JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: Egypt  JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: Egypt
Date: 2011-05-25
Institutions: European Commission, High Representative of the Union
Subjects: Egypt, European neighbourhood policy, State aid, association agreement, bilateral agreement, democracy, economic reform, human rights, political cooperation, political reform

EUROPEAN COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR 
FOREIGN AFFAIRS AND 
SECURITY POLICY

Brussels, 25.5.2011 
SEC(2011) 647 final 

JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report: Egypt 

{COM(2011) 303 final} 
{SEC(2011) 637 final} 
{SEC(2011) 638 final} 
{SEC(2011) 639 final} 
{SEC(2011) 640 final} 
{SEC(2011) 641 final} 
{SEC(2011) 642 final} 
{SEC(2011) 643 final} 
{SEC(2011) 644 final} 
{SEC(2011) 645 final} 
{SEC(2011) 646 final} 
{SEC(2011) 648 final} 
{SEC(2011) 649 final} 
{SEC(2011) 650 final} 
{SEC(2011) 651 final} 
{SEC(2011) 652 final} 

EN 

   EN 

 
 
 
  
 
JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report: Egypt 

1. 

OVERALL ASSESSMENT  

Egypt  and  the  European  Community  first  established  contractual  relations  in  1976  by  the 
signing  of  a  Cooperation  Agreement.  The  EU-Egypt  Association  Agreement  entered  into 
force in June 2004 and constitutes the legal basis for EU-Egypt relations. On this basis, and in 
the framework of the European Neighbourhood Policy (ENP), the EU-Egypt ENP Action Plan 
was approved in March 2007 for a period of three to five years.  

In  2008  Egypt  expressed  its  interest  in  enhancing  relations  with  the  EU.  The  Association 
Council in April 2009 gave a political commitment to work in this direction. An ad-hoc group 
was established to discuss possible areas for deeper cooperation.  

Assessment of progress during the reporting period 

This document reports on progress made in the implementation of the EU-Egypt ENP Action 
Plan between 1 January and 31 December 2010. Developments outside this period are taken 
into  consideration  when  deemed  relevant.  They  concern  in  particular  the  popular 
demonstrations which started on 25 January 2011 and lead in February to the resignation of 
President  Hosni  Mubarak  and  the  establishment  of  temporary  rule  by  the  army.  This  report 
does  not  present  a  general  review  of  the  political  and  economic  situation  in  Egypt.    For 
information on regional and multilateral sector processes, please refer to the sectoral report. 

The Association Council, the Association Committee and seven of the eight sub-committees 
met  in  2010  within  the  framework  of  the  EU-Egypt  Association  Agreement.  An  Economic 
Dialogue took place and the Working Group on Migration, Social and Consular Affairs met. 
The  ad-hoc  group  on  enhancing  relations  held  two  meetings  in  the  first  half-year  and  the 
dialogue stalled towards the end of the year. 

The lack of credibility of the results of the 2010 legislative elections engendered a deep sense 
of frustration and discontent among opposition groups and in much of the population. In the 
Shura  Council  elections  (Upper  Chamber)  in  June  and  the  People’s  Assembly  elections 
(Lower House) in November/December, the ruling National Democratic Party obtained more 
than  90%  of  the  seats.  Numerous  cases  of  irregularities  and  vote  rigging  were  reported 
throughout the country. 

Egypt was subject to the Human Rights UN Universal Periodic Review in 2010. The Egyptian 
authorities accepted most of the recommendations made, and rejected some, but have yet to 
begin putting their commitments into practice. The Emergency law, which has been in force 
for  29  years,  was  extended  in  May  2010  for  two  years.  Against  this  background,  the  state 
security apparatus continued to exercise unrestrained power over the population. 

Egypt remained a key trading partner for the EU in the region. Trade integration advanced in 
June  2010  with  the  entry  into  force  of  the  EU-Egypt  agreement  on  further  liberalisation  of 

EN 

2 

   EN 

trade in agricultural, processed agricultural products and fish and fishery products. However, 
the process towards liberalisation of trade in services stagnated.  

Challenges remained in finding the right social policy mix that would enable the benefits of 
growth  to  be  more  evenly  spread  among  various  social  groups  and  in  providing  access  to 
education and health to the nearly 40% of the population who live in poverty. 

During 2010 the economy had started to regain momentum through a pick-up in exports and 
investment as well as partly due to structural reforms. At the same time fiscal and monetary 
measures taken by the authorities in the past years have contributed positively to reduce both 
the budget and the current account deficit which helped to maintain macro-economic stability. 
Against this background, the objectives of the Action Plan – consolidating the progress made 
with a view to improving macroeconomic stability and to promoting growth and employment, 
and  moving  towards  a  functioning  market  economy  –  were  reasonably  well  fulfilled  in  the 
period under examination.  

On the whole, Egypt's progress in the implementation of the Action Plan was concentrated in 
the  areas  of  trade  and  economic  reform.  There  was  no  progress  on  political  and  social 
reforms. 

Events following the 25th January protests  

The  democratic  deficit,  police  brutality  and  impunity,  corruption  and  poor  living  standards 
triggered popular discontent.  Inspired by the Tunisian revolution, popular demonstrations in 
Egypt began on 25 January 2011, organised mainly by the youth movements. They started in 
Cairo but quickly spread to other major cities. Following 18 days of protests, President Hosni 
Mubarak resigned on 11 February 2011. The governance of the country was handed over to 
the Supreme Council of Armed Forces.  

The military council suspended the constitution, dissolved parliament and declared rule for six 
months or until elections are held. The council has promised a democratic transition leading to 
open  presidential  and  parliamentary  elections.  A  new  transitional  government  was  sworn  in 
on 7 March 2011  

Following a referendum on constitutional amendments held on 19 March 2011, the date for 
new parliamentary elections was set to September 2011 and presidential elections two months 
later.  The  state  of  emergency  is  to  be  abolished  prior  to  the  elections.  The  conduct  of  the 
March referendum indicates more transparency and fairness in reflecting the people’s vote.   

The  mass  demonstrations  of  January  2011  and  the  ensuing  departure  of  former  President 
Mubarak  have  opened  a  period  of  deep  change  for  Egypt.    Commitments  made  by  the 
temporary  government  established  by  the  military  have  started  addressing  several  of  the 
political issues that have been a constant obstacle to deepening EU-Egypt relations. If these 
changes are consistently translated into action during and beyond the transition period, Egypt 
could  go  a  long  way  towards  meeting  the  objectives  put  forward  in  the  Action  Plan  and 
implementing the values at the core of the ‘advanced status’ under the ENP and the principles 
laid out in the Partnership for Democracy and Shared Prosperity. Security sector reform and 
enhanced civilian control over enforcement agencies will be particularly critical. 

As  regards  the  Egyptian  economy,  the  revolutionary  events  experienced  at  the  beginning  of 
2011  have  had  immediate  negative  repercussions  on  the  Egyptian  economy  by  affecting 
tourism revenue and capital flows and by disrupting domestic economic activity. The precise 

EN 

3 

   EN 

consequences are difficult to quantify at such an early stage but economic growth in 2011 is 
set to be lower than in 2010, while the budget deficit is expected to widen significantly. 

2. 

POLITICAL DIALOGUE AND REFORM 

Democracy and the rule of law 

The year was marked by legislative elections; in the interim elections to the Shura Council 
(Upper Chamber) in June 2010, the ruling National Democratic Party (NDP) won 80 of the 88 
seats.  In  the  People’s  Assembly  (Lower  Chamber)  elections,  which  were  held  in  end 
November/early December, the NDP secured 420 seats out of 508. This figure rises to over 
90%  with  the  addition  of  independent  deputies  known  to  be  NDP  members.  The  women's 
quota of 64 seats was filled. The Muslim Brotherhood independent deputies lost all their 88 
seats. After the first round the Muslim Brotherhood and Al Wafd withdrew from the elections, 
claiming  voting  and  ballot  box  irregularities.  The  voter  turn-out  was  remarkably  low  and 
varies between the official figure of 23% and civil society estimates of 5%. 

Despite the government’s stated commitment to transparency, local civil society organisations 
were largely prevented from observing the elections. The High Election Commission received 
numerous  reports  of  irregularities,  including  limited  access  to  polling  stations  for  observers 
and candidates’ representatives, media restrictions, vote rigging  and violence. The EU High 
Representative  for  Foreign  and  Security  Policy  expressed  disappointment  over  reported 
irregularities, asked for appropriate follow-up and reiterated the EU’s offer for international 
observation  of  the  elections.  The  Higher  Election  Commission  ruled  that  only  a  handful  of 
claims  of  irregularities  were  valid.  Administrative  Courts  ruled  that  election  results  in  a 
number of constituencies were invalid; the rulings were challenged by the state. 

