JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in Egypt Progress in 2012 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS European Neighbourhood Policy: Working towards a Stronger Partnership
Date: 2013-03-20
Institutions: European Commission, High Representative of the Union
Subjects: Egypt, European neighbourhood policy, democratisation, economic integration, economic reform, educational reform, institutional reform, political cooperation, political reform, sustainable development, trade cooperation

EUROPEAN 
COMMISSION 

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

Brussels, 20.3.2013  
SWD(2013) 89 final 

JOINT STAFF WORKING DOCUMENT 

Implementation of the European Neighbourhood Policy in Egypt 
Progress in 2012 and recommendations for action 

Accompanying the document 

JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, 
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE 
COMMITTEE OF THE REGIONS 

European Neighbourhood Policy: Working towards a Stronger Partnership 

{JOIN(2013) 4 final} 
{SWD(2013) 79 final} 
{SWD(2013) 80 final} 
{SWD(2013) 81 final} 
{SWD(2013) 82 final} 
{SWD(2013) 83 final} 
{SWD(2013) 84 final} 
{SWD(2013) 85 final} 
{SWD(2013) 86 final} 
{SWD(2013) 87 final} 
{SWD(2013) 88 final} 
{SWD(2013) 90 final} 
{SWD(2013) 91 final} 
{SWD(2013) 92 final} 
{SWD(2013) 93 final} 

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1.  

OVERALL ASSESSMENT AND RECOMMENDATIONS 

This  document  reports  on  progress  made  on  the  implementation  of  the  EU-Egypt 
European Neighbourhood Policy (ENP) Action Plan between 1 January and 31 December 
2012, although developments outside this period are also taken into consideration when 
deemed  relevant.  It  is  not  a  general  review  of  the  political  and  economic  situation  in 
Egypt. For information on regional and multilateral sector processes readers should also 
refer to the Partnership for Democracy and Shared Prosperity progress report. 

In  2012,  the  EU-Egypt  dialogue  resumed  at  the  highest  level.  President  Morsi  visited 
Brussels  on  13  September  and  met  President  Barroso.  The  High  Representative  for 
Foreign  Affairs  and  Security  Policy/Commission  Vice  President,  (HR/VP)  Catherine 
Ashton chaired the EU-Egypt Task Force in Cairo on 13-14 November  - an event which 
convened top business leaders, ministers and civil society. The President of the European 
Council Van Rompuy paid a visit to Egypt on 13 January 2013. Formal dialogue under 
the  ENP,  which  had  been  suspended  since  January  2011,  resumed  in  February  2013, 
through an Association Committee. 

During 2012, Egypt continued its democratic transition to which the Egyptian authorities 
had committed following the democratic revolution in January 2011 and the subsequent 
ousting  of  ex-President  Mubarak.  In  this  process  of  transition  several  significant 
milestones  were  achieved,  in  particular  the  orderly  organisation  of  elections  the  end  of 
the state of emergency and the smooth transition from military to civilian rule. However, 
there  have  also  been  some  serious  set-backs,  such  as  the  dissolution  of  the  People's 
Assembly  and  the  lack  of  progress  on  human  rights.  President  Morsi’s  constitutional 
declaration  of  22  November  giving  him  near  absolute  power,  the  rushed  adoption  of  a 
draft Constitution by the Constituent Assembly,  the abrupt interruption of the dialogue 
on  its  provisions,  and    the  President’s  subsequent  call  for  a  constitutional  referendum 
have  pitched the nation into a deeply divisive political crisis between supporters of the 
President, on the one hand and the secular liberal opposition, mainly represented by the 
National Salvation Front on the other. 

In  late  2011  and  early  2012,  Egypt  held  parliamentary  elections  under  full  judicial 
supervision, in a peaceful and transparent environment.  The elections gave the Islamist 
parties  a  strong  lead  in  the  parliament.  The  next  step  was  to  establish  a  Constituent 
Assembly to draft the new Constitution. 

Presidential  elections  were  held  in  May,  with  run-offs  in  June,  in  a  highly  charged  and 
polarised political climate. Observers concluded that the elections were largely free and 
once again no systematic attempts were made to   fix the results. The turn out was 51%. 
Mohamed  Morsi  from  the  Muslim  Brotherhood/Freedom  and  Justice  Party  defeated 
Ahmed Shafiq, the former Prime Minister under Mubarak, by a small margin. 

Just days before the Presidential run-offs, the Constitutional Court ruled that parts of the 
parliamentary election law were unconstitutional. This led the military transitional regime 
to dissolve the parliamentary lower house, the People’s Assembly, on 17 June. 

2 

 
 
On  30  June  Mohammed  Morsi  was  inaugurated  as  the  first  democratically  elected 
President  of  Egypt.  He  appointed  a  largely  technocratic  government  headed  by  former 
Water Minister Hisham Kandil, and a Presidential Team, half of whom are Islamists. 

In early August, the President took a number of decisions de facto handing down powers, 
including  judicial  power  and  in  the  absence  of  a  parliament  legislative  power,  to  the 
civilian government. 

The  parliamentary  upper  consultative  house,  the  Shura  Council,  and  the  Constituent 
Assembly continued their work. However, the secular and liberal members walked out of 
the  discussions  because,  in  their  views  the  draft  Constitution  contained  too  many 
provisions restricting human rights and fundamental freedoms or provisions inspired by 
religious considerations. In late November, President Morsi issued a controversial decree 
giving him sweeping powers and decided to put the draft constitution to a swift popular 
referendum.  The  constitutional  referendum  took  place  on  15  and  22  December.  On  25 
December  the  results  of  the  referendum  were  announced.  63.8%  of  voters  approved  it, 
but the turnout was only 32.9% of eligible voters. The referendum was marred by reports 
of  procedural  irregularities  and  other  breaches.  The  Higher  Electoral  Commission 
investigated the claims and found them all to be without merit. 

