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Centre de développement

Progress on Africa’s integration boosts prospects for economic transformation in Egypt

 

08/07/2021 – The African Continental Free Trade Area (AfCFTA) will add 32 new trade partners to Egypt and could be an important driver of diversification and upgrading for the country. To benefit from AfCFTA Egypt needs to update its policy approach for economic transformation, according to Egypt’s Production Transformation Policy Review.

The report was launched today under the auspices of the Government of Egypt and with the participation of senior officials from the Development Centre of the Organisation for Economic Co-operation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Africa (ECA), the UN Industrial Development Organization (UNIDO) and the African Export Import Bank (Afreximbank).

Egypt is among Africa’s heavyweights. Although Africa is a small industrial player, accounting for only 2% of world manufacturing, Egypt is the continent’s top manufacturing hub, accounting for 22% of Africa’s value added in this sector. The country’s fast-growing economy has been increasingly attracting the attention of international investors. A growing number of firms are choosing Egypt to produce for the African continent and the Middle East. During 2017-20, Egypt attracted the highest percentage of Foreign Direct Investment in electronics and electrical manufacturing in Africa (21% of the total number of projects), and the second highest of knowledge-intensive ones (14%). However, Egypt still trades little with other African economies, with only 15% of its goods exports going to the continent.

Egypt reacted quickly to mitigate the economic effects of the COVID-19 pandemic. The recovery package mobilised in 2020 accounted for 1.9% of Egypt’s GDP, including tax breaks, loan repayment deferrals and subsidized credit to firms. Since 2017, Egypt has been reforming its governance and regulatory framework to attract investment, foster trade and digitalisation in firms.

Among the key reforms carried out, the implementation of the National Single Window in 2021-an online platform to speed up customs processes- stands out. Egypt has also been investing in raising quality, as demonstrated by the establishment of the National Food Safety Authority in 2017. Finally, Egypt has invested in supporting start-ups and has become one of Africa’s top start-ups hubs, accounting for 14% start-ups and 10.5% venture capital in the continent. However, the country continues to rely predominantly on traditional tools to support industrialisation, including special economic zones.

To go forward, Egypt needs to continue implementing effective reforms. The agenda is vast. This report identifies three game changers are particularly relevant in the current context.

  • Investing in making AfCFTA a real development driver.  An important step will be implementing effective industrial policies and observing their impact by setting up a monitoring and evaluation system to track the progress of AfCFTA’s implementation in relation to Egypt’s Vision 2030 and the National Structural Reform Program (2021-24).
  • Engaging the private sector in innovation. Egypt falls short, by international comparison, of the typology of tools and the budget allocated to innovation and Research &Development. The introduction of fiscal incentives through Law no. 72/2017 is a step forward. Egypt should increase public support for innovation to all firms across all sectors, leveraging on existing tools, such as the ones managed jointly by the Industrial Modernization Center and the Science and Technology Development Fund.
  • Getting policy making ready for the future. Egypt would benefitby rationalising and strengthening implementation institutions, for example by building their capacities to operate across the whole country and by modernising its quality infrastructure system to ensure it operates well in an Industry and Agro 4.0 landscape.

 

The Production Transformation Policy Review (PTPR) of Egypt has been a 21-month policy support process requested by the Government of Egypt and implemented by the Development Centre of the Organisation for Economic Co-operation and Development (OECD) in collaboration with the United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Africa (ECA) and the UN Industrial Development Organization (UNIDO). It benefitted from peer contributions from Malaysia and Italy. The German International Cooperation (GIZ) supported this process.




Click here to read the report

Follow discussions about the report on social media: #PolicyReview & #ProductiveTransformation

For more information, please contact Annalisa Primi, Head of the Economic Transformation and Development Division, OECD Development Centre – annalisa.primi@oecd.org.

 

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