On  13  February  2011  the  Supreme  Council  of  Armed  Forces  dissolved  both  houses  of 
parliament.    New  parliamentary  elections  are  to  be  held  in  September  2011  and  should  be 
followed by presidential elections two months later. 

The state of emergency, in force for 29 years, was extended by a Presidential Decree on 10 
May 2010 for an additional two years until 31 May 2012, despite a previous commitment to 
remove  the  law  once  appropriate  counter-terrorism  legislation  had  been  introduced.  The 
application  of  the  law  has  been  limited  to  cases  of  terrorism  and  its  financing,  and  drug 
trafficking.  However,  the  government  has  retained  a  number  of  powers  which  include  the 
restriction of all forms of public gathering, including public demonstrations, and the power to 
search any person or place without abiding by the Law on Criminal Procedures. The Supreme 
Council  of  Armed  Forces  undertook  in  February  2011  to  remove  the  state  of  emergency 
“when  the  security  situation  allows”.  This  was  later  changed  to  “before  the  elections  are 
held”.  

No progress was made on the independence of the judiciary, which remained subject to the 
Emergency  law.  The  State  Security  Emergency  Courts  and  the  military  courts  continue  to 
exercise  jurisdiction  over  cases  related  to  national  security,  but  not  limited  only  to  these. 
Civilians continue to be tried before these specialised courts whose judgements are not open 
to appeal.  

Efforts  were  made  to  gradually  improve  the  administration  of  justice,  including  the 
establishment  of  specialised  child-friendly  courts,  training  of  judges  and  automation  of 
justice. The EU approved financing of EUR 10 million in support of this effort. 

EN 

4 

   EN 

The  government  continued  the  reform  of  local  administration  through  the  implementation 
of  the  national  decentralisation  strategy,  testing  pilot  projects  in  several  governorates 
nationwide.  

Some efforts could be noted in the fight against corruption. The national Transparency and 
Integrity Committee (TIC) released its third report in February 2010 suggesting improvements 
in  adopting  new  legislation,  raising  efficiency  of  the  state  administration,  conducting  field 
research, enhancing the role of the media and pursuing international cooperation. In October 
2010  the  Attorney  General  recommended  the  establishment  of  a  national  anti-corruption 
committee  to  work  on  implementing  the  UN  Convention  against  Corruption,  including 
cooperation with civil society. Development of e-government services, online publication of 
government  procurement  procedures  and  the  active  role  of  civil  society  contributed  to 
enhancing transparency. An EU programme with UNODC will support implementation of the 
UN Convention. 

In February 2011 the public prosecutor began investigating a growing list of former ministers 
and NDP officials on grounds of corruption, and formally sought the co-operation of the EU 
and other partners in freezing the assets of a number of those under investigation. 

Human rights and fundamental freedoms 

Egypt’s  human  rights  record  was  subject  to  the  2009-2010  Universal  Periodic  Review 
(UPR).  Out  of  the  recommendations  made,  Egypt  agreed  to  speed  up  the  adoption  of  anti-
terrorism  legislation,  to  consider  lifting  the  state  of  emergency,  change  the  definition  of 
torture, strengthen its policy on the rights of the child, consult NGOs in drafting the new NGO 
law, fight against discrimination and violence against religious minorities, combat trafficking 
in  human  beings  and  promote  the  rights  of  migrants.  Egypt  rejected  recommendations  on 
discrimination,  abolishing  the  death  penalty,  the  NGO  law  and  foreign  funding,  allowing 
independent  trade  unions,  election  monitoring,  torture,  and  libel.  Consultation  between  the 
government and civil society took place during the UPR process, although a number of those 
who participated were critical of the quality of the consultation. To date no steps have been 
taken towards implementing the recommendations. Many of these areas are being supported 
through a bilateral programme on human rights.  

Concerning the death penalty, there are no official data available on the carrying out of death 
sentences. At the UN General Assembly, Egypt voted against the Resolution on a Moratorium 
on the Use of the Death Penalty. 

Egypt has six pending mandatory periodic reports to UN treaty bodies. It has not extended an 
open invitation to UN Special Procedures. Egypt hosted the visit of the Special Rapporteur on 
Trafficking in persons, especially women and children. 

Conditions  in  prisons  and  detention  centres,  as  well  as  the  estimated  large  number  of 
administrative  detainees,  remain  a  cause  for  concern.  Access  to  the  places  of  detention  is 
limited  to  the  Public  Prosecutor.  Egypt  did  not  grant  access  to  the  UN  Special  Rapporteur. 
The  military  leadership  gradually  began  releasing  political  prisoners  in  February  2011, 
although a number of activists were detained by the military during the same period. 

In the UPR process Egypt committed to reformulating the definition of torture in accordance 
with  the  UN  Committee  against  Torture  (CAT).  Torture  and  ill  treatment,  mainly  in  police 
stations,  State  Security  investigation  centres  and  places  of  detention,  remain  a  very  serious 
human  right  abuse.  Seven  cases  of  death  in  detention  are  listed  in  the  2010  report  of  the 
United  Nations  High  Commissioner  for  Human  Rights  (UNHCHR).  Following  the  death  of 

EN 

5 

   EN 

blogger  Khaled  Said  in  Alexandria  in  June  2010,  EU  Heads  of  Mission  issued  a  statement 
calling for the proper investigation of police abuse allegations and prosecution of offenders. 
The death caused widespread revulsion in Egypt and triggered a debate on torture and police 
impunity  that  subsequently  merged  into  the  popular  demonstrations  in  January  2011  which, 
under the banner ‘we are all Khaled Said’, called for an end to police brutality and torture. In 
March  2011  the  State  Security  Investigation  Office,  carrying  most  of  the  blame  fore  the 
torture cases, was dissolved and is to be replaced by a new national security agency. 

Egypt has not yet responded to the repeated requests made since 1996 (and echoed by the EU) 
for an invitation to be issued to the UN Rapporteur on Torture to visit Egypt. It is not a party 
to the Optional Protocol of the UN Convention Against Torture (OPCAT). 

The  scope  for  freedom  of  expression  has  expanded  in  recent  years,  as  evidenced  by  the 
growing number of independent newspaper, television and internet news and media outlets in 
Egypt.  However,  the  election  period  at  the  end  of  November  2010  witnessed  a  number  of 
restrictive measures, limiting the work of journalists and media, restricting text message news 
services  and  satellite  broadcasting.  Human  rights  organisations  reported  an  increase  in  the 
harassment and detention of internet bloggers and journalists.  

At  the  end  of  January  2011,  when  the  popular  demonstrations  intensified,  the  Egyptian 
authorities  first  blocked  the  access  to  the  social  networking  websites,  then  ordered  the 
switching off of all internet and e-mail services. The three mobile networks were shut down 
nation-wide, and subsequently in selected areas such as Cairo. Mobile phone text messaging 
was blocked for a longer period. 

Freedom  of  association  and  freedom  of  assembly  continue  to  be  restricted  by  the 
Emergency law and the NGO law, and by trade union legislation. The registration, operation 
and  funding  of  non-governmental  organisations  remain  under  the  control  of  the  Ministry  of 
Social Solidarity, with the involvement of the Ministry of the Interior. There was no progress 
on the revision of the NGO law. 

Despite  the  provisions  of  the  Egyptian  constitution  on  freedom  of  belief,  Copts  and  other 
non-Muslims continue to face discrimination and inaction from the authorities to effectively 
ensure  the  equality  of  all  citizens  in  law  and  in  practice.  Incidents  of  sectarian  tension  and 
violence  between  Christian  and  Muslim  communities  continued  in  2010.  The  worst 
expression  of  violence  took  place  on  New  Year’s  Day  2011,  when  a  bomb  was  detonated 
outside a Coptic church in Alexandria, killing more than 20 people and injuring around 100. 
Two  Coptic  protestors,  angered  at  a  refusal  to  convert  a  community  centre  into  a  place  of 
worship, were killed when confronted by police in Cairo in November. 

The draft unified code on places of worship was withdrawn from parliament. The draft code 
was intended to establish equal rules for all religions on the construction and maintenance of 
places  of  worship.  Copts  have  been  pressing  the  authorities  for  several  years  to  ease 
restrictions on permits for constructing churches.  

