companies and State-owned enterprises reached about 73.4 million tons during 2006/07; with an increase of 4% than the previous year. It is also worthmentioning that about 41.3 million tons of gases were produced with an increase of 7.5% from last year, mainly from the fields of ElTemsah, El-Kasr in Western Desert, PortFouad, Baltim El-Bahary, in addition to the full operation of the fields of Semian, Sienna, and Safayer. As for petroleum, petro-chemicals and butagas products, their production reached about 34.9 million tons during 2006/07; almost equivalent to the previous year production [fig. (4/4)]. Figure (4/4) Production Development of Oil, Natural Gas and Petroleum Products Million ton 42 41 40 39 38 37 36 35 34 33 32 31 30 As for the petroleum trade balance, it achieved a surplus of $ 6.1 billion with an increase of 27% compared to the previous year, despite the stagnation of exports' proceeds. This surplus is due to the decrease of petroleum imports from $ 5.4 billion to $ 4 billion [fig. (4/6)]. Figure (4/6) Development of Petroleum Trade Balance $ Billion 12 10 8 10.2 10.1 2005/06 2006/07 5.4 6 4 2 0 6.1 4.8 4.0 -1.0% - 26% Exports Imports 27.1% Surplus Source: Ministry of Petroleum 41.3 38.4 2005/06 2006/07 35.3 Main Accomplishments: 34.9 - 0.4% 7.5% 32.2 32.1 1.0% Natural gas Source: Ministry of Petroleum Crude oil Petroleum products On the other hand, local consumption of petroleum products and gases reached about 54.7 million tons during 2006/07; with an increase of 6% compared to the previous year. Product Natural gas Benzene Butagas Propane Solar Mazot Growth Rate 8% 11% 6% 9% 5% 2% Notable expansion in the usage of natural gas as an alternative fuel due to the extension of gas connecting lines to 202 thousand housing units in 2006/07, totaling 2.5 million units; in addition to switching 11400 cars to operate using compressed natural gas, as well as establishing (11) new supply stations during the year. Starting the implementation of some petroleum-related industrial projects in Suez governorate, in order to meet the petroleum sector's needs of land drills, gas and oil pumps. 4/3 Agriculture and Irrigation Investments in this sector reached about LE 7.5 billion in 2006/07. Private sector contributed with an estimated investment of about LE 5.4 billion; accounting for 72% of the total, while public investments were in the order of about LE 2.1 billion, constituting 28%. The agricultural product amounted to LE 68.6 billion in 2006/07 compared to LE 66.2 billion in the previous year. This implies an unprecedented growth rate of 3.7%. Natural gas consumption increased by 8% and petroleum products by 4% during 2006/07 [fig. (4/5)]. Figure (4/5) Development of Natural Gas Consumption 2005/06 29 28 27 26 25 24 23 2006/07 27.7 Million ton 27.0 26.7 25.0 4% 8% Natural gas Petroleum products Source: Ministry of Petroleum Social and Economic Development Follow-Up Report for the Year (2006/2007) 31 Ministry of Economic Development The main achievements throughout 2006/07 could be summarized as follows: Executing infrastructure and internal reclamation works for an area of 70 thousand feddans, of which 75% are in Sinai and Upper Egypt [fig. (4/7)]. Figure (4/7) Relative Distribution of Infrastructure Works and Internal Reclamation Lands By Region South of Upper Egypt 17% Middle Egypt 3% East of Delta 12% Other Regions Sinai & East of Canal 58% North West Coast 3% 7% 4/4 Electricity In order to satisfy the electrical needs for all users, a number of electricity projects (plants transformer stations electric power transmission lines - electric power distribution networks, etc...) has been implemented during the fiscal year 2006/07, along with the replacement and renewal of existing projects. This is in addition to the implementation of schemes designated for the development of new and renewable energy sources. Total executed investments reached about LE 6.9 billion in 2006/07, of which nearly LE 4.8 billion were carried out by holding companies distributed among the Egyptian Holding Company for Electricity and Production, Distribution and Transmission electricity