DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. EMA-56a CURRENT ECONOMIC POSITION AND PROSPECTS OF THE ARAB REPUBLIC OF EGYPT December 30, 1972 Europe, Middle East and North Africa Department This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CU,1 RICY EQUIVALENTS 1 Egyntian Pound (LE) = 2.30 US Dollars 1 US Dollar* E 0435 1 3 -- 100 Piasters = 1,000 MIiliemes 1 Tallarie = 20 Piasters The exchange rate wIth the US Dollar remained unchanged in December 1971. TZEINHTS AMI) EASUtEJS 1 hectare = 2.379 feddans 1 feddan = 1.038 acres 1 acre 0.963 feddans 1 sq. kilometer 238 feddans 1 ardeb (metric) 198 liters 158 kilograms (kg) of wheat, lupine, fenugreek =- 155 kg of beans, sesane, lentils, chick peas, clover = 140 kg of maize, millet, aroundnuts - 120 kg of cottonseed, barley 1 kantar = 157.5 kg of seed cotton = 20.2 kg onions = i45 kg sugarcane 1 dariba (rnetric) = 9L to 935 kg of rice (paddy) FISCAL YEAH The Government's fiscal year ends on June 30. This report is based on the findings of an Economic Mission which visited Egypt in March/April 1972. The mission was composed of the following members: Robert Armstrong - Chief of lission Roger Carmignani - Industrial Economist Franz Heidhues - General Economist Hans-Joachim Lell - Industrial Economist S. Rangachar - Economist R. Venkateswaran (part- - Special Projects time) - Adviser Carlos Merayo (part-time) - Debt Specialist William Grau - Debt Specialist Claude Brisson (Consultant part-time)- Transport Economist William Brown (Consultant)- Manpower and Rural Development Specialist Wyn Owen (Consultant) - Agricultural Economist TABLE OF CONTENTS Page No. PASIC DATA STJIMAlY AND CONCLUSIONS i I. BACKGROUND AND RECENT DEVELO?LOTITS 1 II. POPULATION AND ElWLOYMENT 9 III. EDUCATION AND SOCIAL POLICY 15 IV. AGR?ICULTURE 20 V. INDUSTRY AND TOURISM 28 VI. PFUBLIC FNANCE, MCNEY kN PilICES 43 VIi. BALANCE OF PAYMENTS AND EXTERNAL DEBT 55 VIII. PROSPECTS AND POLICY ISSUES 69 Appendix: The Projection Model and its 78 Assumptions STATISTICAL ANNEX RRD 10047 sr~~~~~~~~~~~~~~~~~~~~~~~~~~4 Pr PS . .,.' o^ S I NAI \ A ~~~~~~" PART AMA ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~A C - - - - - - - - - - - - - - - , t a X - ~~~~~ARAB REPUBLIC OF 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- - - -;Q - -- ......... d l .... vbe ...SAr/rsE t '----'- -t---- I f 5< r1 \ + . _t wamo a ]ues rn; eseXzi s t #fi1s ------------- /55 \A = AG;I1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ e,,.9 '"';I,N,_ COUNTRY DATA - EGYPT POPULATION DENSITY i,O0~~,0OO km2 ~ Rate of Growth: 2.5% (from 1960 to 1970) 350 per km2ofihbtdae 1,00X,000 km2 34.1 miZlicn gmid-1971) )~9540 Pper kmz2 of inhabited area OPCT'SkTIN CHARACTERI-STCS . (1970) HEALTH (1970) ,r'de Birth Rate per 1,000) 35.6 Population per physician: 2025 Jrude Death Rate (per 1,000) 15.0 Population per hospital bed: 455 Infant Mortality (per 1,000 live births) 119 (1969) NUTRITION EDUCATION Calorie intake as % of requiremients: 103% (1970) Adult literacy rates40% (1971) Per capita protein intake (granmes) t 83.5 (1969) Primary school enrollment:70% (1970) GNP PER CAPITA: $206 (1970/71) 1/ GROSS NATIONAL PRODUCT IN 1970/71 2/ ANNUAL RATE OF GROWTH (g, constant prices) Us $ m. 1960-65 1 965-O 1971 GNP at Market Prices 7,242 1000 6X 2.9 3.4 Gross Dxmestic Investment 868 12.0 14.9 -3.9 -12.2 Gross National Savings 641 8.9 Current Aocotmt Balanoe -227 3.1 - - - Exports of Goods, NFS 1, 017 114.0 5.7 24.7 imports of Goods, NFS 1,380 19.1 11.2 12.5 Transfers, net receipts 272 3.8 - CUTIUT, LABOR FORCE AND PRODUCTIVITY 1( 1969_7O Value Added Employment Value Added Per Worker IS XNn __M ln. us $S_ Agriculture 1,793 31 4 2 62 Industry 1,654 28 1.36 16 1216 1711 Services 2,424 41 2.86 35 848 119 Total/Average 5,871 100 8.27 100 710 100 GOVEP2`.aT FINANCE Central/Federal Government (IS Mlnt. % of GEDP 1 970hl ~~1 970771 1969,/71 Current Receipts 865 28.0 28.0 Current Expenditure 897 29.0 27.2 Current Surplus -32 1.0 0.8 Capital Expenditures 358 11.6 11.7 External Assistance (net) -2 -0.1 -o.4 1/ The Per Capita GNP estimate is at 1970 market prices, calculated by the sane conversion technique as in the 1972 World Atlaa. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 2/ GNP and savings are defined here inclusive of net transfer receipts, most of which consist in payments from Arab c(mntries to compensate Egypt for the loss of Suez Canal dues. 3/ Accurate conatant price growth rates are not available owing to insufficient information concerning trade deflators. Moreover, the export growth rate for this period is biased by the drop in Suez revenues after 1966/67. Between 1967/68 - 1970/71, exports ( in current prices) rose on the average by 12.5 percent annually, imports by 10.6 percent annually, See also the note to Table 2.2 in the Statistical Annex. CWUNTHY DATA - EYPT Dec. Apr. MONEY, CREDIT and PRICES 1965/66 1968/69 1969/70 1970/71 1971 1972 (Million LE outstanding, end period) Money and Quasi Money 912 1005 1106 1104 1163 1175 Bank Credit to Government 870 1028 1133 1232 1333 - Bank Credit to Non-Government Sector 397 435 456 491 549 _ (Percentages or Index Numbers) Money and Quasi Money as % of GDP 1/ 42 37 37 36 General Price Index (1964/65 o100o 102*9 108*2 110.4 111.0 - Annual percentage changes in: General Price Index 2.9 1 *3 2.0 0.5 2.5 2/ - Dark Credit to Government 8.8 5.2 10.2 8.7 13.4 71 8.L 4,' Bank Credit to Private Sector 4.7 7.4 4.9 7.6 5.1 _t 1i 0 r/ BALANCE OF PAYMENTS, 1968/69-1970/71: (millions US $) MECH1IDISE EXPORTS 1968/69 1969/70 1970/71 (Average of period. 1968769-1970/71) Exports of Goods, NFS 833 ($ ml9o % Inports of Goods, NFS 1037 1274 1412 Resource Gap (deficit ) -204 -338 -447 Raw cotton 338 45 Cotton yarn. and textiles 118 16 Factor Payments, net -32 -31 -41 Rice 92 12 Transfers, not 288 320 272 Onions 16 2 Balance an Current Account 2 -49 -216 ALL other commoddities 161 25 Medium and Long-Term Loans -68 -18 1B Total 745 100 Disbarsements (178) (249) (349) Ajaortization (244) (267) (331) Other Capital, net 34 61 42 S lERNAL DEBT, DECEER 31. 1971 Overall Balance (deficit _ ) 18 -6 156 -S $ _ Public Debt, incl. guarant eed 1,371 Errors and Omissions 5 -5 -2!5 Non-Guaranteed Private Debt - Total Outstanding & Disbursed 1i Reserve Position end ofs 1968 1969 1970 1971 -ross eserves 35 7 -7 Net Reserves -350 -417 -535 -768 DEBT SERVICE RATIO f m970'L 5/ RATE OF EXCHAWrE Public Debt, incl. guaranteed IEE.D data 20 Through - 1971 uS $ 1.00 -E 0.435 JE 1.00 - US $2.30 IEHD/IDA LENDING, (Sept, 30,1 972) (MiLlion US $ Since - 1971 IBRD IDA us $ 1,O0 = LE 0.435 Ou)tstanding and Disbursed T737? O24 TE 1.00 - US $2.30 Undisbursed - 55,6 Oitstanding incl. Undisbursed 13.7 ITZi5 1/ End period stock as % of period GDP. 7/ Change in consamer price index from 4th quarter of 1970 to 4th quarter of 1971, V Based on annual rate from December 1970 - December 1971. 7/ Based on annual rate from April 1970 - April 1971, wi.th slightly different coverage from previous years, as reported in IFS. 5/ Ratio of debt service to exports of goods and non-factor services pls transfers. SUMMARY AND CONCLUSIONS 1. In the twenty years which have passed since the Revolution of 1952, Egypt's economy has undergone a transformation from an essentially private enterprise economy to a largely government-owned and centrally- controlled system. The years 1956 and 1961 were actually more significant turning points than 1952, from the standpoint of economic organization and policy. In the first years of the regime which took power in 1952, economic and social policies were directed mainly at improving the con- ditions in which private enterprise could flourish, although the Government did implement a major land reform program and approved major reclamation schemes such as the High Dam and New Valley developments. Following the Suez War of 1956, the influence of the foreign community in the economic life of the country was largely eliminated, and in 1957 the Government launched an Industrialization Plan. In 1960, Egypt moved a long step to- wards comprehensive planning with its First Five Year Plan. Already by 1960 the Government had assumed responsibility for nearly all investment. Following the nationalizations in 1961 of the bulk of industrial, commer- cial and financial enterprises, most current production decisions also came under State control. In the course of the 1960's, State control over trade, transport, services and agriculture was also extended and strength- ened. The management of the Egyptian economy is now highly centralized, and the functioning of market forces has largely been displaced by direct controls. 2. With the impetus of the First Five Year Plan, Egypt's economic growth accelerated in the early 1960's to an average annual rate of about 6 percent - nearly reaching the ambitious Plan target of 7 percent. This was considerably faster than the pace of growth in the 1950's. However, the increased investment rate of the early 1960's was accompanied by grow- ing defense spending (reflecting Egypt's involvement in Yemen), and this led to serious inflationary and balance of payments' pressures by the mid-1960's. In 1966/67, the Government was compelled to impose severe import restrictions and deflationary policies, resulting in negligible growth in that year. Thus, the war of June 1967 compounded an already dif- ficult situation, and there was a substantial fall in GNP in 1967/68. 3. In the succeeding three years, the economy recovered rapidly, and the growth rate of GDP a7eraged about 5 1/2 percent annually. However, defense spending has taken a progressively greater share of Egypt's re- sources (reaching 15 percent of GNP in 1970/71), largely at the expense of investment expenditure, which has fallen to about 12 percent of GNP in recent years. In the aftermath of the 1967 war, Egypt abandoned its sys- tem of medium-term planning. A new Five Year (1973-77) Plan is currently under discussion at the highest levels of Government, but it is not yet clear when this Plan is to be promulgated. This Plan aims at a 6 1/2 per- cent average annual. growth in GNP. 4. While the long-term growth potential of the Egyptian economy appears very promising, the near-term prospects for approaching the Plan tar- get will remain much less promising in the absence of major new efforts : 9 ~- ii - to remove or overcome the formidable proximate constraints to development. The most severe constraints appear to be: (a) the defense burden; (b) the scarcity of convertible foreign exchange (including funds not tied to newr investment projects); (c) the debt burden (notwithstanding some recent reschedulings); and (d) the rigid and arbitrary nature of the decision-making process, wherein a highly centralized administration regulates nearly all. production, distribution, employment and financial decisions, leaving little a room for the market mechanism or for individual incentiveS to play a role. Rapid population growth also looms as a critical constraint. 5. The overriding determinant of Egypt's current economic performance and prospects is undoubredly the conflict with lsrael. This affects nearly every aspect of the economy, including the share of defense spending (presently about 35 percent of total Government expenditure), the deficits in the balance of payments, the direction of trade, the sources and levels of capital finan- cing (both domestic and foreign), the sectoral allocation of resources, em- ployment and price levels, tourism and transport development, and the prospects for regional political and economic cooperation. 6. in the period 1968/69-1970/71, the value added in agriculture rose by more than 2 percent annually, in industry by 10 percent and in serv- ices by 5 percent. Also in this period, public consumption rose by 12 percent annually (defense expenditures by twice that rate), private consumption rose by 5 1/2 percent annually, and the growth of exports (not including factor services) averaged 9 vercent annuall.y. However, despite a rapid growth in Imports 'averaging 12 percent per year), investment remained low (under 12 percent of GNP). ThIs recent period was also been characterized by increased deficit financing, growing inflationary pressures, and severe balance of payments difficulties. 7. Despite the considerable constraints to development imposed by the state of hostilities, there have also been some auspicious develop- ments in the economy, other than those implicit in the growth figures cit-ed. These include a rapid growth in Governmlent revenues, fuller util- ization of industrial capacity, a resurgence of tourism in 1971 and 1972, the conclusion of new trade, aid and/or debt rescheduling agreements with Western countries, agreement with European financiers on the terms for a major ($360 million) pipeline investmenit, and some promising indications of future petroleum possibilities. S. The advent of the Sadat Government has also brought some tentative moves iLn the direction of liberaAizationl and decentralization in economic decision-maki ng Also, in an effort to attract private Western and Arab capital, an International Bank for Foreign Trade and Development was estab- lished and a new Investment Code was adopted. A reorganization of the banking system is underway, and there are plans to restructure the public sector industries to give firm managements more autonomy and to provide greater incentives in the wage structure. A much-needed Price Board has also been created to study ways in which the price system can be reformed - iii - to achieve more efficient allocation -- in keeping with the income distri- bution and other goals of pricing policy. All of the above actions or statements of intention appear to be constructive movements, and they may be taken as evidence of more flexible economic attitudes. Thus far, however, their net effect on the economy has been small. 9. There are also some disturbing elements in the picture of Egypt's recent economic performance. For example, not only have investment expendi- tures been squeezed by the growing defense spending, but so have needed current developmental expenditures. Employment has grown only slowly (by about 2 percent annually in recent years), resulting in an increase in unemployment and underemployment. Claims by the military on skilled and managerial personnel have had an adverse effect on the civilian economy. Average wages have risen faster than productivity, adding cost-push infla- tionary forces to existing demand-pull forces, with a high level of Central Bank deficit financing contributing to the latter. Price controls are sup- pressing some of the inflationary pressure. The rapid rise in imports has also absorbed some of this pressure. However, the consequence of the rapid import growth has been a deterioration in the balance of payments. Net foreign exchange reserves have fallen steadily to such an extent that by mid-1972 foreign liabilities exceeded foreign assets by the equivalent of six months imports. 10. The balance of payments situation remains a critical constraint to Egypt's short-run development. Although transfer receipts from Arab countries are more than sufficient to offset the loss of Suez Canal reve- nues, the overall availability of foreign exchange has not been sufficient to finance both the servicing of debt and a level of imports consistent with the requirements of rapid and balanced growth of the civilian economy. While a number of Egypt's major investment projects are supplied and financed from Russia and other Eastern countries, the continuing scarcity of convertible exchange is still resulting in a hand-to-mouth financing of imports from, and debt service to, convertible currency countries. This situation (together with the political situation) has precluded the possibility of meaningful multi-year planning, and allocative efficiency has suffered as a result. The insufficiency of imported raw materials is no longer such a serious cause of idle capacity as in the recent past, but the exchange problem continues to underlie current defaults on debt service (to Germany and Japan), shortages of spare parts and replacement equipment, and a low level of overall invest- ment. In addition to the need to replace existing capital stock in some sectors (especially transport), some new infrastructural investments are badly needed -- especially those associated with urbanization. 11. Egypt has a serious demographic problem. The population is already the most densely settled in the world, and is growing rapidly. A high rate of natural increase is combined with a high rate of internal migration to urban areas, resulting in growing urban congestion -- espe- cially in Cairo. Especially in light of Egypt's already high dependency ratio, and its low rate of participation in the labor force, this rapid pop- ulation growth is burdening the economy by creating expensive needs for infrastructure and social services -- at the expense of foregone capital - iv - deepening. In the longer run, continuing rapid population growth portends worsening problems of unemployment and underemployment, and even greater pressure on the land. A promising beginning has been made on a national family planning program, but much more needs to be done -- and quickly. The future costs of delay could be extremely high. And greater attention will need to be given to issues relating to population location and migration, and to the implications of development policies for the balance of urban vis-a-vis rural development. 12, Agriculture remains Egypt?s most important sector in terms of its contribution to GDP (about 30 percent), its provision of employment (about half of total employment) and its generation of foreign exchange earnings (about 55 percent of total exports in unprocessed form, about 80 percent including processed farm products). The growth rate of value added (in real terms) in agriculture has averaged about 3 1/3 percent arnually over the past fifteen years. Egypt has already attained quite high levels of physical productivity in agriculture (yields per hectare) even without having introduced the new high yielding strains of wheat anid rice. But the growth rates of both yields and labor productivity have declined in recent years. Part of this decline was no doubt related to the 1967 war and its aftermath, and part to the related reduction in the growth of fertilizer applications. On the whole, however, there are grounds for- optimism concerning the prospects for further improving productivity and for raising the contri- bution of the sector to export earnings, domestic savings and employment. Significant progress has been made recently towards a better integration of agricultural po-icy. This is reinforced by an appropriate snift in investment priorities, from expensive new land development to integrated projects and programs wihch promise higher short-term returns, These include drainage and soil amelioration, land and cropping consolidation projects, further adjust- ments 4in the cropping system in favor of summer crops and vegetables and fruits, improved seeds and increased fertilizer use, and the expansion of protein food pro&uiction -- especially poultry and fish. However, the impact of this change in priority is yet to be felt, and the scarcity of capital will rer:ain a riajor constraint limiting the undertaking of these needed programs. A, number ol other planned projects are highly complementary to agricultural cevelopwLent. These include the rural electrification progra:m, expansion of the fertilizer industry and of the textile and other agricultural product processing industries, and investment in rural education, storage and marketing facilities. Si'rnce tse nationalization of indust2a in 1961, the Government's industrial policy has emphasized import-substitution and self-sufficiency targets The development of some capital-intensive basic iindustries has also been stressed. Iron and steel manufacturing and transforming industries, together with crude oil extraction and refining, have continued to receive hiLghest priority. It seems doubtful, however . that this inward-looking orientation has been optimal. Owing to its agricultural and other natural resources, its geographical location, the structure of domestic demand, the availabili'y and skill endowment of its low-wage force, and the technical and managerial capacities of its trained personnel, Egypt is well equipped to develop a wide range of industries directed both to export and domestic markets. 'Moreover, its continuing balance of payments difficulties emphasize the need for its pattern of industrial development to be geared to take ad- vantage of these resources. The extreme degree of centralization in adminis- trative control over pricing and allocative decisions has largely done away with the signalling and clearing functions of market forces, and has contri- buted both to the high cost of industrialization and to inefficiency in planning and management. There were some portents of changes in policy in 1971, pointing to a somewhat more outward-looking approach. There have also been indications that there is now a lesser degree of interference in industrial policy and management on the part of Government officials. 14. Egypt's industry has great potential for future growth, and is counted upon to remain the leading sector in the country's development. The domestic market will provide a substantial base for enlarged produc- tion -- particularly if the civilian economy regains momentum. A factor of significance in this context is that there appears to be a greater equality of income distribution in Egypt than in most countries at a similar low level of per capita income. There are also good export prospects in goods where Egypt has a demonstrated comparative advantage, as in textiles, food, leather, and engineering goods industries. Moreover, important new comparative ad- vantages are emerging -- partly as consequences of oil and gas discoveries and completion of the Aswan Dam -- in other resource-based industries such as fertilizers, cement and building materials, petrochemicals, and electricity- consuming industries. The prospects for expanding production and exports of crude oil -- a key factor for the economy because of the immediate need for foreign exchange earnings and savings -- are uncertain. But the outlook is not promising for the next two years, when annual production is expected to remain at 15 million tons or less. However, it is thought by most ob- servers that the medium-to-longer term prospects for increased oil extraction are reasonably bright. In any event, the new gas and electricity resources constitute valuable new inputs for further industrialization. 15. Egypt has a vast potential for tourism development, by virtue of its historical sites and treasures, its modern cities, its climate and beaches, its hospitality to foreign visitors, and its moderate prices for tourist services. Its special attractions for Arab visitors are obvious, and its geographical situation is also favorable with respect to tourism from both West and East. In the years 1968-70, however, the number of tourist nights spent in Egypt was less than half the levels reached in 1965 and 1966. There was a strong resurgence of tourism in 1971 and in the first months of 1972, reflecting some easing of ternsions in the Middle East. Tourism could be a leading sector in Egyptian development if peace were restored. But there also appear to be good prospects for moderate growth (perhaps by 10 percent annually) even in the face of continuing ten- sions in the area. 16. In the draft Five-Year Plan for the period 1973-77, industry is given highest priority, claiming one-third of the LE 3 billion investment - vi - planned over the period. Next in importance is transportation/communica- tions (23 percent of planned investment'), followed by agriculture (13 per-* cent). Tourism is given very low prior:lty, with private foreign investment relied upon to provide most of the needed investment funds. The investment priorities indicated in this Plan differ somewhat from the composition of investment in the early and mid 1960's, when the High Damn and other agricul- tural projects were emphasized. The present Plan emphasizes iron and steel and petroleum development, while education and health are also expected to receive greater emphasis. Investmenl: planning in industry continues to be based mainly on physical production targets to achieve se1.f -sufficiency. Sectoral priorities are still established at the highest level of Government, and cost/benefit criteria are not employed in the choice of projects. 