Although  Egypt  is  a  signatory  to  the  1951  Refugee  convention  and  to  its  1967  Protocol, 
hosting some 41,000 registered refugees, violation of the rights of migrants, refugees and 
asylum seekers continue to be reported. Some migrants in need of international protection (in 
particular those fleeing from Eritrea) have difficulties to have access to asylum. In 2010, 34 
unarmed refugees and asylum seekers were killed at the Israeli–Egyptian border. A number of 
Egyptian  border  police  were  killed  in  clashes  with  criminal  gangs  of  human  traffickers  and 
smugglers in the frontier area with Israel. The EU, the United Nation High Commissioner for 
Refugees  (UNHCR)  and  civil  society  organisations  have  all  expressed  concerns  about 

EN 

6 

   EN 

hundreds  of  refugees  and  asylum  seekers  from  Sub-Saharan  Africa  being  held  hostage  and 
mistreated by illegal traffickers in Sinai, a region where UNHCR is not permitted to carry out 
its mandate. Egypt has still not adopted adequate asylum legislation. Refugees registered with 
the  UNHCR  face  great  difficulties  in  finding  jobs  and  meeting  minimum  survival  needs.  
Unfortunately Egypt has not yet lifted the reservations which the country made when joining 
the  Geneva  Convention,  and  which  prevent  even  refugees  registered  with  UNHCR  from 
having  access  to  some  forms  of  social  assistance.    Egypt  has  been  designated  for  the 
implementation  of  the  Regional  Protection  Programme  (also  covering  Libya  and  Tunisia), 
which now needs to be developed. 

The National Council for Women (NCW) continued promoting rights of women, combating 
discrimination and violence against them. A draft personal status law defining and regulating 
marriage  and  divorce,  amending  the  Personal  Status  Law  has  not  yet  been  put  before  the 
parliament. The law on sexual harassment has been withdrawn from parliament without any 
indications  about  future  adoption.  The  strategy  to  combat  violence  against  women  is  still 
under preparation.  

Efforts  to  combat  female  genital  mutilation  continued,  and  positive  results  have  been 
reported. Nonetheless, the practice remains widespread. Women's rights and the fight against 
FGM  were  supported  through  EU  programmes.  Egypt  maintains  its  reservations  on  the 
provisions of the Convention on Elimination of all forms of Discrimination against  Women 
(CEDAW).  In  the  framework  of  the  UPR  process  Egypt  promised  to  lift  its  reservation  to 
Article  2  on  non-discriminatory  policy  measures  and  to  consider  lifting  the  reservation  on 
provisions related to marriage and family life. 

With regard to rights of the child, Egypt undertook in the UPR review to strengthen the legal 
framework to combat all crimes against children. Significant progress has been made on the 
right  of  identity.  Amendments  to  the  Child  Law  recognize  the  legal  right  to  free  birth 
registration and give the mother the right to obtain a birth certificate for her child under her 
name,  even  if  the  marriage  relationship  cannot  be  proven.  The  amended  law  also  includes 
specific provisions for family financial assistance.  

Revisions to the legislation (Law 126) introduced the prohibition of work for children under 
15, and the obligation of medical checks before work. An ongoing project with the support of 
UNICEF  and  the  US  Department  of  Labour  addresses  the  worst  forms  of  child  labour  and 
occupations.  

Egypt  has  not  signed  the  Hague  Convention  on  the  Civil  Aspects  of  International  Child 
Abduction. 

Limited  progress  was  made  as  regards  fundamental  social  rights  and  core  labour 
standards. The Egyptian case was reviewed by the International Labour Organization (ILO) 
Committee on the Application of Standards at the ILO annual Labour Conference. Egyptian 
authorities undertook to review the labour legislation in order to comply with ILO Convention 
No.  87  on  the  Freedom  of  Association  and  Protection  of  the  Right  to  Organise  No  draft 
legislation was submitted to the parliament. 

With  regard  to  rights  of  persons  belonging  to  minorities,  relations  between  the  Bedouins 
and the government remained tense. Several clashes occurred in the Sinai between Bedouins 
and  the  police.  The  situation  in  the  Sinai  is  complicated  by  the  government’s  security 
concerns for the area and the need to safeguard the borders and control smuggling activities.  

EN 

7 

   EN 

Cooperation  on  foreign  and  security  policy,  regional  and  international  issues,  conflict 
prevention and crisis management 

Egypt  is  an  active  partner  on  CFSP  matters.  Egypt  has  been  part  of  the  renewed  efforts  in 
2010  to  find  ways  for  a  comprehensive  solution  to  the  Middle  East  Peace  Process.  It 
contributed to the re-launch of the Israeli-Palestinian direct peace negotiations in September 
2010 and hosted the second round in Sharm el Sheikh the same month.  

Egypt has a strong engagement in Africa and played an active role in the Africa-EU political 
dialogue  ahead  of  the  Africa-EU  Summit  in  Tripoli  in  November  2010.  Egypt  actively 
supported  developments  in  Sudan,  promoting  reconstruction  activities  in  Darfur  and 
mediation between North and South Sudan ahead of the referendum on the secession of South 
Sudan.  Egypt  began  to  adopt  a  more  conciliatory  approach  in  its  dialogue  with  Nile  Basin 
states  seeking  a  greater  share  of  Nile  river  waters.  However,  Egypt  and  Sudan  opposed  the 
Cooperative  Framework  Agreement  signed  in  May  by  Ethiopia,  Kenya,  Rwanda,  Tanzania 
and Uganda.  

Egypt  continued  in  its  role  as  co-president  of  the  Union  for  the  Mediterranean  (UfM) 
throughout 2010 and co-chaired five Ministerial level meetings.  

In  February  2010  Egypt  expressed  its  interest  to  participate  in  the  EU  crisis  management 
operations  in  the  framework  of  the  European  Security  and  Defence  Policy.  Egypt  was 
included in the group of third countries with which the EU is ready to conclude a framework 
agreement on their participation in EU crisis management operations. 

Since the political dialogue on counter-terrorism between the EU and Egypt which was held 
in  Brussels  in  March  2009,  Egypt  has  expressed  a  willingness  to  deepen  the  cooperation. 
Dialogue continued within the sub-committee on political matters and the sub-committee on 
justice and security. For several years Egypt has declared its intention to introduce a new anti-
terrorism law in preparation for rescinding the Emergency law. The anti-terrorism legislation 
is still awaiting discussion by the parliament.  

Egypt continued to play an active role on multilateral non-proliferation and disarmament 
fora,  most notably in  the  Non-Proliferation Treaty (NPT) Review Conference in May 2010. 
Establishment of a Middle East zone free of nuclear weapons and all other weapons of mass 
destruction (WMD) remains a key security objective for Egypt. EU services continued close 
consultations  with  Egypt  on  the  planned  EU  seminar  in  2011  on  Middle  East  security  and 
WMD non-proliferation. 

In 2010, the EU established a regular political dialogue with Egypt on non-proliferation and 
disarmament  issues.  The  first  meeting,  held  in  Brussels  in  February  2010,  focused  on  the 
preparations  for  the  2010  NPT  Review  Conference  and  the  Arms  Trade  Treaty  negotiation 
process.  

Egypt has not yet signed the Ottawa Convention on the Prohibition of the Use, Stockpiling, 
Production  and  Transfer  of  Anti-Personnel  Mines  and  on  their  Destruction.  It  signed  the 
Rome Statute of the International Criminal Court in 2000, but has not yet ratified it. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy  

EN 

8 

   EN 

In fiscal year 20101, the Egyptian economy outperformed expectations, with a very positive 
GDP growth of 5.1% – up from 4.7% in fiscal year 2009. This growth was driven mostly by 
private sector consumption, on the back of three government fiscal stimulus packages,  each 
amounting to roughly 1% of GDP. 

However, the global economic crisis did affect some key growth sectors in Egypt, such as the 
Suez Canal and remittances, which at the end of 2010 were still below their pre-crisis level. 
Foreign Direct Investment also remained at low levels, while exports suffered as a result of 
weak consumer demand from the main trading partners, such as the EU and USA.  

Having  peaked  at  an  average  of  18%  in  fiscal  year  2008,  inflation  dropped  to  an  estimated 
11% in fiscal year 2010. The Central Bank of Egypt (CBE) started loosening monetary policy 
accordingly since the beginning of 2009 on the back of a negative external demand shock that 
gradually  slowed  inflation.  The  Central  Bank  intends  to  introduce  an  inflation  targeting 
regime.  