Companies [fig. (4/9)]. Figure (4/9) Investment Structure of Electricity Holding Companies, 2006/07 The Electricity Holding Company 0.1 Reclaiming about 53.5 thousand feddans during 2006/07, of which 55% in Middle Egypt [fig. (4/8)]. Figure (4/8) Relative Distribution of Reclaimed Lands by Region Sinai 7% East of Delta 38% (%) Egyptian Company of Electricity Transmision 24.6 Production Companies 61.5 Source: Ministry of Electricity and Energy Distribution Companies 13.8 Middle Egypt 55% The performance indicators of the electricity sector during 2006/07 include the Finishing the implementation of irrigation and drainage infrastructure for 137 thousand feddans in the district of Sahel El Tina, and South of Qantara Shark. Completing irrigation development works for about 190 thousand feddans. Executing covered drainage networks for 91 thousand feddans. Expanding and deepening open public drainages for 95 thousand feddans. Replacing and renewing covered drainage networks for 102 thousand feddans. following: • • • Increasing the generation capacity of electricity stations by about 1475 megawatts. Increasing capacities of transformation stations by about 2015 mega volt ampere. Increasing generated energy from 108.4 billion k.w.h in 2005/06 to 114.3 billion k.w.h in 2006/07, with a growth rate of 5.4% [fig. (4/10)]. 32 Figure (4/10) Development of Generated Electrical Power 115 110 105 Billion K.w.h. 108.4 101 114.3 In the field of upgrading lighting services in rural areas and slums, the most important achievements include: Supplying electricity to 503 thousand units in slum areas. Lighting 292 affiliated villages. Supporting 105 previously lighted villages. Replacing and renewing electrical networks in 104 villages. 100 94.9 95 90 85 80 2001/02 2002/03 89 83 2003/04 2004/05 * 2005/06 2006/07 Source: Ministry of Electricity and Energy • Extending and operating medium tension lines of length 216 km. Supplying electrical power to 59 public projects. Electrifying 8000 thousand feddans of reclaimed land belonging to cooperatives, companies and individuals. In the field of consolidating electricity city networks: Installing (10) medium tension distribution circulates. Installing (181) kiosk with transformers of different capacities. Executing and operating (467) km air lines and ground cables of medium tension. Implementing and operating (817) km air lines and ground cables of low tension. Total investments executed in the above two fields reached about LE 550 million during the year 2006/07 [table (3/4)]. Table (3/4) Investments in the Field of Village Electrification and City Networks Consolidation, 2006/07 Increasing the production and value added of holding companies by 11% during the period 2005/06 - 2006/07 [fig. (4/11)]. Figure (4/11) Development of Production and Value-Added of Holding Companies LE Billion 15.5 LE Billion 15 Growth Rate 11 % 15.1 10 9.5 9 Growth Rate 10.6 % 9.4 14.5 14 13.6 8.5 8.5 8 13.5 13 12.5 7.5 2005/06 2006/07 2005/06 2006/07 Production Value (Market Prices) Source: Ministry of Electricity and Energy Value-Added • Increasing energy consumption from 92.8 billion k.w.h in 2005/06 to 98.9 billion k.w.h in 2006/07, with a growth rate of 6.6% [fig. (4/12)], of which 37% were for domestic use and 35% for industrial use [fig. (4/12)]. Figure (4/12) Electrical Power Consumption Public Utilities 11% Houses 37% Shops and Others 7% Governmental Usage Distribution of Electricity Consumption Exports 0.4% Industry 35% 99 98 97 96 Activity Village Electrification City networks Consolidation Electricity Supply to Reclaimed Lands Total Source: Ministry of Electricity and Energy Authorities 6% LE Million 390.5 155 5 550.5 (%) 71 28 1 100 Agriculture 4% Billion k.w.h 98.9 Consumption Development 95 94 93 92 91 90 89 92.8 In addition to the above, the year 2006/07 has witnessed extensive efforts towards the exploitation of renewable energy sources, especially wind energy with a total installed capacity of 230 megawatts; in addition to opening new markets for energy amounting to 354 million kilowatt / hour. 2005/06 Source: Ministry of Electricity and Energy 