RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/55
18 May 1999
(99-1938)
Trade Policy Review Body
TRADE POLICY REVIEW
EGYPT
Report by the Secretariat
This report, prepared for the second Trade Policy Review of Egypt, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Egypt on its trade
policies and practices.
Document WT/TPR/G/55 contains the policy statement submitted by the
Government of Egypt.
__________________________________________________________________________________
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Egypt
.Egypt WT/TPR/S/55
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) I NTRODUCTION ix
(2) T RADE POLICY FRAMEWORK ix
(3) T RADE AND TRADE -RELATED REFORMS x
(4) O THER MEASURES AFFECTING TRADE x
(5) S ECTORAL POLICIES xi
(6) T RADE POLICIES AND TRADING PARTNERS xii
I. ECONOMIC ENVIRONMENT 1
(1) I NTRODUCTION 1
(2) R ECENT ECONOMIC DEVELOPMENTS 1
(i) Economic growth and structure 1(ii) Fiscal stabilization 5
(iii) Balance of payments 6
(3)
DEVELOPMENTS IN TRADE 8
(i) Overview 8(ii) Merchandise trade 10(iii) Trade in services 13
(4)
TRENDS IN FOREIGN INVESTMENT 13
(5) O UTLOOK 14
II. TRADE AND INVESTMENT REGIME 15
(1) INTRODUCTION 15
(2) INSTITUTIONAL FRAMEWORK 15
(i) The Executive 15
(ii) Legislature 16
(iii) The Judiciary 16(iv) Legislation 17
(3)
DEVELOPMENT AND ADMINISTRATION OF TRADE POLICY 18
(i) Policy formulation and implementation 18(ii) Main trade-related laws 19
(iii) Trade policy objectives 19
(4)
TRADE RELATIONS 21
(i) The World Trade Organization 21(ii) Regional and bilateral trade agreements 23
(5)
FOREIGN INVESTMENT REGIME 25
(i) Investment statutes 25
(ii) International investment agreements 28WT/TPR/S/55 Trade Policy Review
Page iv
Page
III. TRADE POLICIES AND PRACTICES BY MEASURE 29
(1) OVERVIEW 29
(2) MEASURES DIRECTLY AFFECTING IMPORTS 29
(i) Customs procedures 29(ii) Customs valuation, clearance and inspection 31
(iii) Rules of origin 32
(iv) Tariffs 33(v) Tariff quotas 41(vi) Variable import levies 41(vii) Other charges affecting imports 42
(viii) Import restrictions and licensing 43
(ix) Import quotas 44(x) Balance-of-payments restrictions 44(xi) State-trading enterprises and import cartels 44(xii) Import surveillance 45(xiii) Anti-dumping, countervailing and safeguard measures 45
(xiv) Standards and other technical requirements 47
(xv) Free trade zones 50(xvi) Other measures 50
(3)
MEASURES DIRECTLY AFFECTING EXPORTS 50
(i) Registration and documentation 50(ii) Export prohibitions and licensing 51
(iii) Export charges 52
(iv) Export monopolies 52(v) Performance requirements 52(vi) Export promotion activities 53(vii) Measures maintained by importing countries 54
(4)
MEASURES AFFECTING PRODUCTION AND TRADE 55
(i) Production incentives 55(ii) Adjustment and regional assistance 57(iii) Public sector enterprises and their reform 59(iv) Trade-related intellectual property rights 62(v) Government procurement 66
(vi) Competition policy 67
IV. TRADE POLICIES BY SECTOR 69
(1)
OVERVIEW 69
(2) AGRICULTURE 70
(i) Main features 70(ii) Policy reforms 71
(iii) Government assistance 74
(3)
PETROLEUM AND NATURAL GAS 76
(i) Petroleum 76(ii) Natural gas 78
(4)
MANUFACTURING 79
(i) Overview 79
(ii) Recent developments in key industries 83Egypt WT/TPR/S/55
Page v
Page
(5) SERVICES 89
(i) Overview 89(ii) Commitments under the General Agreement on Trade in Services (GATS) 90(iii) Financial services 91(iv) Telecommunications 95
(v) Transport 97
(vi) Tourism 100
REFERENCES 103
APPENDIX TABLES 107
CHARTS
I. ECONOMIC ENVIRONMENT
I.1 Investment rates, 1985-97 3
I.2 Relative importance of foreign trade and investment, 1990-97 9
I.3 Intensity of Egypt's intra-industry trade with selected regions, 1992 and 1997 9