Although fiscal year 2010 was a difficult year, owing to tax reforms, the government deficit 
increased to 8 % of GDP from 6.6% of GDP in fiscal year 2009. The size of the fiscal deficit 
and the high public debt-to-GDP ratio of around 75% remain a constraint for Egypt’s overall 
macroeconomic  strategy.  However,  the  government  is  committed  to  a  gradual  fiscal 
consolidation strategy that can be stepped up if the gains from the improved economic activity 
permit. Ongoing reforms, such as the introduction of VAT and the reduction of fuel subsidies 
for the industrial sector, are commendable and will help to keep the deficit under control. 

During the global crisis, a widening trade deficit, lower tourism revenues, lower remittances 
and lower Suez Canal revenues served to push the current account into negative territory for 
the  first  time  since  the  1990s.  A  slight  improvement  was  recorded  in  the  current  account 
deficit  of  the  fiscal  year  2010:  it  narrowed  to  1.4%  of  GDP,  compared  to  1.6%  of  GDP  in 
fiscal year 2009. 

The  Egyptian  pound  continued  to  largely  track  USD-EUR  movements,  although  exchange 
rate  flexibility  appears  to  have  increased.  On  the  back  of  high  inflation  differentials  with 
Egypt’s trading partners and a relatively stable currency in nominal terms, the real exchange 
rate has appreciated in the recent past (the real effective exchange rate appreciated by around 
21% in fiscal year 2009 and is estimated to have appreciated further in fiscal year 2010). Even 
though  non-oil  export  performance  has  been  good,  suggesting  that  structural  reforms  have 
helped productivity, further real appreciation could have a negative impact on medium-term 
growth prospects.  

Employment and social policy 

In  spite  of  a  general  upward  trend  recorded  in  human  development  over  the  past  20  years, 
geographical disparities remain, with extremely high poverty levels in upper Egypt (43.7%) 
and  significant  inequalities  between  rural  and  urban  areas  throughout  the  country.  Egypt 
continued  to  implement  the  “1000  villages  most  in  need”  programme  initiated  in  2009  and 
there is a special programme to address urban areas. Living conditions remain very poor for 
the estimated 20% of Egyptians living on less than $ 1 (EUR 0.76) per day. The Ministerial 
Committee  for  Social  Development  was  enlarged  by  including  the  Minister  of  State  for 

1 

The fiscal year 2010 runs from July 2009 until June 2010. 

EN 

9 

   EN 

                                                 
Family and Population, the National Council for Youth, the National Council for Sports, the 
General Authority for Adult Education and the Post Authority. 

Social dialogue continued to take place in an over-structured framework, and bilateral social 
dialogue remained underdeveloped. However, the establishment of a new trade union centre 
was announced on 31 January 2011. Egypt has yet to adapt the Labour Law and Trade Unions 
Act  in  compliance  with  the  International  Labour  Agreements  to  which  it  is  a  party.  The 
provisions on social dialogue, child labour, health and safety at work, sending labour abroad, 
training  centres  and  collective  bargaining  are  among  the  issues  to  be  included  in  future 
legislative amendments. 

There was no development towards establishing the Economic and Social Council.  

Unemployment  remains  a  major  problem  in  Egypt,  in  particular  for  young  people.  After 
having  risen  to  9.4%  in  2009  (from  8.7%  the  previous  year),  unemployment  rose  again  in 
2010  to  9.7%  (around  2.37  million  people).  The  Youth  Action  Plan  to  promote  youth 
employment was revised to take account of the impact of the economic crisis and presented to 
the Cabinet of Ministers. There are three policy priorities: (i) Technical Vocational Education 
and  Training  (TVET)  to  increase  youth  employability;  (ii)  Enterprise  development,  to 
improve the success rate of micro, small and medium enterprises (SMEs); (iii) Labour market 
policies  and  programmes,  to  activate  the  minimum  wage  rule  and  its  enforcement,  and  to 
upgrade employment offices and encourage the establishment of private recruitment agencies. 
The Ministry of Manpower and Immigration restructured some employment offices to lay the 
basis  for  developing  a  National  Employment  Agency  but  the  approach  to  establish  this 
Agency has yet to be developed.  

An  occupational  health  and  safety  Strategy  was  developed  with  the  support  of  a  Twining 
project, which ended in July 2010 as well as pilot actions in one governorate.  

Egypt prepared a new draft law on social insurance and pensions. The new law would add 
new  social  categories  to  the  beneficiaries,  ensure  a  better  maintenance  of  the  benefits’  and 
pensions’  real  value  in  conditions  of  inflation,  combat  illiteracy,  improve  the  income 
generating capacity of families and reinforce the partnership with NGOs. 

The  National  Council  for  Women  (NCW)  has  organised  training  courses  for  women 
community  leaders  and  awareness  campaigns  to  enhance  the  participation  of  women  in 
political, economic and social life. NCW opened a Business Women Centre in Cairo and aims 
to establish similar centres in all governorates. An Ombudsman was established at the NCW. 
Three-quarters of women remain outside the labour force.  

Some  progress  was  achieved  in  the  area  of  agriculture.  During  the  reporting  period  the 
Ministry  of  Agriculture  and  Land  Reclamation  presented  the  Business  Plan  covering  the 
period  2010  –  2017  that  will  implement  the  National  Strategy's  recommendations.  The  plan 
encompasses  nine  Development  Programmes.  They  address  inter  alia  agricultural  human 
resource needs, sustainable development of natural resources – particularly land and water - 
improving  production  to  meet  food  security  needs  and  upgrading  the  livelihood  of  rural 
populations.  The  investments  of  approximately  EGP  107  billion  (around  EUR  14.3  billion) 
over  seven  years  will  be  shared  between  the  private  sector  (approximately  54%)  and  the 
government  (46%).  Although  the  productivity  of  agriculture  is  increasing,  Egypt  is  still 
dependent  on  imports,  especially  as  far  as  cereals  are  concerned.  The  food  trade  deficit 
accounts  for  17%  of  the  total  trade  deficit.  Furthermore,  food  insecurity  and  malnutrition 
remain an issue for the country, despite the large food safety net system which absorbs 7% of 

EN 

10 

   EN 

the  State  budget's  subsidies  (1.8%  of  GDP).  An  EU  Rural  Development  Programme 
implemented  by  the  Ministry  of  Agriculture  will  support  these  reforms  by  improving  water 
use, farming methods and income for farmers. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

During the reporting period, bilateral trade between Egypt and the EU regained its increasing 
trend and exceeded the trade volumes of 2008.  In 2010 Egypt’s exports to the EU increased 
by  14.5%  and  EU  exports  to  Egypt  increased  by  16.6%.  The  dismantling  of  Egypt's  tariffs 
applicable to imports of industrial goods originating in the EU proceeded as laid down in the 
Association  Agreement.  The  EU-Egypt  agreement  on  further  liberalisation  of  trade  in 
agricultural  products,  processed  agricultural  products  and  fish  and  fishery  products  entered 
into force in June 2010. Egypt did not adopt any new trade distortive measures, such as export 
taxes  and  export  bans,  during  the  reporting  period.  However,  the  Ministerial  Decree  of 
September 2010 extended the application of trade restrictive measures regarding Egyptian rice 
exports until 1st October 2011. The export ban on Portland cement and clinkers expired on 1st 
October  2010.  In  November  2010,  the  EU  and  Egypt  signed  the  Protocol  establishing  a 
Dispute  Settlement Mechanism  applicable to  disputes under the trade provisions of the EU-
Egypt Association Agreement.  

Limited  progress  was  registered  during  the  reporting  period  as  far  as  the  implementation  of 
the  customs-related  sections  of  the  Action  Plan  was  concerned.  The  new  customs  law  was 
still  not  approved  by  parliament.  The  interactive  English  version  of  the  Egyptian  Customs 
Authority  website  has  been  in  operation  since  September  2010.  Egypt  participated  in  the 
"SIROCCO"  operation  carried  out  in  June  2010.  SIROCCO  is  a  joint  customs  operation, 
coordinated by the European Commission Anti Fraud Office (OLAF) and carried out by the 
customs  administration  of  the  EU  and  11  partner  countries  from  the  southern  rim  of  the 
Mediterranean2.  

On  free  movement  of  goods  and  technical  regulations,  Egypt  continued  its  active 
preparations for the negotiation of an Agreement on Conformity Assessment and Acceptance 
of  Industrial  Products  (ACAA).  Egypt  selected  the  following  priority  sectors  to  be 
approximated  with  EU  technical  legislation:  toys,  gas  appliances,  construction  products, 
electrical appliances, pressure equipment, medical devices, machinery and vehicles and their 
parts.  Draft  Egyptian  legislation,  aligning  the  new  legislative  framework  (on  accreditation, 
conformity assessment and market surveillance) was submitted to the European Commission 
for  assessment.  In  October  2010,  the  Egyptian  draft  legislation  on  Liability  for  Defective 
Products  was  aligned  to  the  relevant  EU  Directive.  A  memorandum  of  understanding  and 
cooperation  agreements  were  signed  with  European  notified  bodies  in  the  priority  sectors. 
Egypt also continued to adopt EU standards in the priority sectors.  