17. The import component of the Plants projected invesc;.zeant is estimated at about LE 750 million -- about a quarter of the total. The sources of financing the Plan have not yet been fullly determined, but the share of net foreign financing (not including inflows classified as transfers) is projected at below 10 percent of investment. However, achievement of thlese targets would imply a major effort in domestic resource mobilization -- which will se dif- ficult to reconcile both with income distribution objectives and w-ith the priority given to military expenditure. The Plan is apparently premised on a growth of public consumption of 6 percent annually -- less thar, haLf the rate of recent years. Such restraint in public consumption wv.rould seem to imply a considerable cutback in military spending, but whether this can be achieved remains an open question so long as the recovery of occupied territory remains Government's highest priority. IS, The sal'ent feature of Egypt s fiscal development in recent years has been the rapid increase in military spending (26 percent annually in current prices between 1966/67-1970/71), while non-defense current expenditures - though rising in 1969/70 and 1970/71 -- had still not recovered to their pre-war level as of 1970/71. Similarly, public sector fixed investment also rose somewhat in the period 1968/69-1970/71, but still did not reach the level attained prior to the 1967 war. On the positive side, it should be noted that there has been a major effort to raLise revenues. Tax receipts rose by nearly 12 percent annually in the period. 1967/68-1970/71, while rapidly rising social security premia also constituted an important effective source of revenue. Nevertheless, total public sector savings remained virtually unchanged in the three years 1968/69-1970/71, their share in GDP falling to about 8 percent and their share in public investment finaancing falling to about 72 percentt in 1970/71. With net external financing of the public sector being nil (actually slightly negative), Central Bank finance rose to about a quarter of total investment financing. 19, Egypt's balance of payments difficulties worsened in 1970/71 as the trade deficit widened to LE 173 mtillion and the current account deficit reached nearly LE 100 million. In contrast to the three preceding years, when t9here had been a net outflowr of medium-and-loAg term capital, there was a small (LE 8 million) net inflow in 1970/71, as amortization payments on the debt absorbed 95 percent: of the gross capital inflow. As i.n previous years, however, there was a net resource transfer from Egypt to abroad. - vii - 20. Raw cotton exports still account for nearly half of Egypt's commodity exports. The stagnation of cotton exports in 1970/71 largely explains the small 3 percent rise in total commodity exports in that year. Egypt has been diversifying its exports in recent years (only a decade ago cotton exports accounted for 70 percent of total exports). In recent years cotton textiles, petroleum, citrus, and cement have been among the rapidly growing exports. The share of Egyptian exports directed to Russia reached nearly 40 percent by 1970, including about one-third of total cotton exports. Egypt maintains substantial trade deficits with her major suppliers from Western Europe, and apparently substantial trade surpluses with the Soviet Union and the Eastern European bloc as a whole. 21. Egypt's outstanding external debt at end December, 1971 was reported at US $1.3 billion disbursed, or $1.8 billion including undisbursed credits - equivalent to about one-fourth of GNP. The USSR is Egypt's principal creditor, followed in importance by the United States, Kuwait, Germany and Italy. In 1971, the average terms of newly contracted loans (as reported to the IBRD) were: interest rate, 6 percent; maturity 8 years; grace period 3 1/2 years; and grant element, 17 percent. Egypt's debt service burden was indicated by a debt service ratio in 1970/71 of about 32 percent according to balance of payments data. The near-term debt servicing burden promises to be very difficult, as 36 percent of the reported outstanding debt at end 1971 was due to be amortized within two years, 51 percent within three years, and 74 percent within 5 years. The debt data noted here reportedly do not include military debt. 22. Projections of Egypt's principal macroeconomic variables suggest that a continuation of the present low savings rate (including transfers, 12-13 percent of CDP in recent years, 9 percent in 1970/71) will almost certainly lead to stagnating per capita income. Certainly if the 6b percent growth target of Egypt's draft Plan is to be realized, then there will have to be severe restraint on both public and private consumption growth and a major effort to increase the volume and soften the terms on new capital inflows. In light of Egypt's pressing balance of payments' pressures, short-run priorities should emphasize programs or projects having both a short gestation period and an immediate export-earning or import-saving impact. And in keeping with long-run needs, the criteria of employment creation and rural location should also be given considerable weight. 23. The Egyptian economy does have considerable strengths, advantages and opportunities. In comparison with many less developed countries, Egypt is relatively favored in terms of: its geographical, natural, and human resources; the size of its domestic market; the extent of its existing infra- structural development; its technical and managerial experience in agriculture, industry, and other sectors; and its importance to major developed countries and to other Arab countries. Egypt is one of the few countries which may be able to benefit simultaneously from both the "Green Revolution" and large petroleum revenues. And from the standpoint of the country's creditworthiness, the prospects for export growth could be quite good if investment were ade- quate. Moreover, it may be emphasized in this context that any country's - viii - long-term creditworthiness is fundamentally a matter of its; growth potential, and its capacity to transform savings into foreign exchange. This report indicates that Egypt has very promising possibilities. 24. If these many growth opportunities were exploited in accordance with economic criteria and with improved economic management, then Egypt's overall development prospects could be excellent. But there remains the question of whether sufficient domestic and external resources can be mobilized. And this will depend in large measure on the problematic pros- pects for peace, and to a lesser extent, for petroleum. To a large extent, Egypt's ability to mobilize the needed external resources will be determined by her investment climate and her creditworthiness rating. The reduction of political tensions and the changes irn economic policy in the past year or so have improved the outlook, but not by enough to ensure the realization of sustained rapid development. The implication of Egypt's debt profile is that steadily and rapidly rising gross capital inflows will be needed even to sustain a zero net resource transfer, unless there are genuine long-term debt reschedulings or unless the terms on new inflows are very much softer than those applied to recent borrowings. This debt burden makes it all the more imperative that a major effort be made to mobilize domestic resources for development. I. BACKGROUND AND RECENT DEVELOPMENTS 1. Twenty years have passed since the Revolution of 1952, when a group of young army officers took power in Egypt. In this period, Egypt's economy has undergone a major transformation from an essentially private enterprise market economy to a largely government-owned and centrally controlled system. Other salient developments of the period included implementation of a major land reform program, construction of the Aswan High Dam, industrialization on a broader scale, and the waging of three wars (the Suez War of 1956, the Yemeni involvement of the mid-1960's, and the June War of 1967). All of these developments profoundly affected not only Egypt's economic organization and institutions but also the structure of production and employment and the direction of aid and trade relation- ships. 2. The Free Officers who came into power in July 1952 were not origin- ally committed to State control in the economic field. Indeed, in the first years of their rule, their economic and social policies were directed mainly at improving the conditions in which private enterprise could flourish. The principal economic innovations of the new regime were a major land reform program and an increased emphasis on agricultural development, as shown by the approval of major land reclamation schemes such as the High Dam and New Valley. 3. The year 1956 was more of a turning point in economic and social policy than was 1952. The Suez War resulted in a consolidation of the author- ity of the new regime, following which the influence of the considerable for- eign community in the economic life of the country was largely eliminated. Not only was the Suez Canal nationalized, but with the sequestration of British and French property, the Government acquired control over the main part of the banking and insurance system and some business enterprises. In 1957, the Government announced its commitment to comprehensive planning, to begin three years later. In the interim, an industrialization program was begun and the role of the State in promoting long-term growth increased substantially. By 1960, the Government had already assumed responsibility for nearly all investment, whereas before 1952 it accounted for less than a quarter of total capital formation. 4. The early 1960's comprised still another phase in Egypt's move- ment towards Arab Socialism and comprehensive control of the economy. In 1960, a Five Year Plan was launched with the aim of achieving a growth rate of GDP of about 7 percent annually. In 1961, the Government nationalized the bulk of industrial, commercial and financial enterprises -- both foreign and Egyptian. Land, housing, internal trade and transport were not much affected by these nationalizations, though the Government did redistribute more land and impose rigid controls on rents. In the course of the 1960's, the public sector extended its control over trade and transport; through the control of producers' cooperatives and other institutions, its control of agriculture was also strengthened. Small industry and some services (includ- ing housing) have remained in the private sector. But these too are subject to the pervasive price controls and rationing which have largely displaced the role of market forces in determining resource allocation. -2- 5, A Second Plan. for the period 1965/66 to 1969/70, was prepared but never implemented. After the 1967 war, the system of medium-to-long term planning was abandoned; planning since then has been on an ad hoc short-term basis. 'While reference is made to annual plans, in practice an annual budget and frequently-revised foreign-exchange budget appear to have been the main instruments of planning. Various drafts of a third Five-Year Plan have been under discussion for several years, but political and economic uncertainties have precluded adoption of another plan. Now the Government has formulated the broad outlines of a Ten-Year Plan for the period 1973-82. The priorities and principal projects envisaged for the first five years (1973-77) are cur- rently being discussed in government forums, while technical -ork on the Plan is continuing within the various Ministries. 6. The predominant role of the public sector in the Egyptian economy is indicated by the fact that public consumption now accounts for nearly 30 percent of total consumption, while pub:Lic investment accounts for about 90 percent of total investment. In such a centrally directed economy, the lines are blurred between fiscal, pricinlg, ard wTage policies, Costs and prices are administered not so much towards achieving economic efficiency as towards achieving the Government' s goals respecting income distribution and resource mobilization. Savings as well as investments are largely directed through the budget; for example, nearly all savings generated by the Dublic authorities and economic organizations are transferred via the Treasury. Investment financing for the business sector is provided mainly by Government loans or participations, fhile household savings mobilized through financial intermediaries and corntractoral savings schemes are also channelled through the budget. Thus, Egypt's public finance, decisions are crucial not only with respect to mobilizing and allocating resources for economic growth, but they also bear heavily on issues of income distribution, price stability, and balance of paymente; management. 7. The most severe constraints to Egyptian economic development appear to be: (a) the defense burden; (b) the immediate need for convertible foreign exchange (including funds not tied to new investment projects); (c) the debt burden (notwithstanding some recent reschedulings); and (d) the rigid and arbitrary nature of the decision-making process, wherein a highly centralized administration regulates nearly all production, distribution, employment and financial decisions, leaving little room for the market mec_hanism or for individual incentives to play a role. Rapid population growth also looms as a critical constraint. 80 The overriding determinant of Egypt's current economic performance and prospects is undoubtedly the conflict with Israel. This affects nearly every aspect of the economy, including the share of defenses spending (pre- sently about 35 percent of total Government expenditure, 15 percent of GNP), the deficits in the balance of payments, the direction of t-rade, the sources and levels of capital financing (both domestic and foreign), the sectoral allocation of resources, employment and price levels, tourism and transport development, and the prospects for political and economic cooperation in the region. - 3- 9. The balance of payments situation remains a critical constraint to Egypt's short-run development. Although transfer receipts from Arab countries have been more than sufficient to offset the loss of Suez Canal revenues, the overall availability of foreign exchange has not been sufficient to finance both the servicing of debt and a level of imports consistent with the require- ments of rapid and balanced growth of the civilian economy. While a number of Egypt's major investment projects are supplied and financed from Russia and other Eastern countries, the continuing scarcity of convertible exchange is still resulting in a hand-to-mouth financing of imports from, and debt service to, convertible currency countries. This situation (together with the political situation) has precluded the possibility of meaningful multi- year planning, and allocative efficiency has suffered as a result. The insufficiency of imported raw materials is no longer such a serious cause of idle capacity as in the recent past, but the exchange problem continues to underlie current defaults on debt service (to Germany and Japan), shortages of spare parts and replacement equipment, and a low level of overall invest- ment (about 12 percent of GDP in 1970/71). In addition to the need to replace existing capital stock in some sectors (especially transport), some new infrastructural investments are badly need74d - especially those associated with urbanization. Congestion in Cairo is already a major problem, and with the labor force growing by about 3 percent annually, it is evident that urban unemployment and under-employment are likely to become increasingly serious problems. The Growth Record 10. In the first half of the twentieth century, per capita income in Egypt probably fell, perhaps by as much as 20 percent. The economic position improved after World War II, and income per head began to rise slowly, despite the rapid increase in population which began at this time. From the revolution of 1952 through the mid-and late 1950's, the GNP probably grew at between 3-1/2 - 4 percent annually. In the early 1960's, following the introduction of the First Development Plan, investment increased substantially, and the growth rate rose to over 6 percent per year. However, this acceleration was accompanied by growing public consumption, and was not matched by a corres- ponding rise in domestic savings. The control of domestic prices suppressed the growing inflationary pressures, but with an adverse effect on the balance of payments. Insofar as foreign exchange reserves were virtually exhausted by the early 1960's, the consequence was a rapid increase in external debt - both long-term and short-term. Import restrictions and exchange controls were tightened, but these restrictions caused shortages of imported inputs which in turn led to an underutilization of capacity. 11. In contrast to the first half of the 1960's, the second half of the decade was marked first by a slowdown in economic activity (in 1965/66 and 1966/67), then by the adverse economic effects of the 1967 war and its aftermath. The slowdown beginning in 1965/66 was attributable to inadequate imports for industrial growth. In 1966/67, an unfavorable harvest aggravated an already difficult external payments position. In response, the authorities further tightened import restrictions and carried out deflationary fiscal and monetary policies, which included cutbacks in both military and investment .4- spending. Economic growth in 1966/67, therefore, was negligible. Thus, the Middle East war of June 1967 came at a time when the economry was already in difficulty. Among the immediate adverse effects of the war were: the loss of foreign exchange earnings from the Suez Canal and from tourism, damage to industry and infrastructure in the Canal zone, and the loss of oilfields in Sinai. GDP declined in 1967/68 by an estimated 2-1/2 percent, and the stabilization measures adopted earlier were reinforced, Import restrictions were tightened again, taxes were increasetd, and both investment and non-defense current expenditures were severely contained. 12. The economy showed considerable resilience in the face of the dislocations caused by the war. With the help of Arab financial support and increased petroleum revenues, GDP rose in 1968/69 by over 5 percent. A recovery of industry and increased construction activity (both civilian and military) provided most of the impetts. In 1969/70 and 1970/71, despite considerable constraints imposed by the state of hostilities with Israel, there were other auspicious developments in the economy. These included: continuing agricultural growth, a fuller utilization of industrial capacity (with industrial growth of about 10 percent annually), a resurgence of tour- ism in 1971 and 1972, the conclusion of rnew trade, aid and/or debt rescheduling agreements with Western countries, agreement with European financiers on the terms for a major ($360 million) pipeline investment, and some promising in- dications of future petroleum potentialities. GDP growth during the last two years (FY 1969/70 and 1970/71) averaged about 5-1/2 percent, with some slowdown evident in the latter year. The following table provides a summary of the overall evolution of the major economic variables in recent years: Table 1.1 Changes in Major Economic Variables Three-Year 1966/ 1967/ 1968/ 1969/ 1970/ Ave. Annual Change National Accounts 1967 1968 1969 1970 1971 1968/69-1970/71 (In {Rbil1ions, 1964/65 prices) (Percent) GDP (factor costs) 2.10 2.05 2.16 2.31 2.41 5.6 Agriculture .58 .60 .60 .64 .63 2.1 Industry /1 .56 .54 .61 .66 .72 10.1 Services .96 .91 .95 1.01 1.06 5.2 Gross Investment .35 .31 .28 .36 .32 1.0 Exports, gnfs .42 .28 .33 .35 .3.6 8.7 Imports, gnfs .48 .46 .47 .58 .65 12.0 Financial Indicators (In BE millions, current prices) Balance of payments, current deficit 48 71 23 21 94 Ordinary revenues 597 484 534 618 635 9.5 Current expenditures 663 616 651 835 897 13.4 of which: defense /2 (167) (224) (268) (386) (423) 23.8 Public sector savings ,. 178 258 260 256 12.9 Claims on gov't /3 985 1010 1045 1176 1333 9.7 Net foreign assets /3 -131 -135 -144 -188 -272 (1966/67 = 100) Consumer price index 100 102 106 109 114 3.7 /1 Including mining, power, construction and public utilities. /2 Assuming 70% of Emergency Fund is designated as defense spending. 73 Figures apply to end of calendar year. The Changing Composition of Output and Expenditure 13. As background to the analysis of recent developments which follows, two tables below summarize some of the salient aspects of the structural changes which have taken place in the Egyptian economy in the past 15-20 years: 6 Table I-2 The Structure and Growth of GDP by Sectoral Origin (% shares based on current prices, 2: growth in constant prices) Average Shares of GDP Annual Growth Rate 1955/56 1965166 1970/71 1956-61 1961-66 1966-71 Agriculture 31 28 29 3-1/2 4 2 Industry/Mining 17 21 23 8 7 5 Electricity - 1 2 - 14 15 Construction 3 4 5 9 17 3 Transport/Communication 6 9 6 9 11 -6 Trade/Finance 9 8 9 4 2 3 Other Services 34 29 26 4 6 5 Total 100 100 100 5-1/2 6 3 14. As may be seen, the most significant shift has been in the share of industry, which in the mid-1950's was only about half as important as agriculture, but in 1970/71 had become nearly as important a contributor to GDP. 1/ During this period, industry and trade were transformed from mainly private sector acdivities to predominately public sector activities. Another notable feature was the continued moderate growth in agricultural output, notwithstanding a major change in land tenure. Whereas before the 1952 land reform, 94 percent of lanidowners held only a third of the land (while 0.2 percent of owners controlled over a fourth of the land), by the mid-1960's, 94 percent owned nearly 60 percent of the land and 01 percent owned 6-1/2 percent, Not shown on the table is the composition of other services, wnere the share of housing declined while the share of Government administration rose markedly. 15. The following table indicates some of the main elements in the changing composition of expenditure on GNP over the past fifteen years, with greater detail1 for recent years: 1/ it should be noted, however, that these observations do not correct the distortions implicit in the price structure. If the value-added in each sector were computed at world traded prices, then the share and growth of industry would not be so great. -7- Table I-3 The Structure of Expenditure on GDP /1 (in % of GNP at current market prices) Change 1955/ 1960/ 1965/ 1968/ 1969/ 1970/ 1965/66- 1956 1961 1966 1969 1970 1971 1970/71 Tnt^1 (se + 8Ft"t N no 6 95 +8 Private (67) (69) (67) (68) (66) (68) (+1) Public (18) (17) (20) (24) (25) (27) (+7) Gross Investment 16 15 18 12 14 13 -5 Exports net (nil 19 17 14 15 15 -2 Imports ( 20 22 17 19 20 -2 Net Factor Payments to Abroad 1 - 1 1 1 2 +1 /1 Shares do not always add to exactly 100% due to rounding and statistical discrepancies. 