I.4 Merchandise trade by product, 1992 and 1997 11I.5 Merchandise trade by partner, 1992 and 1997 12
III. TRADE POLICIES AND PRACTICES BY MEASUREIII.1 Frequency distribution of MFN tariff rates, 1998 34
III.2 Tariff escalation by 2-digit ISIC industry, 1998 37
III.3 Egypt's bound and applied tariffs, 1998 39
IV. TRADE POLICIES BY SECTORIV.1 Trade in agricultural products, 1994 and 1997 72
IV.2 Crude petroleum and gas output, and export revenue, 1992-97 77IV.3 Trade in manufactured products by ISIC categories, 1994 and 1997 81
IV.4 Evolution of textiles and clothing exports, 1992-97 86WT/TPR/S/55 Trade Policy Review
Page vi
TABLES
Page
I. ECONOMIC ENVIRONMENT
I.1 Economic performance, 1991-97 2
I.2 Basic economic and social indicators, 1991-98 4
I.3 Fiscal operations, 1991-98 6
I.4 Balance of payments, 1991-98 7I.5 Foreign direct investment inflows and outflows, 1995-98 13
II. TRADE AND INVESTMENT REGIMEII.1 Ministerial responsibility for trade-related issues 18
II.2 Main trade-related laws in Egypt 19
II.3 Status of selected notification requirements to the WTO, as at April 1999 21II.4 Fields of investment under the Law of Investment Guarantees and Incentives 27
III. TRADE POLICIES AND PRACTICES BY MEASUREIII.1 Applied MFN tariff, 1998 33
III.2 Tariffs in excess of 50 per cent, 1998 35
III.3 Applied MFN tariff by degree of processing, 1998 36
III.4 Bound and final tariff averages, 1998 37III.5 Concessional duty schemes 41III.6 General sales tax rates, 1991 and 1998 42III.7 Anti-dumping actions, as of 30 June 1998 45III.8 Tariff concessions for local content in assembled products 52
III.9 Anti-dumping measures maintained on Egyptian exports, 1992-99 55
III.10 Main tax exemptions offered to companies in Egypt by the
Central Government, July 1997 56
III.11 Size and composition of the public sector in Egypt, 1996 60III.12 Privatization in Egypt, 1991-99 62
III.13 Summary of intellectual property rights protection in Egypt corresponding
to its TRIPS obligations 63
IV. TRADE POLICIES BY SECTORIV.1 Agricultural output in Egypt, 1992-98 70
IV.2 Effective rates of protection for selected manufacturing industries 82IV.3 Evolution of the textiles and clothing industry, 1992-95 84
IV.4 Average tariff for motor vehicles, 1998 89
IV.5 Value added in the services sector, 1992-97 90IV.6 Main indicators in the telecommunications sector, 1990 and 1995 96IV.7 Legislation applied to the maritime sector 98IV.8 The tourist industry, 1992-98 101IV.9 Investment incentives in the tourism industry 102Egypt WT/TPR/S/55
Page vii
APPENDIX TABLES
Page
I. ECONOMIC ENVIRONMENT
AI.1 Exports by groups of products, 1992-97 109
AI.2 Imports by groups of products, 1992-97 110
AI.3 Exports by destination, 1992-97 111
AI.4 Imports by origin, 1992-97 112
III. TRADE POLICIES AND PRACTICES BY MEASUREAIII.1 Appeals against customs decisions, 1992-97 113
AIII.2 Specific and mixed duties, 1998 113
AIII.3 Main items bound at levels below applied MFN tariff rate, 1998 114
AIII.4 Services subject to sales tax 114AIII.5 Banned imports, 1998 115AIII.6 Permitted second-hand imports and prescribed conditions 116AIII.7 New Egyptian standards, 1992-97 117AIII.8 The new communities 117
IV. TRADE POLICIES BY SECTOR
AIV.1 Applied and bound tariffs and imports, by ISIC category, 1998 118
AIV.2 Egypt's specific commitments under the GATS 121AIV.3 Summary of Article II (MFN) exemptions listed by Egypt 124Egypt WT/TPR/S/55
Page ix
SUMMARY OBSERVATIONS
(1) INTRODUCTION
1. Egypt's economic stabilization
programme launched in 1990/91 has resulted
in a significant improvement in mostmacroeconomic and trade indicators since
Egypt's previous Trade Policy Review in 1992.