Regarding sanitary and phyto-sanitary (SPS) issues, the draft law establishing a single food 
safety  authority  remains  under  discussion  in  parliament.  The  unified  food  law,  aimed  at 
introducing  the  ‘farm  to  fork  approach’,  is  still  in  a  preparatory  phase.  As  Egypt  provided 
sufficient  guarantees  regarding  controls,  the  European  Commission  allowed  potato  exports 
also for the 2010/11 season. The European Commission’s Food and Veterinary Office (FVO) 

2 

SIROCCO focused on deep sea containers loaded in China or the United Arab Emirates and arriving in 
countries  of  the  Union  for  the  Mediterranean.  Around  40  million  cigarettes,  1243  kg  of  hand-rolled 
tobacco, 7038 litres of alcohol and 8 million other counterfeits were seized during the operation.  

EN 

11 

   EN 

                                                 
carried out three missions to Egypt on pesticide residues in fruit and vegetables, horses and 
the  production  of  casings.  Egypt  started  to  address  the  deficiencies  identified  by  FVO. 
Following the missions, the European Commission suspended Egyptian casings exports to the 
EU.  It  also  suspended  trade  in  horses,  due  the  outbreak  of  a  serious  horse  disease  in  the 
region. Egypt pursued the fight against animal diseases including avian influenza, which has 
had a serious impact on human beings and animals since its outbreak in 2006. 

In the field of establishment, business climate and company law, there was no progress on 
the  adoption  of  the  draft  Unified  Company  Law.  The  General  Authority  for  Investments, 
which is the only institution responsible for company registration since July 2009, operated a 
one-stop-shop benefiting from an ISO 9001 certificate and worked on a system of electronic 
registration  for  companies.  A  new  law  on  Public-Private  Partnerships  (PPP)  was  enacted  in 
May  2010.  It  is  expected  that  the  law  will  facilitate  foreign  direct  investments  (FDI)  as  it 
eliminates the preference for Egyptian contractors and some performance requirements. The 
new law has the potential to contribute to the improvement of Egypt’s infrastructure in areas 
such  as  hospitals,  roads,  railways,  ports  and  wastewater  treatment.  However,  caution  is 
needed in relation to the associated potential increase in contingent liabilities. The Ministry of 
Housing has already planned a PPP tender for a major wastewater facility west of Cairo, and 
other PPP tenders are under preparation. 

In  March  2010,  the  Egyptian  Corporate  Responsibility  Centre  launched  an  index  for  social 
and  environmental  corporate  governance:  Egypt  Stock  Exchange  Economic  Social  and 
Governance Index based on a Standard and Poor’s methodology.  

Egypt's strategy for regulatory reform and administrative simplification started to bear fruit: 
from  March  2009  to  July  2010,  more  than  34,000  regulations  that  affect  the  business 
environment in Egypt were identified and introduced into an electronic database; about 30% 
of the inventoried regulations have been reviewed and streamlined since 2009. 

Bilateral negotiations for the liberalisation of services and establishment made no progress.  

On financial services, Egypt weathered the global financial crisis relatively well, as the level 
of  financial  intermediation  is  low  and  the  state  maintains  a  strong  presence  in  the  financial 
sector. Thanks also to progress in reforming the government debt management and pensions 
Egypt’s  creditworthiness  was  never  in  doubt.  The  Central  Bank  of  Egypt  strengthened 
banking  supervision  by  enforcing  minimum  capital  requirements,  improving  assessment  of 
state  owned  banks,  providing  resolution  to  non-performing  loans  and  working  towards 
introducing  the  Basel  II  framework.  The  Egyptian  Financial  Supervisory  Authority  (EFSA) 
continued supervising all non-banking financial transactions and markets. Several draft laws, 
e.g.  on  mortgages,  licensing  for  non  banking  companies,  and  pension  funds  are  under 
preparation. A regulation aimed at separating life and non-life insurance services is also under 
consideration. A draft law on micro-finance companies is before Parliament. 

Other key areas 

There was limited progress in the implementation of the priorities of the Action Plan related 
to  tax.  The  2010/11  budget  included  an  across-the-board  tax  increase  of  40%  for  cigarettes 
and 100% for tobacco.  

In the area of competition policy, the most recent amendments to the Competition Law are 
awaiting  approval  by  the  parliament.  They  mainly  address  the  issue  of  full  leniency,  and 

EN 

12 

   EN 

possibly  mergers  and  acquisitions.  The  Egyptian  Competition  Authority  (ECA)  and  the 
Regulator for Telecommunications are currently discussing a memorandum of understanding 
that  would  clarify  the  respective  competences  and  establish  a  coordination  mechanism 
between them. In 2010, the ECA published three decisions and pursued their investigations. 
The ECA also worked on a number of market studies. ECA was active in awareness raising 
and  dissemination  of  information;  it  regularly  organizes  training  events  and  seminars  in  the 
field  of  competition.  On  state  aid,  ECA  is  working  on  a  paper  that  would  help  provide  a 
better  understanding  of  state  aids,  including  in  reference  to  WTO  and  EU  law,  to  be 
disseminated among various stakeholders. 

In the area of Intellectual property rights, Egypt made no progress in the ratification of the 
Rome  Convention  for  the  Protection  of  Performers,  Producers  of  Phonograms  and 
Broadcasting Organisations, the International Convention for Protection of New Varieties of 
Plants  (UPOV)  and  the  Budapest  Treaty  on  the  International  Recognition  of  the  Deposit  of 
Micro-organisms  for  the  Purposes  of  Patent  Procedures.  There  is  an  ongoing  reduction  of 
software piracy, and piracy rates as measured in a study by an independent organisation have 
declined since 2006 to 59% in the 2010 edition.  

Egypt  drafted  executive  regulations  for  the  implementation  of  the  law  governing  public 
procurement, based on the 2009 gap analysis conducted by the Organisation for Economic 
Co-operation  and  Development  (OECD).  The  Ministry  of  State  for  Administrative  Reform 
developed  the  platform  for  e-procurement,  which  is  divided  into  three  parts:  publishing, 
bidding and evaluation. The first part is expected to be operational and made mandatory at the 
end of 2010. The Ministry of Finance amended the executive regulations on public bids and 
tenders in September 2010. The new guidelines prescribe the publication of a full list of all 
specifications, a copy of the draft contract to be signed, noting the rights and obligation of the 
contracting  parties,  and  the  timeline  for  the  tender.  Contractors  will  also  be  required  to 
identify all deliveries provided under the advance payment, with the possibility of seizure of 
the contractor's letter of guarantee as a penalty. 

During  the  first  half  of  the  year  the  Central  Agency  for  Public  Mobilization  and  Statistics 
(CAPMAS) developed a draft national statistics law with the assistance of the EU Twinning 
project.  

Egypt  finalised  the  revision  of  its  accounting,  broadly  in  compliance  with  the  International 
Financial  Reporting  Standards.  A  new  authority,  the  Audit  Oversight  Board  -  which  is  a 
member of the International Forum of Independent Audit Regulators - began supervising the 
quality of the work of registered auditors on the basis of the new auditing standards, which 
fully reflect international standards. 

With  regard  to  public  financial  management,  the  Ministry  of  Finance  created  a  fiscal 
decentralisation committee in February 2010 which was responsible for overseeing all public 
finance reforms, including internal audit. The pace of reform remains slow and there remains 
a  need  to  develop  the  internal  audit  function  for  overall  budgetary  expenditure.  Greater 
transparency is needed in external audit.  

On enterprise policy, Egypt continued to participate in the industrial cooperation activities, 
including  the  implementation  of  the  Euro-Mediterranean  Charter  for  Enterprise  at  national 
level.  Particular  efforts  were  also  made  to  improve  SMEs'  access  to  finance  and  to 
information, notably via training in corporate governance, the creation of an SME web portal 
and  capital  injected  by  the  Social  Fund  for  Development  into  microfinance  institutions.  In 

EN 

13 

   EN 

June 2010, the Ministry of Investment announced a set of new laws and amendments aimed at 
developing  the  legal  framework  governing  investment  in  Egypt.  This  includes  modernising 
non-banking  financial  services,  with  a  focus  on  SMEs  and  microfinance,  and  adapting 
legislation.  