16. It may be seen that the share of private consumption remained re- markably constant (at about 67-68 percent of GNP) over this entire period, notwithstanding both the increased share of investment between the mid-1950's and mid-1960's and the rapidly increasing share of public consumption through- out the 1960's. The increased shares of public consumption and investment were at the expense of a substantially widened resource gap, which rose from nil in 1955/56 to 5 percent of GNP by 1965/66. The external borrowing which this occasioned was later reflected, of course, in a larger share of GNP devoted to factor payments to abroad. As shown in the last column of the above table, a major shift in the composition of expenditure occurred in the period 1965/66-1970/71, when a very large increase in the share of public consumption - mainly defense expenditure -- (and smaller increases in the shares of private consumption and factor payments) were achieved mainly at the expense of investment. The shares of exports and recorded imports in GNP may also be seen to have declined from the 1965166 level. It should be emphasized, however, that the fall in the share of export earnings was mainly a consequence of the closure of the Suez Canal. But insofar as the loss of Suez revenues was compensated by transfer payments from Libya, Saudi Arabia and Kuwait (under the provisions of the Khartoum Agreement), Egypt's resource availabilities were essentially unaffected by the closure of the Canal. Hence, the preceding table (which reflects the drop in Suez earnings but not the transfer receipts) tends to understate Egypt's savings performance. An alternative formulation, which includes transfers as part of GNP and savings, is presented below. The adjusted variables are denoted with an asterisk. -8- Table I-4 Savings and Inrestment 1955/56 1960/61 1965/66 1968/69 1969/70 1970/71 (% Shares of GDP*) Total Investment 15.4 15.1 18.3 11.3 13.3 11.8 Resource Gap* 1,2 5.0 -2.1 -0.6 1.2 Gross Domestic Savings* 15.4 13.9 13.3 13.4 13.9 10.6 (% Shares of GNP*) Total Investment 15.5 15.1 18.4 11.4 13.6 12.0 Current Account Deficit* 0.8 1.1 5.7 -0.8 0.9 3.1 Gross National Savings* 14.7 14,0 12.7 12.2 12.7 8e9 17. While this table presents a rather better picturte, Egypt's savings performance may still be seen to have deteriorated markedly since the mid- 1960's. Although the 1970/71 figures are particulatly low, it should be noted that calculated residuals of this kind are subject to considerable short-term variations -- which may or may not be meaningful. However, the overall implications of the table are clear, In order for Egypt to raise its investment rate to a level consistent with rapid economic growth, a major effort will have to be made to mobilize domestic resources for development -- even if net foreign capital inflows increase their share of investment fi- nancing. Since such a large proportion of total savings is generated in the public sector, moreover, the need is emphasized for the Government to increase tax revenues, to restrain public and private consumption, and to increase the profitability of public enterprises through reforms in economic management and organization. -9- II. POPULATION AND EMPLOYMENT Population and'Family Planning 18. Egypt has a serious demographic problem. The population is already the most densely settled in the world, and is growing rapidly. A high rate of natural increase is combined with a high rate of internal migration to urban areas, resulting in growing urban congestion -- especially in Cairo. Especially in light of Egypt's already high dependency ratio and its low rate of participation in the labor force, this growth is burdening the economy by creating expensive needs for infrastructure and social services -- at the expense of foregor.e capital deepening. Continuing rapid population growth portends worsening problems of unemployment and underemployment, and -- in the light of the country's severe limitation of land - a possibly critical congestion problem. A promising beginning has been made on a national family planning program, but much more needs to be done -- and quickly. The future costs of delay could be extremely high. And greater attention will need to be given to issues relating to.population location and migration, and to the implications of development policies for the balance of urban vis-a-vis rural development. 19. In mid-19'1, Egypt's population was estimated at 34,1 million. Of this number, 43 percent were under 15 years of age and 3 percent were 64 years or older; another 10 percent were in the 15-19 year range. Compounding the burden of this high dependency ratio (0.84) is a very low rate of female participation in the labor force (estimated at 5-8 percent). 20. Egypt's population density has been doubling every 40-45 years over the past century, and now stands at about 950 persons per square kilo- meter in the inhabited area. This is the highest reported density for any comparable area in the world (exceeding that of Java, for example). The population has been growing recently at about 2.5 percent annually; at this rate, about 10 million more people would be added to the population in the next decade. The Aswan High Dam, by permitting an extension of the cultivated area by around 10-15 percent, will accommodate directly on newly reclaimed land some 2 - 4 million additional people -- representing only some three or four years of population increase. Partly as a consequence of this relentless demographic pressure on an almost fixed supply of land, increases in agricul- tural output per worker have not kept pace with the rate of population growth, and increasing numbers have migrated to the cities in search of economic opportunities. 21. The proportion of Egypt's population classified as urban rose from 35 percent in 1950 to 38 percent in 1960 and to 42 percent in 1970. A large share of the internal migration is directed to Cairo, which has been growing recently at an estimated rate of some 4-1/2 to 5 percent annually. Metro- politan Cairo already numbers about six million persons. The issues of continuing industrial concentration and growing population congestion are presently vexed questions. - 10 - 22. Between 1965 and 1970, Egypt's recorded birthrate decreased from 41.4 (per thousand population) to 35.6. This would imply a drop in the rate of natural increase to about 2.1 - 2.2 percent annually, but this re- mains to be confirmed by census data. The recorded change is not attrib- uted to Egypt's family planning program so much as to factors such as the effects of the 1967 conflict, the trend to later marriages, and results of more widespread education. 23. The Egyptian Governmentts recognition of the need to reduce popu- lation growth was reflected in the establishment in 1966 of a natironal family planning program. Some measure of success in this program has been achieved in the last six years. The network of facilities for the delivery of health services (on which the family planning program depends heavily) is reasonably well developed. The availability of medical and paramedical manpower is relatively satisfactory. Government policy and the climate of public opinion are supportive of population control measures. However, eveln though the 8-9 percent of eligible couples who are today practicing fertil:ity control meas- ures compares moderately well with the acceptance rate in several other coun- tries, the Egyptian population problem is so pressing that far more needs to be done. Even under the optimistic assumption that Egypt's net reproduction rate could be lowered to 1.0 by the year 2000, the population in that year would be nearly double the present level. 24. Among the measures needed to strengthen the country's family plan- ning program are: a more effective field structure to take family planning services into peoples' homes; additional construction of health facilities (especially in urban areas); greater use of private commercial enterprises in the distribution system; strengthening of training activities; greater attention to communication with young people and adult males; rationalization oL the production and procurement of contraceptive supplies; establishment o-F targets; a programn of evaluation studies; and a generally more experimen- tal, ambitious and aggressive approach to the problem. Employment 251 Egypt's labor force -- presently estimated at abouit 9.1 million -- has been growing at the rate of 2.8 percent annually. Employment, on the other hand, has been increasing by only 2: percent per year, resulting in a rising rate of unemployment. Assuming a participation rate for women of 5-10 percent, aln estimated 350,000 young people now enter the labor force annually, while perhaps 100,000 depart due to superannuation or deaths in the 15-65 age category. Against this net: annual increase of 250,000, em- ployment has increased on the average by 155,000 annually during the past several years. Since 1965 alone, therefcore, the growth of the labor force appears to have exceeded the growth of employment by about half a million equivalent to 5-1./2 percent of the.present labor force. Given these cir- cumstances, it seems likely that the Ministry of Planning's estimate of an 8 percent unemploymnent rate is not excessive. - 11 - 26. Egypt has a shortage of perhaps 350,000 skilled workers. At the same time, the practice of guaranteeing employment to all university grad- uates has created a glut in most liberal professions and in the Government's administrative and social services. Much of the growth in the labor force has been accommodated in this fashion. Moreover, the services sector claims a very large share of the total wage bill. The following table summarizes some of the main features of the structure of employment and wages: Table II-1 Employment and Wages (% shares of total) 1959/60-1969/70 1959/60 1969/70 Increase in labor Sector Employment Wages Employment Wages force absorbed by sector Agriculture 54.0 17.8 49.0 18.5 37,0 Industry 10.0 16.2 11.1 14.9 14.5 Services /1 17.8 39.0 19.1 40.4 23.7 Distribution /2 14.2 19.9 13.8 18.0 13.6 Others /3 4.0 7.1 7.0 8.2 11.2 /1 Personal services, culture and recreation, and such governmental activities as education, health, social services, general and administrative services and defense, justice and security. /2 Transportation, communications, trade and finance. /3 Housing, utilities, electricity and construction. 27. As may be seen, the sectoral distribution of employment has not changed very much over the past decade, although it is significant to note the structure of changes at the margin. Thus, employment in industry is seen to have accounted for only about 15 percent of the total increase in employment in the 1960's -- notwithstanding the Government's heavy emphasis on industrial development, which claimed about 30 percent of total fixed investment under- taken during the period. Most of the increase in employment continues to be absorbed by the agricultural sector, but apparently at the cost of diminished growth in labor productivity. In the period 1966-71, for example, output per worker in agriculture (in constant prices) rose on the average by only 0,5 percent annually -- as compared to a growth of about 2 percent annually in the early 1960's. Labor productivity in industry, on the other hand, is reported to have risen by about 2 percent annually over the past decade. (See Table 1.7). Output per worker in agriculture (in terms of value added at current prices) is now about 60 percent of the national average. The corresponding percentages for industry (including construction and power) is about 170 percent, and for all services, 120 percent. - 12 - 28. In terms of current prices, the national wage bill appears to have risen somewhat faster than output per worcer over the past decade -- implying some shift in income distribution in favor of labor. Part:Lcuarly in. the early 1960's, agricultural income per worker seems to have risen considerably faster than output per worker. In recent years, on the other hands there seems to have been little change in the relationship between these variables. As may be seen in Table 1.5, a striking fact is that the share of the serv- ices sector in the wage bill is double the share in total amployment. 29. Despite open unemployment of perhaps 750,000 to a mJLl1Lo% personas and an underemployed rural labor force, average daily wage levels or between 40 and 50 piastres are well above the legal minimum rates of i S p`astres tar farm labor, 25 piastres for services and trade, and 30 piastres in indLustrvy Oftentimes, agricultural and construction workers cannot be located -by em- ployers. An explanation of these apparenit contradictions lies in: i) the increasing demand for rural labor; (ii) the geographical maldistriburi onr- the labor force; and (iii) the (improper) identification of 4rre-ular par- ticipants in the labor force as underemp'Loyed. Payment of the Lega1l miniimum wage to increasing numbers of agricultural laborers employed irl government construction and land reclamation work has helped establish an up..ard trend in rural wages; Maldistribution and varying regional wage rates are evident from the activities of private labor contractors who shuttle soma 250,000 laborers around the country for seasonal agricultural work and construction projects. Furthermore, children who are taken from school durling ha-rvests and women who do not seek permanent work account for most cf the 800,000 variation i-n seasonal agricultural employment. Consequently, neither creates downward pressure on wages. 30. Rural migrants are another anon;aly of the manpower structure. These constitute a floating population of perhaps 150,000 that periodically move into the cities for 2-3 week periods, seeking short-term employment, In most cases, this leaves them outside the reach of employing 3institutions, particularly the highly structured companies of the public sector. As a result, they are available only as casual labor in the urban market. 4osost of these migrants bring with them to the cities their village life patterns, including a tolerance for underemployment:. As a consequence, they appear to become urbanized only rather slowly. 31, Am3ng the urbanized population, there is very little turnover in employment. In the Egyptian system, apprentices, semi-skilled and skilled workers, clerical and technical employees and professionals are locked into their jobs t'hrough the training-cum-certification process by w'hich positions are allocated, Employees cannot be discharged without cause. Salaries are estab'lished administratively rather than by market forces. Thus, the use of wage incentives is precluded by the association of wage and salary scales with a rigid social structure which rests largely on standards of job cer- tification and seniority derived from the dominant public sector. Only among high level and technical manpower is there much job mobility or salary %ncentive. Those who have job options usually exercise them. through dual employment, rather than by changing jobs. Often in white collar categories, individuals hold both government administrative posts -- from which they - 13 - acquire prestige and legitimacy and also perform some independent profes- sional function. Among technicians, the typical job combination is to work in a public sector plant while simultaneously operating a small privately- owned workshop. 32. The influence of Egypt's defense mobilization on the manpower sis- uation is difficult to assess. The armed forces (estimated at 350,000 men) do not press unduly on the availability of unskilled labor, but the drafting of skilled workers has undoubtedly constrained the development of the civil- ian economy. Together with the armed forces, military factories have first call on technical manpower, and the ratio of skilled employees to the total labor force in the military plants is relatively high. Conversely, in some civilian factories (e.g., in the metals industry) work is limited to one shift because of the scarcity of technicians and skilled labor. Highly skilled technicians are frequently retained by the military beyond the completion of their stipulated compulsory service, and are eligible to draw full salary from their place of civilian employment. One consequence of this situation is that the skilled labor force in public industry is exceedingly young and still inexperienced. Some of the technical shortage is covered by foreign specialists, particularly in electrical and mechanical maintenance and in technical standards compliance. 33. Egypt has been attempting to improve the quality of its industrial labor force through two apprenticeship programs. One program places grad- uates of preparatory school in one-year vocational training, followed by two years of in-plant work; currently about 60,000 young men are participat- ing. Few plant managers consider this program altogether satisfactory, both because the trainees are poorly prepared and because Egyptian industry has not yet mastered the techniques of shop-floor on-the-Job training. The public sector has little choice, however, other than to recruit much of its semi-skilled manpower through this channel. Most large establishments oper- ate their own training facilities, usually in cooperation with the above program. A second program, which offers vocational courses and on-the-job training for primary school graduates, has been designed by the Ministry of Manpower to meet the labor demands of small private industries in woodwork, textiles, plastics, ceramics, leather and benchfitting metal work. More than 30,000 are enrolled in this program, and three-quarters are placed permanently upon the completion of their apprenticeship. The Ministry hopes to double the size of this program within the next five years. 34. Planners assume that during the next five years preparatory school will become obligatory and that 25 percent (as opposed to the present 12 per- cent) of preparatory school graduates will proceed to advanced training and enter high level manpower categories as professionals, technicians and ad- ministrators. Another 35-40 percent are expected to be accommodated in agri- culture. 35. Currently, about 25 percent of the labor force are engaged as un- skilled workers outside the agricultural sector, with some 10-12 percent having acquired some level of non-agricultural skills. By 1980, the inten- tion is to achieve equality in the number entering non-agricultural pursuits 14 - as unskilled labor and those who take the first step toward skill development through in-plant training. 36. As of 1980, the ratio of administrators to technicians appears likely to be even more unfavorable than at present. This imbalance is not untypical of less developed countries, but in Egypt it reflects also the exceptionally great importance given to academic certification at the second- ary and university levels as the determinant criterion for job placement. Skilled industrial workers will still be in short supply, and agricultural labor will exceed the desired level. The sharp increase projected for Dro- fessional, technical and administrative personnel between 1970-80 is derived from the number of individuals who will receive higher education rather than from the demand expected for specific categories of high level manpower. About 25 percent of the labor force would be classified as high 'Level man- power, but it is not likely that the qualitative demands of the production sectors will be satisfied. With a continued growth in employment of 2 per'- cent annually, attainment of the target of increasing skilled manpower from 12 percent to 18 percent of the total would necessitate the introduction i nto the labor force annually of about 82,000 workers having some skill devel- opment. Even with the planned expansion of its two apprenticeship programs during the next five years, Egypt would produce only about half this number of new apprentices. - 15 - III. EDUCATION AND SOCIAL POLICY 37. Egypt's social policies are comprised of a comprehensive social insurance plan, free health and education services, subsidized consumption of basic commodities, and an array of wage and price controls that provide standards of equity in the distribution of income. The concept of the cit- izen having a constituent right to certain advantages is firmly fixed, and the Government is active in its efforts to extend social benefits. Education 38. The high priority given by the Government to educational develop- ment is suggested by the following percentage increases in enrollments reg- istered over the last decade: primary school (6 years), 43 percent; prep- aratory school (3 years), 288 percent; secondary school (3 years), 275 percent; and universities and higher institutes, 95 percent. The compelling nature of the drive for more education is also seen in the current expenditure budget, where education accounts for about 45 percent of total current expenditure on economic and social services. Currently about 150,000 individuals are em- ployed in education, where a major effort is being made to reduce adult illi- teracy, to move towards nine years of compulsory education, and to assure equal participation for females. Enrollment at the primary level has now reached 70 percent of school-age children; the corresponding ratio for the preparatory and secondary levels combined is about one-third. Dropouts are not a major problem; about 75 percent of those who entered secondary school in 1969 graduated in 1971. The following table summarizes the current enroll- ment and graduation structure: Table II1-1 School Age Population and Enrollment, 1970/71 (in thousands) Age First Year First Year Total Total Group Enrollment Age Group Enrollment Age Group Graduates Primary 6-11 742 925 3,740 5,406 309 Preparatory 12-14 300 800 851 2,385 203 Secondary 15-17 194 690 569 2,050 134 University 18-21 49 680 203 2,450 31 & Higher Institutes 39. All education through the university level is free. Admission to the universities depends on qualifying examinations following secondary school. Unfortunately, the Government's policy of hiring all graduates of universities and higher institutes serves to emphasize the formalities of training rather than skill development. The career selection process has - 16 also led to an excessive emphasis on preparation for liberal/administrative careers rather than technical occupations, and has produced an overstaffed bureaucracy. An attempt to limit entrance into some university faculties (such as law and the humanities) does not appear to have been effective; in 1970 and 1971 enrollment, in these areas increased by 12 percent annually. 1.Ioreover, whiLle half of higher educational enrollment i-s in "practicalf' or technical fields, many of the graduates from these programs sti11 opt for Governmental administrative positions. On the other hand, in some areas of engineering and agriculture, trained personnel exceeds demand. The high value which young professionals place on remaining in Cairo furl-her compli- cates the high-level manpower situation. 40. Attempts are being made to induce students to ente>r programs of technical education wlhich terminate at the secondary level. Most a employers make no distinction, however, between graduates of technical and general secondary schools. From the standpoint of the student, therefore, technical schools as a terminal educational experience have no advantages The system serves both to reinforce aspirations to professional status among those at- tending the technical schools and to deprecate pride in technical skill, Egypt is currently experimenting with several varieties of technical educa- tion in its Higher Institutes. Twenty-three specializations in commerce and industry are included irn this program, and there are sir*ilar opportuni- ties in health, agriculture and education. Egypt's planners appear to be- lieve that even though their educational system produces great numbers of marginal white collar workers, in the long run its advantages will outweigh current disadvantages. Other Social Policies and Programs 41, The share of health in Egypt's current expenditure an economic and sociLal services is curreritly only about one-third educational expeniditures, but the Government plans to raise the priority of its health programs. Thus tar. emphasis has been placed on increasing the delivery of preventive health services to the rural population. In 1970/71, rural health units numbered 1,827 -- compared to 761 ten years earlier. Because of the shortage of doc*- tors, however, diagnostic service and treatment is available to only about 50 nercent of the rural population. For those receiving this service, a net- work has been established by which cases requiring complicated treatment are sent (in many cases with transportation provided) to district centers and on to hospitals if necessary, A major accomplishment has been the control of glaucoma, and currently the .Iinistry of Health is working with international agencies in formulating a nation-wide campaign to be launched against schis- tosomiasis. 