Egypt Country Profile

General Information

Political Climate


Following the introduction of a liberal reform policy, the Egyptian economy is demonstrating impressive development. The ruling National Democratic Party has dominated the political landscape in Egypt since its establishment in 1978, and is today headed by President Mohammed Hosni Mubarak. Upon gaining office after former President Sadat's assassination in 1981, President Mubarak declared a state of emergency in Egypt, which has been in force ever since. The political environment is characterised by an extremely strong executive and many political areas (e.g. interior, defence, and justice) lie outside parliamentary review and control. Moreover, the constitution subordinates the legislative and judicial branches to the executive. Egyptian elections are exclusive and suffer from irregularities. The 2007 referendum on amendments to the constitution not only resulted in the boycott by the political opposition, notably the Muslim Brotherhood and Kefaya, but was also characterised by fraud, bribery, pre-marked ballot cards and other irregularities.

Observers agree that corruption in Egypt is pervasive and that the use of wasta ('mediation' or 'influence' in Arabic) and facilitation payments are essential for doing business. The country faces major challenges in combating both grand and petty corruption. In 2007, the government even admitted that corruption is a serious problem and Prime Minister Ahmed Nazif expressed his dedication to combating bribery, as reported by Transparency International Focus on Egypt.

A number of initiatives to combat corruption have been launched by the government in recent years, such as the establishment of the National Committee to Combat Corruption in 2008 and the Transparency and Integrity Committee, set up within the Ministry of State for Administrative Development in 2007 with the aim of diminishing corruption in the public sector. However, it is a widely held perception that President Mubarak controls all existing anti-corruption initiatives and agencies, and that they serve as tools for the President's personal political agenda. This explains why corruption scandals involving the sale of public companies at under-valuated prices to affiliates of the President have had few consequences for the parties involved. Furthermore, it seems that in cases where action has been taken against high-ranking officials involved in corruption, the officials in question had already fallen out of the government's favour. Accountability of the government and Parliament is generally weak, despite the fact that there are regulations to govern conflict of interest and asset disclosure for members of government and the head of state - these have proven to be largely ineffective. Global Integrity 2008 presents several examples of high-level politicians engaging in business relations with the state or fraud related to asset disclosure forms. More than half of the business executives surveyed by the Transparency International Bribe Payers Index 2008 distrust the government's efforts to fight corruption, perceiving them to be 'ineffective' or 'very ineffective', while about one-third perceive them to be 'effective' or 'very effective'. Egyptian citizens surveyed by the CIPE & Ahram Center for Political and Strategic Studies Egypt National Corruption Survey 2009 are also sceptical of the effectiveness of governmental anti-corruption institutions. Only 17% of the citizens surveyed stated that monitoring agencies play a principle role in combating corruption, while 29% mentioned religious clergy as the principal institution in the fight against corruption. On the other hand, according to the World Economic Forum Global Competitiveness Report 2009-2010, the public trust of politicians in Egypt constitutes a competitive advantage for the country. When business executives are asked to rate the level of public trust in the ethical standards of politicians, Egypt scores of 3.5 on a 7-point scale (1 being 'very low' and 7 'very high').

Business and Corruption

Companies wishing to invest in Egypt should be aware that several sources identify pervasive corruption as a major obstacle to doing business. According to the World Bank & IFC Enterprise Surveys 2008, a bit more than 45% of companies identify corruption as a major constraint of doing business. On the other hand, while acknowledging the existence of corrupt low-level officials, many US investors have not identified corruption as a major impediment to foreign investment, as reported by the US Commercial Service 2010. Moreover, although companies in the World Economic Forum Global Competitiveness Report 2009-2010 identify inefficient government bureaucracy as the most problematic factors for doing business in Egypt, corruption is identified as the fifth.