5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

No progress was reported on border management. Egypt had declined to enter into dialogue 
on this issue.  

Egypt has bilateral migration agreements in place, including provisions on the economic and 
social rights of migrants. No major developments were noted in the reporting period (see also 
section 2). 

In  March  2010,  the  European  Commission  and  the  UN  launched  the  Joint  Migration  and 
Development Initiative in cooperation with the Egyptian Ministry of Foreign Affairs to help 
small  scale  actors  to  contribute  more  fully  to  linking  migration  and  development.  Egypt  is 
rapidly becoming a key transit country for migrants and refugees from sub-Saharan Africa (to 
Europe  and  other  neighbouring  countries),  placing  strains  on  public  services  and  leading  to 
localized  tensions.  Migrants  and  refugees  are  also  vulnerable  to  organized  crime  and 
exploitation, particularly smuggling and trafficking networks.  

On  asylum,  Egypt  remains  committed  to  the  principle  of  non-refoulement,  hosting  some 
41,000  registered  refugees.  However,  it  has  no  domestic  procedures  and  institutions  for 
asylum, opting to cooperate with UNHCR through a Memorandum of Understanding. In the 
fight against organised crime, the parliament adopted the Organ Transplant Law in March 
2010, regularising organ transplants within Egypt and banning their commercial trade abroad 
in  order  to  curb  illicit  trade  in  human  organs.  In  April  2010,  it  adopted  a  Law  on  Human 
Trafficking,  which  criminalised  all  forms  of  human  trafficking  including  prostitution, 
slavery, child exploitation in pornography and forced labour. This important law is predicated 
on a comprehensive approach of prevention, legal protection and assistance to victims, while 
providing  for  rehabilitation  and  education  programmes,  including  cooperation  with  non-
governmental  organizations.  The  National  Coordinating  Committee  to  Combat  and  Prevent 
Human  Trafficking  took  several  support  measures,  including  the  establishment  of  a  victim 
hotline and an intensive media campaign. Egypt made no progress on ratification of the Third 
Additional Protocol to the 2003 United Nations Convention against Transnational Organised 
Crime on the Illicit Manufacturing of and Trafficking in Firearms, Their Parts, Components 
and Ammunition.  

Regarding the fight against drugs, limiting the drug supply and trafficking continued to be 
Egypt’s  priority,  with  particular  attention  being  paid  to  eradicating  drug  cultivation,  trade 
networks  and  precursors.  The  Ministry  of  the  Family  and  Population  oversaw  the 
implementation  of  preventive  and  harm  reduction  programmes  through  schools,  youth 
networks and higher education institutions in cooperation with civil society. As was the case 
in  2009,  there  is  still  a  need  for  a  greater  exchange  of  information  between  all  agencies 
involved, with renewed attention to developing drug-abuse and harm-reduction programmes 
in prisons. Egypt participated in the ENP regional seminar on the EU drug monitoring system 
organised by EMCDDA (European Monitoring Centre for Drugs and Drug Addiction) and by 
the Commission in Brussels in October 2010. Egypt participated in the work of the Council of 
Europe’s Pompidou Group from June 2010 onwards.  

EN 

14 

   EN 

In  the  area  of  the  fight  against  money  laundering,  as  was  the  case  in  2009,  the  relevant 
supervisory authorities continued to implement the national control regime based upon the ‘40 
plus 9’ Special Recommendations by the Financial Action Task Force (FATF). The financial 
services industry pursued the application of ‘Know Your Customer’ (KYC) and ‘Know Your 
Business’  (KYB)  practices.  Egypt  pursued  regional  cooperation  within  the  Middle  East  and 
North Africa Financial Action Task Force (MENAFATF) and Egmont Groups. 

With regard to international police and judicial cooperation, Egypt continued to work on the 
signature  and  ratification  of  the  various  instruments  to  which  it  is  party  under  the  Hague 
Conference  on  Private  International  Law.  International  police  and  judicial  cooperation  was 
successfully  pursued,  particularly  in  the  area  of  cross-frontier  family  disputes,  with  Egypt 
showing an interest in capacity building in forensic medicine. 

6. 

TRANSPORT, ENERGY, ENVIRONMENT, THE INFORMATION SOCIETY, RESEARCH AND 
DEVELOPMENT 

The  implementation  of  the  ambitious  transport  reform  programme  suffered  considerable 
delays. The Ministry of Transport (MoT) approved a new organisation chart, which includes 
the  creation  of  a  Strategic  Environmental  Assessment  (SEA)  unit  and  a  Public  Private 
Partnership (PPP) unit. The new chart should be implemented in early 2011. In March 2010, 
the unified transport law was presented to the Parliament. 

Egypt completed the first phase of the rail sector reform. This led to a thorough restructuring 
and, most importantly, to the introduction of a new safety culture.  

In  the  field  of  civil  aviation,  negotiations  between  the  European  Commission  and  Egypt  on 
the  horizontal  agreement  were  not  completed.  The  EU  encourages  Egypt  to  conclude  the 
negotiations speedily. 

As regards Inland Waterways, the Prime Minister decided, in March, to start restructuring the 
inland  waterway  sector  with  the  aim  of  transferring  river  ports  and  barge  operations  to  the 
private sector.  

In the Maritime Sector, the Minister of Transport’s decree of October 2009, stating that the 
Egyptian ‘partner share’ in all companies in the maritime services must be not less than 51%, 
creates a barrier to the liberalization of services. Despite discussions with EU Member States, 
Egypt has shown no sign that it intends to amend the decree. The Egyptian flag remained on 
the black list of the Paris Memorandum of Understanding on Port State Control.  

In  October  2010,  the  EU  and  Egypt,  through  energy  dialogue,  took  forward  the 
implementation  of  their  2008  Memorandum  of  Understanding  on  a  strategic  partnership  on 
energy. The parties agreed, inter alia, to cooperate on preparing an Energy White Paper. The 
paper  is  to  be  based  on  the  Egyptian  energy  strategy  –  2030,  which  was  adopted  by  the 
Supreme Council for Energy in February 2010. The strategy aims, inter alia, to open up the 
energy  sector,  which  includes  the  establishment  of  a  gas  and  oil  regulator  and  the  gradual 
elimination of price distortions.  

Egypt continued with studies on the future use of domestic oil shale and uranium. It wishes to 
become an energy bridge for the region and the EU. With a view to its rapidly growing energy 
needs,  Egypt  continued  the  construction  of  new  electricity  generators.  The  country  faced 
electricity shortages and reduced gas exports. The draft acts on the reform of the electricity 

EN 

15 

   EN 

and  petroleum  sectors  are  still  in  a  preparatory  phase.  In  July  2010,  Egypt  adopted  new 
electricity  tariffs.  Egypt  further  developed  its  electricity  and  gas  networks  and  prepared 
electricity interconnections with its neighbours. 

Egypt worked towards a renewable energy master plan. It commissioned a solar power plant 
and further developed additional solar plants. It made advances on wind power plants, which 
are  expected  to  become  the  mainstay  of  green  power  production.  These  projects,  jointly 
financed by European Development Banks and EU grant funds, contribute, inter alia, to the 
development  of  the  Mediterranean  Solar  Plan.  Egypt  continued  implementing  energy 
efficiency measures, including on efficient lightning. 

Egypt further pursued work for the construction of a nuclear power plant, which is expected 
to  be  located  on  the  Mediterranean  coast  in  the  El-Dabaa  area.  In  May  2010,  it  adopted  a 
comprehensive  nuclear  energy  and  radiation  law,  which  provides,  inter  alia,  for  the 
establishment of an independent nuclear regulator. The EU and Egypt continued cooperation 
regarding the Egyptian nuclear regulator under the Nuclear Safety Cooperation Instrument.  

In  the  field  of  climate  change,  Egypt  submitted  its  Second  National  Communication  to  the 
UN  Framework  Convention  on  Climate  Change,  including  a  greenhouse  gas  inventory, 
mitigation and adaptation measures. Egypt prepared and approved further Clean Development 
Mechanism (CDM) projects. Two new such projects were registered at the UN level, bringing 
the overall number of registered projects to seven. Egypt is encouraged to fully implement the 
Cancun  agreement  and  in  particular  devise  a  low  carbon  development  strategy  including 
update  information  on  target  or  actions  that  it will  implement.  Regarding  the  environment, 
Egypt  continued  to  implement  the  national  environmental  action  plan  (2002-2017).  Actions 
are underway in fields such as reducing vehicle emissions and strengthening of the air quality 
monitoring network. The legislative framework continues to require further development, in 
particular with regard to implementing legislation. New legislation on water and wastewater, 
as well as on waste management, is still under preparation. Egypt introduced a gradual ban on 
the  transport  of  hazardous  and  toxic  substances  on  the  River  Nile.  A  national  solid  waste 
management  strategy  and  an  integrated  coastal  zone  management  strategy  are  still  under 
preparation. A waste management master plan for Cairo was designed as a model for the rest 
of the country. Continuing attention is required in order to implement existing strategies and 
plans and to further enhance monitoring and enforcement.  