42. Social insurance is available to about 4 million of the 8 million gainfully employed or self-employed, but it does not yet apply either to those engaged in agriculture and domestic service or to day laborers. Be- cause small industries and minor traders evade their responsibilities under the program, and since a large part of the construction indtLstry relies on contracted day-laborers, fewer than 3 million individuals ac:tually receive - 17 - coverage. Benefits include occupational injury, health care, unemployment compensation, retirement, disability and survivors insurance. The program is supported by contributions of 9 percent from the employee and the equiva- lent of 24 percent from the employer. 1/ A Labor Code regulates hiring, dis- missal, working hours, wages, apprenticeship and the employment of women and children. But as the case of social insurance, this Code is enforced for less than 40 percent of those who work. 43. Officials estimate that 600,000 families (10 percent of the popu- lation) are in desperate need of some social assistance. Currently, about one-fourth of that number receive some type of aid or pension aimed at help- ing the handicapped, aged, orphans, delinquents, widows, etc. In 1969/70, direct payments of all varieties averaged about BE 18 million annually to such families. Other than direct family payments, welfare strategy is large- ly educational, with a view to developing earning capacity. Volunteer orga- nizations are supported through subsidies that amount to about BE 2.5 million annually. The underlying purpose of this program is to encourage self-help and to mobilize funds for social welfare at the local level. 44. Egypt's public housing operations are devoted largely to overcoming urban shortages. Major reliance is placed on providing loans to individual builders under terms which encourage private savings. For the eight-year period 1962/63-1969/70, a total of 6E 309 million was invested in 351,000 living units. From this total, 55 percent of expenditure and a proportionate share of the units consisted of private construction. Government outlays were about equally divided among middle range urban housing, low cost urban multi-unit housing, and rural housing. While rents are fixed, "key money" payments and flexibility in determining rents when new leases are signed have given an upward bias to rents on urban units that are not publicly adminis- tered. Government operated economy housing in Cairo currently costs an oc- cupant between L6 and L12 per month. 45. A major feature of Egypt's social policy is the protection of consumption levels among low income groups. Rationed basic food commodi- ties - bread, cooking oil, sugar and kerosene -- are subsidized, and the cost of this support is generally covered by Government sales on the free market of additional quantities of these items. Price controls on basic textiles, shoes, household wares and gasoline are also used to protect consumption. Stocks have been manipulated effectively, and black markets in these items are not prevalent. 1/ However, because the total premiums paid into the system far exceed the benefit payments, the social insurance program is also a major contri- butor to public savings, as will be described in Chapter VI. 7 ~~- 18 - 46. Officials contend that the needs of high income groups are being met and that the pressure of demand from low income earners should be given priority. For the past decade, it has been the Governmentls policy to limit luxury consumtption periodically, usually by restricting imports through quota adjustments and variations in tariffs. Regulations announced early in 1972 indicate that Egypt's salaried middle class faces another period of relatikve privation. In this regard, the purpose is not to decrease middle and upper income consumption, but rather only to restrain it for a period of time. As noted earlier, however, the national accounts suggest that to}.al private con- sumption has risen faster than might havie been expected in a period winen nLl- itary preparedness has been given such high priority. 47. Since the late 1950's, Egypt has moved steadily t:oward more equi- table income distribution. In particulars land reform. and the nationalization of industry have removed extreme deviations in farm income. Depending on its source, personal income is taxed at an average rate of up to 39-42 percent,D and marginally up to 64-68 percent at L10,000. In addition, all In.20me is taxed by a global levy that adds progressivity to the structure by reaching a marginal rate of over 90 percent at 7mE 10,000. 43. A major social problem which Egypt still faces isE the diraty between urban and rural income. Personal consumption per c.apita for tne rural population is about BE 40, compared to ;iE 68 in urban areas. Yet the worst conditions exist among recent migrants to the cities. About 50 percent of the migrant population is found in Cairo and Alexandria. Egyptian officials see solutions to the plight to the migrant and to the mounting problem of ur- ban congestion in inducing more stability in the rural population by narrowing the urban/rural gap. Means which are currently being applied are: a) in- creasing the effectiveness of social services through the decentralization of governmaent agencies; b) socializing students to provincial ll-ife Dy developing institutions of higher educat:Lon outside Cairo and Alexandria; c) increasing farm. income to blunt the lure of the supposedly high wage that can be obtained in the cities; and d) dispersing industrial plant locations. 49 Enabling legislation for decentralization was enacted more than ten years ago, but only recently has any momentum been developed in this program. Some new plant locations are being directed to outside the Cairo area by the Ministry of Industry) while the Ministry of Social Affairs now has 90 percent of its employees in provinicial offices; the Ministries of H-ealth and Education have adopted similar patterns. Supervision of the comiined centers providing social, health and educational services in the rural areas has been transferred to the provincial governments. And a train- ing program aimed at developing planning and project formulation capacity at the local level is now underway in fivre provinces, with 700 individuals being trained annually. But the total progress toward decentralization re- mains slow, and the Government lacks an integrated strategy of rural devel- opment. - 19 - 50. Among the principal constraints on the decentralization program are Government practices in the recruitment of professional personnel for provincial offices, in the determination of provincial budget allocations, and in the approval of project proposals. These aspects of Egypt's public administration inhibit movement toward greater decision-making at the provincial level. Consequently, a limit may already have been reached in the implementation of a social policy which, conceptually, would otherwise permit continued progress in improved income distribution and greater social mobility. - 20 - IV. AGRICULTUR The Role of Agriculture in the Economy 51. Agriculture remains Egypt's most important sector in terms of its contribution to GDP (abcut 30 percent), its provision of employment (about half of total employment) and its generation of foreign exchange earnings (about 55 percent of total exports in u.Lprocessed form, and considerably more including processed agricultural goods). The share of agriculture in. employment and in total output have declined only very slightly in the past decade or so. The reliance on agricultural export earnings also remains about the same, with the exception that a greater proportion of these earn- ings now stems from processed rather than unprocessed agricultural exports. The growth rate of value added (in real terms) in agriculture has averaged about 3-1/2 percent annually over the past fifteen years. The growth of agricultural output per worker, however, has not kept pace with the growth of physical output per hectare, and the growth rates of bo:th measures of pro- ductivity have declined in recent years. This partly reflects one over- whelming fact about the rural economy: namely, the continuing increase in the rural population and in the numbers of persons dependent upon farming for their livelihood. In absolute numbers, the agricultural labor force is still expanding at a rate of about 60,000 workers per year. 52. The heavy reliance of the economy on agricultural export earnings is indicated by the 80 percent share of total exports consisting in raw or processed farm products. In particular, the economy continiues to depend very heavily on cotton and cotton product exports (still over 60 percent of the total value of exports). However, the proportiona'l significance of cot- ton nas declined somewhat and, in addition, the local textile industry is absorbing an increasing proportion of the output (about 40 percent). Cot- ton is no longer a highly profitable crop in many areas, and its present im- portance is partly a reflection of a Government program of assigned planting areas. In the short run, while the immediate export market prospects for Egyptian cotton appear to be quite favoraDle, and while there is a strong need to maximize foreign exchange earnings, there is an economic case for maintaining cotton in lower yield areas -- largely at the expense of rice. Ln the longer run, however, undoubtedly there will be (and should be) a con- tinuing decline in the relative importance of cotton in the total cropping pattern. 53. Agriculture's share in total public investment has been declining in recent years (from about 20 percent in 1967/68 and 1968/69 to approximately 14 percent in 1970/71 and 1971/72). Agricultural investmerLt (not including the High Dam) has also shown some decline in absolute terms (byr about 12 percent over the same period). The decline has been mainly in expenditure on land re- clamation and irrigation system extensiona, though increasin.g amounts have been allocated to drainage and livestock development. Especially impressive under the circumstances has been the successful initiation of an ambitious program. of modernization and expansion ia the poultry industry. - 21 - 54. Among the more important features of the agricultural sector is the high degree of continuity that has been maintained in the administration of the sector. Also, significant moves have been made to effect better coor- dination by consolidating reclamation and agrarian reform programs under the general supervision of the Minister of Agriculture. The Ministry of Agriculture currently appears mainly interested in promoting agriculturally related indus- tries, high value crops, livestock production, mechanization and other yield improving techniques. Drainage and land and cropping consolidation appear to have high priority, while land reclamation now has a much diminished priority. Recent Developments 55. In spite of the deleterious impact of the 1967 war and its after- math on agricultural production, the value added in the sector (in real terms) has still shown continuing growth. The Ministry of Planning estimates this growth to have averaged about two percent over the period 1965/66-1970/71. National accounts data for 1970/71 indicate an absolute fall in agricultural value added for the year. But data on the volume of outputs from -- and in- puts into -- the sector suggest that there was real growth in the sector in this year as well. 56. There has also been a substantial expansion of agriculturally related industries in the economy. Especially notable in this connection have been the growth of the phosphate fertilizer industry, the textile in- dustry, and the rice and sugar milling industries. The development of the nitrate fertilizer industry was seriously interrupted by the war, but there is every reason to expect that Egypt will be able to supply its own increas- ing needs for this critical input during the next decade. 57. New land development has been an important component of total de- velopmental activity during the last decade. About 700,000 feddans have been reclaimed out of 1.3 million feddans scheduled for reclamation development. However, only about 80,000 feddans have actually been transferred to settlers. Part of this slow rate of completion is associated with some indecision over whether or not land should be retained more or less permanently in state farming status. However, the high cost and the long period required to fully develop new land, especially in the sandy soils, is also having an influence. 58. The crops experiencing major expansion in areas planted have been summer season maize, rice, sugar cane, fruit and vegetables and, among winter crops, berseem clover. Rice has become the second most important ex- port crop (with around 10 percent of export earnings) but rice prices are de- clining on world markets. Nevertheless, since rice is a principal reclama- tion (salt tolerant) and high water-using crop, the areas planted to this crop will probably be sustained or even expanded. The maize crop is almost entirely consumed as human food. As a result of the shift in most of this crop's production from nili to summer season status, maize production has been able to keep pace with the expanding local demand for it. - 22 - 59. The increase in berseem clover plantings in the winter season re- flects an expanding demand for animal feed. Livestock numbers have increased substantially in recent years in response to both the demand for "livestock wealth" on the part of the farm population and a growing demand for animal products on the part of the expanding urban population. The latter are also demanding increased supplies of fruit and vegetables. Substantial crop areas are being shifted over to those two lines of production under the influence of rising free market prices for both vegetables and animal products in a. context of depressed (controlled) prices for the major field crops. 60. Yield trends in most crops have been decidedly positive during the last decade. Over the decade, illustra.tive increases in 1970/71 yields com- pared to 1960/61 were 1/: Haize, 70 percent; sorghum, 30 percent; wheat and cotton, 25 percent; and rice, 6 percent:. However, between 1965-70 the increases were only: maize, 8 percent; sorghum, 9 percent; wheat, 5 percent; cotton, 11 percent; and rice, 8 percent. These data emphasize an apparent slowing in progress in recent years. Part of this was no doubt related to the war and its aftermath, and part to the related reduction in the growth of nitrogenous fertilizer applications. The latter may weall have been a primary factor in a decline in the yields of most of these crops in 1970171 as compared with 1969/70, Onr the other hand, there was a spectacular in- crease in wheat yields in 1970/71 (+13 percent), apparent:Ly due largely to varietal improvement. This presents an, example of what mLght be possible on a broader front -- especially in maize and rice - in the future. 61. The post Aswan High Dam era produced a number o- problems as well as opportunities. Among the problems is the apparent increase in water table levels in large parts of the country, and associated increased soil salinity. The fishing industry has also been affected adversely by the substantial decline in the flood season sardine crop in the estuary. Th4s may be offset to some extent by a rising catch from Lake Nasser, but not within the next few years. The absence of silt in water discharged from the lake is resulting in an erosion problem in the main stream, and, some believe, in a loss of soil nutrients added by the water and a loss of its soil-building value in sandy-soil reclamation work. The added supply of water and the ability to elimiinate flooding has possibly also rendered obsolete much of the present water distribution system. There is a possibility, too, that the extension of perennial irrigation has resulted in a higher incidence of bil harzia. Government Policies and Programs 62, Egypt's land reform progran continues more or less along its original lines. About one million feddans (or one-sixth of the old land area) have been redistributed. A 1969 law further reducesL the ceiling of ownership to 50 feddans (or 100 per family). However, in contrast to previous procedures, firm compensation rights were apparently extended to 1/ The crop production year ends on October 30, in contrast to the fiscal year which ends on June 30. - 23 - past owners of the 30,000 feddans requisitioned under this law. The land reform authorities maintain that there is little likelihoood that the ceiling will be further reduced, so the redistribution program can be assumed to be effectively completed. Substantial as the redistribution program has been, however, the impact of the tenancy regulations has probably been more than twice as important in terms of the area of land affected, These regu?-a- tions essentially reduced the landlords to controlled rent-receiving agents, Cash tenants thereby acquired a security of tenure and a freedom of farming operation nearly equivalent to those of an owner-operator. 63. A program of cropping consolidation initiated in 1961 was quite successful in the case of cotton. All of the cotton crop is apparently now raised in blocks of over 20 feddans, and this no doubt facilitates the ad- ministration both of area allotments and of certain practices such as in- sect control. However, crops other than cotton are still planted largely according to the traditional fragmented pattern. 64. Tight controls continue to be maintained on prices of all basic export and food crops. Farm prices of these commodities are generally held down relative to other prices. Following some rises in previous years, farm prices for wheat, maize and especially rice were all reduced in 1971 - even though prices for food commodities were increasing. Farm cotton prices were raised only 1.9 percent in the two years, preceding May 1972, then raised by about 6 percent in the summer of 1972. The agricultural credit and cooperative organizations are used as instruments for rationing the distribution of fertilizers, seeds and insecticides and for collecting commodities for export and processing companies (including wheat, sugar and rice). Considering the generally restrictive circumstances, both organiza- tions appear to operate quite efficiently, and with considerable involvement of farmers in the decision-making process. 65. The announced target of the Government is to achieve an increase of about 40 percent in agricultural value added over the next decade, i.e. a continuation of the long-term trend, but a substantial increase in the growth rate achieved in the past several years. About 20 percent of the ten-year increase is expected to come from the further development of 700,000 feddans already reclaimed since the High Dam was initiated, and another 20 percent is assigned to land to be reclaimed in the future. These two programs presently receive about half of the total public invest- ment allocated to agriculture -- a decline from the 75-80 share of five years ago. It is questionable, however, whether the targeted increases in output can be achieved with the prospective allocation to agriculture of only some 13 percent of public investment. As indicated above, this invest- ment is expected to be directed mainly to activities designed to increase productivity on established cultivated areas and on land already in process of reclamation and development, rather than to further new land reclamation. Relatively high priority is to be given to expanded drainage and soil im- provement programs, to further development of poultry and other livestock industries, and to improved farming practices. Specific objectives for the next five years are to increase nitrogenous fertilizer use by about 20 per- cent and to raise the output of poultry from the current output of about 12 - 24 - million to 75 million broilers per year. In the short run, there will like- ly be a continued effort to maintain areas devoted to cotton and wheat. There may also be new efforts to shift resources in the direction of vegetable and fruit production and processing, especially with a view to developing export markets for these high--value products. Priorities and Problems: An Evaluation 66. The low share of investment in agriculture in total investment i s hoped to be offset by a substantial enlargement of total investment funds, which in turn will depend upon the mobilization of higher rates of domestic (and perhaps also foreign) savings. Considering the continuing state of hostilities and the high priorities giveni to defense and indust rial develop- ment, the goals for agricultural investment and output as noted above appear optimistic. Certainly the prospect of a shortage of public capital for the agricultural sector will limit the possibilities of carrying forward several promising lines of development. 67. The development program in agri culture will also be constrained by national policy objectives concerning foreign exchange earnings and sav- ings. One of the major problems will be the need to provide for domestic food demands of the growing population without sacrificing either export earnings (especially from cotton) or reqtuiring increased food imaports (espe- cially maize for the low income population and meat for upper income groups). It will be difficult to maintain cotton areas in the face of rapid increases in domestic consumption of both maize and rice. In the face of increasing local demand and unfavorable export prospects, rice is likely to become less important as an export crop. 68. These considerations lead to thie basic conclusions that: (a) Great reliance must be placed on yield-improving technologies in the main field crops (cotton., maize, rice and wheat) to head off a domestic food crisis (especially among low income groups) and/or a drastic decline in foreign exchange earnings (or savings) from these commodities. Iiowever, this will call for increased allocations of foreign exchange for the importa- tion of fertilizers, insecticides, livestock feed concentrates, and certain machinery. Without these inputs, the needed in- creases in crop production cannot be realized. (b) As a corollary of (a) above, Egypt must immediately look to new possibilities for promoting non-traditional agricultural exports. This may involve heavier reliance on sugar and especially vegetable and fruit production. Properly managed, these could provide much higher export earnings per feddan than any of the traditional crops. The critical question is how fast these potential areas of development can be exploited efficiently within the limits of available techniques and supporting facilities. In the meantime, there is the possi- bility of substituting cotton for rice on some of the better - 25 - rice lands - though this would inevitably prove to be a very short run opportunity and would involve substantial implementation problems. 