Street protest peaked again on 25 January 2013, the second anniversary of the revolution 
which coincided with the sentencing to death in Port Said of 21 local football supporters 
for the killing of 72 rival fans from Cairo. The clashes resulted in some 60 people dead 
over  that  week-end  with  troubling  reports  of  human  rights  abuses.  As  these  events 
unfolded,  the  opposition  parties  within  the  National  Salvation  Front  kept  raising  their 
demands  on  President  Morsi  to  engage  in  a  meaningful  dialogue.  Their  main  demands 
included the establishment of a national unity government (with the related postponement 
of the parliamentary elections); the appointment of a committee to discuss amendments to 
the  constitution;  the  replacement  of  the  Prosecutor  General  and  the  independent 
investigation  of  recent  human  rights  abuses;  and  the  secularisation  of  state  institutions. 
The electoral law is another bone of contention. In February, President Morsi announced 
the  dates  for  parliamentary  elections  (from  end  April  to  end  June)  and  an  official 
invitation was extended to the EU to observe the elections. Due to an administrative court 
ruling on 6 March 2013 to refer the electoral law to the Supreme Constitutional Court, it 
is likely, however, that the elections will be postponed. 

The state of emergency was lifted in May 2012 after 31 years. However, the law allows 
prosecutions  initiated  under  the  state  of  emergency  and  the  trials  of  persons  before  the 
state of emergency courts to continue after the lifting. Thus a number of cases continue to 
be brought before emergency courts which fall short of international standards. Hundreds 
of civilians,  including  juveniles,  were  convicted by military courts during the transition 
and remain in prison. It is still possible to refer civilians to military courts, but this has 
not  been  used  systematically  in  recent  months.  A  government-appointed  panel  has 
reviewed  their  cases  and  President  Morsi  has  pardoned  several  hundred  of  those 
convicted.    Under  the  new  constitution,  civilians  can  still  continue  to  be  tried  before 
military courts. 

3 

 
 
Current NGO legislation continues to hinder the work of NGOs in terms of registration 
and funding. The issue of revising the legislation has been under discussion since August 
2011.  It  was  high  on  the  agenda  of  the  first  parliament  elected  after  the  uprising.  The 
People’s Assembly did not reach an agreement before it was dissolved and reportedly a 
new law will have to wait under a new People’s Assembly is in place. 

The economic situation has remained challenging. By mid-2012 the economy started to 
stabilise on the basis of increasing non-oil exports, the stabilising of the external position 
and strong remittance flows. It was also supported by the approval of the new Economic 
and Social Programme with a strong fiscal adjustment component, and the prospects of 
concluding negotiations with the IMF on a stand-by arrangement amounting to USD 4.8 
billion  which  would  open  the  door  to  substantial  external  donor  financing.  However, 
towards the end of the year, in a context of further political instability, Egypt requested a 
postponement of the IMF Board decision on the IMF arrangement, due in all likelihood 
to  political  fragility  in  the  run-up  to  the  constitutional  referendum.  It  suspended  the 
unpopular tax increase and subsidy-reduction measures that the government had agreed 
to put in place prior to the signature of  the  agreement. The Central Bank of Egypt was 
forced  to  put  in  place  emergency  restrictive  measures  in  the  face  of  falling  foreign 
exchange  reserves  and  downward  pressures  on  the  currency.  The  heightened  political 
uncertainty by the end of 2012 could have further impact on the domestic economy. 

However,  despite  a  long  and  protracted  economic  transition,  and  provided  that  Egypt 
follows through with the fiscal and structural reforms to  reduce the vulnerability of the 
economy  and  rebuild  fiscal  and  external  buffers,  the  country  could  restart  a  sound,  if 
slow, recovery process, one that should be more inclusive and responsive to its people’s 
aspirations. 

In  2012  Egypt  addressed  only  some  of  the  key  recommendations  contained  in  the  last 
year's  ENP  progress  report.  Power  was  handed  over  to  a  civilian  government,  and  the 
state  of  emergency  was  lifted.  A  constitution  was  drafted  and  adopted  by  popular 
referendum,  although  the  process  was  controversial  and  heavily  criticised  by  the 
opposition, and led to a deeply divisive political crisis. Many other key recommendations 
still need to be addressed. On the basis of this year’s report and to sustain implementation 
of the ENP Action Plan in 2013, Egypt is invited to: 

•  Ensure  an  inclusive  dialogue  with  all  political  parties  and  other  actors  including 
religious  leaders  to  ensure  that  the  Constitution  is  co-owned  by  all  Egyptians  and 
enshrines respect for human rights and fundamental freedoms, notably preserving the 
freedom of religion and protecting minorities. 

•  Organise  within  the  set  timetable  fair  and  transparent  parliamentary  elections  with 

the participation of foreign election observation missions. 

•  Completely halt the use of military courts to judge civilians. 

•  Create  conditions  conducive  to  an  active  and  independent  NGO  community  and 

adopt NGO legislation in line with international standards. 

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•  Pay particular attention to the protection of women’s rights and gender equality. 

• 

Implement the  Economic  Reform  Programme that ensures macroeconomic stability 
and strengthens public finance management in line with international standards. 

•  Ensure and implement social safety net systems to protect the most vulnerable from 

the impact of commodities subsidy reductions. 

•  Engage  in  the  Deep  and  Comprehensive  Free  Trade  Area  (DCFTA)  preparatory 

process in line with the EU-Egypt task force conclusions. 

•  Sign  and  ratify  the  regional  Convention  on  pan-Euro-Mediterranean  preferential 

rules of origin.  

2.  

POLITICAL DIALOGUE AND REFORM 

Towards deep and sustainable democracy 

Egypt  held  parliamentary  elections  in  late  2011  and  early  2012,  under  full  judicial 
supervision.  Observers  found  no  evidence  of  any  systematic  attempt  on  the  part  of  the 
authorities  to  rig  the  results  of  these  elections  in  favour  of  any  one  party.  Presidential 
elections  were  held  in  May,  with  run-offs  in  June  in  a  highly  charged  and  polarized 
political  climate.    Although  some  restrictions  on  foreign  monitors  were  imposed, 
observers concluded that the elections were largely free. The turn-out was at 51%. 

New  political  parties  are  regularly  formed.  There  have  been  no  reports  of  any  official 
efforts to obstruct the formation of new parties, and no reports that any  application has 
been rejected by the judicial committee in charge of vetting party applications. 