Egypt took some steps to enhance administrative capacities with regard to integrated coastal 
zone  management  and  marine  pollution.  However, 
strengthening  administrative 
implementation  capacity  at  all  levels  of  the  country,  including  coordination  between 
authorities,  remains  a  major  challenge.  Steps  were  taken  to  integrate  environment 
considerations in other policy areas, such as transport. 

Egypt  continued  to  publish  environmental  information  on  a  regular  basis,  and  carried  out 
some activities to inform and involve the public. Public consultation is still not mandatory for 
certain environmental impact assessment studies.  

Egypt took some further steps towards acceding to the Integrated Coastal Zone Management 
Protocol to the Barcelona Convention for the Protection of the Marine Environment and the 
Coastal  Region  of  the  Mediterranean.  There  were  no  significant  developments  as  regards 
ratifying  the  amendments  to  its  Land-Based  Sources  Protocol  and  its  Emergency  Protocol. 
The implementation of already ratified agreements requires particular attention.  

EN 

16 

   EN 

Egypt  continued  to  participate  in  the  Horizon  2020  Initiative  and  the  EU  Water  Initiative. 
Cooperation  and  information  exchange  took  place  between  the  European  Commission  and 
Egypt, 
including  on  water,  waste  management,  de-pollution  and  management  of 
environmental information. 

In  the  field  of  civil  protection,  Egypt  was  actively  involved  in  the  Euro-Mediterranean 
Programme  for  the  Prevention,  Preparedness  and  Response  to  natural  and  man-made 
Disasters.  

The Ministry of Communications and Information Technology launched the first worldwide 
internet  domain  name  using  Arabic  letters.  As  part  of  Egypt's  "Green  ICT  Strategy",  the 
ministers  for  Communications  and  Information  Technology  and  for  Environmental  Affairs 
signed a Memorandum of Understanding regarding a Green Information and Communication 
Technology (ICT) Strategy, which aims to reduce the adverse environmental impacts resulting 
from the expanding use of ICT devices. 

The  National  Telecommunications  Regulatory  Authority  (NTRA)  announced  its  new 
numbering plan, and the board of directors of NTRA awarded two licences for the construction 
and  operation  of  (fibre-based)  access  telecommunications  networks  in  closed  compounds. 
There  are  no  new  developments  or  plans  regarding  the  introduction  of  a  second  fixed 
telephony licence. Consequently, this market remains a de facto monopoly.  

Egypt established a national institution (CERT) to support early discovery and containment of 
information  on  security  attacks  and  incidents.  It  is  also  developing  a  new  framework  for 
licensing  new  triple  play  services  for  voice  data  and  video.  There  were  a  number  of 
developments in Egypt in the field of e-Learning: inauguration of new projects in schools as 
part  of  the  Smart  Schools  Network  Project  and  the  organisation  of  a  workshop  on 
technological infrastructure in schools. During 2010, Egypt also launched new projects in the 
field of e-government at local level.  

There is no progress to report on audiovisual issues.  

In  the  area  of  research  and  innovation,  the  Egyptian  Ministry  of  Higher  Education  and 
Scientific  Research  continued  to  implement  its  reform  strategy  (2007-2012).  Egypt 
significantly  increased  the  participation  of  Egyptian  researchers  in  the  European  framework 
programme for research (FP7), also thanks to the setting up of a network of thematic National 
Contact  Points.  Three  new  thematic  contact  points  were  appointed  for  Energy,  Environment 
and Science in Society, bringing the total number of contact points to 42. Up to March 2011 
Egypt had a very high number of applicants, 790, of which 109 were successful in submitting 
a proposal, receiving a total contribution of about EUR 10 million. The thematic areas which 
provoke the main interest are Health, Environment, Food, Agriculture & Biotechnologies and 
ICT. In September 2010, a high-level Delegation from Egyptian Research Centres visited the 
JRC-Ispra site; five Egyptian research organisations have four collaborative ventures with the 
Joint  Research  Centre.  Egypt  strengthened  its  co-operation  with  the  Enterprise  Europe 
Network. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

Egypt  pursued  education  reforms  on  the  basis  of  the  National  Strategic  Plan  for  pre- 
university  education  2007-12,  with  EU  financial  support,  with  advances  on  fiscal 
decentralisation,  school-based,  curricular  and  textbook  reforms,  as  well  as  use  of  ICT. 
Implementation of the first two phases of the Teachers’ Cadre was achieved in the context of 

EN 

17 

   EN 

public service reform, but challenges still remain for early-childhood, girls and out-of-school 
education, as well as on special educational needs. A key unaddressed aspect of reform is the 
permeability between secondary education streams and student progression from secondary-
technical to tertiary education. The reform of university admission (Thanawiya Amma) will be 
crucial  in  this  context.  The  General  Authority  for  Literacy  and  Adult  Education  continued 
implementing  the  National  Plan  for  Adult  Literacy,  focusing  on  integrating  literacy,  adult 
education and measures to prevent school drop-out, in cooperation with civil society 

The Government approved the third phase (2012-17) of the Higher Education Master Plan in 
October  2010  which  provides  for  the  establishment  of  a  Supreme  Council  of  Education, 
compatibility  of  higher  education  with  international  reference  points,  including  on  credit 
transfer  (ECTS),  reform  of  vocational  training  within  higher  education  institutions  and 
adoption of a national qualifications framework (NQF). Quality assurance is prioritised with 
additional resources to improve quality and ensure institutional accreditation. In this respect, 
the  work  of  the  National  Authority  for  Quality  Assurance  and  Accreditation  in  Education 
(NAQAAE)  made  good  progress,  completing  the  development  of  quality  standards  and 
accreditation  manuals  for  all  education  branches  while  establishing  links  with  European 
accreditation  bodies.  It  is  also  tasked  with  NQF  development.  The  Ministry  of  Higher 
Education  showed  growing  interest  in  the  development  of  technological  training  centres,  as 
well  as  in reforms under  the Bologna Process. Higher education  would benefit from further 
decentralisation  and  the  use  of  performance-based  funding  as  a  means  to  improve  cost-
effectiveness 

In the field of technical vocational education and training, the Inter-Ministerial Committee 
on Human Resources Development initiated discussions on the implementation of the 25-year 
strategy  to  reform  the  whole  system,  with  attention  to  the  realignment  and  definition  of 
mandates as well as the NQF. Immediate attention is required to address the serious mismatch 
between  training  content  and  delivery  and  labour-market  needs.  The  EU-funded  TVET 
programme  served  as  a  catalyst  in  securing  consensus  on  the  policy  choices  ahead.  Its 
establishment of 12 sector-based enterprise training partnerships laid the foundation for future 
reform  work.  The  Ministries  of  Education,  Industry,  Manpower  and  Migration  participated 
actively in the self-assessment analysis under the Torino Process and its linked Education and 
Business  Study.  This  led  to  the  discussion  and  validation  of  its  finding  in  a  national 
dissemination  workshop  in  October,  co-organised  by  the  European  Training  Foundation 
(ETF) and the Egyptian Observatory for Education, Training and Employment. In December, 
the  Ministry  of  Higher  Education  approved  a  proposal  for  the  design  of  a  national  career 
guidance and counselling system, developed by the National Task Force on Career Guidance 
with ETF support.  

Egyptian  universities  and  higher  education  institutions  participated  actively  in  the  third  call 
for proposals under Tempus IV, resulting in the selection of four projects contributing to staff 
capacity  building  and  innovative  curriculum  development.  Eight  Egyptian  students  were 
awarded Erasmus Mundus Masters scholarships, while student and academic mobility will 
be further enhanced with the expected award of 108 grants under Erasmus Mundus Action 2 
for  the  academic  year  2010-11.  In  addition,  one  Egyptian  organisation  is  taking  part  in  a 
project to promote European higher education in sustainable development under Action 3. In 
2010 a Jean Monnet module and a Chair in Euro-Mediterranean relations were awarded to 
Cairo University for the first time.  

