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Services in Egypt: Services in Egypt: The New Engine for GrowthThe New Engine for Growth

By: Ahmed F. Ghoneim

Overview of Services Sector in EgyptOverview of Services Sector in Egypt

n Importance of Services in the Egyptian Economy

n Status of Services Liberalizationn How to approach services liberalization

Importance of Services in the Importance of Services in the Egyptian EconomyEgyptian Economy

Overview of Services Sector in Egypt Overview of Services Sector in Egypt (Cont(Cont’’d)d)

Share in GDPShare in GDP

Source: Ministry of Economic Development data base, Feb. 2007

89/1990 Agricultural19%

Manufacturing, Oil, Oil products

and Mining22%

Housing, Infrastructure and

Utilities 4%

Government services, Social

Services and Social Insurance

17%

Services38%

99/2000Services36%



16%


Utilities 4%


and Mining27%

Agricultural17%

05/2006Agricultural

17%

Manufacturing, Oil, Oil products and

Mining20%


Utilities 4%



14%

Services45%

82/1983Services36%



16%

Housing, Infrastructure and Utilities

4%


and Mining24%

Agricultural20%


Share in EmploymentShare in Employment


82/1983

Agricultural38%

Manufacturing, Oil, Oil

products and Mining11%

Housing, Infrastructure

and Utilities

26%

Government services,

Social Services

and Social Insurance

8%

Services17%

89/1990

Agricultural35%



Housing, Infrastructure

and Utilities

27%


Social Services


8%

Services19%

99/2000Services

23%


Social Services


8%


28%



Agricultural29%

04/2005

Agricultural28%




5%


Social Services


30%

Services24%

Overview of Services Sector in EgyptOverview of Services Sector in Egypt(Cont(Cont’’d)d)

-5000

0

5000

10000

15000

20000

1996

/97

1997/9

8

1998

/99

1999

/2000

2000

/2001

2001/2

002

2002

/2003

2003/2

004

2004

/2005

2005

/2006

*

Current Account

Private Remitances

Comodity Exports

Comodity Imports

Exports of Services

Imports of Services

BOP

Non Oil Exports

Source: Central Bank of Egypt database, Feb. 2007

Services in the Egyptian External Sector (I):Services in the Egyptian External Sector (I):


-15.0

-10.0

-5.0

0.0

5.0

10.0

1990/91

1991/92

1992/93

1993/94

1994/95

1995/96

1996/97

1997/98

1998/99

1999/2000

2000/2001

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006*

Trade Balance

Services (net)

Transfers

Capital & FinancialAccount

B.O.P.

Source: Central Bank of Egypt database, Feb. 2007

Services in the Egyptian External Sector (II):Services in the Egyptian External Sector (II):

Public Vs. Private Investments in Services Sector in Egypt:Public Vs. Private Investments in Services Sector in Egypt:



0

2000

4000

6000

8000

10000

12000

14000

Public Private Public Private Public Private Public Private

82/1983 90/1991 99/2000 04/2005

Construction Transportation ,Communications & Suez Canal

Trade, Finance & InsuranceTourism

L.E. Mn

Construction

Transportation ,Communications& Suez Canal

Trade, Finance & Insurance

Tourism

Foreign Participation in Issued Capital in Services Sector (I):Foreign Participation in Issued Capital in Services Sector (I):


Source: GAFI database, March 2007

219.62110.4 42.93 101.72 172.11

1953.8

181

14%

22% 25% 27%21%

13%

71%

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 20060%

10%

20%

30%

40%

50%

60%

70%

80%Net Foreign Participation in IssuedCapital in Servies Sector

% of Total Foreign Participation inIssued Capital

Foreign Participation in Issued Capital in Services Sector (II):Foreign Participation in Issued Capital in Services Sector (II):


Source: GAFI database, March 2007

-20%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006

Financial services andInsurance

Information TechnologyServices

Construction

Telecom

Tourism

Transport

* % of Total Issued Capital per Sector* % of Total Issued Capital per Sector

20042004

NA

8

12

8

13

NA

19

7

12

11

9

20012001

--34%34%150.2150.2235.6235.6NA227.1227.1Government services n.i.e.Government services n.i.e.