Much progress has been made in reducing
trade barriers:  most non-tariff measures have
been removed and tariff protection has beensharply reduced.  MFN duties currently
average about 27% compared to 42% in 1991.
The removal of export bans and reduced
domestic restrictions on pricing and
distribution has also reduced the anti-exportbias in the economy.  More liberal investment
policies and a programme to reform and
privatize public sector companies have
widened the choice of sectors for domestic and
foreign private investors in Egypt.
2. Egypt's economic growth has been
achieved in the presence of external shocksand despite a relatively uneven programme of
structural reform which, although clearly
positive overall, has allowed the persistence of
some distortions rooted in past inward-looking
economic policies and a long tradition ofwidespread state intervention in the economy.
Reduced border protection has brought out
more clearly the potential benefits of
rationalizing the remaining import
prohibitions, lowering tariff peaks andescalation, and narrowing the list of imports
subject to compulsory quality control
inspection.  Tariffs on a number of products
are applied in excess of WTO bound rates.
Although transparency has clearly improved,the degree of discretion that remains in the
system, including with respect to legislative
change, adds an element of unpredictability for
traders.  Thus far investment appears mainly to
have taken place in the non-tradable sectors
with the result that growth has not led to
significantly improved export performance.
3. Egypt's reform strategy reflects the
need to maintain social concensus around
reform but it may be the case that furthereconomic gains could be secured by stepping
up the pace of internal reform both to forge a
more uniform, predictable set of economic
incentives, and to achieve the faster growth
that the Government seeks.  The Government
believes that the key factors in improvinggrowth are an increased level of investment
and an acceleration in export growth to at least
10% annually.  This would require further
trade reform, especially through a more
uniform tariff structure and continued dutyreductions, including for the sectors currently
excluded from the tariff reform programme.
Continued reform could also help to attract
more investment, particularly to the tradable
sector, thus allowing trade to play a greaterrole in fostering Egypt's economic
development.
4. Other factors that may also need to be
addressed include industrial restructuring,
especially of important export industries such
as textiles and clothing, and continued
deregulation, especially of key serviceactivities. Maintaining the pace of reform
would thus complement the stabilization
programme and allow Egypt to improve
growth and employment opportunities for its
growing labour force and help it to becomemore closely integrated into the international
economy.
(2) T
RADE POLICY FRAMEWORK
5. Egypt's trade and structural reforms
have been carried out within the framework ofa stable political and institutional environment,
with only a few changes in the policy-making
structure since the previous Review.  New and
amended legislation requires passage though
the People's Assembly, although the Presidentand Ministers enjoy discretionary powers to
issue amendments that have the force of law.
Frequent modifications to trade-related
legislation, including recent changes that
require imports to be shipped directly from the
country of origin, reduce predictability in
government policy and may create uncertaintyamong traders.  Enhanced transparency with
respect to laws and regulations would helpWT/TPR/S/55 Trade Policy Review
Page x
consolidate the considerable gains achieved in
this respect since the previous Review.
6. Egypt has notified the WTO of new
legislation on anti-dumping, countervailing
and safeguard measures that it adopted in
1998.  New laws are being introduced toensure compliance with the WTO Agreement
on Trade-Related Aspects of Intellectual
Property Rights);  Egypt already provides a
mailbox facility for patent applications as
required under the Agreement.  Legislativeamendments in other trade and related areas,
including preferential rules of origin, have not
yet been notified to the WTO.