No  progress  was  achieved  with  regard  to  improving  the  working  conditions  for  civil 
society  organisations.  Their  work  continues  to  be  hindered  by  the  current  NGO  law, 
which is still not in line with international standards. 

Protests are regularly held at locations that were previously considered unapproachable, 
including the Presidential Palace and various state ministries. However, there have been 
increasing concerns of rising violence in recent months during public demonstrations, in 
particular from security forces. 

Despite  the  greater  room  for  freedom  of  expression  since  former  President  Mubarak 
stepped down, cases of interference towards individuals and the media are still reported, 
including prosecutions against critics of the President and of the ruling party, and arrests 
and prosecutions under the blasphemy law, which predates the new administration. 

A committee set up by President Morsi to investigate abuses perpetrated by the security 
services against demonstrators since the revolution has yet to issue a report. 

5 

 
 
The  June  decision  of  the  Supreme  Constitutional  Court  to  dissolve  the  entire  Islamist-
dominated  lower  house  of  parliament,  based  on  the  allegedly  unconstitutional  electoral 
law  governing  elections  to  a  third  of  the  seats,  was  perceived  by  many  as  a  political 
decision, and it contributed to the polarisation of the country. In April, an administrative 
court  dissolved  the  elected,  Islamist-dominated,  Constituent  Assembly  charged  with 
drafting a new constitution, also on questionable legal grounds. 

The state of emergency was lifted in May 2012 after 31 years of continuous imposition. 
However,  the  law  allows  prosecutions  initiated  under  the  state  of  emergency  and  tried 
before  state  emergency  courts  to  continue  after  the  lifting.  Hundreds  of  civilians, 
including juveniles, were convicted by military courts during the transition and remain in 
prison. 

A  number  of  high-profile  corruption  cases,  chiefly  focused  on  individuals  associated 
with the former regime, have been and continue to be brought before the courts, which 
have handed down prison sentences and massive fines in several cases. 

The  President  replaced  the  head  of  the  Government  Oversight  Agency  after  allegations 
that  the  former  head  was  complicit  in  concealing  evidence  of  financial  impropriety  by 
members  of  the  former  government.  Major  land  sales  concluded  under  the  previous 
regime  have  been  annulled  when  found  to  have  violated  the  law,  or  deliberately 
undervalued, or in cases where companies have been forced to pay market prices to make 
up the difference. 

In  August,  the  President  undertook  an  extensive  reshuffle  of  the  military  and 
subordinated the military establishment to the elected civilian executive. 

Other human rights and governance-related issues 

The culture of violence and torture in the police, the security sector, and in some cases 
the  military,  did  not  change  dramatically  after  January  2011.  The  Egyptian  authorities 
have  announced  their  intention  to  undertake  a  general  reform  of  the  police,  including 
measures against the use of torture, but it is unclear to what extent this has materialised. 
Investigations have also been conducted to assess army and police involvement in torture, 
but no reports have yet been issued. 

As  regards  freedom  of  religion,  Article  43  of  the  Constitution  guarantees  freedom  of 
belief, but requires the State to safeguard the right to practice and build places of worship 
for  the  Abrahamic  religions.  This  raised  concerns  on  the  part  of  other  religious  groups 
such  as  the  Baha’is  and  the  Shias.  Article  3  specifies  that  the  canons  of  Egyptian 
Christians and Jews will be the principal  source  of legislation that regulates minorities’ 
personal  and  religious  affairs.  In  2012  no  progress  was  achieved  on  authorisations  to 
build  places  of  worship  or  on  investigations  into  disputed  construction  permits  for 
churches announced in 2011. 

Women  played  a  very  active  role  in  the  2011  uprising,  but  their  rights  are  now  being 
severely challenged in the process of political transition. The new constitution obligates 

6 

 
 
the  state  to  provide  equal  opportunities,  but  the  previous  provisions  on  gender  equality 
have  been  dropped.  Egyptian  women  activists  feel  that  women  have  been  intentionally 
excluded from the political and civil scene and that women's voices are not represented in 
the political process. There is deep concern about the Islamist political parties and their 
stance towards women's rights. Egypt still lacks a legal environment to protect girls and 
women from violence, to encourage them to report attacks, and to deter perpetrators from 
committing abuses against them. In the 2012 upper house elections, women won only 4 
out of the 180 seats. Reported violence against women participating in demonstrations is 
a matter of serious concern. 

Child  labour  persists  and  the  children  involved  are  subjected  to  harsh  working 
conditions.  Street  children,  reportedly  in  the  hundreds  of  thousand,  are  exposed  to  sex 
trafficking.  Egyptian  children  are  also  recruited  for  household  services  and  there  are 
frequent charges that wealthy people from the Gulf have come to Egypt to buy temporary 
wives under 18. 

As regards the situation of minorities, relations between Bedouins  and the  government 
remain tense and Bedouins consider themselves to be marginalised. The situation in the 
Sinai is complicated by the government’s security concerns for the area, safeguarding the 
borders with Israel and Gaza, and controlling smuggling activities, in which Bedouins are 
sometimes implicated. 

In  the  aftermath  of  the  Egyptian  uprising,  the  Ministry  of  State  for  Administrative 
Development provided administrative and technical support to the democratic transition 
and  electoral  processes.  This  work  helped  to  build  up  the  capacity  of  the  Egyptian 
administration  by developing  and streamlining voter  databases and  improving  access to 
information on the voting process. 

Several  ongoing  national  programmes  address  the  improvement  of  public  services  and 
administrative  simplification,  the  development  of  national  databases  of  Egyptian 
households,  institutional  development  of  different  administrations,  including  the 
introduction  of  results  based  management,  piloted  in  the  Ministry  of  Planning  and 
International  Cooperation,  the  Ministry  of  Finance,  and  the  Ministry  of  Local 
Development, and the National Planning Institute. There is no formal national strategy on 
public administration reform. 

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

Egypt is an active partner on many CFSP matters in the region and has been a key player 
in  Palestinian  reconciliation.  Representatives  from  both  Hamas  and  Fatah,  including  at 
the highest level, have visited Cairo on a number of occasions and Egypt has pushed both 
to  the  Doha  Declaration  of  6  February  2012.  President  Morsi  and  his  team  played  a 
fundamental role in achieving the Gaza ceasefire on 21 November. 