268%268%69.169.172721218.818.8Personal, cultural and Personal, cultural and recreational servicesrecreational services

60%60%2779.72779.72091.92091.9111736.71736.7Other business services ****Other business services ****

116%116%100100120.8120.8746.346.3Royalties and license feesRoyalties and license fees

5%5%73.873.879.679.6970.270.2Financial servicesFinancial services

303%303%37.937.936.736.7NA9.49.4InsuranceInsurance

50%50%33.333.322.722.71022.222.2Computer and information Computer and information servicesservices

188%188%406.4406.42222225141.2141.2ConstructionConstruction

74%74%404.8404.8309.1309.18232.1232.1CommunicationsCommunications

61%61%6125.16125.14583.74583.71038003800Travel***Travel***

47%47%4016.34016.33298.93298.982738.32738.3Transport**Transport**

% change in exports% change in exports’’value* in 2004value* in 2004

Value in 2004Value in 2004(million US$)(million US$)

Value in 2003Value in 2003(million US$)(million US$)

Rank among leading Rank among leading developing countriesdeveloping countries

Value in 2001 Value in 2001 (million US$)(million US$)

Table 1.: Indicators of Services Exports Performance in Egypt

* % change in comparison to 2001* % change in comparison to 2001** Excludes freight insurance, which is included with insurance ** Excludes freight insurance, which is included with insurance servicesservices*** Includes goods and services acquired from an economy by non*** Includes goods and services acquired from an economy by non--resident travelers during visits shorter than one yearresident travelers during visits shorter than one year**** Includes merchanting and other trade**** Includes merchanting and other trade--related services; operational leasing services; and miscellaneourelated services; operational leasing services; and miscellaneous business, professional and technical servicess business, professional and technical servicesSource: UNCTAD: Handbook of Trade Statistics, 2005Source: UNCTAD: Handbook of Trade Statistics, 2005


Table 2.: Revealed Comparative Advantage for Egypt in Services

0.360.770.441.013.770.540.40Government services n.i.e.Government services n.i.e.

0.340.480.110.03......Personal, cultural and recreational servicesPersonal, cultural and recreational services

0.860.760.951.090.950.860.89Other business services Other business services

0.110.200.110.11......Royalties and license feesRoyalties and license fees

0.080.130.080.21......Financial servicesFinancial services

0.100.120.160.070.371.060.26InsuranceInsurance

0.060.050.080.01......Computer and information servicesComputer and information services

1.681.200.600.00......ConstructionConstruction

1.301.291.431.23......CommunicationsCommunications

0.570.570.600.731.040.670.63Other servicesOther services

1.521.461.470.950.530.440.88TravelTravel

1.341.401.231.541.562.031.47TransportTransport

20042004200320032000200019951995199019901985198519801980

Source: UNCTAD: Handbook of Trade Statistics, 2005 authorSource: UNCTAD: Handbook of Trade Statistics, 2005 author’’s calculationss calculations


Status of Services LiberalizationStatus of Services Liberalization

Multilateral level:Multilateral level:

nn Commitments in new sub sectors (Commitments in new sub sectors (ConstructionConstruction).).nn Refinement of the economic needs test (Refinement of the economic needs test (InsuranceInsurance).).nn Elimination of expiry dates for some sub sectors (Elimination of expiry dates for some sub sectors (Communications and Communications and

InsuranceInsurance).).

In December 2004, Egypt submitted some new offers including: In December 2004, Egypt submitted some new offers including:

nn Air transportAir transportnn Courier services Courier services nn Computer services. Computer services. nn It increased the level of commitments undertaken in It increased the level of commitments undertaken in InsuranceInsurance and and

ConstructionConstruction..

The revised offer was submitted in June 2005 and included commitThe revised offer was submitted in June 2005 and included commitments in ments in new sectors as:new sectors as:

Status of Services LiberalizationStatus of Services Liberalization(Cont(Cont’’d)d)

nn Telecommunication Telecommunication nn Computer Computer nn Postal & CourierPostal & Couriernn Distribution Distribution nn Environment Environment nn Energy Energy nn Construction Construction nn Financial servicesFinancial servicesnn Air Transport Air Transport nn Maritime Transport Maritime Transport nn Legal servicesLegal servicesnn LogisticsLogistics’’ services services nn Cross Border Supply (Mode 1& 2) Cross Border Supply (Mode 1& 2) nn Commercial Presence (Mode 3) Commercial Presence (Mode 3)

Egypt received plurialteral requests for opening up the followinEgypt received plurialteral requests for opening up the following sectors:g sectors:

Status of Services LiberalizationStatus of Services Liberalization(Cont(Cont’’d)d)Multilateral level:Multilateral level:

nn Eight Developed CountriesEight Developed Countries: ¨ Australia ¨ Canada ¨ European Communities ¨ Japan¨ United States ¨ New Zealand ¨ Switzerland ¨ Norway

n One Developing Country: One Developing Country: Indiann Egypt was one of the coEgypt was one of the co--sponsors of the plurilateral request prepared by sponsors of the plurilateral request prepared by

a number of developing countries (India and other Members) in ora number of developing countries (India and other Members) in order der to liberalize mode 4 (Temporary Movement of Natural Persons) to liberalize mode 4 (Temporary Movement of Natural Persons) submitted to a set of developed countries.submitted to a set of developed countries.