69. While the scarcity of investment resources promises to be a severe constraint on agricultural development, there are perhaps some grounds for more optimism than is indicated simply by appraising the sectoral investment framework and its prospects for implementation. In the first place, actual investment allocation procedures may prove to be relatively flexible. If so, then on a year-to-year basis a progressively stronger case may be able to be made for agricultural sector projects. As a result, ex post public invest- ment allocations could well turn out to be more favorable to agriculture than the preliminary planning framework implies. Secondly, a substantial part of the non-agricultural sector investment activity during the next several years will be diverted to areas highly complementary to agricultural development needs, e.g., expansion of the fertilizer industry and investments in rural electrification, rural education, transport and storage facilities, and food processing industries. Thirdly, many of the investments needed to support increasing yields in agriculture (e.g. drainage) are capable of drawing heavily upon private sector savings - especially if they are managed with this dimension in mind. Finally, certain lines of agricultural develop- ment depend largely on organizational changes which could promise high returns for relatively small injections of public investment resources. An example of this would be shifting land use to higher value crops. Similarly, expanded capability on the part of the agricultural credit system could serve an im- portant catalytic function without making large demands on public investment expenditures. A greater reliance on price incentives both as a means to increased productivity in particular crops and as a stimulant to private in- vestment activity might produce quite impressive results. 70. Especially in view of the relatively lower public investment alloc- ation for the sector, a shift in priority away from high cost, long gestating programs (such as new land development) toward projects that use less capital and yield higher short-term returns is unquestionably sound. In this context, a shift in emphasis toward policies and activities to elicit greater private sector investment is clearly advisable insofar as the agricultural sector is still fundamentally based on private sector economic activity. Finally, con- siderable emphasis should clearly be given to defining priorities in all lines of public investment expenditure, in order that high productivity op- portunities are exploited first within the internal framework of all project work. 71. There is an apparent shift in emphasis in most of these directions in the Egyptian agricultural development program. The current de-emphasizing of land reclamation and the high priority being given to drainage, soil im- provement, seed improvement and increased fertilizer use are fully consistent with this. This is true also of the increased attention given to the possi- bility of increasing vegetable and poultry production as high value lines of output needed both to satisfy the demands of the growing urban market and as a substitute for an expanding component of high cost imports. - 26 - 72. The goverrment has taken certain steps to elicic greater involve- ment of the main component of the private sector in agriculture -- the farmers holding 5 to 50 feddans -- in the development process. Important among these steps is the assurance that the land requisitioning process will not be carried further, i.e. beyond the 50) feddan ceiling, Certain moves have also been made to further develop the cooperative system and the serv- ices it can perform in the old land areas.. However, much still remains to be done in this area. Egypt has already effectively implemented w7hat is perhaps the most far-reaching redistribution of land rights yet accomiplished in any country in modern times. However, a great deal still. needs to be done in restructuring rural institutions, including the marketing system, the credit system and -- perhaps most important of all -- the land tenancy system. The land reform areas have never provided a wholly adequate model to follow in this respect. 73. In a short-to-medium term perspective, the greatest opportunities appear to lie in improving farm practices generally (especially through seed improvement and upgraded rates of fertilizer and water usage) anLd in develop- ing the potentials both for vegetable and fruit cultivation and for meat and milk production. Shifts in land use toward animal production, vegetables, and fruits are clearly justifiable. Concerning the latter, there seems lit- tle doubt that Egypt has a basic and long--term comparative advantage with re- spect to soil and climatic conditions (including seasonal characteristics) relative to the European market. However,, the development of this opportu- nity will depend upon a wide range of new skills in production and marketing procedures and new facilities for transportation, storage (especially cold storage) and processing. An unresolved question here is whether such a de- velopment is more compatible with state farming or with the private sector. iany of the same issues are also involved in the development of the meat and milk industries, In any event, both directions of development deserve high priority, and will no doubt warrant a large cumulative commitment of investment resources. It would appear highly desirable to identify, as soon as possible, a limited number of pilot projects focused on particular areas and products, in order that the full set of inter-relations can be evaluated and progress hastened in the movement to greater concentration on "high value" lines of output. 74. Another issue which must be confronted in the immediate future is the need to create employment opportunities in the rural areas. This is, of course, onrly partly an agricultural problem. In large part, it is also a problem of industrial development and locational policies. In particular, the whole Delta area lends itself to the possibility of movinlg towards a fully integrated agricultural-industrial development program. In the past, the creation of employment opportunities for small farmers and for landless rural laborers was sought mainly through the subdivision of :Large landholdings or through industrial development in Cairo. What is needed ilow is a policy to raise income levels of rural households through creating employment oppor- tunities in non-farming activities, without requiring a change in residence by these household members. This could be complemented by h:Lgh yield practices on the small farms and by some shift in land use toward labor intensive lines - 27 - of production. The location of food and fibre-processing industries in the countryside is one means through which this employment-creation objective can be pursued. The prospective impact of rural electrification and of the rural education program is complementary to this direction of development. 75. In the long-run, Egypt's agricultural program will continue to require both land and water development components. Unless existing projections of water supply and demand prove to be very wrong, Egypt will face a water sur- plus situation for several years to come. Consequently, continued extension of the cultivated area will be needed as a means of using water. Given suf- ficient time and resources, of course, any land can be reclaimed. And Egypt still has significant areas to reclaim before resorting to pure sand. However, the reclamation program will always have to be designed in the context of both the availability of investment funds and the need to continually up-grade existing system of water distribution and use on the old lands. This system appears to have many obsolete features in the post-High Dam era, and its renovation probably deserves high priority in the long-term strategy of land and water development. Given these considerations, together with the potential Upper Nile development project, there is much to be said for an early initiation of a comprehensive review of land and water resource development in the Nile Valley. - 28 - V. INDUSTRY AND TOURISM 76. Egypt has a long-established manufacturing sector. Traditional agro-based industries (essentially textiles and food) were first established between the 1930's and the mid-1950's. Since the nationalization of industry in 1961, the Government has launched some capital-intensive and heavy basic industries, emphasizing import-substitution and self-suffic:iency targets. Iron and steel manufacturing and transforming industries, a'Long with crude oil extraction and refining, have received highest priority.. Industry today accounts for a large share (23 percent) of GDP 1/. 77. It may be questioned whether the inward-looking orientation of Egyptian industrial policy has been optimal, given the country s short-run need to earn and save foreign exchange, and evident compara_Ive, advantages owing to its agricultural and other natural resources, its geographical location, the structure of domestic demand, the availability and skill Aaedow- ment of its low-wage labor force, and the technical and managerial capacities of its trained personnel. The extensive administrative control over pricing and allocative decisions has largely done away with the signalling and clearing functions of market forces, and has contributed both to a h:igh cost of industrialization and to inefficiency in planning and management. There were some portents of changes in policy in 1971, pointing to a somewhat more outward-looking approach. There are also indications that there is now a lesser degree of interference in industrial policy and management on the part of Central Government officials. 78, Egypt's industry has great potential for future growth, and is counted upon to remain the leading sector in the countryv's development. The domestic market can provide a substantial base for enlarged produc- tion -- particularly if the civilian economy regains momentum. There are also favorable export prospects in goods where Egypt has a demonstrated com- parative advantage, as in textiles, food, leather, and engineering goods in- dustries. Moreover, important new comparative advantages are emerging -- partly as a consequence of oil and gas discoveries and completion of the Aswan Dam - in other resource-based industries such as fertilizers, cement and building materials, petro-chemicals, and electricity-consuming indus- tries. The prospects for expanding production and experts of crude oil -- a key factor for the economy because of the immediate need for foreign exchange earnings -- are uncertain, and not promising for the next two years. However, it is thought by most observers that the medium-to-longer term prospects for increased oil extraction are reasonably bright. In any event, the new gas and electricity resources constitute valuable new inputs for further industrialization. I/ If output were valued at internationally-traded prices, the share would, of course, be substantially lower. - 29 - Industrial Structure and Growth 79. There have been three major phases of Egypt's industrialization to date. The first phase, between the 1930's and the 1950's, was local- resource oriented industry consisted mainly in processing local agricul- tural products both for the internal market and for export. During this period, traditional industries (cotton textiles, food and leather indus- tries) were expanded by private initiative, which naturally exploited the country's comparative advantages in these fields. Oil refining and cement were also established in this period. Accelerated industrialization became a major economic objective of the Government in the mid-1950's, when the first industrial plan was launched. The second phase coincided with Egypt's Industrialization Plan (1957) and its first national development plan for the early 1960's. At this time, most industry was nationalized, and new directions in industrial policy were charted. The Government assumed the major role in establishing industries to exploit other domestic resources, e.g. iron and steel, petroleum extraction, phosphate rock and building mat- erials industries. Import substitution was also a major objective of this period, e.g., in the development of the engineering goods industries. Aid and barter trade with Eastern countries expanded rapidly. In the third and present phase of Egyptian industrialization, the emphasis on import substitution has been continued and industrial development has become more capital intensive and oriented to basic industry, particularly iron and steel and oil. Industrial planning is characterized by a physical (materials balance) approach, with priority given to achieving self-sufficiency targets in intermediate and fi- nished goods. The aim is to achieve fuller linkages and integration in major production lines (e.g., iron and steel manufacturing and transformation). 80. The share of industry in GDP rose from about 17 percent in the mid- 1950's to around 20 percent in 1960 and 23 percent in 1971. The present industrial structure may be classified as follows: 1. The long-established agro-industries (textiles, food, leather) accounting for about 40 percent of the value of industrial output. 2. The more recently established non-agricultural resource- based industries (oil extraction, cement and building materials, phosphate rock mining and beneficiation, fertilizers, oil extraction); these account for about 20 percent of the value of industrial output. 3. Other industries which are partly resource-based but with a low comparative advantage (iron ore mining, iron and steel manufacturing); these now account for 10 percent of output. 4. Other recently-developed industries which are not based on local raw materials (metal fabrication, engineering and electrical goods); these account for the remaining 30 percent of industrial output. - 30 Despite the recent emphasis given to investment in heavy basic industry, the structure of output has not changed much over the past decade. In terms of the value of production, cotton yarn and cotton textiles remain most important (21 percent of the tota]L); food industries are second in importance (currently 19 percent of the total). 81. Since 1961, public sector industry has dominated all lines of activity. The public sector now accounts for 75 percent of the value of industrial output and includes all large plants in the country -- some 200 firms, each employing more than 50() workers. Employment in public sector industries numbers about 500,000 workers (two-thirds of whom are in textile and food industries) out of a total labor forcle of 650 p000 workers (in all industries employing more than 15 workers). The private sector remains dominant in the woodworking and leather industries. Private sector industry also accounts for about 20-25 percent of the output in the textiles, food, and chemical and engineiering industries. Private sector plants are small some 4,000 firms having less than 50 workers each. Total employment in industry currently accounts for about 15 percent of the labor force. The following table summarizes a number of major indica- tors of Egypt's industrial structure and growth in recent years. - 31 - Table V-1 INDICATORS OF INTDUSTRIAL DEVELOPMENT Structural Indicators A Measure 1960/61 1965/66 1968/69 1969/70 1970/71 Indastrial Output % of total output 43 42 43 42 Value added in industry % of GDP 21 22 22 21 Fixed investment in industry (% of total investment 30 27 30 35 38 (% of indastrial output 6 6 5 5 5 (% of value added 24 22 20 23 20 Employment in industry % of total employment 10 U 11 311 Indastrial output by main branchea - apinning & weaving % of total industrial 20 20 21 21 21 - food output 15 16 19 19 19 - chemicals -t 4 5 5 5 - engineering & electronics .. 4 5 5 - metallurgical & mning n 2 3 3 - petroleum /2 6 7 6 5 6 Pub:Lic industries /3 % of indLustrial output3 ..1. 75 75 76 Priirate industries T ..I 25 25 24 Manufacturing exports /4 % of total exports 23 27 46 38 42 Exports by main products - cotton yarn % of manuf. exporte/4 19 33 26 26 24 - cotton textile " 11 15 12 12 13 - bleached rioe Ft 34 27 34 29 21 - fuels 6 5 10 1960/61-65/66 1965/66-70/71 1968/69 1969/70 1970/71 Growth Indicators A IndL.strial Output 9 6 7 9 7 Valve added (constant prices) 7 5 10 7 12 Fixed investments in industry 8 5 18 22 2 FEiploysment in industry /5 6 2 3 3 Indc.strial output by main branches /6 - spinning & weaving 8 3 4 9 8 - food 6 7 14 8 6 - chemioals 27 4 14 9 14 - engineering & electroic .- .. 4 18 21 - metallurgical & rining 18 4 4 17 35 - petroleulm 15 24 38 - 7 26 Public industries 3 .. 13 10 13 Private industries *- .. 9 5 8 -Manufacturing exports 7 12 37 -12 13 -cotton yarn 22 6 18 - 9 1 - cotton textiles 16 10 20 -10 23 - bleached rice 8 7 37 -33 -24 Fuels .. '- 32 -31 108 1 Current prices unless indicated otherwise. 72 Excluding partners' share. 75 Excluding military factories, cotton ginning, flour mills, etc. 74 Exeluding fuels, but including husked and bleached rice. The average annual growth rates correspond to; 1958/59-64/65 and 1964/65-70/71. /5 The average annual growth rate correspond to: 1959/60-65/66; 1965/66-69/70. The average annual growth rates of 1959-65 and 1965-70 are based on the Industrial Production Index (constant prices). Source: Computation on the basis of data of the General Organization for Industrialization, Central Agency for Public Mobilization and Statistics, Federation of Egyptian Industries. - 32 82. Industry was the leading sector in Egypt's growth in the 1960's, Despite the impact of the 1967 war (which caused the volume of output to stagnate in 1966/67 and to decline in 1967/68, and which is still reflected in destroyed or idle refining and production capacity at Suez, Ismailiya and Port Said), the value added in Egyptian industry rose over the decade at an average rate of about 6 percent annually (ilL real terms). In the past three years, value added in industry rose by nearly 10 percent annually, with the public sector growing more rapidly than the private sector, Inr 1970/719 the value of output of the textile and food industries grew by 8 percent and 6 percent, respectively. Growth rates; in more recently established industries ranged from between 14-35 percent. 83. Particularly in the late 1960's, Egypt's; industrial capacity was under-utilized to a considerable extent, owing both to the premature estab- lishment of large units unable to produce for export (e.g., steel) and to severe rationing of foreign exchange. This led tco shortages of imported raw materials and spare parts, and prevented needed replacements of worn-out and inefficient equipment. Shortages of local rav materials appear to have been a much lesser problem, occasionally affecting mainly the food industries, The utilization of capacity appears to have improved considerably in the past year or two, and many industries (e.g. textiles, cement, petroleum refinit.g, sugar, leather) reportedly now operate at full capacity. This improvoewnt was in large part due to the Government's easing cf import restrictions -- at the cost of a widened trade deficit. But underutilized capacity still persists in several branches -- mainly in chemicals and in metal imanufact;uring and transforming industries, including steel forging and roll4ng, In. these industries, however, it is not mainly the scarcity of foreign exchange which is the problem but rather the insufficiency of demand for the products of those industries. 84. Egypt's exports of manufactures have grown to account for about 40 percent of total commodity exports, an increase of about 10 percent from the early 1960's. Cotton yarn and textiles are the most important, accounting for about one-third of total manufactured exports. There have been slight increases in the shares of exports of sugar, cement, shoes, beverages, ready-made wear, etc. -- indicating some progress in export diversification. However, given the orientation of industry to import substitution, there has been no major change in the composition of indus- trial exports over the past decade. An exception would be the case of petroleum and petroleum products, exports of which have more thar doubled in the past several years. The overall growth of exports of itanufactured goods averaged some 10 percent annually (in current prices) over the last decade. The growth in 1970/71 was 13 percent. Airong the principal com- modities, cotton yarn exports have remained nearly constant for several years, but cotton textile exports have risen on the average by 5-1/2 percent annually and other textiles by over 20 percent per year over the past two years. Bleached rice exports, on the other hand, declined by more than 20 percent annually from 1968/69 to 1970/71. - 33 - 85. Investment in industry has absorbed a major share of Egypt's total investment expenditures - about 30 percent in the early 1960's and nearly 40 percent in 1970/71. The level of investment in industry fell from about 1E100 million in 1965/66 to ME86 million in 1967/68, but then recovered back to BE0l million in 1968/69 and rose to a level of about bE125 million in both 1969/70 and 1970/71. Public sector investment in industry, which accounts for more than 90 percent of the total, declined slightly in 1970/71, reflecting mainly the economy-wide pressure on re- source availabilities. As shown in the table below, recent investment expenditures have been channelled mainly to iron and steel and petroleum, and to a lesser extent to chemicals; together, these industries have accounted for about 70 percent of total public sector investment. Table V-2 Public Investment in Industry (as % of total) Plan Branches 1968/69 1969/70 1970/71 1973/77 Textiles 5 9 7 10 Food 10 6 6 6 Chemicals 17 7 9 16 Engineering 6 4 5 12 Iron and Steel 18 25 35 21 Petroleum and Petrochemicals 24 34 30 27 Building materials, mining and others 20 15 8 8 86. Over the five-year period 1973-77, the Government hopes to invest about BE 190-220 million annually in industry -- about 32-37 percent of total investment in the Plan. As may be seen above, sectoral priorities are planned to remain about the same as in recent years. Investments by the private sector are difficult to forecast, but the recent improvement in the business climate may lead to greater investments in traditional industrial such as textiles, clothing, food, leather, woodworking and engineering industries. However, despite new laws aimed at creating a better climate for foreign investment (including the creation of free zones), it is not expected that any significant direct investment from abroad will be directed to Egyptian industry unless a peace settlement is reached in the area. 87. Industrial finance is provided in large part by companies' inter- nally generated cash flows. In addition to depreciation allowances, alloca- tions to reserves on the average amount to about 20 percent of net income, including 5 percent of profits which must be invested in Government bonds. The remaining net profits are distributed between labor (25 percent) and shareholders, i.e. the holding organizations (75 percent). In some public sector enterprises, moreover, depreciation allowances are apparently not kept by the companies but have to be transferred to the State. Reserves nominally kept in the companies are earmarked for investment in industry, - 34 - but the Government rather than the firm decides which projects are to be financed. It is not clear to what extent such reserves (including depreciat- tion allowances) are sterilized, transferred through the banking system, or allocated through other transfer mechamisms. Resources transferred directly to the State are pooled into the Investment Fund (i.e. the invest-- ment budget) and designated for reallocation within industry. The sources (by sub-sector) of these transferred resources are shown in Table 8.9. In 1970/71, the estimated transfers from public sector industries was about ME 50 million, i.e. somewhat less than half of public sector investmnents in industry in that year. About 60 percent of the total transfers were generated by the textile, food and chemical industries. Complementary financing is obtained directly from the budget, foreign aid and suppliers credits, and to a limited extent from the banking system. 