Egypt has increased its engagement with its African partners in general. For the first time 
since  1995,  the  Egyptian  President  was  present  at  the  African  Union  Summit  of  2012. 

7 

 
 
Egypt  has  stepped  up  its  efforts  to  find  a  solution  to  the  Syrian  crisis.  An  Egypt-led 
quartet on Syria, including Turkey, Saudi Arabia and Iran, has met three times.  

Since the attacks on its border troops on 5 August 2012, Egypt has undertaken security-
related operations in the Sinai aimed at curbing the presence of Jihadists in the peninsula. 
Despite  the  recent  domestic  political  turmoil,  Egypt  has  continued  its  active  regional 
policy  in  the  field  of  disarmament,  both  bilaterally  and  via  its  membership  in  the  Non-
Aligned Movement especially on the issue of a nuclear-free Middle East. 

3.  

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy1 

The  25  January  revolution  continued  to  contribute  to  a  depressed  economy  in  2012. 
Egypt  recorded  GDP  growth  of  2.2%  in  Fiscal  Year  (FY)  2011/12,  following  a  1.9% 
growth  the  year  before,  far  from  the  7%  growth  achieved  prior  to  the  financial  crisis. 
Whereas  by  the  autumn  of  2012,  Egypt’s  economy  showed  some  clear  signs  of 
stabilisation  and  the  basis  had  been  set  for  a  much-awaited  recovery  following  the 
drafting  of  a  new  economic  reform  programme  and  the  agreement  on  a  Stand-by 
Arrangement  with  the  IMF,  Egypt  reversed  course  in  end-November,  thereby  bringing 
back a period of macroeconomic instability. As these events took place on the back of an 
already vulnerable economy, their consequences are still being felt. 

Egypt’s  inflation  has  traditionally  been  high,  reflecting  in  part  the  supply-side  market 
inefficiencies.  Since  mid-2012,  however,  inflation  has  been  on  a  significantly  declining 
path – an average of 4.7% in 2012, relative to 10.1% a year earlier - owing to a negative 
output  gap,  although  projected  to  increase  again  due  to  depreciation  pressures  and  to 
energy-administered prices likely to go up. 

The FY 2011/12 fiscal deficit stood at 10.8% of GDP  –  up from 9.7% the  year before. 
The  FY  2012/13  budget  deficit  will  likely  exceed  the  previous  year’s  deficit,  as  the 
government has not yet been able to adopt an economic programme with a strong fiscal 
consolidation  component.  The  reform  of  the  generalised  subsidies  system  should  be 
central to these efforts. 

The current account deficit increased to 3.1% of GDP in FY 2011/12 from 2.6% the year 
before, primarily due to the increasing import price of commodities, namely oil, and to a 
drop  in  tourism  receipts.  The  greatest  pressure  continued  to  be  exerted  on  the  financial 
account,  with  a  flight  of  portfolio  investments  of  USD  12.8  billion  since  early  2011 
through end-2012, as well as drastically lower FDI inflows. These pressures accelerated 
since end-2012. Whereas the reserves position had stabilised since February 2012 thanks 
to  the  drying  up  of  portfolio  investment  outflows  and  the  receipt  of  various  financial 
pledges,  the  political  instability  since  end-2012  led  to  a  renewed  period  of  heightened 

1 Figures on GDP, inflation, trade and employment are generally from Eurostat based on data supplied by 
the national statistical offices; or IMF or Commission Staff estimates, as indicated in the Statistical Annex. 
When other data sources are used these are then indicated. 

8 

 
 
                                                 
external pressures. By end-January 2013, international reserves had dropped to USD 13.6 
billion, despite significant offsetting foreign contributions. 

After three failed attempts to adopt a financial arrangement with the IMF, which would 
provide  access  to  USD  4.8  billion  and  open  the  door  to  further  donor  financing, 
negotiations were expected to be re-launched in 2013. 

Social situation, employment and poverty reduction 

Unemployment remained a major problem,  and was expected  to  increase  from  12%  in 
2011  to  12.7%  in  2012.  The  unemployment  rates  of  higher  education  graduates  were 
particularly high; overall unemployment remained much higher for women than for men.  

Geographical disparities remained, with poverty levels at 43.7% in rural upper Egypt and 
major  inequalities  between  rural  and  urban  areas  throughout  the  country.  The  country 
appears  not  to  be  “off  track”  and  unlikely  to  achieve  some  of  the  Millennium 
Development  Goals  by  the  set  date  of  2015,  especially  with  regard  to  the  gender  gap. 
Further  efforts  are  needed  in  many  social  fields,  particularly  in  higher  and  technical 
education, primary health care, employment and social policy. 

In 2012, the new Government endorsed the National Action Plan on Youth Employment 
for 2010-2015, which had been prepared in 2010.  The Plan has three policy priorities: (i) 
increasing youth employability; (ii) obtaining technical assistance for business incubators 
and (iii) developing a career guidance system. The main problem continued to be the lack 
of  funds  for  its  implementation  and  an  integrated  employment  and  social  policy  is  also 
still lacking. 

The new Government disregarded the  Labour Law that had  been submitted during  the 
transition  period.  A  new  law  was  tabled  by  the  Muslim  Brotherhood  within  the 
Parliamentary  Committee  in  charge  of  Labour  issues  before  the  dissolution  of  the 
Parliament,  but  the  debate  stagnated.  According  to  independent  trade  unions,  the 
amendments to the already restrictive Trade  Union Law 35/1976 would further weaken 
workers'  and  trade  unions'  rights,  including  in  relation  to  freedom  of  assembly  and 
freedom of association. It would also weaken the protection of trade union members and 
representatives  from  unjustified  dismissals.  In  November,  the  EU  agreed  to  support 
Egypt  (EUR  70  million)  in  creating  short  term  employment  opportunities  for  unskilled 
and semiskilled workers in small scale infrastructure projects and in community services 
in the poorest Governorates of the country. 

4.  

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

The EU is Egypt's main trading partner accounting for 30% of its trade volume in 20112. 
Bilateral trade flows increased and during the first eleven months of 2012 amounted to 

2 Data for 2012 was not available at the time of writing. 

9 

 
 
                                                 
EUR 21.8 billion. EU exports to Egypt consisted mainly of machinery and chemicals. EU 
imports from Egypt consisted mainly of energy products, chemicals, textiles and clothing. 