2006/07 Social and Economic Development Follow-Up Report for the Year (2006/2007) 33 Ministry of Economic Development 4/5 Suez Canal and Maritime Transportation Suez Canal revenues rose to about $ 1.12 billion in the fourth quarter of 2006/07 compared to about $ 934.8 million in the corresponding quarter of the previous year, with a growth rate of 19.6%. For the whole year, the revenues of the Suez Canal augmented to approximately $ 4.17 billion against $ 3.56 billion last year, growing by over 17% [fig. (4/13)]. Figure (4/13) Suez Canal Revenues During The Fourth Quarter and Years 2005/06 & 2006/07 $ Billion 2.5 2 1.5 Figure (4/15) Suez Canal Activity during 2005/06 and 2006/07 Growth Rate (8.7%) Number 19600 19400 19200 19000 18800 18600 18400 18200 18000 17800 Growth Rate (12.8%) Million Tons 840 702.2 740 640 540 440 340 240 140 19479 792 18476 2005/06 2006/07 2005/06 2006/07 Number of Crossing Ships ٍ Source: Suez Canal Authority. Net Weight Investments by the Suez Canal Authority amounted to about LE 303 million in 2006/07. Among the most important achievements are the following: Dredging the main Canal to 162.25 km, deepening pit area cables of Kantara at 44.05 km, and deepening and maintaining the port entrance of Port Said. Completing the establishment of sedimentation basins and the dredging of West Port Said from 3.6 km to 16.5 km, and completing the establishment of new tower site guidance. Completing the construction of five locomotives, and the purchase of two satellite communication devices. Completing the consolidation of the western wave barriers. Establishing towers and buildings to secure the navigation path of the Canal, and installing passages that link insurance points across the Canal path. $ Billion Growth Rate (19.6%) 0.94 1.12 5 4 3 2 1 0 3.56 Growth Rate (16.9%) 4.17 1 0.5 0 2005/06 2006/07 2005/06 2006/07 Fourth Quarter Source: The Central Bank of Egypt, Suez Canal Authority. Fiscal Year - This increase in revenues is attributable to the rise in the numbers of ships passing the Suez Canal by 9.4%, and in the net weight by 3.4% (from 180.4 to 204.6 million tons) during the fourth quarter compared with the same period of the previous year [fig. (4/14)]. Figure (4/14) Suez Canal Activity During the Fourth Quarter of 2005/06, 2006/07 Number 5400 5200 5000 4800 4600 4400 4200 4000 - - Million Tons Growth Rate (%9.4) 4563 4993 220 210 200 190 180 170 160 150 140 Growth Rate (%13.4) 180.4 204.6 2005/06 2006/07 2005/06 2006/07 Number of Passing Ships Net Weight With regard to seaports and maritime transportation, the follow-up indicators display a substantial increase in the carrying capacity of the National Shipping Fleet during 2006/07 by about 40%, as well as the capacity of the seaports in the same year by 29%. Figure (4/16) depicts the development of these capacities over the years of the Fifth Five Year Plan. For 2006/07, the number of crossing ships increased by 5.4%, and their net weight by 12.8% [fig. (4/15)]. 34 Figure (4/16) Development of Seaports and Maritime Transportation Capacities Million Ton 140 120 100 80 60 40 20 0 Million Ton 125.8 97.5 10 8.0 8 6 4 58.5 70.6 82 5.7 4.5 1.8 1.7 2 0 The number of tourist nights also increased, hitting 23.5 million nights in the fourth quarter of 2006/07 compared to 19.6 million nights in the corresponding quarter of 2005/06, which signals a growth rate of approximately 20%. Similarly, tourist nights increased during 2006/07 - albeit at lower growth rate (13%) from 85.1 million to 96.3 million nights [fig. (4/18)]. Figure (4/18) Development of Tourist Nights During 2005/06 & 2006/07 and the Fourth Quarter Million 110 2002/03 2003/04 2004/05 2005/06 2006/07 2002/03 2003/04 2004/05 2005/06 2006/07 Maritime Ports Capacity Source: Suez Canal Authority Carrying Capacity of the National Shipping Fleet 96.3 85.1 4/6 Tourism Tourism contributes effectively in generating value added, securing job opportunities and providing foreign exchange earnings, in addition to supporting other related industries through the tourism multiplier. Despite the rising political conflicts and military tensions in the