7. Under the General Agreement on
Trade In Services (GATS), Egypt madecommitments in construction and related
engineering services, financial services,
tourism and transport services.  In some cases,
notably financial services, recent liberalization
goes beyond Egypt's GATS commitments but
in general Egypt's GATS commitments focus
on binding the current policy framework.
(3) T
RADE AND TRADE -RELATED
REFORMS
8. Since its last Review, Egypt's trade
policy goals have been twofold:  to reduce the
number of products subject to non-tariffbarriers, such as export or import bans, and
thus to rely increasingly on the tariff as the
only trade policy instrument;  and to reduce
tariffs and rationalize the tariff structure.
Since 1992 Egypt has removed export bansand reduced the products subject to import
bans to clothing and some poultry products;  it
has also removed whole poultry and textiles
from the list of products subject to import bans
as committed to under the Uruguay Round;the former was tariffied at 80% and the latter
at 54%.  All MFN import licensing
requirements appear to have been
discontinued.  Products removed from the list
of banned imports have tended to be placed on
a list of imports subject to quality control
requirements.  As a result, the list of productssubject to quality control inspection on entryinto Egypt grew from 69 at the time of the
previous Review to 182 in 1998.
9. In 1994 Egypt adopted the
Harmonized System of Tariff Classification.
An ongoing programme of tariff reductions
has resulted in a significant reduction in MFNtariff rates;  the simple average MFN tariff has
fallen to 26.8% (30.2% with a surcharge and
customs service fee) in 1998, from 42.2% in
1991.  Tariff reform has also reduced the
maximum MFN tariff from 100% in 1991 to40% in 1998.  Thus the overall degree of
protection granted to the Egyptian economy,
through tariff and non-tariff barriers, has
declined significantly since Egypt's last
Review.  There has also been a decline in tariffescalation as duty reductions have introduced
a greater degree of tariff uniformity across
sectors.  However, overall tariff dispersion has
increased, in part due to the reduced average
tariff highlighting tariff peaks in key sectors
not subject to tariff reductions, including some
motor vehicles, textiles and alcoholicbeverages from tariff reductions.  Tariff
dispersion is reinforced by a number of
temporary exemptions for imports of inputs
and capital goods and for goods imported by
assembly industries.
10. As a result of the Uruguay Round,
Egypt bound over 98% of its tariff, compared
to an average of 73% for developing countries.
The overall average bound tariff was 45% in
1998, well in excess of the current averageapplied tariff, and is expected to decline to
37% by the end of the implementation period
in 2005.  In most cases the current applied
tariff is considerably lower than the bound
rate.  However, in 1998, some 12% of thetariff had applied rates in excess of their bound
levels, and almost 2% of the tariff had applied
rates in excess of their initial Uruguay Round
base rates.
(4) O
THER MEASURES AFFECTING
TRADE
11. Macroeconomic and trade reform has
been complemented by domestic deregulation
and liberalization, which has concentratedEgypt WT/TPR/S/55
Page xi
mainly on reducing government intervention
in the economy.  The process has been gradual
mainly to allow economic agents to adjust to
reduced state intervention and to adapt to
market signals.
12. Domestic reform has mainly consisted
of reduced state intervention, through a
reduction of pricing and distribution controls
and through an ambitious programme of
privatization of public sector companies.
Since Egypt's previous Review in 1992, pricecontrols have been lifted on all but a few
industrial products such as pharmaceuticals,
sugar and edible oil, and there appear to be no
restrictions on distribution.
13. The privatization programme has
accelerated since 1995, with almost 200 out of
an initially selected 314 companies expected
to be fully or partially privatized by the end of
1999.  The programme has focused, in the
main, on non-financial public sector
companies which account for around a quarter
of total government and public sector output;most of the remaining entities in the public
sector are not being considered for
privatization at the present time.  The
Government has also taken action to reform
and restructure public sector companies in theservices sector, notably in banking, insurance
and telecommunications.  Privatization to date
has been largely through the stock market and,
thus, has generated increased foreign portfolio
investment.