Egypt continued to dismantle its tariffs on imports of EU industrial goods, as laid down 
in  the  Association  Agreement.  Egypt  formally  lifted  an  import  ban  on  cotton  in  March 
2012.  However,  not  a  single  permission  to  import  cotton  has  been  granted.  This  goes 
against 
initiated  safeguard 
investigations on imports of cotton yarn, cotton textiles and polypropylene, which led to a 
final  imposition  of  safeguard  fees  on  cotton  yarn  in  August  2012.  The  two  remaining 
investigations were suspended in September 2012 and the fees were lifted. 

the  Association  Agreement  and  WTO  rules.  Egypt 

In  February  2012,  Egypt  imposed  restrictions  on  imports  of  dairy,  meat  and  live  cattle 
from  the  EU  following  the  outbreak  of  the  Schmallenberg  virus  (SBV)  in  Europe.  The 
restrictions on meat and dairy were lifted in May 2012 and the ban on live cattle imports 
was  lifted  in  July  under  certain  conditions.  The  EU’s  import  restrictions  for  seeds  and 
sprouts from Egypt, related to the E. coli outbreak, expired in March 2012 and were not 
renewed  due  to  the  measures  taken  by  Egypt  in  compliance  with  the  FVO’s 
recommendations. 

Negotiations on the liberalisation of services and establishment made no progress. The 
preparatory process for the Deep and Comprehensive Free Trade Area with Egypt has yet 
to be launched. Egypt has yet to notify the EU of the completion of internal procedures 
for the entry into force of the Protocol on the Dispute Settlement Mechanism signed in 
November 2010. 

Egypt  failed  to  modernise  and  simplify  customs  legislation  and  procedures,  as  a  new 
Customs Law, which was expected to be adopted already in 2011, has yet to be approved 
by the Parliament. Egypt has yet to sign and ratify the regional Convention on pan-Euro-
Mediterranean preferential rules of origin, but it did regularly participate in the meetings 
of pan-Euro-Med Working Group, which is currently discussing the revision of the rules 
of origin in the framework of the regional Convention. 

Little  progress  was  made  on  free  movement  of  goods  and  technical  regulations. 
Preparations for the EU-Egypt Agreement on Conformity Assessment and Acceptance of 
industrial products (ACAA) did not progress significantly, since further progress depends 
largely on the adoption of new legislation. Egypt established a National Quality Council 
for  strategic  coordination  of  quality  infrastructure;  its  future  role  in  the  ACAA  process 
remains  to  be  clarified.  New  standards,  aligned  to  those  of  the  EU,  were  issued  for  a 
number of products (e.g. household appliances, cement and furniture). Egypt introduced 
two  new  technical  barriers  to  trade:  compulsory  pre-shipment  inspection  for  imports  of 
textiles and leather products, which constitute disproportionate and unnecessary obstacles 
to trade. 

Regarding sanitary and phytosanitary issues work on the draft unified food law and the 
establishment  of  a  single  food  safety  authority  remained  pending.  Thanks  to  improved 
control  measures  in  Egypt,  the  EU  lifted  import  restrictions  for  certain  seeds  and 
simplified  import  conditions  for  potatoes  from  Egypt.  Egypt  participated  in  a 

10 

 
 
for 
Commission/European 
Mediterranean  ENP  countries  on  regional  coordination  of  animal  identification  and 
disease control measures held in Cyprus in September. 

Safety  Agency/TAIEX-supported 

seminar 

Food 

The  suspension  of the granting of licences for  the establishment of tourism companies 
(domestic or foreign) was extended until March 2013. In February 2012 Egypt amended 
its  rules  for  public  private  partnerships  (PPP)  to  allow  disputes  to  be  resolved  through 
arbitration  rather  than  through  Egyptian  courts.  In  January  2012  a  decree-law  for  the 
Integrated Development of the Sinai Peninsula opened the way for foreign participation 
(up to 45%) in investment and development projects in the region. 

Some concerns related to the business climate persisted, more particularly over physical 
security  (especially  in  the  Sinai  but  also  in  the  Cairo  area),  often  related  to  labour 
disputes,  legal  uncertainty  in  relation  to  contracts  and  the  increase  in  payment  arrears. 
Several rulings on privatisations by administrative and civil courts have raised questions 
about  the  definition  of  competences  in  the  judiciary,  and  on  the  compliance  of  these 
decisions  with  Egypt’s  international  commitments  on  investment.  Egypt’s  rank  in  the 
World  Bank’s  Doing  Business  report  remained  stable  but  weak,  rising  to  109th  (out  of 
185). 

In  the  area  of  financial  services,  Egypt  suspended  trade  in  foreign  securities  in  July 
2012. This measure was intended to protect investors from losses abroad; however, one 
of its main consequences is that it limits the cross-border movement of capital. 

Other key areas 

In  July,  Egypt  began  to  use  difficult-to-counterfeit  banderols  and  stickers  to  indicate 
payment  of  customs  duties  and  sales  tax.  New  tax  accounting  rules  and  principles  and 
procedures  for  profit  tax  collection  were  issued  for  SMEs,  the  aim  being  to  reduce  the 
administrative  burden.  Egypt  also  brought  a  number  of  incentives  for  tax  settlement, 
reducing the amount of tax payable to reward prompt payment. 

The Egyptian Competition Authority continued to improve its institutional performance 
with the support of an EU twinning project. 

In April a decree was issued requiring the administrative bodies of the State with separate 
budgets (except in the defence sector) to publish the results of tenders on the Government 
procurement web portal. 

Egypt  improved  training  for  statisticians  with  the  creation  of  a  statistics  training 
committee  within  the  Central  Agency  for  Public  Mobilisation  and  Statistics.  It  also 
started preparations for a household survey on migration, to be carried out in 2013. 

Concerning enterprise policy, Egypt participated in the 2011-2012 work programme for 
industrial  cooperation  and  welcomed  in  November  2012  an  EU  task  force  with  a 
delegation of EU entrepreneurs with the set up of a business and tourism forum. 