88. Egyptian industry is heavily concentrated in tihe Cairo/Helvan area, and to a lesser extent in the Alexandria region. Followingz the 1967 war, most of the industrial activity which could be moved from the Suez Canal zone was transferred to the Cairo/ldexandria region. Aswa-n is pre- sently a relatively minor growth pole, but substantial industrialization is projected there, mainly in electricity-based industries (aluminum and elemental phosphorous). When feasible, a decentralization of industry to the Red Sea shore and along the Suez Canal would appear to have a strong economic rationale. The uncertain prospects for reopening the Canal remains a hindrance to the formulation of locational policy, but as suggested in Chapter II, there remains a pressing need for the authorities to develop a comprehensive approach to the questior of the location of economic activity in geaeral. The important issues here are not so nuch strictly locational matters, but have to do with the whole balance of urban vs. rural development. These issues in turn have to do not only with the strategy of industrial development but with the country's overall long-term development objectives. Objectives and Policies 89. Major investment and policy decisions are often taken at very high levels in the Government, and little freedom has remained to indi- vidual managers or firms in their choices of activities or sectors in which to invest. There are indications, however, that during the past year or so those in positions of authority in firms and in the General Organizations have been less subject than previously to reviews, reversals of policy, and frequent cQanges in operational directives dictated from above. Consequently, these officials are reportedly taking greater indi- vidual initiative, and becoming more fonrward looking. The movement towards some decentralization of decision-making should be seen in the context of other moves by the Government to introduce elements of economic and political liberalization. But it remains true that: the formulation and implementation of industrial as well as other programs and policies is highly centralized. Ln industry, the key decisions are now taken at three levels: (a) the Prime MAinister and Cabinet; (b) several key Ministries, including War, Economy and Foreign Trade, Treasury, Planning, and Industry; (c) the nine General - 35 - Economic Organizations (GEO's) dealing with industry, plus the General Organization for Industrialization (GOI). The GOI plays a major role in project identification, appraisal, and preparation, in cooperation with the responsible GEO's (i.e. holding companies). This centralization 3f decision- making implies considerable "red tape" in conducting administration and opez-- ations, and sometimes leads to inefficient plant management and investment allocation. Classical economic tools (such as tariff and fiscal policies) and incentives (such as the interest rate) have virtually no role in resource allocation, and only a limited role in the mobilization of resources. 90. Industry has been given a priority role by the Government for military, economic and social reasons. The principal mechanisms of industrial policy have been: control of all industrial investment (including that of the private sector) through plant licensing; physical planning and materials balancing; import licensing, and administrative controls over all movements of goods in the country; the manipulation of input and output prices in order to make all public enterprises appear financially viable; diversion of funds from established cash-flow generating sectors to less profitable but more favored sectors; and project selection according to criteria such as achieving self-sufficiency or improving interindustry linkage. 91. Industry faces some major problems, as neither the present indus- trial structure nor the current investment program appear to reflect Egypt's existing comparative advantages. Textile and food industries require modern- ization, while the engineering goods industries appear too much guided towards import substitution. Emphasis is given to capital intensive and heavy basic industry, despite its long gestation period, high import requirement, and low employment content. Industrialization has developed at a price level higher than the one corresponding to the official exchange rate. Due to price manipulations and administrative controls, the exchange rate and price determination mechanism have ceased to be operative for large segments of the economy, so that there is no general yardstick for measuring the efficiency of projects to be undertaken. It is difficult to determine, therefore, where domestic prices are "relevant," and if relevant, to what extent they have affected allocation. In this system, world prices do not perform signalling or clearing functions, as export prices are manipulated and imports are rationed administratively. "Competitive" export prices for manufactured goods are often realized by increasing domestic prices for the same products (e.g. textiles and cement). However, high cost sectors lacking a large domestic market base (e.g. iron and steel) cannot benefit from marginal cost pricing for export because of the magnitude of difference between world and domestic prices at the official exchange rate. Iron and steel, for example, are produced at costs double the c.i.f. import prices. In general, apart from some processed food and leather products, prices of most domestically produced industrial goods appear to need an exchange rate adjustment in order to become internationally competitive. Because of price distortions and ad- ministrative controls, benefits at the enterprise level are also unevenly distributed. W4hat might have been self-generating growth (through reinvestment of surpluses by profitable enterprises) has been interrupted by the continuous - 36 - diversion of resources from cash-flow generating sectors (e.g. textiles) to high-cost industries (e.g. steel). This system has not provided much incentive to managers to achieve greater efficiency. 1/ 92. As noted above, there have been some recent signs of movement towards a greater measure of economic decentralization. The authorities do not intend to alter the public ownership or centralized planning of industry, but they do appear to recognize the benefits of reducing certain administrative controls, and there is a new receptivity to the discussion of alternative criteria for resource allocation. There is also evident a more outward looking trade strategy and a greater appreciation of private sector industrial activity. Among the indicators of this trend are the recent passage o- rnew laws affecting foreign investment, creation of the International Bank, establishment of a price commdssion to review relative price levels and price/cost relationshirs (though the commission has not yet turned to industry), envisaged free use for investment by export-manufacturing firms of part of their foreign exchan,e earnings (above assigned export targets), and some desequestration of private and commercial property. These developments appear to be leading to a somewhat more favorable business climate in the private sector. Prospects and Priorities 93. Egyptian industry has a great potential for future development, and it is counted upon to remain Egypt's leading sector. The hi.gh priority given to this sector seems appropriate, especially in light: of the relatively uncertain outlook for tourism and the prospect for only moderate agricultural growth in the lonig run. A large-scale expansion of manufactured exports as well as sound import substitution also appears imperative to ensure a viable long-run balance of payments position. However, industry could grow faster and increase its real contribution to the economy (in terms of value added at world prices) if priorities within the sector were guided to a much greater extent by world prices. This would in itself impose a more economic approach to the measurement of efficiency, and serve to orient intra-sectoral priorities to reflect Egypt's comparativie advantages. The Egyptian authori- ties are themselves aware of the need to reform the pricing and incentive systems in order to promote greater compietitiveness. Givern the current dif- ficulties, the need to raise efficiency in the use of the limited resources available for civilian purpose is all the more urgent. 1/ These comments are not intended to suggest that "efficiency" in the sense of short-run profit maximizat:Lon or cost minimization is the only "legitimate" objective. However, it may also be argued that EgyptIs industrial policy has been too little concerned with employ- ment creation or income distributioni objectives. - 37 - 94. In the short run, sub-optimal ("second-best") pricing corrections can usefully be implemented, especially in branches such as fertilizers or cement in xwhich inter-industry linkages with the high cost engineering goods industry are not very strong. Market considerations -- rather than the aim of self-sufficiency at any cost - should also play an increasing role in defining plant size and lines of production. There is also a need to rationalize the cost structure of the engineering goods sector, where high economic returns and good export prospects can be expected if input prices into the industry can be brought into line with world prices. This will require a review of inter-industry linkages (including local manufac- ture of equipment and machinery) and an assessment of needed corrections in input prices. In the short run, there may be a good case for subsidizing some of the presently high steel prices, in order to offset the competitive disadvantage which these prices entail for the steel-consuming industries. Concerning trade in general, particular attention should be given to the economics of Egypt's barter trade and to the prices and exchange rates which regulate such trade - particularly in the case of capital goods imports. 95. In the short-to-medium term, Egypt can successfully continue to exploit its comparative advantage in agriculture-based industries. In particular, it is important that Egypt compete aggressively in textiles, and particularly in clothing, through improving its quality and cost con- trols. Over the medium-to-longer term (and parallel to the expansion of agro-based industries), there are also good prospects for the development of selected resource-based industries (fertilizers, cement, some electricity- based industries, petroleum, etc.) and engineering industries. Sub-Sectoral Development Prospects 96. The following paragraphs provide a brief summary of the outlook for the main branches of Egyptian industry. 97. Egypt's crude oil production expanded rapidly in the 1960's, but experienced a setback in 1971 when the output from the El Mforgan field dropped by one-third, due to a lowering of pressure in the reservoir. Con- sequently, total production is likely to drop from the 16 million tons reached in 1970 to about 12-13 million tons in the next two to three years. The medium-to-long term prospects for increased oil production are uncertain, but most observers believe that the Government's forecast of 45 million tons by 1981/82 is probably achievable. Given its foreign exchange earning prospects, the sector certainly deserves the priority given it by the Government. The present refining capacity for local consumption and ex- ports (7.7 million tons/year) is fully utilized. The projected doubling of refining capacity by 1982 appears economically justified, and the naphtha surpluses generated can profitably be used as inputs into the petro-chemicals industry. The natural gas resources now under development will also provide promising new basic resources for use as industrial and domestic fuels and as feedstock in fertilizer manufacturing. Natural gas supplies nay also liberate some petroleum products for export, and contribute in the short run to an improvement in the balance of payments. In the long run, exports of liquefied natural gas may also be envisaged. - 38 - 98. Import-substitution in the field of nitrogenous fertilizer is planned to fill what would otherwise be an import requirement estimated at 250-350,000 tons of nitrogen by 1975. An envisaged ammonia-urea plant based on natural gas seems likely to show a satisfactory economic return despite competition from neighboring Gulf and Eastern countries. Annual foreign exchange savings might reach about 1E 13 million, as compared to an estimated FE 20 million foreign exchange investment. Forward integration into manu- facturing phosphoric acid or elemental phosphorous based on local phosphate rock may also prove attractive. However, the economics of this operatioa will have to be closely examined, particularly in the case of the envisaged elemental phosphorous complex. The planned petrochemical indusLry (plastics, synthetic rubber and synthetic fibers) will process local naphtlha surpluscs and substitute for increasing imports of petrochemicals; it could also sub- stitute for some basic natural resources which are in short supply, such as timber or jute. Miarket conditions appear to warrant the creation of these facilities by the end of the decade. It will be essential for their succe!3s, however, that the technologies used be of high international standards a.nd have been proved operational in previously installed plarits. 99. The textile industry (spinning and weaving) has operated at full capacity since the mid-1960's, reflecting both growing local and forWign demand and a lack of major capacity expansion in the recent past. in addi- tion to the need for expansion, about one third of existing spinning capacity and a fifth of existing weaving capacity urgently requires replacement. Similarly, the finishing segment of the industry urgently needs mioderniza- tion to meet the quality standards of developed countries. Clothing produc- tion also deserves high priority, given its booming international demand anld its high local value added. Against such needs, Egyptts planned investment appropriation (only 10 percent of the total industrial investment planned over the period 1973/77) appears quite insufficient, The prospects appear good for textile exports to hard currency as well as Eastern markets. 100, Expansion of the Helwan iron and steel complex from 0,3 to 1,2 million tons of steel products constitutes Egypt's single largest current and projected industrial investment. The total capital cost for the 1969-74 expansion program is BE 330 million, including the development costs of a new iron ore mine and of railway infrastructure. The increase in plant size and lowered cost for iron ore will improve the economics of the existing plant, but final steel costs may remain well above c.i.f. import prices for the same goods. The adverse effect of the high steel prices on the rest of the economy, and particularly the engineering goods industry, has already been noted, The steel transforming industry (including rolling, stamping and forging) operates below capacity and will probably need subsidies for the same reasons. 101o The iron and steel consuming industries (electrical and engineering industries) benefit from a low cost and imechanically-inclined skilled and semi-skilled labor force and good demand prospects, both locally and for ex- ports. In developing these industries it will be important to avoid high - 39 - costs due to idle capacity and excessive import substitution, to maintain input prices in line with world prices, and to give the sector a strong export orientation. 102. The expansion of the cement industry to meet growing local and export demand also appears to be a promising resource-based development. Egyptian expertise in this sector is considerable. Two issues of particular relevance to the growth of this sector are: a) the need for timely finan- cing; and, b) the need for economic criteria to be paramount in locational decisions. 103. The food and leather industries provide large opportunities for continued import substitution and export expansion. The sector is dominated by the private sector and benefits from dynamic entrepreneurial capabilities. Action to assist rapid development in this field would include the assurance of adequate and timely supplies of agricultural inputs into the industry, in- creased efforts to improve the efficiency of internal and export marketing channels, diversification of the range of products and of export markets, and provision of adequate investment finance to enable modernization and expansion. Tourism 104. Egypt has a vast potential for tourism development, by virtue of its historical sites and treasures, its modern cities, its climate and beaches, its springs and recuperative facilities, its hospitality to foreign visitors, and its moderate prices for tourist services. Its special attrac- tions for Arab visitors are obvious, and its geographical situation is also favorable with respect to tourism from both West and East. This potential was being exploited in the early and mid-1960's, when the numbers of tourist arrivals and nights spent rose rapidly to reach a peak in 1965/66, but then fell drastically following the 1967 war. In the years 1968 to 1970, the number of tourist nights spent in Egypt was less than half the levels reached in 1965 and 1966. However, there was a strong resurgence of tourism in 1971 and in the first months of 1972, reflecting some easing of tensions in the Middle East. Tourism could be a leading sector in Egyptian development if peace were restored; but there also appear to be fair prospects for moderate growth even in the face of continuing tensions in the area. 105. The following table summarizes some of the principal indicators of Egypt's tourist development in recent years: - 40 - Table V-3 Absolute numbers (thousands) Annual Rates of Growth 1965 1971 1966 1967 1968 1969 1970 1971 Total Tourist Arrivals 542 428 7 -40 -8 8 4 20 Total Tourist Nights 10,400 5,979 -6 -35 -31 - 4 31 Arabs 7,067 4,619 -9 -39 -13 -3 10 26 Europeans 2,328 317 - -31 -61 10 -22 52 Americans 395 188 7 -7 -68 18 -14 50 Other 610 355 -3 -30 -55 -16 6 51 Estimated Tourist Earnings (UE mil- lions) 50 36 8 -31 -27 6 1 25 106. The numiber of tourist arrivals in Egypt increased from fewer than 300,000 in 1961 and 1962 to about 540,000 in 1965, reaching a peak of about 580,000 in 1966. The number of tourist nights recorded in this period rose from an average of about 4 million in 1962 and 1963 to 7 million in 1964 and about 10 million in both 1965 and 1966. Tourists to Egypt in 1965-66 spent an average of about 18 nights each, and Egypt's receipts of foreign exchange from tourism was in the order of BE 50 million in each of those years -- equivalent to over 20 percent of merchandise exports. 107. In 1967, in consequence of the June conflict, the number of tourist nights fell to about 6 million, and in the years 1968-70 averaged close to 4-1/2 million -- or less than half the level of 1965-66. Tourist expenditures in the period 1968-70 were estimated to have averaged about SE 28 million annually. In 1971, however, as tensions in the area eased somewhat, there was a. strong resurgence of tourism, and the number of tourist nights rose by more than 30 percent above the 1970 level. This recovery continued into 1972; in January-February 1972, the number of tourist nights was over 50 percent above the number recorded for the same period in 1971. Tourist arrivals in 1971 were equivalent to about three- fourths of the 1966 peak. However, due to a fall in the average number of nights spent per tourist (from 18 nights in 1965-66 to 14 nights in 1971), the number of tourist nights in 1971 was still only 57 percent of the 1965 record of 10.4 million. In the period 1968-71, tourists passed an average of 13 nights and spent an average of around BE 70 each. Total foreign exchange earnings from tourism in 1971 were estimated at !E 36 million -- equivalent to about 10 percent of merchandise export earnings. - 41 - 108. The composition of tourists has shifted somewhat irn recent years as the proportionate decline in visits by European and American tourists was greater than that of Arab tourists. In 1965, Arab tourists comprised 68 percent and European plus North American tourists accounted for 26 per- cent of all tourists. In 1971 these proportions were 77 percent and 17 percent, respectively. It is estimated that about 70 percent of Arab tourist nights are spent in rented apartments rather thar. hotels. The present supply of accommodation consists of about 24,000 hotel beds and some 30,000 beds in furnished apartments. The latter presently account for about 70 percent of tourist nights. In the spring of 1972 there was considerable pressure on the country's luxury and first class hotel capacity in Cairo, Luxor, and Aswan, but in general there is still a condition of general excess capacity, as evidenced by the low average occupancy rates implied by the above figures. In 1965, Egypt accommodated about 7 million tourist nights in apartments and 3 million in hotels. If Egypt were to achieve the 70 percent occupancy rate considered as optimal, this would in fact permit 15 million tourist nights annually with the present capacity. However, this would require a very successful promotional effort to achieve better balance between tourist demand and the supply of facilities -- by location, by season, and by type of accommodation. 109. The Egyptian authorities believe that if peaceful conditions were restored to the Middle East, Egypt could realize 15 million tourist nights by 1974, and that tourism could continue to grow by as much as 30 percent annually through the mid-1970's, reachiing perhaps 25 million tourist nights in 1977. Of this projected growth, about half would be expected to come from Arab tourists, half from non-Arabs. Egypt's prospective strategy for tourism development in the coming decade will emphasize: (a) more selective promotional and marketing activities aimed at improving the util- ization of existing capacity and at attracting specific groups of Arab and European visitors; and (b) greater development of mass and budget tourism, with less emphasis on attracting luxury-class sightseeing-oriented visitors and more emphasis on developing recreation or recuperation-oriented tourists. An objective of this approach is not only to attract greater numbers of visitors, but also to increase the average length of stay. To this end, the authorities are hoping to develop new resorts, spas and holiday villages, and to exploit the attractions of Egypt's climate, beaches and mineral springs in addition to well-known historical sites and attractions. In particular, the Government sees great potential in developing tourist complexes on the north coast. Other projects include recuperative resorts in the Faiyum area, a 720 million luxor project, and exploitation of Red Sea sites for winter tourism. There is also a pressing need to improve the condition of existing facilities and to complete certain projects already undertaken (e.g., unfinished h1otels in Cairo and Aswan). 110. The Egyptian authorities appear to hiave somewhat ambivalent feelings about giving a high priority to tourism development at a time when the country is in a state of war. However, it is also recognized that tourism is a sector in which the country enjoys a comparative advantage which, if developed, could provide considerable economic and financial returns in addition to much - 42 - needed foreign exchange. But tourism remains a relatively neglected sector -- at least as far as budgetary allocationas are concerned. In the 1971/72 budget, for example, only some IE 2.4 were appropriated for tourism. In the 1973-77 draft plan, investment in tourism was indicated at BE 60 million (2 percent of the total) - of which more than half was counted upon to be provided by foreign investors. The Goverinment is presently seeking to attract Arab, European and American investors to provide at least the foreign exchange component of new accommodations. In addition to qualifying for the general benefits of the Law on Foreign Investment, investors in tourism will also receive special tax exemptions for periods of 5-8 years, with additional exemptions applied to reinvested earnings. It is hoped also that the exemption of foreign investors in housing from most oL the regula- tions of the present housing law may resu:lt in the construction of new apartments with potential touristic utility. It is reported that some foreign investors are considering constructing hotels. 