14. In an attempt to raise private
investment both by Egyptians and by foreign
companies, the Government provides a
number of mainly tax and tariff incentives in
certain sectors.  Since its previous Review,Egypt has considerably liberalized its
investment regime, first by reducing the
negative list of sectors in which private
investment was discouraged, and then by
replacing it with a positive list of sectors in
which investment is encouraged.  The new
Law of Investment Guarantees and Incentivespassed in 1997 is likely to increase foreign
direct investment in the coming years.  Efforts
are also being made to bring greatercompetition into the economy through the
introduction of competition policy, for which
legislation is presently being drafted.
15. Although not a member of the WTO
Agreement on Government Procurement,
Egypt introduced a new Tenders Law in 1998which introduces greater transparency in the
process of public procurement;  the new Law,
while allowing price preferences for Egyptian
suppliers, is likely to lead to improvements in
procurement practices in Egypt.
(5) S
ECTORAL POLICIES
16. Sectoral reform has made significant
strides in some areas, while in others it has
lagged, reflecting the difficulty of overcoming
decades of government intervention in theeconomy.  Agriculture has received closer
attention than manufacturing, while some
services are only gradually being liberalized.
Reform in agriculture, which began in the
1980s, has concentrated on reducing the
degree of government control over production,
pricing and distribution.  As a result, thereappear to be no major remaining restrictions
on annual production and most agricultural
products are freely tradeable and may be sold
directly to private sector traders.
17. Despite a decline in production,
petroleum exports still make an important
contribution to the economy.  Production is
undertaken through production sharing
agreements between the state-owned Egyptian
General Petroleum Company (EGPC) and anumber of foreign companies.  Reforms in the
sector since Egypt's last Review include a
reduction in price controls and an opening of
the oil distribution sector to private
investment.  Natural gas, whose productionhas been rising, is mainly used for domestic
consumption, although the Government
expects it to substitute for oil exports in the
future.  As for petroleum, the Government has
reduced price regulation for natural gas, and
gas distribution has been opened for private
sector investment.WT/TPR/S/55 Trade Policy Review
Page xii
18. Reform in the manufacturing sector
has continued although not as rapidly as in
other activities.  All import and export bans
and quotas have now been abolished with the
exception of a ban on imports of clothing,
which will be removed in 2002. There are noforeign investment restrictions and investment
incentives are provided for manufacturing
activities, under the new Investment Law.
Tariff reductions and exemptions have been
concentrated in intermediate and capital goodsas a result of which tariff escalation remains
high in industries such as food, beverages and
tobacco, and textiles and leather.   Continued
protection for finished products and tariff
concessions for assembly industries such asmotor vehicles, in combination with a liberal
investment environment, has led to tariff
jumping foreign investment.  The good
performance of industries such as food
processing (excluding alcoholic beverages)
suggests the desirability of widening the scope
of trade and internal reform to other keysectors such as textiles and clothing.
19. With the need for higher economic
and export growth, the Government seeks to
eliminate bottlenecks created by a number of
service activities.  For example, significantheadway has been made in reforming the
financial sector, which has recently been
completely opened to foreign investment;  the
telecommunications sector is gradually being
opened to competition, notably in mobiletelephony and value added services.  In
addition, since the mid 1990s, the Government
has opened to the private sector a number of
infrastructure services, such as port services,
and energy generation and distributionnetworks.  In general, although the
Government retains control of the existing
services infrastructure, most new projects are
run as build-own-operate-transfer (BOOT)
schemes and are likely to help producers and
exporters.(6) T
RADE POLICIES AND TRADING
PARTNERS
20. Trade policy reform has been pursued
mainly under an autonomous programme of
trade liberalization.  An active member of the
WTO, Egypt is also committed to meeting itsUruguay Round requirements, utilizing in
many cases the permitted implementation
period for developing countries.  Concurrently,
Egypt has focused on preferential trading
agreements as a means for increasing tradeflows, joining regional agreements such as the
Common Market for Eastern and Southern
Africa (COMESA) and the Greater Arab Free-
Trade Area (GAFTA).  It has also signed a
number of bilateral trade agreements toaccelerate regional trade liberalization.  The
completion of negotiations for the Euro-
Mediterranean agreement with the European
Union (EU) will further deepen the process of
preferential trade liberalization and should
improve Egypt's access to its largest export
market;  as in similar cases, the agreementraises questions about possible trade diversion.