The countries who submitted plurilateral requests to Egypt incluThe countries who submitted plurilateral requests to Egypt included:ded:

Status of Services LiberalizationStatus of Services Liberalization(Cont(Cont’’d)d)Multilateral level:Multilateral level:

Regional Level: Two Initiatives:Regional Level: Two Initiatives:

nn (Egypt(Egypt--EU Partnership Agreement)EU Partnership Agreement)

nn (GAFTA)(GAFTA)

Status of Services LiberalizationStatus of Services Liberalization

nn July 2004: Istanbul EuroJuly 2004: Istanbul Euro--Med Ministerial Conference Med Ministerial Conference ““Commitment to Commitment to liberalize trade in servicesliberalize trade in services””

nn During the Istanbul Ministerial Trade Conference (July 2004), thDuring the Istanbul Ministerial Trade Conference (July 2004), the e ““Framework Protocol for the Liberalization of Trade in ServicesFramework Protocol for the Liberalization of Trade in Services”” was was adopted.adopted.

Under the EgyptUnder the Egypt--EU Partnership: EU Partnership:

Status of Services LiberalizationStatus of Services LiberalizationRegional LevelRegional Level (Cont(Cont’’d)d)

nn March 2006: Marrakech Ministerial Declaration,March 2006: Marrakech Ministerial Declaration,Outcomes: Outcomes: ““Negotiations officially launchedNegotiations officially launched””..

nn July 2006: The EuroJuly 2006: The Euro--Med Negotiations on Services, Med Negotiations on Services, ““Trade Liberalization and Right of EstablishmentTrade Liberalization and Right of Establishment”” ..

nn Negotiations to liberalize trade in Services took place in July Negotiations to liberalize trade in Services took place in July 2006, 2006, Specifically Specifically ““The General Provisions of the Istanbul ProtocolThe General Provisions of the Istanbul Protocol””..

nn But No SectorBut No Sector--SpecificSpecific--commitments were negotiated. commitments were negotiated.

Under the EgyptUnder the Egypt--EU Partnership: EU Partnership:


nn Further liberalization of trade in services (GATS+)Further liberalization of trade in services (GATS+)¨ Develop administrative measures to facilitate services liberalization as

stipulated by the GATS. ¨ Simplify regulatory and administrative measures to foster the Egyptian

Services Sector Competitiveness. ¨ Increase information availability for Egyptian suppliers who seek to

access the European market.

nn CoCo--operation is to be considered in the following sectors:operation is to be considered in the following sectors:¨ Transport¨ Financial Services

Under the New Neighborhood Policy, Action Plan includes:Under the New Neighborhood Policy, Action Plan includes:


Regional LevelRegional Level

nn Some members of the GAFTA adopted a special framework for Some members of the GAFTA adopted a special framework for services liberalization based on (GATS +) approach. services liberalization based on (GATS +) approach.

nn The special framework was adopted in December 2003.The special framework was adopted in December 2003.

nn Member countries are:Member countries are:

Under The GAFTA:Under The GAFTA:


•Egypt•Tunisia•Kuwait

•Morocco•Saudi Arabia•Bahrain•Emirates

•Oman•Lebanon•Qatar•Jordan

Regional LevelRegional Level

nn Three meetings were held among the members (October 2004, May 20Three meetings were held among the members (October 2004, May 2006 06 and February 2007).and February 2007).

nn The first round involved Arab countries that presented their The first round involved Arab countries that presented their commitments. commitments.

nn Participants included Egypt , Lebanon, Jordan , Qatar and EmiratParticipants included Egypt , Lebanon, Jordan , Qatar and Emirates. es. nn Egypt has been receiving a number of requests from Arab countrieEgypt has been receiving a number of requests from Arab countries s

mainly concerned with horizontal commitments, business, mainly concerned with horizontal commitments, business, communication, construction, and financial services. communication, construction, and financial services.

nn Egypt made requests to a number of Arab countries to liberalize Egypt made requests to a number of Arab countries to liberalize professional, communication, construction, financial, transportaprofessional, communication, construction, financial, transportation, tion, audioaudio--visual, tourism services, and mode 4.visual, tourism services, and mode 4.

nn In the third meeting Egypt and Jordan agreed to fully liberalizeIn the third meeting Egypt and Jordan agreed to fully liberalize three three sectors (communications, computer, and education).sectors (communications, computer, and education).