Middle East region, the performance of Egyptian tourism has been agreeable throughout 2006/07. The number of tourist arrivals reached about 2.6 million during the fourth quarter of 2006/07 compared to about 2.2 million during the same period in the previous year, recording a growth rate of more than 17%. The numbers of visitors during the fiscal year 2006/07 reached approximately 9.8 million compared to 8.7 million in the previous year, growing by 13%. This is largely due to the effectiveness of promotional campaigns and the development of new tourism products and niche markets, in addition to the development of new tourism destinations, particularly along the north-west coast. The diversification of the tourism product has promoted new patterns, such as safaris, eco-tourism, therapeutic and conventions tourism, besides beach and cultural tourism [fig. (4/17)]. Figure (4/17) Development of Tourists Arrivals During 2005/06 & 2006/07 and the Fourth Quarter Million 110 100 90 80 70 60 50 40 30 20 10 100 90 80 70 60 50 40 30 20 10 2005/06 2006/07 19.6 23.5 Fourth Quarter Source: Ministry of Tourism Year It is worth-noting that there has been no substantial change in the structure of the tourism movement by region during 2006/07 compared to 2005/06. European visitors accounted for most of incoming tourists (although their relative importance increased from 69% to 74%), followed by visitors from the Middle East, then from Asian Countries [fig. (4/19)]. Figure (4/19) Structure of Tourist Movement by Region in 2005/06 and 2006/07 Middle East Middle East 19% Asian 14% Asian 5% American 6% American 4% African 4% African European 3% 3% European 69% 73% Fiscal Year 2005/06 Source: Ministry of Tourism Fiscal Year 2006/07 96.3 2005/06 2006/07 85.1 19.6 23.5 Regarding tourism revenues, they increased by 5.9% in the fourth quarter, and by 11% in the fiscal year 2006/07. These rates - though reasonably high - are still lower than target rates (15%) [fig. (4/20)]. Fourth Quarter Source: Ministry of Tourism Year Social and Economic Development Follow-Up Report for the Year (2006/2007) 35 Ministry of Economic Development Figure (4/20) Tourism Revenues Development 10 8 6 4 2 0 The following indicators reflect the significant developments achieved by the sector during 2006/07: 2005/06 2006/07 7.2 8.0 • 1.7 1.8 Increasing the number of mobile phone users by about 4.1 million, with a growth rate of 28.5% [fig. (4/22)]. Figure (4/22) Development of Mobile Phone Users 20 18 16 Fourth Quarter Source: Ministry of Tourism Year Million Persons 14.4 9.9 6.4 3.95 5 18.5 In response to demand developments, lodging capacities of hotels and tourist villages increased from 175 thousand rooms in year 2005/06 to about 184 thousand rooms in year 2006/07. As a result, executed investments in the tourism sector augmented from LE 3.25 billion to LE 4.13 billion, recording a growth rate of 27% [fig. (4/21)]. Figure (4/21) Tourism Investments and Lodging Capacities LE billion 5 4 14 12 10 8 6 4 2 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Source: Ministry of Communications and Information Technology • Growth Rate 27.1% 4.13 3.25 185 183 181 179 177 175 173 171 169 Thousand rooms Growth Rate 5.1% 184 10 9 Increasing the number of internet users by about 2 million persons, with a growth rate of 38% [fig. (4/23)]. Figure (4/23) Development of Internet Users Million Persons 7.3 3 2 1 0 175 8 7 6 5.3 4.5 3.3 1.7 2005/06 2006/07 2005/06 2006/07 5 4 3 Tourism Investments Source: Ministry of Tourism Lodging Capacities 2 1 0 1.2 4/7 Communications Technology and Information 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 * (*) July 2006 - March 2007 Source: Ministry of Communications and Information Technology Communications and Information Technology play a vital role in fostering economic development. Accordingly, emphasis is given to developing the infrastructure of communications and information, and establishing a modern national industry to prepare a generation of young people capable of acquiring knowledge, skills and pursuing the information revolution. Investments during 2006/07 amounted to