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In conjunction with Deloitte, OBG explores the taxation system, examining Egypt’s investor-friendly environment.

The largest country in the Arab world, Egypt has well-established medical facilities. However, the health sector faces significant challenges in caring for a rapidly growing population using a system hampered by structural weaknesses. In its 2014 constitution, the Egyptian government pledged to devote 3% of GDP to health care. With pressing matters of security and political stability facing the next government, health care workers are not anticipating radical reforms immediately. Yet the consensus is that reforms must come in the medium term to improve standards and services, reduce inefficiencies and inequality, and prepare the system for the pressures involved in dealing with a rapidly growing population. The education system in Egypt currently faces many challenges as it seeks to improve and better prepare the country’s young people to join the workforce. One of the biggest component groups of Egypt’s jobless are graduates, who account for 33% of the total. Optimism was sparked by the new constitution, which came into force in January 2014. Article 238 stipulates that education must receive expenditure to the value of at least 4% of GDP each year. Yet increasing funding cannot be the only solution; the reform of curricula, implementation of technology and improvement in teaching are all also urgent requirements. This chapter contains interviews with Hamed Sherif, Chairman, Misr International Hospital and Mahmoud Abo El Nasr, Minister of Education.

Egyptian media caters to a population of nearly 90m individuals, more than 60m of which are over the age of 15. However, given high rates of illiteracy and wealth disparity, industry players must adapt to a diverse audience. The industry is able to extend far beyond the country’s borders to tap into a broader base of more than 300m readers, viewers and listeners across the Arabic-speaking world with its books, magazines, films, radio and television programmes. Egypt’s advertising sector benefits from strong, long-term fundamentals, although the political turbulence of the past three years has been challenging. However, with a new presidential administration in place and greater stability in the economic environment, the sector could see a rebound in the coming months as firms begin to increase spending once again.

A major employer and contributor to GDP and export earnings, Egypt’s agriculture sector thrives despite limitations imposed by geography. The country has been one of the breadbaskets of a range of great empires, and the fertile Nile Delta is one of the region’s most important agricultural areas. Agriculture, forestry and fishing generated 14.5% of GDP in 2013, making it the third-largest contributor behind extractive industries and manufacturing. The agriculture sector grew by 3% in the fiscal year 2013 (July-June), edging very slightly up from 2.9% in 2012, according to Bank Audi. The bank expects a similar figure for the 2014 fiscal year, once data are in, following 2.9% growth in the early months. Egypt will continue to balance agricultural production for its large, growing population, and export-oriented output, like citrus, that is an important earner of foreign currency and attracts foreign investment. Investors should see growing opportunities in Egypt’s moves to boost output by increasing desert cultivation and yields, alongside efforts to consolidate and improve infrastructure. This chapter contains an interview with Adel El Beltagy, Minister of Agriculture and Land Reclamation.

Tourism has long been an integral and major contributor to Egypt’s economy – reaching 11.3% of GDP in 2010 – as well as a ready source of foreign currency. Nevertheless, the 14.7m international visitors seen in 2010 had decreased by more than a third to 9.1m by 2013. Almost as worrying was Egypt’s 85th position among global tourism destinations ranked by the World Economic Forum. Yet, the Ministry of Tourism’s switch in emphasis to regional source markets paid off to such a degree that by mid-2014 it was forecasting 2m Arab visitors by the end of the year and an overall rise to 9.5m tourists despite a discouraging start. Continued stability is clearly key. The speed with which confidence returns to Egypt’s foreign source markets is impossible to predict. Retaining slightly over 9m tourists a year, even in the worst days, is perhaps a remarkable achievement and in any case a big base on which to build.

Like many sectors in the country, construction has had more than its fair share of challenges in recent years. Yet in spite of the downside risks, the prospects for the building industry have not been brighter for decades. Continuation of new cities around Cairo, complete with offices and shopping malls, plans for 1m new affordable homes in the social housing segment, the expansion of the Suez Canal, the development of 75,000 sq km of land on either side of the canal for industry and myriad other infrastructure schemes are turning Egypt into a hive of activity. The ambitiousness underpinning the construction plans – as well as the country’s finances – is certainly impressive, but project delivery will be crucial in sustaining the momentum, particularly given the externalities, such as job creation, that the country’s construction sector provides. After a sharp decline in real estate activity in 2011, the market has bounced back and many companies should see full-year figures for 2014 return to pre-revolution levels. The residential market was the strongest-performing sector in Cairo in the third quarter of 2014, with sales recovering ahead of rents in most locations as confidence returns. Going forward, the type and balance of future developments will almost certainly change to better meet the needs of a greater number of Egyptians. The 1m-home housing project could well see its completion date slip in face of the practicalities of producing so many units in an atmosphere where there is huge pressure on resources. Even so, with so many programmes being pushed by the government in all sectors of the economy, in a decade Egypt could look a very different country than that on display today. This chapter contains interviews with Osama Bishai, CEO, Orascom Construction Industries and Iyad Malas, CEO, Majid Al Futtaim Holding.