111. While prospects for the near-term development of the sector are compromised by the uncertain political situation in the region, the Govern- ment believes that a growth in tourist demand of perhaps 10 percent annually can still be achieved without major chang,es in this situation Despite present limitations on the movements of tourists, most of the major attrac- tions are accessible, and certainly Egypt's prices are competitive. In the winter of 1972, for example, hotel prices were at the same level as prevailed in 1966, while tourists enjoyed a 35 percent premium in the rate of exchange. In June 1972 this premium was raised to 50 percent in an effort to diminish black market exchanges. - 43 - VI. PUBLIC FINANCE, MONEY AND PRICES Overall Development - 112. The salient feature of Egypt's fiscal development in recent years has been the rapid increase in military expenditures, and the consequent squeezing of resources available for civilian expenditures - both current and capital. Between 1966/67 and 1970/71, defense expenditures rose at an average rate of about 26 percent annually, while non-defense current expendi- tures - though rising in 1969/70 and 1970/71 - had still not recovered to their pre-war level as of 1970/71. 2/ Similarly, public sector fixed invest- ment also rose somewhat in the period 1968/69-1970/71, but still did not reach the level attained prior to the 1967 war. As of 1970/71, military expenditure accounted for about 15 percent of GNP and about 35 percent of total public expenditure, compared with proportions in the early 1960's of about 9 percent and 20 percent, respectively. Public fixed investment has meanwhile accounted for less than 11 percent GNP in recent years. The following table summarizes the evolution of defense and non-defense spending in the past six years: Table VI-i 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 (in LE millions) Defense expenditure 175 167 224 268 386 423 Non-defense current expenditure 510 497 392 383 449 474 Public investment 300 271 267 312 352 358 of which: fixed (350) (329) (290) (291) (313) (308) Total non-defense 810 768 659 695 801 832 Annual percentage changes Defense expenditure -1 -5 34 20 44 10 Non-defense current expenditure 41 -3 -21 -2 17 6 Public investment 2 -10 -2 17 13 2 of which: fixed ( 3) (-6) (-12) (-) (8) (-2) Total non-defense 23 -5 -14 5 15 4 1/ The analysis of fiscal developments is made difficult by the reclassifi- cations of expenditures and revenues over time. For details, see the footnotes to Tables 5-1 through 5-4 in the Statistical Annex. 2/ The assumptions and methods used in classifying Emergency Fund sources and uses are described below in paragraphs 124 and 127. - 44 - 113. As may be seen, in 1970/71 total non-defense expenditure (as defined above) was only little more (in current prices) the level reached before the 1967 conflict. And since the price level (GDP deflator) increased bv over 10 percent in this period,, there was a decline in total civilian expenditure in real terms. On the other hand, it should be noted that some of the prewar civilian expenditure included debt service and settlements of arrears not included in the 1970/71 figures. Expenditures on social and economic services rose by some 30 percent (in real terms) in this period, but: fiXed pliblic investment remained far below the pre-war level. 114. On the positive side, it should be noted that there was a major fiscal effort on the revenue side. Tax receipts rose rapidly sinCe 1967i68; much of the defense burden was borne by other Arab countries wich MOde large grants to Egypt (apparently well in excess of the Khartoum Agreement transfers). After a current deficit of the Central Government around BE 70 million in 1966/67 and 1967/68, a small surplus emerged in 1968/69 and 1969/70. In 1970/71, however, there was a deficit of BE 32 million. The Government's stabilizatiorn measures following the 1967 war (wfhich included tax incrcease.s and reductions in cost-of-living subsidies in addition to other cuts in non-defense spending) was accompanied by a reduction in Egyp-t's trade ieficit, which fell from an average of LE 160 million in the two year 9erioc 1965/6t5- 1966/67 to LE 134 million in 1967/68 and BE 77 million in 1i9&8/69, 115. In 1969/70 and 1970/71, however, there was an increase - . bank financing (to iE 30 mllion in each year) and a widening of the trade deficit (to BE 125 million and BE 173 million, respectively)9 T1he domestic deficits increased despite substantial rises both in ordinar revenues and in the surpluses of the public enterprises and social insurance f- dEs. The mai n reason for the inicreased deficits was a nearly 60 perc:ent rise in military spending and a 20 percent rise in non-defense current expenditure over this two year period, together with a rate of investment expenditure more than 20 percent above the average of the preceding two years. Public sector savings remained virtually unchanged 4i 1969/70 -and 1970/71, as did Government borrow- ing from households and net external financing. The financing of investment will be discussed below in mre detail, following a descript:lion of the struc- ture and recent growth of Government current revenues, current expenditures, and public investment expenditure. Government RevenuLes and Social Security Surplus i16, In the three years 1968/69-1970/71, Egypt's total ordinarv revenues grew by nearly 10 percent annually, raising their share in GDP to 21 percent in 1970/71. Including savings from the Social Insurance System,, this ratio becomes 27 percent. The 1967 war had an adverse effect on a number of revenue sources, especially Suez revenues, business profit taxes, and customs duties. Mainly because of the closing of the Canal, non-tax revenues fell by nearly LE 100 million between 1966/67-1967/68, and these still remained in 1970/71 at only about half their 1966/67 level of BE 174 million. Tax revenues, on the other hand, grew at an average rate of 12 percent annually in the period 1966/67-1970/71, with the fastest growth in property taxes and business profit taxes, largel-y through greater efforts to improve tax administration in coL- lecting arrears. The following table summarizes the recent: development of the revenue structure: - 45 - Table VI-2 Central Government Ordinary Revenues: Structure and Growth 1963/64 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 (Budget", (in IE millions) Tax Revenues 272 342 423 414 451 524 572 531 Non-Tax Revenue 97 132 174 70 83 94 63 91 Total Ordinary Revenue 369 474 597 484 534 618 635 622 Extra-ordinary Revenues /1 - - - 60 128 225 230 298 Total Revenues 369 474 597 544 662 843 865 920 Average Annual Growth Rates Share of Total Ordinary Revenue 1963/64-1970/71 1967/68-1970/71 1963/64 1970/71 (%) (%) (%) (%) A. Direct Taxes 17 17 13 22 Income Tax 10 9 4 4 Business profit tax 20 19 9 18 B. Indirect Taxes 10 10 61 68 Property tax 12 21 2 3 Excise and con- sumption taxes 20 11 14 27 Customs duties 5 11 39 31 Other 9 -1 6 7 C. Total Tax Revenues (A+B) 11 12 74 90 D. Non-Tax Revenues -6 -3 26 10 E. Total OrdinaUrY Revenues 8 10 100 100 F. GDP at current prices 7 6-1/2 /1 Emergency Fund receipts less transfers from public sector surpluses classified as "other expenditure". 117. As may be seen from the table, customs duties and other indirect levies are the most important taxes, accounting for about one-third each of total tax receipts. Next in importance are business profit taxes. Personal income taxes account for less than 5 percent of total taxes; more important as a source of personal taxation are the social insurance premiums, to be described below. There were few changes in tax rates or in the tax base since 1967/68, excepting the introduction in 1968 of a national security tax, levied as a 50 percent surcharge on the defense tax. Most of the recent increase in tax revenues was attributable to higher levels of imports and consumption, and to better tax collection procedures. The Egyptian tax structure is widely believed to be quite inelastic, but recent data indicates a fair measure of - 46 - tax buoyancy with respect to changes in GNP. A notable exception has been the land tax, revenues from which have not kept pace with rises in agricul-- tural income. The time appears opportune for an increase in this tax, preferably through an assessment procedure linking the tax to potential pro- ductivity. Another area of potential tax reform is in personal income tax- ation, where receipts remain low despite very high marginal rates; this poor yie,ld is reportedly largely because of wiidespread evasion. In January 1972, the Government announced a new set of taxC measures, includ-i-ng :ncreased gasoline taxes, higher customs duties (or bans) on nonessential i anrts, and the introduction of a tax on orchards. Given the substantial _acreases in private consumption which have taken place notwithstanding the miltary burden, there also appears considerable room for increasing taxes on rents, on durable consumer goods, and on other goods and services consumed airnly by people with upper and middle level incomes. 1t8. A major source of revenue for Egypt since the 1967 war has been transfers fromr abroad to the Emergency Fund, which was created in 196 to finance military and related expenditure., Neither the specific SOUcCaS o the Fund's financing nor the specific destinations of its expenditures is reported. 1/ In 1968 and 1969 transfers under the Khartou.m Agrsamer;n- appear to have accounted for most of the Fund's finances, but the finerMcin,g of the much-expanded Fund in 1969/73 and 1970/71 cannot be explained either by reference to published balance of payments or budgetary data. It appears from public sector budgets that some domestic resources were transferred to the Fund in 1969/70 and 1970/71 (as indicated in the footnote to the above table), but the unexplained revenue sources still remain in the order of Mt 100 aillion. It is presumed that considerable amounts of Soviet and Arab aid (above and beyond Khartoum Agreement assistance) were directed to the Emergency Fund in those years, but there is no direct corroboration that these flows were of this magnitude. 1t9. For a large part of the population it is not taxes but premiums to social security and pension funds that constitute the most important tax. -embersh:ap in these funds rose by a half million persons in the five years preceding 1970/71; reaching a total of 2.6 million in that year. M.embership is pr;esently limited mainly to public sec.tor employees, but the Government plans to extend the system's coverage to agriculture and other parts of the private sector; specifically its aim is to raise membership to 7 million within three years. If these plans are realized, the socia:L security surpluses shtuad be one of the most dynamic sources of public savings in the years ahead. Total receipts of the system rose from LE 141 million in 1965/66 to LE 216 million in 1970/71, of which 60 percent consisted of premiums and 40 percent returns on invested funds. Combined benefit payments and operating costs meanwhile rose from LE 18 million to BE 45 million over this period. v/ The totals are shown in Table 5.1 in the Statistical Annex. - 47 - Consequently, the net surplus of the system rose from BE 123 million to LE 171 million - the latter figure being equivalent to six-fold the total personal income tax receipts. 1/ Current Expenditures 120. The principal points concerning Egypt's current expenditures were summarized above (para 112 including Table VI-1. The table below presents some additional significant information on the recent development of these expenditures: Table VI-3 Government Current Expenditures: Structure and Growth Share of Total 4 Yr. Av. Annual Amounts in LE millions Expenditure Growth, 1967/68- 1963164 1966/67 1970/71 1963/64 1966/67 1970/71 1970/71 (%) (%) (%) (%) Organizational Services 239 237 582 48 36 65 25% Defense /1 177 167 423 36 25 47 26% Other 62 70 159 12 11 18 22% Social and Economic Services 178 230 273 36 35 30 4% Agriculture/ Irrigation 24 29 40 5 4 4 10% Education 82 100 126 17 15 14 6% Health 21 29 40 4 4 4 8% Other services 51 72 67 10 12 8 -6% Other /2 76 197 42 16 29 5 -32% Total 493 664 897 100 100 100 8% /1 Includes Emergency Fund expenditures, on assumption that 70% of the Fund is allocated to defense; the remaining 30% has been classified under other organizational services. /2 Includes domestic debt service (including principal in 1963-64 and 1966/67), pensions and remunerations, cost of living subsidies, and a settlement of arrears in 1966/67. 1/ Treasury accounts (see Table 5.4) report a 1970/71 surplus of BE 188 million; the mission was not able to determine the reason for the discrepancy. - 48 - 121. Total current expenditures were equivalent to 30 percent of GNP in 1970/71. As may be seen from the table, non-defense expenditures accounted for all of the rise in the mid-1960's, when defense spending even declined in absolute terms. Since 1967, however, military spending has received absolute priority. The military spending reported above consists of the sum of the current expenditures denominated for defense plus 70 percent of the Emergency Fund. According to Government sources, this Fund has been used not only for strictly military purposes, but also for reconstruction and other "conflict- related" expenditure which might be classified partly as civilian expenditure. Any attempt to estimate actual defense expenditure on the ba,sis of published information is, of course, subject to a wide margin of error, 122, Among other noteworthy features of the structure of current experndi ture is the continuing substantial share of educational expenditure (14 percenL of total expenditure and 4 percent of G;NP in 1970/71). and the increased prior- ity given to health. Not shown in. the table is the drop in cQSt oL living subsidies (from an average of about BE 45 million in the mid-1960's to zero in recent years), a measure taken as part of the stabilization effo-rt of 1968/69, Accordirng to the 1971/72 budget, defense spending was projected to rise another 10 percent, total non-defense expenditure by 15 perce:,t. In January 1972, howaver, the Government announced a cutback in "lIess assential` current expenditures in order to free more resources 'or the war effort. Public Investment and its Financing 123. Public investment expenditure has borne much of the burden of retrenchment in Government spend'ng for civilian purposes. Unfortunzately, it is impossible to be precise about year-to-year changes in public in.vest- ment,, owing to a number of unresolved discrepancies in budgetary, national accounts, and sectoral data, 1/ However, it appears by all accounts that the share of public investment in GNP dropped in 1966/67-1967/68 to below 11 percent of GINP and has remained in the general area of 11-12 percent since 1968/69 T'he following table shows the shares of total investment claimed by the principal sectors, and the respective growth rates of investment by sector in recent years: _J There-is also a significant discrepancy in the budgetary data provided to the IMF and IBRD missions. IF (lata for 1970/71 show public invest- ment at ME 292, compared to a figurre of hE 358 in IBRD mission data -- a discrepancy of over 20 percent. A possible reconciliation might be found in the item identified only as "other expenditure" in the table summarizing public sector operations (Table 5.4 in this report). Tnis item is BE 60 million higher in the IMF data -- conceivably representing additionaZl investment expenditure. However, the 1MF assumes that most of the "other expenditure" has been transferred to the Emergency Fund, to be used for current rather than investment purposes. - 49 - Table VI-4 Public Sector Investment: Structure and Growth Share of Average Annual Total Public Investment Growth Rates (%) 1963/64 1966/67 1970/71 1963/64-1966/67 1968/69-1970o71 Agriculture 13 18 8 -1 -2 High Dam 17 21 2 -3 -47 Electricity 5 9 5 9 6 Industry 30 15 44 -28 15 Transport/Comm. 5 5 9 -10 -12 Housing & Utilities 5 5 6 -7 62 Other 25 27 26 Total 100 100 100 -10 7 124. The salient feature of the changing structure of investment is seen in the changed priorities of agricultural and High Dam investment vis-a-vis industrial investment. The latter was yery much squeezed in the mid-1960's, but since completion of the Dam in 1968, industry has had by far the highest priority. Somewhat surprising, perhaps, in light of the Government's social objectives, is the still rather low share of housing investment, though most housing continues to remain in the private sector. 125. The role of public sector savings, domestic and foreign borrowing and Central Bank finance in the financing of total public investment was briefly touched upon above. The following table presents a fuller summary of the sources of this financing: - 50 - Table VI-5 Public Sector Savings and Investments (in E millions) Budgt 1967/68 1968/69 1969/70 1970/71 1971/72 Public sector investments 267 312 352 358 350 Public sector savings 178 258 260 256 248 Central gov't current surplus -72 11 8 -32 -91 Current revenues /1 (544) (662) (843) (865) (920) Current expenditures /2 (616) (651) (835) (897) (1011) Local gov't current surplus 16 9 17 12 11 Social insurance surplus 145 151 159 188 188 Public enterprise savings 63 55 66 84 98 Other receipts 26 32 10 4 42 Other domestic financing 65 68 107 103 102 Borrowing from households 15 20 27 25 22 Central bank finance 50 48 80 78 80 External financing (net) 24 -13 -15 -2 - Disbursements 58 32 43 55 69 Repayments 34 45 58 57 69 Memo Items: Increase in net claims of banking system on public sector (-E, m.) 28 36 93 82 PuDlic sector savings as % of public investment 67% 83% 74% 72% 71% Public sector savings as % of GD? 7.0% 9.6% 8.8% 8.3% es Public invest-ment as % of GDP 10.5% 11.6% 11.8%X 11.6% Public sector resource gap 3.5% 2.0% 3.0% 3.3% /1 includes receipts of transfers from abroad for Emergency Fund. /2 Includes expenditures of Emergency Fund. Three important features stand out: a) the recent stagnation of public sector savings; b) the (seeming) negligible net contribution of external finance; and c) the increased reliance on Central Bank financing sinc:e 1969/70. - 51 - 126. Given the evolution of current revenues and expenditures as described above, the Central Government's current balance moved from a deficit in 1967/68 to small surpluses in 1968/69 and 1969/70, then deteriorated to a deficit again in 1970/71. However, even though the current balance deteriorated by over LE 40 million between 1968/69-1970/71, public savings were maintained at a con- stant level of about BE 260 million over these years, owing to substantial increases in the social insurance surpluses and in public enterprise savings - the latter only in 1970/71. 1/ Since GDP was growing in the meantime, however, the share of public savings in GDP declined each year, from nearly 10 percent in 1968/69 to just over 8 percent in 1970/71. Similarly, as investment rose over the period with unchanged savings, the public sector resource gap widened from 2 percent of GDP in 1968/69 to over 3 percent in 1970/71. 127. The financing of the public sector resource gap was provided entirely through domestic borrowing, both from households and from the banking system. In fact, as may be seen, rising external debt service obligations were not even fully offset by disbursements of foreign resources, so that there was a small net outflow on the external account. This additional deficit was more than offset by domestic borrowing from households, as the public's holdings of saving certificates and postal savings grew by some BE 10 million in the period 1967/68-1970/71. However, as noted above, there was also a substantial increase in Government borrowing from the banking system in 1969/70, increasing the share of bank finance in total public investment from an average of 17 percent in 1967/68-1968/69 to about 22 percent in 1969/70-1970/71, placing greater pressure on available resources. The increase in net claims on Government by the banking system shows a very similar trend. But it is not clear to what extent this trend reflects a shift to an increasingly expansionary policy. 2/ Budgetary projections for 1971/72 point to a substantially widened current deficit, more or less unchanged investment expenditures, an increase in "other receipts" (reflecting the lack of provision for transfers to the Emergency Fund), and virtually no change in other domestic or external finan- cing. In the light of the usual conservatism of budgetary forecasts, the tax and expenditure actions of January 1972, and the issue of war bonds in March 1972 (bE 15 million in "Jihad bonds"), it appears that the current and overall deficits might be less than forecast. HIowever, there are also reports of supplementary allocations for military expenditure, so there seems little prospect that there will be much improvement in public savings in the short run. 1/ While this stagnation in public savings is a serious problem, it is at least not as alarming as the large drop in total national savings in 1970/71 reported in the national accounts. The mission was not able to reconcile this apparent discrepancy between the national accounts and the public sector accounts. 2/ A confusing element in this interpretation is the unknown reason for a large decline in time and savings deposits of public enterprises in 1970/71. See below, para 131. - 52 - 128, In the longer run, one key to higher public savings and higher investment rates will lie in the ability of the Government to foster efficient and competitive enterprises with a pricing system conducive to the generation of substantial surpluses in the most efficient firms. The rationalization of the pricing system will be a key element in generating higher real enterprise savings to be distributed between budgetary uses (via profits taxes) and increased direct financing of investment (whether by firms themselves or through Government holding companies). The pricing and taxing of agricultural commodities will also be a key element in the generation of public savings, since it would appear that the consumption of food and other agricultural consumer goods will have to be restrained if domestic resource mobilization is to move forward rapidly. Tha fiscal ques- tion of overriding importance for the foreseeable future is basically a political question: namely, whether conditions will permit extensive trans- fers from military to developmental expenLditure - both current and capital. Money, Credit, and Prices 129. Since the recent IMF and IBRD missions were provided with identical information concerning the development of money, credit, a4nd prices, this report will only briefly sunmmarize recent developments in these areas, leaving a fuller description to the 1972 I3 report ent-itled "Arab Republic of Egypt: Recent Economic Developments." 13Ce Egypt's credit policies, like her fiscal policies, were strongly expansionary in the early 1960's, Domestic credit expanded at an average rate of 15 percent annually between 1960/'61-1965/66, giving rise to rapid inflation in the mid-1960's. Thus, in the three years ended 1966/67, cornsumer prices rose at an average rate of 9 percent annually. As noted earlier, in 1966/67 the Government embarked upon a stabilization program. This included a tight monetary policy which succeeded in reducing the rate oL credit expansion to about 4 percent annually in that year and the next. T'he principal reason for the slowed credit expansion in those years was the reduced relianice of the public sector on the banking system. During that time, the money supply remained almost unchanged while net foreign assets declined. 