According to the UNDP Project 2007-2011 Supporting the Ministry of Investment in Enhancing Transparency and Fighting Corruption, the civil service is marred by nepotism in hiring procedures and by general over-staffing. Companies are likely to encounter corruption in meetings with public officials, as officials in various government departments are known for bribery, embezzlement and tampering with official documents. According to the CIPE & Ahram Center for Political and Strategic Studies Egypt SME Survey Report 2009, 42% of the surveyed SMEs reported having paid bribes to obtain necessary licences in the establishment process, while 29% paid bribes to government officials during the operation of the company. On the other hand, the same study shows that those who did pay bribes spent more time establishing their companies and had to obtain more licences than those who did not bribe. This indicates that bribes were not paid to speed up procedures but to receive other benefits, such as being awarded a licence despite failing to meet legal requirements. According to the World Bank & IFC Enterprise Surveys 2008, a little more than 15% of companies expect to make unofficial payments to public officials to 'get things done'. The Ministry of State for Administrative Development has specified several areas where corruption and bribery are commonly found, including public services, customs and taxes, public utilities, and procurement. Foreign companies should note that they are required to go through a local agent in order to bid directly on a government tender. The World Bank & IFC Enterprise Surveys 2008 report that 12.5% of companies surveyed expect to give gifts in order to secure a government contract. The CIPE & Ahram Center for Political and Strategic Studies Egypt SME Survey Report 2009 shows that 39% of respondents with public procurement experience report that bribes are paid to a great extent to win government contracts, while 40% state that bribery takes place to a limited extent. In this regard, companies are recommended to use a specialised public procurement due diligence tool in order to mitigate the corruption risks associated with public procurement in Egypt. Furthermore, companies are recommended to develop, implement and strengthen integrity systems and to conduct extensive due diligence when planning to do or when already doing business in Egypt.

Regulatory Environment

Egypt was singled out for the third year running as one of the world's top reformers by the World Bank & IFC Doing Business 2010. The country has dramatically improved its performance in a number of areas, including starting a company and trading across borders, areas in which Egypt performs impressively compared to regional averages. Starting a company in Egypt now requires the entrepreneur to go through just 6 procedures, taking an average of 7 days at a cost of 16% of GNI per capita. Payment in minimum capital in regards to starting a company was eliminated in 2009. According to the World Economic Forum Global Competitiveness Report 2009-2010, Egypt holds a competitive advantage with regard to the time and number of procedures required to start a company. However, the same source also states that inefficient government bureaucracy is considered to be the most problematic factor for doing business in the country by business executives.

Despite Egypt's position as a top reformer, numbers from the World Bank & IFC Doing Business 2010 show that companies continue to face time-consuming procedures, particularly in relation to taxation, registering property, contract enforcement and dealing with construction permits. According to the same source, companies report that building a warehouse and obtaining the necessary licences, permits and completing the required notifications and inspections requires 25 administrative steps and takes 218 days at a cost of more than 331% of income per capita - more cumbersome and time-consuming than the averages for both the OECD and the MENA region. The US Department of State 2009 stresses that excessive bureaucracy is an obstacle to investment, and notes that bureaucratic impediments are often imposed arbitrarily. Companies should know that Egypt's vast privatisation programme poses a licensing and entry barrier in relation to certain sectors. Due to the privatisation process, no licences are issued for the establishment of new companies in the banking sector and the insurance sector. In effect, this means that companies can only enter into the insurance and banking market through acquisitions and mergers.

Egypt has established free zones and qualified industrial zones that are targeted to attract foreign investment, whereas the General Authority for Investment and Free Zones (GAFI) operates as a one-stop shop for investment that offers a range of services, including company registration, partner identification, contracts and licences acquisition. These services are provided free of charge for investors. The Ministry of Investment Egyptian Investment Portal provides business information concerning investment and joint venture opportunities. The government's Business Services Portal presents business related legislation (mostly in Arabic). The Egyptian government has also prioritised investment dispute resolution and has succeeded in resolving some disputes with foreign investors. However, companies should note that the resolution of disputes in Egypt is both costly and time-consuming due to an inefficient judicial system. Companies can access the Investment Conflict Resolution Committee (in Arabic) for information regarding decisions on commercial disputes. Egypt is a signatory to the International Centre for the Settlement of Investment Disputes (ICSID) and the related framework regarding dispute settlement is in place. The US Commercial Service 2008 advises companies to include clauses in their contracts specifying provisions for binding international arbitration of disputes. The Cairo Regional Centre for International Commercial Arbitration provides access to arbitration laws and information and services to companies seeking international arbitration solutions to commercial disputes. Access the Lexadin World Law Guide for a collection of legislation in Egypt.