11 

 
 
There were no significant developments on intellectual property rights, company law, 
including accounting and audit, or public finance management. 

5.  

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

On 27 February 2012 the European Commission adopted a Decision establishing the list 
of  supporting  documents  to  be  presented  by  visa  applicants  in  Egypt.  From  1  March 
2012,  all  EU  Member  States  require  the  same  set  of  documents  from  visa  applicants 
wishing  to  travel  to  the  European  Union  (Schengen  area).  This  measure  is  a  huge 
simplification  for  the  some  120,000  visa  applicants  in  Egypt,  who  now  no  longer  face 
differing requirements. 

The EU reiterated in 2012 its offer to start with Egypt a Dialogue on Migration, Mobility 
and Security leading towards the conclusion of a Mobility Partnership, similar to what the 
EU is doing with other Southern Mediterranean countries. However, Egyptian authorities 
continued to decline the offer. 

Concerning  asylum  issues,  the  UN  High  Commissioner  on  Refugees  (UNHCR) 
confirmed  records  of  44  refugees  and  asylum  seekers  in  detention  in  Egypt.  29  689 
Syrian nationals were registered in Egypt as of February 2013 according to UNHCR. The 
number of Syrian nationals wishing to register as asylum seekers in Egypt is expected to 
increase further, given the continuing humanitarian and refugee crisis. 

Hundreds of African nationals (most of them Eritreans) are reportedly detained in police 
stations in Sinai in conditions that fall well below minimum detention standards required 
by human rights law. The Egyptian government has consistently denied UNHCR contact 
to  the  detained  refugees  and  asylum  seekers.  It  claims  that  the  detained  persons  are 
economic migrants and not asylum seekers, and as such it perceives no obligation to give 
UNHCR access to these centres. 

Human  trafficking  in  Sinai  remains  a  matter  of  concern.  Migrants,  primarily  from 
Eritrea and Sudan, are being held for ransom and seriously abused by human traffickers 
and other criminals before they are allowed to continue their journey to Israel. Egypt has 
a strong law against human trafficking, but prosecutions are very rare.  

According  to  the  MFO  (Multinational  Force  and  Observers)  the  flow  of  migrants  has 
decreased since Israel started building a fence at the Egypt-Israel border. 

Since  mid  2011,  the  EU  has  granted  EUR  2.5  million  in  support  for  the  "fight  against 
corruption, money laundering and asset recovery" project, being run by the UN Office 
on  Drugs  and  Crime  (UNODC)  in  close  cooperation  and  partnership  with  the  Egyptian 
authorities.  It  aims  to  create  an  effective  mechanism  to  combat  corruption  and  money 
laundering,  to  foster  asset  recovery  procedures  and  to  create  a  solid  framework  to 
implement the United Nations Convention against Corruption (UNCAC). Several events 
took place in 2012, notably a workshop on asset recovery, training courses on UNCAC 
review mechanisms, and a workshop on formulating an anti-corruption strategy. 

12 

 
 
Egypt  participated  in  a  Multi-Country  Workshop  on  Drug  Prevention  and  Monitoring: 
Situation  and  Perspectives in the  ENP  Southern Partnership countries, organised  by the 
European  Commission  and  the  European  Monitoring  Centre  for  Drugs  and  Drug 
Addiction (EMCDDA). This took place under the auspices of the Cypriot Presidency, and 
was held in Cyprus in October. 

In  the  area  of  police  reforms,  Egypt  participated  in  the  regional  Euromed  Police  III 
programme.  In July it attended the first meeting of the General Directors of Police and 
Security Forces of the Southern ENP partners and EU Member States. In October, the EU 
offered support to the Ministry of Interior in its security sector reform. 

Due  to  the  heavy  electoral  agenda  in  the  first  half  of 2012,  with  judges  responsible  for 
supervising polling stations, the workload of the Egyptian Ministry of Justice prevented 
any substantial progress in the implementation of the EU bilateral projects in the justice 
sector.  It  also  hampered  Egypt’s  effective  participation  in  the  Euromed  Justice  III 
regional  Programme.  No  significant  progress  was  achieved  in  the  field  of  judicial  and 
law-enforcement  cooperation,  and  several  international  conventions  regarding  family 
law (notably children) remain unsigned. 

6. 

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

In  the  area  of  transport,  Egypt  launched  a  feasibility  study  for  a  mass  transit  system 
linking the 10th of Ramadan City to Cairo. It also launched a detailed study and an action 
plan  to  implement  the  east  Port  Said  master  plan,  aiming  to  create  a  regional  hub.  In 
September an agreement to co-finance the Cairo Metro line 3 was signed, involving the 
Neighbourhood  Investment  Facility  (EUR  40  million  in  grants),  the  EIB  (EUR  600 
million)  and  Agence  Française  de  Developpement  (AFD)  (EUR  300  million).  In 
November, the EIB and Egypt agreed on a project to upgrade the air traffic management 
systems  of  the  National  Air  Navigation  Services  Company  (NANSC).  On  maritime 
issues,  the  Egyptian  flag  remained  on  the  grey  list  of  the  Paris  Memorandum  of 
Understanding on Port State Control. 

Energy  cooperation  with  Egypt  continued  in  2012  including  in  the  context  of  the  EU-
Egypt Memorandum of Understanding on a strategic partnership on energy. In January, a 
major  EU  energy  sector  policy  support  programme  (EUR  60  million)  got  started.  It 
includes  reform  commitments  on  electricity  and  renewable  energy  sources.  In  2012, 
Egypt  faced  electricity  black  outs  and  fuel  shortages.  Egypt  continued  working  on 
electricity tariffs, market rules, grid codes, investment promotion plans and the creation 
of a web-based register for market operations. It further upgraded its electricity networks, 
partly  in  the  framework  of  a  project  funded  by  the  Neighbourhood  Investment  Fund 
(NIF),  EIB,  KfW  (German  development  bank)  and  AFD.  In  April,  the  League  of  Arab 
States,  in  cooperation  with,  inter  alia,  the  EU  organised  a  Forum  on  renewable  energy 
and  energy  efficiency,  promoting  Euro-Arab  cooperation.  Egypt  progressed  on  several 
renewable  energy  projects.  In  June,  an  agreement  was  reached  with  an  Italian  private 
investor to install 120 MW of wind power at Gulf El Zeit, which will supply electricity to 

13 

 
 
cement  factories.  Egypt  made  progress  on  a  feasibility  study,  co-funded  under  the  NIF 
(EUR 3 million), for the Kom Ombo 100 MW concentrated solar plant. In September, a 
NIF-supported (EUR 0.8 million) tender for a pre-feasibility study of the Kom Ombo 20 
MW photovoltaic power plant was launched. Work on the 200 MW Gabal El Zeit wind 
power  plant  also  continued.  Egypt  is  encouraged  to  continue  focusing  on  renewable 
energy  sources  and  energy  efficiency  and  to  address  the  heavy  burden  of  energy  price 
subsidies. 