Under The GAFTA:Under The GAFTA:


nn Unilateral liberalization is often neglected. Unilateral liberalization is often neglected.

nn Law 8 of 1997 has opened so many service fields Law 8 of 1997 has opened so many service fields (e.g. aviation transport, financial leasing, housing (e.g. aviation transport, financial leasing, housing projects for nonprojects for non--administrative purposes). administrative purposes).

nn The extent of such unilateral liberalization should The extent of such unilateral liberalization should be taken into consideration.be taken into consideration.

How to approach services liberalization?How to approach services liberalization?

Approaching services liberalization:Approaching services liberalization:

nn Incomplete information.Incomplete information.

nn Scattered nature of firms which are probably small.Scattered nature of firms which are probably small.

nn Lack of public awareness among service providers.Lack of public awareness among service providers.

nn Structure of new trade agreements.Structure of new trade agreements.

nn Lack of full transparency of services negotiations.Lack of full transparency of services negotiations.

nn Insufficient mechanisms to involve domestic regulators.Insufficient mechanisms to involve domestic regulators.

Challenges of forming positions:Challenges of forming positions:

(Cont(Cont’’d)d)

Approaching Services Liberalization:Approaching Services Liberalization:

nn Who is exporting what and where and by which mode.Who is exporting what and where and by which mode.

nn Who should be consulted (absence of full representatation for seWho should be consulted (absence of full representatation for services rvices industries).industries).

nn Gaps Assessment: Determine exports interests: (as greater mode 4Gaps Assessment: Determine exports interests: (as greater mode 4 access, right access, right to trade without local establishment, identification of export nto trade without local establishment, identification of export niches as back iches as back office services). office services).

nn Make use of the position statements of private sector in WTO memMake use of the position statements of private sector in WTO members bers available on WTO website.available on WTO website.

nn Determine the interest of domestic firms from domestic regulatorDetermine the interest of domestic firms from domestic regulatory reform y reform which might overlap with foreign requests.which might overlap with foreign requests.

For effective negotiation, it is needed to know:For effective negotiation, it is needed to know:


Approaching Services Liberalization:Approaching Services Liberalization:

nn Determine import interests: (as possible contribution of FDI to Determine import interests: (as possible contribution of FDI to infrastructure, or competitive markets, or enhancing quality of infrastructure, or competitive markets, or enhancing quality of services).services).

nn It is important in the Gaps Assessment to know the status quo It is important in the Gaps Assessment to know the status quo domestically and in the markets you want to target. In many casedomestically and in the markets you want to target. In many cases the s the status quo is more liberal than what is mentioned in GATS schedustatus quo is more liberal than what is mentioned in GATS schedules. les. ““In other words know the water in tariffs for servicesIn other words know the water in tariffs for services””..

nn Establish a mechanism for interEstablish a mechanism for inter--governmental cooperation (creating governmental cooperation (creating joint committees or working groups that meet on regular basis) tjoint committees or working groups that meet on regular basis) that hat include all line ministries and regulatory bodies.include all line ministries and regulatory bodies.

nn What type of non tariff barriers are affecting service exportersWhat type of non tariff barriers are affecting service exporters (make (make sure that you make ask for effective liberalization and not onlysure that you make ask for effective liberalization and not onlytheoretical market access and make sure that the complementary theoretical market access and make sure that the complementary measures for any liberalization move you take are present).measures for any liberalization move you take are present).

nn What role is there for service imports to ensure economic benefiWhat role is there for service imports to ensure economic benefits from ts from more liberal market access?more liberal market access?


nn There is an urgent need to ask each ministry to compile all lawsThere is an urgent need to ask each ministry to compile all laws, and , and regulations including municipalitiesregulations including municipalities’’ regulations affecting their regulations affecting their industry. industry.

nn There is a need to clarify the domestic social objective of eachThere is a need to clarify the domestic social objective of eachregulation.regulation.

nn This should be the starting point to provide some guidance on hoThis should be the starting point to provide some guidance on how to w to negotiate.negotiate.

nn A negative list approach exercise a la NAFTA should be adopted wA negative list approach exercise a la NAFTA should be adopted where here a checklist for all the measures and their relevance should be ea checklist for all the measures and their relevance should be examined. xamined.

nn For the status of other countries, Trade Policy Reviews and AcceFor the status of other countries, Trade Policy Reviews and Accession ssion Reports of WTO can act as a starting point.Reports of WTO can act as a starting point.

Approaching Services Liberalization:Approaching Services Liberalization:(Cont(Cont’’d)d)

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