The  National  Council  for  Youth  (NCY)  continued  implementing  youth  empowerment 
programmes  in  line  with  its  four  year  plan  (2006-10),  in  coordination  with  national 

EN 

18 

   EN 

stakeholders  and  civil  society.  Egyptian  young  people  and  youth  organisations  continued  to 
benefit  from  the  opportunities  offered  by  the  Youth  in  Action  Programme,  which  supports 
exchanges, voluntary service and cooperation in the field of youth and non-formal education. 
Egypt confirmed its participation in the Euro Med Youth IV programme.  

In the area of culture, the Parliament adopted a new Law on Antiquities. Work proceeded on 
the ratification of the UNESCO Convention on Underwater Cultural Heritage. Investment in 
capacity to ensure full implementation remains a challenge, as does coordination between all 
of the actors concerned. In June 2010, the Ministry of Culture engaged in a positive dialogue 
with  cultural  operators  in  the  framework  of  the  first  Conference  on  Cultural  Policies  in  the 
Arab region to be held in Beirut. Four Egyptian cultural organizations participated in projects 
selected as part of the 2010 ENP Special Action under the Culture Programme. In the context 
of EU bilateral cooperation, work proceeded on a project to enhance creativity and access to 
culture as a means of development. Egypt also continued to play an active part in the regional 
Euro-Med Heritage IV programme.  

Egypt,  with  considerable  EU  assistance,  continued  the  reform  of  the  health  sector, 
particularly by further implementing its “Family health model”. The model aims at universal 
coverage, financial sustainability and better quality. For example, Egypt established additional 
primary  health  care  facilities  and  made  progress  with  the  renovation  of  hospitals.  In  June 
2010, the draft health insurance law was submitted to Parliament, although negotiations on the 
future financial sustainability of the health system have been difficult. Egypt completed a first 
pilot project on health insurance management in Suez and launched additional pilot projects. 
Egypt  continued  to  monitor  influenza  A  (H1N1).  The  EU  and  Egypt  enhanced  the  health 
sector  dialogue  through  the  health  reform  programmes  financed  by  the  EU  as  well  as,  inter 
alia,  by  Egypt’s  participation  in  the  EU’s  global  health  conference  of  June  2010.  Egypt 
continued  to  take  part  in  the  ‘Episouth’  network  on  communicable  diseases  for  the  EU, 
Mediterranean and Balkan countries.  

8. 

FINANCIAL COOPERATION – 2010 KEY FACTS AND FIGURES 

Cooperation framework 

The  Mid-Term  Review  of  the  programming  document  confirmed  that  the  Country  Strategy 
Paper  adopted  in  2007  remains  a  valid  framework  for  cooperation  with  Egypt.  The  new 
National Indicative Programme (NIP) 2011-13 for Egypt was adopted in March 2010 and has 
a  budget  of  EUR  449.3  million.  The  programme  is  geared  towards  supporting  the 
achievement  of  key  policy  objectives  as  outlined  in  the  EU-Egypt  ENP  Action  Plan  and 
pursues  three  priorities:  (1)  political  reform  and  good  governance,  (2)  competitiveness  and 
productivity  of  the  economy,  and  (3)  socio-economic  sustainability  of  the  development 
process. 

Implementation 

Implementation  of  the  measures  covered  by  the  previous  NIP  (2007–2010)  is  underway.  In 
the Education Sector, the National Strategic Plan is being rolled out to improve the quality of 
and  access  to  education,  with  most  of  the  major  system  reforms  and  particularly  those 
targeting school-based reform, advancing the reform of the civil service and modernisation of 
schooling.  In  the  transport  sector,  the  reform  programme  has  regained  momentum  and  it  is 
improving  in  the  areas  of  institutional  and  regulatory  structures,  as  well  as  the  planning  of 
inland waterways, railways and roads. The support to social development has had an impact 

EN 

19 

   EN 

in  deprived  rural  areas  of  Egypt,  including  the  generation  of  1,651  permanent  and  251 
temporary job opportunities, 2,260 new drinking water connections, 30 health care units and 
795  medical  mobile  clinics.  Women  are  being  empowered  through  literacy  and  vocational 
training. 

In  2010,  the  EU  continued  to  support  the  national  reform  efforts  in  Egypt  and  committed 
assistance for a total amount of EUR 192 million under the bilateral envelope of the European 
Neighbourhood and Partnership Instrument (ENPI). The new 2010 Annual Action programme 
(AAP)  focused  on  sustainable  development  and  improving  the  competitiveness  and 
productivity  of  the  Egyptian  economy.  Within  this  envelope,  a  EUR  120  million  reform 
support  programme  in  the  water  sector  will  help  strengthen  institutional  structures  and 
promote  more  efficient  use  of  water  resources,  while  also  protecting  public  health  and  the 
environment. Cooperating with other EU donors, a EUR 20 million contribution was made to 
a  EUR  300  million  Wind  Farm  project  that  will  produce  clean  renewable  energy,  limiting 
greenhouse gas and other emissions. An additional EUR 20 million to the ongoing Research, 
Development  and  Innovation  programme  will  help  to  facilitate  Egypt's  move  towards  a 
knowledge-based  economy,  while  a  EUR  10  million  Justice  Reform  Programme  will  target 
the juvenile justice system and the fight against trafficking in human beings. The successful 
twinning programmes receive a further EUR 10 million, while EUR 9 million is provided to 
support the efficiency and transparency of public administration. Finally, EUR 3 million was 
allocated to a cultural programme to broaden access to cultural activities across the country.  

The  2010  AAP  also  included  a  sector  budget  support  operation  in  the  water  sector  and 
twinning projects for a value of around EUR 5 million in support to the Egyptian Water and 
Electricity  Regulators,  as  well  as  Consumer  Protection  and  Real  Estate  Taxation.  Twinning 
operations  were  being  implemented,  among  others,  in  the  areas  of  maritime  safety,  water 
quality management, postal management and tourism. Other programmes from 2007 and 2008 
include  a  Waste  Water  project,  as  well  as  support  to  Good  Governance,  Human  Rights  and 
Civil Society.  

In  addition  to  the  bilateral  allocation,  Egypt  also  benefited  from  cooperation  activities 
financed  under  the  ENPI  cross-border,  inter-regional  and  regional  programmes.  Egypt 
participates  in  the  Cross-Border  Cooperation  (CBC)  Mediterranean  Sea  Basin  programme 
(EUR 173.6 million for the whole programme in the period 2007-13). The main priorities of 
the Programme are four-fold (i) promotion of socio-economic development and enhancement 
of territories, (ii) promotion of environmental sustainability at the basin level, (iii) promotion 
of  better  conditions  and  modalities  for  ensuring  the  mobility  of  persons,  goods  and  capitals 
and (iv) promotion of cultural dialogue and local governance.  

Under  the  ENPI-financed  Neighbourhood  Investment  Facility  (NIF)  contributions,  four 
projects in Egypt were approved in 2010, committing EUR 34 million in grants and technical 
assistance,  expected  to  leverage  broadly  EUR  1.6  billion  in  loans  from  European  Finance 
Institutions in the water, energy and power sector. 

Other  EU  Instruments  supplement  the  ENPI  assistance  package.  Egypt  benefited  from 
cooperation activities financed under horizontal instruments such as the European Instrument 
for  Democracy  and  Human  Rights  (EIDHR)  and  the  Development  Co-operation  Instrument 
(DCI) thematic programmes: Non-State Actors and Local Authorities in Development (NSA-
LA)  and  Investing  in  People  (IIP).  Egypt  also  benefited  from  other  instruments  such  as  the 
Instrument for Nuclear Safety Cooperation (INSC), strengthening the capabilities of Egypt's 

EN 

20 

   EN 

Atomic Energy Authority and its National Centre for Nuclear Safety and Radiation Control by 
linking it to EU nuclear regulatory authorities. 

The European Investment Bank has signed finance contracts in 2010 for an amount of EUR 
906  million  in  the  Energy  and  Refinery  sectors  in  Egypt,  aimed  at  improving  electricity 
supply and distribution and increasing refining capacity. 

Donor coordination 

In  2010,  the  EU  Delegation  in  Egypt  ensured  the  coordination  of  assistance  activities  to 
support  the  Egyptian  authorities  who  are  dedicated  to  implementing  the  aid  effectiveness 
agenda. In 2010 progress was made in setting up a mutual accountability mechanism between 
the Egyptian authorities and the donor community. This is taking place in the context of the 
'Cairo Agenda for Action' and the drafting of a 'Situation Analysis' that summarises Egypt's 
key development challenges. From this analysis a number of core areas have been selected to 
enable donors to focus their financial support.  

EN 

21 

   EN