In the field of climate change, Egypt is encouraged to build up capacity and engage in 
the new carbon market mechanism to be developed following the 17th and 18th session of 
the UN Framework Convention on Climate Change Conference of the Parties. With the 
support  of  the  newly  launched  regional  technical  assistance  project  for  climate  change 
and related matters, Egypt is encouraged to devise a low-carbon development strategy as 
well as to develop a nationally appropriate mitigation action. Additional efforts should be 
made to fully implement the Cancun and Durban agreements. 

As  regards  the  environment,  the  Government  established  the  Ministry  of  Utilities  for 
Drinking  Water  and  Wastewater,  with  responsibility  for  investment,  service  provisions 
and  regulatory  functions.  In  2012  the  EU  scaled  up  a  NIF  participation  to  a  joint 
European programme to improve water and wastewater infrastructures in Upper-Egypt by 
EUR 10 million bringing total EU contribution to EUR 23 million. 

Dealing  with  solid  waste  was  one  of  President  Morsi's  key  priorities.  A  Solid  Waste 
Management  Unit,  the  nucleus  of  a  Solid  Waste  Management  Agency,  was  established 
and the hiring of staff started. The EU assistance to Egypt in 2013 will notably include 
EUR 20 million that are earmarked for a project in the field of solid waste management. 

Since  January,  the  EU  has  been  assisting  the  Government  in  introducing  an  innovative 
mechanism  for  recharging  treated  wastewater  into  the  Egyptian  aquifer  with  a  view  to 
enhancing the water management efficiency. As part of the integrated pollution reduction 
programme for Lake Burullus, the wastewater handling expansion for the Kafr El Sheikh 
Governorate  is  one  of  the  four  leading  projects  of  the  Mediterranean  Hot-Spot 
Identification Programme (MeHSIP) financed under the Facility for Euro-Mediterranean 
Investment  and  Partnership  (FEMIP)  and  managed  by  the  European  Investment  Bank 
(EIB). 

Egypt  continued  its  participation  in  the  Integrated  Maritime  Policy  (IMP-MED) 
technical assistance project under the ENPI South programme. 

In the area of civil protection, the flagship programme for Prevention of, Preparedness 
for,  and  Response  to  natural  and  man-made  disasters  (PPRD  South)  contributed  to  the 
establishment  of  a  regional  framework  of  disaster  management  authorities  that  could 
intervene  collectively  in  the  event  of  disasters  overwhelming  the  affected  country. 
Indeed, sustainable development requires adequate disaster risk reduction efforts. Egypt 
is among the 168 governments that adopted in 2005 the "Hyogo Framework for Action: 
Building the Resilience of Nations and Communities to Disasters", which emphasizes the 
central  role  of  disaster  risk  reduction  for  all  development  policies.  However,  work  on 

14 

 
 
Disaster Risk Reduction (DRR) and climate adaptation is only at the beginning and it will 
require considerable further support to develop capacities and processes. DRR policy is 
fostering dialogue with Civil Society and NGOs, thus contributing to a more sustainable 
democracy. Analysis of the regulatory and institutional frameworks started with the aim 
of strengthening capabilities and inter-ministerial coordination in the second phase of the 
programme. 

Regarding  the  development  of  information  society  policies  in  Egypt,  a  number  of 
initiatives continued to be discussed, including in the context of the Arab Spring. In many 
cases, progress remains linked to the current political situation. For example, a new draft 
telecommunications law has been prepared but is yet to be approved. The move towards a 
more  unified  licensing  system  was  also  under  review.  Plans  to  issue  a  second  fixed 
licence  to  liberalise  the  fixed  line  market  have  been  set  back  due  to  the  international 
financial crisis. A National Broadband Plan was finalised in 2012 and an action plan was 
being  drawn  up  combining  infrastructure  and  education-related  projects.  The  Egyptian 
national  telecommunications  regulator  NTRA  took  over  the  chair  of  the  joint  EU-
Southern  Mediterranean 
in  2012. 
Information society consultations took place in November under the auspices of the EU-
Egypt Joint Task Force. 

telecommunications  regulator  forum  EMERG 

No  significant  progress  was  made  in  the  area  of  audiovisual  policy.  There  is  no 
comprehensive  policy  for  the  audiovisual  sector,  and  censorship  remains  an  issue  to  be 
addressed.  The  EU  supported  Egypt’s  audiovisual  sector  through  the  Euromed 
Audiovisual III Programme to analyse the challenges and future of the industry.  

Progress was made on integrating Egypt into the European Research Area (ERA). Under 
the EU’s RDI II programme, the Egyptian authorities put in place an effective network, 
across  the  country,  of  contact  points  for  the  EU’s  Seventh  Framework  Programme  for 
Research  and  Technological  Development  (FP7).  In  2012,  there  were  81  FP7-funded 
projects  with  54  Egyptian  partners,  with  a  total  of  101  Egyptian  participations. 
Cooperation was also pursued in the context of the EU-Egypt Innovation Fund. The total 
EU  contribution  to  these  projects  amounts  to  EUR  295  million,  more  than  EUR  12 
million of which went to the Egyptian partners. The EU-Egypt Science, Technology and 
Innovation  Cooperation  Portal  was  launched  in  October  as  part  of  the  EU  FP7  BILAT 
project  ShERACA  (Shaping  Egypt’s  association  to  the  European  Research  Area  and 
Cooperation  Action).  It  was  funded  under  the  FP7  INCO  programme,  with  the  overall 
objective of getting more Egyptian R&D stakeholders and key players involved in ERA 
activities. In November 2012, at the EU and Egypt Joint Task Force meeting, the parties 
agreed to give support to science and innovation. This support will build upon EU-Egypt 
cooperation in FP7 in synergy with other instruments (e.g. RDI) and will boost stronger 
cooperation in research and innovation in Horizon 2020 programme. 