about LE 8.2 billion registering an increase of 30% from corresponding investments in 2004/05 (LE 6.3 billion). This substantial increase (ranging between 20% and 30% annually) reflects the large importance of this sector and its responsibility for turning Egypt into an information society. • Augmenting the number of subscribers in fixed telephone lines to reach 12 million compared to 7.2 million in 2001/02, with a growth rate of 67% during the referred period [fig. (4/24)]. Figure (4/24) Development of Fixed Telephone Lines Subscribers 14 13 12 11 10 9 8 7 6 5 Million Persons 12 10.6 9.9 9.2 8.4 7.2 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Source: Ministry of Communications and Information Technology 36 • Increasing Centrals capacity by 20% during 2006/07, and by 70% over the years of the Fifth Five Year Plan [fig. (4/25)]. Figure (4/25) Development of Centrals Capacity During the Fifth Five-Year Plan 4/8 Religious, Cultural and Youth Services Investments in these service activities amounted to about LE 723 million during 2006/07, distributed as shown in fig. (4/28). Figure (4/28) Investments in the Field of Religious, Cultural and Youth Services during 2006/07 LE Million 600 550 500 450 400 350 300 18 17 16 15 14 13 12 11 10 9 8 7 6 Million Lines 12.9 15.5 10.9 9.6 11.7 12.3 Youth 8.5% Religious 20.8% 566 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 250 200 150 100 Cultural 70.7% 166 68 Religious Cultural Youth Source: Ministry of Communications and Information Technology • Augmenting the number of Technology Clubs to 1500 in 2006/07, with an increase of 141 clubs throughout the year [fig. (4/26)]. 50 Figure (4/26) Development of Information Technology Clubs 1600 1400 1200 1000 800 600 400 200 0 2001/02 2002/03 2003/04 2004/05 2005/06 * Religious Services: The most important achievements realized during 2006/07 include the following: * Replacement and renewal of 155 mosques nationwide. * Transforming 17 normal mosques into large ones. Number 1241 961 550 344 1359 1500 * 2006/07 (*) July 2006-March 2007 Source: Ministry of Communications and Information Technology * Establishing 8 mosques in new urban regions. * Printing 50 thousand copies of translated Quran meanings in different foreign languages * Printing 50 thousand copies of CDs in various religious topics. * Printing 14 thousand copies of a number of diverse religious books. This is in addition to contributing to the reclamation and cultivation of 10 thousand feddans in Eastern Owainat. • Adding more than 400 new companies working in the field of communications and information technology during the year 2006/07 [fig. (4/27)]. Figure (4/27) Development of Companies in the Field of Communications and Information Technology 2300 2100 1900 1700 1500 1300 1100 900 700 500 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Number 1825 1641 1261 1042 742 2233 Source: Ministry of Communications and Information Technology Social and Economic Development Follow-Up Report for the Year (2006/2007) 37 Ministry of Economic Development * Cultural Services: The most important achievements realized in 2006/07 include the following: * * * * * Developing 11 cultural houses in different governorates. Establishing 35 museums nationwide. archaeological * Youth Services: The most important achievements realized during 2006/07 include the following: * * * Completing the establishment of 29 open playgrounds. Completing the upgrading of 45 Youth Centers. Completing the Leaders Preparation Centers at Ismailia and New Damietta City. Completing the installation of 29 open courts. Centers. Upgrading three floors in the Youth and Sports Compound with the provision of necessary equipments and a self-extinguishing network. Restoring 85 Pharaonic and 25 ancient Greek monuments. Renovating 35 old mosques and 15 Coptic heritage. Completing the second phase of construction and starting the final stage of the Civilization Museum (Nubian Antiquities). Completing the preparation of the general site of the new Egyptian Museum, and starting the establishment of a restoration center and the electrical power station. * * * 38