7.  

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

Education  reforms  continued  to  stagnate  since  the  events  of  January  2011  and  the 
ensuing  political  transition.  Key  staff  in  the  Ministries  of  Education  and  Higher 

15 

 
 
Education  resigned  due  to  serious  disagreement  with  the  new  political  leadership. 
However,  the  new  Presidency  reiterated  the  strategic  importance  of  education  for  the 
development and competitiveness of the country, promising more resources for next year. 
The  new  authorities  said  they  were  committed  to  an  organisational  restructuring  of  the 
sector and to increasing of academic staff salaries. 

Reforms  in  pre-university  education  continued  stagnating  and  the  National  Education 
Strategic Plan (NESP) expired in 2012. The new Minister of Education started evaluating 
the  NESP  with  a  view  to  developing  a  new  strategy,  and  agreed  to  carry  out  a  joint 
review  with  the  OECD,  the  World  Bank  and  the  EU  of  the  pre-university  education 
sector in early 2013. Despite remarkable successes during the first two years, there were 
no  further  developments  regarding  the  EU  education  budget  support  programme  (thus 
putting  next  payments  at  risk).    The  National  Authority  of  Accreditation  and  Quality 
Assurance  of  Education  (NAQAAE)  completed  its  work  on  quality  standards  and 
accreditation manuals for the whole education sector. 

Technical  and  Vocational  Education  and  Training  (TVET)  continued  to  be  a  major 
concern in Egypt, with poor educational outcomes, high institutional fragmentation and 
ineffectiveness in the allocation and use of resources. The post-revolutionary authorities 
declared  the  sector  as  a  key  priority  given  its  links  with  the  competitiveness  of  the 
economy  and  youth  employment.  A  governmental  committee  was  tasked  with 
formulating  a  proposal  on  how  to  revive  the  tripartite  Supreme  Council  for  Human 
Resources  and  Development  (SCHRD).  The  first  draft  also  includes  provisions  for  the 
potential  creation  of  a  National  Employment  Agency.  The  EU  continued  to  provide 
support  to  the  National  TVET  system  through  a  EUR  50  M  project  decided  in  2012. 
Furthermore,  a  twinning  project  with  the  Productivity  and  Vocational  Training 
Department (PVTD) continued smoothly. 

Egypt  remained  very  active  in  the  Tempus  and  Erasmus  Mundus  programmes. 
Bologna-oriented  reforms,  piloted  through  Tempus  projects,  helped  raise  the  quality 
upgrade  of  the  sector.  Egypt  was  involved  in  33  Tempus  projects,  representing  30%  of 
approved projects in the Southern Mediterranean region to date.  The number of selected 
projects rose significantly, from four to twelve, due to the increase in budget available for 
the ENP South countries.  98 Egyptian students were selected for Erasmus Mundus joint 
Masters or Doctoral programmes, 88 of whom were under a special regional window for 
the  ENP  South  countries  under  the  revised  ENP,  together  with  a  further  150  mobility 
grants  organised  within  a  university  consortium.  Since  2007,  32  Egyptian  researchers 
have  benefited  from  Marie  Curie  Actions,  which  involved  29  organisations  located  in 
Egypt. 

2012  saw  a  large  increase  in  the  number  of  young  Egyptians  and  Egyptian  youth 
organisations  participating  in  the  Youth  in  Action  Programme.  Compared  to  2011,  the 
number  of  young  people  participating  in  the  programme  rose  from  142  to  273,  and  the 
number of projects rose from 50 to 74. 

Access  to  culture  in  Egypt  remained  an  issue,  and  the  absence  of  a  national–wide 
cultural strategy hampered the development of the sector. The Parliament Committee for 

16 

 
 
Culture, Media and Tourism adopted the main basis for a future cultural strategy before 
being dissolved in June 2012. Implementation of the legal framework was difficult due to 
the lack of capacity in relevant Departments within the Ministry of Culture, the lack of 
cooperation with other institutions and the absence of an overarching policy and vision.  
The  EU  took  the  necessary  administrative  steps  to  extend  financial  support  to  the 
Bibliotheca  of  Alexandria  under  the  "Enhancing  Cultural  Diversity  and  Creativity" 
Programme.  Furthermore,  the  EU  supported  the  policy-making  process  and  access  to 
culture through the "Culture for Development Indicators Suite in Egypt" (in partnership 
with the UNESCO) and through the Annual Call for Proposals for Cultural Operators. 

Following the June Presidential elections, a new Minister of Health and Population and 
two deputies for primary health care and for social health insurance were appointed. The 
health  policy  dialogue  between  Egypt,  the  EU  and  other  institutional  stakeholders 
remained  strong.  Egypt  confirmed  that  its  top  priorities  were  to  modernise  and 
standardise  public  primary  health  care  and  to  devise  a  new  social  health  insurance 
scheme.  Under  the  new  Government  some  progress  was  made  on  the  ambitious  and 
longer-term health reform. The drafting of the new social health insurance legislation is 
almost  finalised.  The  primary  health  care  reform  is  progressing  well,  improving  basic 
health service for the most vulnerable. The EU Health Sector Policy Support Programme 
II  (EUR  110  million)  contributed  positively  to  the  health  reforms.  Egypt  continued 
participating  in  the  EU  supported  ‘Episouth  Plus’  project  aimed  at  increasing  health 
security  in  the  Mediterranean  region  and  South  East  Europe.  Egypt  participated  in  a 
Commission/European  Centre  for  Disease  Prevention  and  Control  conference  and 
training  course  aiming  to  strengthen  capacity  building  for  communicable  diseases 
prevention and control in the Mediterranean. The aim is to jointly explore the scope for 
developing a regional training programme on intervention epidemiology. 

17