313YS In 1968/69 and 1969/70, the rate of credit expansion increased to 7 percent and 8 percent, respectively,, as the economy recovered from the depression of the years immediately preceding and following the 1967 .ja-r This credit expansion was fully rei.lected in an increase in domestic Liquidity (i.e. money plus quasi-money), and the net foreign assets of the banking system remained virtually unchanged in those years. In 1970/71, despite the Government's intent to return to a more restrictive monetary policy, domestic credit again expanded by 8 percent, with Government fi- nancing by the banking system again the :Largest expansionary factor. In this year, however, there was a substantial reduction in net foreign assets, and domestic liquidity even declined somewhat. The main reason for the decl4ne of the latter appears to have been an unexplained 20 percent fall in the time and savings deposits of government-owned companies. A summary of the factors affecting Egyptts liquidiity in recent years is presented in the following table: - 53 - Table VI-6 July-Dec. Changes during period 1967./68 1968/69 1969/70 1970/71 1970 1971 (In millions of LE) Money and quasi-maney -8.4 71.2 100.8 -1.9 19.9 58.7 Money -19.5 37.4 73.7 13.9 21.3 70.8 Quasi-money 11.1 33.8 27.1 -15.8 -1.4 -12.1 Foreign assets (net) -51.1 1.1 7.2 /1 -103.5 /1 -86.0 -65.7 Domestic assets, net 42.8 70.1 93.6 101.6 105.9 124.4 Claims on Government (net) /2 28.2 36.4 92,9 81.5 46.6 93.7 Claims on nongovernment sector 29.6 30.1 21.2 34.7 66.7 58.5 Other items (net) -15.0 3.6 -20.5 /1 -14.6 /1 -7.4 -27.8 (In per cent) Money and quasi-money -1 8 10 0 2 5 Domestic assets (net) 4 7 8 8 9 10 Claims on nongovernment sector 8 7 5 8 15 12 /1 Includes the effects of the January 1970 and 1971 allocation of SDR 25.2 million and SDR 20.1 million, equivalent to LE 8.8 million and BE 7.0 mil- lion respectively (at par value). The SDR allocation improved the net external position and exaggerated the contractionary effect of "other items (net)." /2 Includes changes in counterpart funds. 132. In the first half of 1971/72, domestic credit expanded at an annual rate of about 10 percent - again mainly due to heavy government borrowing, which doubled as compared with the first half of the previous year. The external sector, therefore, remained under pressure as net foreign assets declined an additional BE 66 million. Part of the inflationary pressure was expected to be relieved by the war bond issue of March 1972, as well as by new regulations restricting the extension of commercial bank credits to the private sector and ending the roll-over of short-term loans. 133. Interest rates do not play a significant role in Egypt, either as an instrument of demand management or of allocative policies. Except perhaps in housing, monetary policies generally appear to have only minor influence on the level and composition of private consumption. Investment decisions, being mainly governmental, have been little influenced by factor price con- siderations. Egyptian interest rates have tended to remain both low and un- changed over long periods of time. They vary at present between 6 to 6-1/2 percent for medium and long-term bank credits to economic enterprises (except for a 5.75 percent rate for cotton financing). The legal lending rate ceiling - 54 - is 7 percent. Interest rates on deposits are 2-4 percent for time deposits and 3-1/2 - 4-1/2 percent for regular sav7ings. Other savings instruments, such as the 1972 war bonds and various governmental savings certificates, yield returns in the order of 4-1/2 to 5 percent, and are exempt from income tax. 134. While it may be presumed that even the 7 percent interest ceiling is well below the opportunity cost of capital in Egypt, it does not neces- sarily follow that higher rates would leaLd to improved allocation. A pre- condition of such an improvement will be the undertaking of more important adjustments in the pricing system and in the investment-decision process. 135. Prices in Egypt are extensively controlled by government, both in factor and commodity markets (with few exceptions such as meat, fruit and vegetables, and other agricultural produce). Income distribution goals have been predominant, the main aim of controls being to keep consumer prices low and stable - especially for basic goods. In these circumstances, how- ever, price indices are obviously inadequate indicators of open, actual or suppressed inflationary pressures. Thus, for example, while official indices indicate that both consumer and wholesale prices remained fairly stable in the early 1960's, signs of repressed inflation were evident in the form of con- sumer goods shortages, black markets, and deterioration in the balance of payments. In recognition of these factors, the authorities raised prices and indirect taxes in the mid-1960's, firstly in order to diminish distortions (i.e. to bring suppressed and actual inflaktion more in line with open inflation), then as part of the stabilization program of 1966/67-1967/68. Since 1967, prices have increased relatively moderately. The consumer price index has risen by about 3-4 percent annually since then, mainly on account of rising food prices in the free market which have partially been offset by reductions in administered prices. 136. Except for foreign exchange, and to some extent housing, there do not now appear to be extensive black markets in commodity markets. But the recent surge in import demand no doubt reflects some inflationary pressure not measured in the price indices. The tightening of import controls in early 1972 may not be reflected in the incdices because of significant reduc- tions in May 1972 in the administered prices of some basic foodstuffs. 137. The Government appears to have become increasingly aware of the adverse ef.ects on incentives and allocation which past price policies have engendered. In late 1971% a Price Board was created to consider the pricing problem in its many dimensions. However, as of May 1972, only a very sma1L staff was studying the structure of agricultural prices. The work of this Board certainly deserves very high priority, for a thorough and comprehensive reform of Egyptian pricing principles and practices appears to be a necessary step towards improving allocation, mobilizing savings, ans stimulating a faster rate of economic development. - 55 - VII. BALANCE OF PAYMENTS AND EXTERNAL DEBT 138. The balance of payments situation remains a critical constraint to Egypt's short run development. Export growth (in volume) has been slug- gish, while Egypt's ability to borrow on favorable terms has been severely limited by political as well as economic factors. Moreover, of the avail- able foreign exchange receipts, substantial proportions are claimed by debt service obligations and the need to purchase food from abroad. Consequently, there has been insufficient foreign exchange (and particularly convertible exchange) to finance needed imports of raw materials, spare parts, and inter- mediate and investment goods. Egypt's foreign exchange liabilities now far exceed her foreign exchange assets. 139. The receipt of substantial amounts of assistance from other Arab countries has helped Egypt to maintain a continuing import surplus with Western countries, from whom credit has been very tight. The scarcity of convertible exchange has affected adversely both investment and current output in every sector. For example, agricultural productivity has suffered from the rationing of fertilizers, while even the progress of family planning has been hindered by the lack of funds to purchase contraceptive materials. 140. While a number of Egypt's major investment projects are continuing to be supplied and financed by Russia and other Eastern countries, Egypt also has its balance of payments difficulties with these non-convertible currency countries. There appears to be a substantial export surplus in civilian goods trade with Eastern countries, but nothing is reported concerning either the importation and financing of military debt or the servicing of military debt. In any event, the overall balance of payments outlook is worrisome. There is perhaps some limited room for further restricting consumption imports, but other imports must grow substantially if full capacity and allocative efficiency are to be achieved. Similarly, much greater amounts of investment goods will have to be imported to permit an adequate rate of growth of the civilian economy. Background: The Structure of Trade 141. The predominant feature of Egypt's balance of payments development in the 1950's and early 1960's was a persistent and rising deficit on current account. These deficits resulted both from the active efforts of Government to raise the level of economic development and from the strains of increased military expenditures during the Yemen war. These deficits rose despite both a rapid growth in exports of invisibles and a significant improvement in terms of trade recorded over the period. Until the late 1950's, Egypt relied almost entirely on its (then) considerable foreign exchange assets to 1/ All of the data reported are exclusive of military transactions; this omission applies to imports of military equipment, the financing of military imports, and the military debt and its servicing. - 56 finance its deficits. Tn the late '950's and earlv 1960ts, both reserves and foreign borro-wing financed the import surplus, but by 1963 Egypt's for- eign assets were virtually exhausted. Since then, its external indebtedness has risen rapidlyv imposing an increasingly difficult burden. on the economy. 142. In the fifteen year period from 1950 to 1965, Egypt's export structure remained highly dependent upon raw material exports--particularly raw cotton exports. However, there was a significant declinse over the period in the share of raw cotton exports, from 82 percent to 56 percent; the share of other raw material exports remained at about 11-12 percent. In terms of absolute value, Egyptts cotton exports in the mid-1960's earned no more than they had in 1950, while the volume of cotton exports actually declined abso-- lutely in this period. To sorae extent, this was attributable to an increased share of domestic cotton devoted to cotton yarn and textile manufacture. Thus, between 1950-65 the share of semi-manufactured and manufactured exports rose from 7 percent to around 30 percent. These exports consistr mainly of cotton goods, but also of bleached and husked rice, dehydrated onions, cement,, furniture, shoes and tires. Fuel exports also grew rapidly from a small base in the early 1960's. But commodity exporits were neglected on the whole, and their share in GNP fell from about 17 percent in the early 1950's to about 12 percent in the mid-1960's. On the other hand, there was substantial growth in invisible earnings, particularly from tourism and Suez Canal d-ues. 143. On the import side, a combination of rapidly increasing domestic demand pressures and relatively slowly growing foreign exchiange receipts led the Government to impose strict import controls, The aim was both to hold down the aggregate level of imports and to change the import structure in favor of "essential"' goods. Thus, imports of capital goods and intermediate goods grew rapidly, -w'nile consumer durables were the main target of import restrictions, partlv because these were deemed least essential, partly because import-substituting industries were increasingly able to supply the domestic narket. Food imports--mainly wheat and Wieat flour--fluctuated considerably in accordance with domestic ood production, but remained an important component in total imports with a share of around 20 percent, Despite the Goveraments controls and its emphasis on import subs ution, however, the share of commoditY; i ports In GNP in the uid-1960's was about the same (around 20 percent) as in the ear ly 19!50's. 144~ v ''he overeal dceveelopment of: Egypt's balance of payments since the war or June 1967 saw a fall in bot. imp;.rts and exports in 1967/68, with ..s r L.y mocieratel, sjince thcai:, 14oweveI% the rise iL. exports was due .-a:.n- yLgo a 20 cen trse in, te -es of raw cotton in the period 1966/67- 1970S/71e Imports, though unchanged n 1960/69, rose faster in the period 1>6 1970i71l zo produce a record trade deficit In the latter year. The services balance, -whih traditiorally had shown a surplus, also deteriorated to a teadily increasing deficlt since the ,967 war. Whi]Le the decline in Suez C'anal revenuas was, on fhe whola, more than compensated by Kliartoumi Agreem.ent aid ant. by ot'her Arab transfers, the adverse balance on current account never:heless rose very substantially in '1969/70 anrd again in 1970/71-- reaching iE 95 m'ilon in the latter year. The gross capitail inflow more thait doubled in the period 1968/69-1970/771, but amortization obligations - 57 - also rose rapidly in this period. Consequently, the cumulative overall deficit (i.e. loss in reserves) during the past four years was BE 113 mil- lion. As of June 1971, Egypt's foreign exchange liabilities exceeded her foreign exchange assets by some BE 270 million. These developments are summarized in the following table: Table VII-1 Suminary of Balance of Payments (in millions of BE) Annual Rate of Growth (current prices) 1966/67 1967/68 1968/69 1969/70 1970/71 1968169-1970/71 (3 year average) Exports, goods 264 253 307 348 358 12 Imports, goods 414 387 384 473 531 1N Trade Balance -150 -134 -77 -125 -173 Service, re- ceipts 175 59 67 74 74 8 Service, pay- ments 104 80 93 109 114 13 Net Services 71 -21 -26 -35 -40 Transfers, net /1 31 84 125 139 118 12 Current Account Balance -48 -71 22 -21 -95 Medium long-term Capital, net 45 -3 -29 -8 8 Borrowing (100) (56) (77) (108) (152) 39 Amortization (-55) (-59) (-106) (-116) (-144) 35 Other capital,net /2 24 24 15 38 27 Total Capital Movement 69 21 -14 30 35 Overall Balance 21 -50 8 9 -60 . . . . . = = = = /1 Since 1968/69 including Khartoum payments of about BE 110 million annually. /2 Includes allocation of SDR's. 145. The table also reveals some of the major adverse effects of the 1967 war on the balance of payments, namely, the decline in commodity exports (e.g. petroleum), in invisible exports (e.g. tourism and Suez revenues), in imports, and in the net capital inflow. 1/ As may be seen, the trade deficit, 1/ The data in the table above do not include military imports or capital flows related to such imports. As will be described below, however. it seems likely that Egypt's large export surplus with the USSR is not independent of past or present military imports. - 58 - the current account deficit, and the overall deifcit all wi4dane &uDstanit:ad- ly between 1968/69 and 1970/710 A main cause of this sittriOn Was the nearly 40 percent rise in coummodity imports in this period, during -dhich period exports rose by only 17 percent from a smaller base. 146, The services and transfers balances should be seen tsth-3 x inQofar as the fall in service receipts and the rise in net transfers rs n large part offsetting, as the Khartoumi Agreement compensated Egypr: for the loss il Suez revenues. I/ Another significant cause of declining servi`e - aec s 4is was the falloff in tourism, revenues from, which fell from an esti td BE 54 million in 1966 to only 3E 28 million in the years 9918-7?. C ':u ne payments side, there was a substantial rise in interest paymen._S, UE 19 million in 1966/67 to BE 31 million in 197Q/7', 147. At thi same time as the civilian economy was greatly ri n xOme Western creditors. Among the costs of this action was a worsenig oif 6` country's creditworthiness, with the consequence that ne7 capi ta '-S from the West became more severely limiteed, while the capitea: whn w'as ade available was extended on quite strict terms, 3/ During the last -2` Egypt succeeded in negotiating rescheduling arrangements with th.Ar U.'.`.. az: Italy. As of late 1972,s only the debts to Germany and Japam! So sn, There continued, however, some delays in meeting other debt serv4dke -Y'aliga- tions. A debt rescheduling with Germany appears litkely in the near `utua now that diplomatic relations between thtse countries hnave beon T-asumk;:A 1/ After the currency alignment of 1971., the amount payable under tbe Khartoum Agreement rose to ZU 118 million annually. Egypt hase received additional transfers from Arab countries on an a'd 'hoe asls, but the exact amounts by sources are not reported. 2/ The GcSvernment's instrument for exchange rationring is tha 'oreign Exch,-nge Budget, adminis tared 'by.t ie 24Mnistry of Economy and 'Fce5aign ZrEde_ While conatructed izI principle on an annual basis - th4is bodget is inl practice quite freq.uently r..,fised. it appears t-hat the ' aloca- tion of exchange is icatat;e more b- ad hoc cr;itaria or by &mergu=-'V s;.*tuations than by medium-term deveolonment criceria. 31 Not a.ly were landing terms high-, sbt so also were th.e costs of ,3ds provided. T.1e Government s recent experience with the Sumed pipaline pro4ect is a dramatic example of the highl cost of. Ebypt's I-ow crcdit rating, T- is project is now priced at about double the actual eLsti- mated construction cost '(not including risk premiums). A. descriptian fs t:e average terms on loans received in recent years folo;wL.S3. para. 177. - 59 - Exports 148. The following table shows both the structure of Egyptian exports (currently and of a decade ago) and recent export growth rates of major commodities: Table VII-2 Exports: Structure and Growth 4 Yr. Share in/: Annual Growth (%) Aver- Total ()- Fiscal year ending June 30 1968 1969 1970 1971 age 1959-61 1969-71 Raw cotton -14 9 34 - 6 69 46 convertible areas /2 (10) (-7) (-12) (12) - (n.a.) (13) bilateral agreement area /2 (-23) (-9) (61) (-11) - (n.a.) (33) Cotton yarn -6 20 -10 1 1 3 11 Cotton textiles 1 20 -10 23 8 3 5 Rice 45 40 -29 -21 4 4 12 Onions -33 21 -1 -27 -13 2 2 Fuels /3 -54 31 -24 109 -1 3 3 Oranges 103 133 34 17 65 -- 2 Cement 111 50 -74 167 22 1 1 Other 9 57 10 11 20 15 18 Total -5 24 8 3 7 100 100 /1 Average share for each three year period. /2 Percentages based on volume rather than value; data for destination of raw cotton exports is from Table 3.8 which is based on a marketing rather than fiscal year. /3 Excluding off-shore transactions. For fuller coverage, see Table 3.10. 149. This table reveals mainly that significant changes occurred recently in the structure of exports (continuing the trend of the 1950's) and that the recent growth of most exports has been highly variable. The modest growth and declining share of raw cotton exports should not necessarily be interpreted as an indication of poor export performance--even though the recent rise in the value of cotton exports was wholly attributable to price rather than volume increases. As was described in Chapter IV, the acreage planted in cotton has been decreasing, while a growing proportion of cotton output has been directed to cotton yarn and textile manufacturing. This was reflected in export growth in those goods, which increased their share in total exports from 6 percent to 16 percent over the past decade. Other agricultural-based manufactured exports also gained in importance, though their individual shares in total exports remain too small to be shown above; these include dehydrated onions, refined sugar, and beverages. In volume terms, processed rice exports - 60 - also grew rapidly. While Egyptian exports remain heavily dominated 3y agri- cultural and agri cultural-based exports, there has also been some gai I' in diversification into miscellaneous manufactured exports, mostly destined to Eastern European countries. And described in Chapter V, prtroileum axpcsrCs also became important in recent years. 150. In the past coupie of years, the growing foreign axchange crisis has anparently stimulated new efforts to promote exports. For exampla, while long resisting pressures for a general devaluation, the Government introduced an exchange premium of 35 percent for certain agricultural exports Cont- vertible currency areas. This premitu was also applied to :Luegrtrrn remit- tances, transfers, and tourism, In- June 1972, the tourist ntec:Iun vas raised to 50 percent, to approach the black market rate, It is also sigutil`eant zhat in the latter h alf of 1971, the CGovernment chose to keep its exchange rate unchanged with the dollar at - 1$2.30. In effect. this r-e;resenta a general devaluation vis-a-vis otaer convertible currency couzatries, TUnder the 1971 Law for Arab Capital Investments and Free Zones, preference Il be given to foreign-f '-nanced projects which will help exports or promotn- tourism. The Free Zone provisIons (which provide for exemptions from Egyptian tax, trade and exchange regulations) appear particularly oriented to expor- -ro- motion. It remaIas to be seen, however, 'whether these laws will in fact have much impact. 151. In May 1970, Egypt became a contracting party to CAhTTW andC' in April 1972 it concluded a preferential trade agreement 'it: the EEC, The latter provides for tariff reductions by January 1974 ranging from 2_5-SU percent on Egyptian agricultural exports and tro-,: 45-55 percenat on Cndus- trial products. Under the terms of this agreen-.enc-, most exporcs tc the EEC will also face reduced quantitative restrictions, including those on petroleum and cotton textiles, Another indication of the Government's new attention to the need for better trade promotion and marketing is its official request for U.N. assistance in r-er-m=ulating a training program in these fielas, Im-ports 152, In analys_s of Egy-p=t s i=ort structure _s made 'ffzcui: by the fact Xhat significant amounts of commDodities (up to one-third of the total re 'orte; i: baularnce of pazyments data) are niot reported in the customs data; these noaregstered lraperts en -er E.gypr unoer a "temporary admtission" proc.e.-iure, and vary 1n amoun.c oo tcf. fp*sltn fran year to year. Consequent- C. s-jnclusions casec on, t^.- lEI-OW-zg table, while probably stil u serul, shouls be ccn..ideraid_ -t!i> t1its shortc.cmIng in man., - 61 - Table VII-3 Imports: Structure and Growth Av. Annual Share of Growth, Total Imports (Fiscal year ending Annual Growth (%) 4 yrs. (%) June 30) 1968 1969 1970 1971 1968-71 1959/61 1969/71 Consumer goods 26 29 Wheat & wheat flour /1 9 -40 -28 97 2 10 15 Fats and oil 29 -45 51 -61 -19 1 3 Other non-durable consu- mer goods -7 -38 36 -2 -7 11 /2 7 Durable consumer goods -27 31 76 56 27 4 /2 3 of which: (automobiles) (46) (8) (157) (29) 66 (-) (1) Raw materials 10 11 Fuels -31 -24 82 1 -1 8 7 Other raw materials 10 -25 64 -52 2 4 Intermediate commodities 32 32 Chemicals 41 1 42 5 21 5 5 Fertilizers 32 -1 -30 -8 -5 4 1 Insecticides -21 -2 -53 162 -1 1 2 Other intermediate goods -22 -10 34 71 13 22 24 Capital goods 25 22 Transport equipment -14 3 2 3 5 7 7 Other capital goods -5 -32 37 21 2 18 15 Unclassified -32 -30 17 39 -6 7 6 Total /3 -7 -1 23 12 6 100 100 /1 In FY 1969 and 1970 significant amounts of wheat imports (reportedly at least BE 20-25 million in each year) have been imported under the temporary admission procedure and are, therefore, not included in above data. /2 Includes 50 percent of other non-specified consumer goods; the remaining 50 percent are included under durable consumer goods. /3 Based on balance of payments rather than customs data. - 62 - 153. One remarkable fact about the structure of Egyptzan im*crtd. revealed above is the degree to which the shares of main zse cabeor- apparently remained unchanged over the past decade, nsncih sandng SI - nificaant changes taking place over this period in the coa=positon of oa3t- put and investment. The principal food imports (wheat, wheat four, 'cYdag short-cr capital and reserve whanges) were not sufttiza-a to cover aslt e 'ser' A possible explana ana of th.s discrepancy is chat some r Qc. ez&hage from Arab sources rma have been used for this purpose. 1e Capital Plods. 160, Followizg the 1967i war , Egypt 's sbalance on -p4 taL accoCunl deteriorated from a ie nflow of %bE1 69 million in 19,6o/67 'o e ) ' 14,4X 1,8;L 1970/7 1), with the consequence that, on. the average, Egypt <-ertea a net outflow of 5 8 million in med_un- and long-term cait'o,`. of er t tsUr- year period 1967/63 - 1970/7i. 161. According ro i-ncomplete data from the ballance of pyayments, t-he financIng role of t1h-_ USSR in particular appears to have chr'anged sIgnti ficazntt- ly after the 196I war. In both 1965 and 1966 the Government rece-l-ed tra m the Soviet Union about B 3T million -n loans (disbursed, and renald about LE 10 million - a ne Lnflow averaging LE 28 m4 liio in these years iT 1969-70, however, reported disbursements from Russiar cred%LS ssl u.a average of about 2` c - i14-onll o 4hile repayments rose to LE 30 milifla - or a net outflow averaging E 5 milliorn EEC countries al-so acoutnte for net repaymeats averagwng about 5E 5 million in 1969-70. -In thiL pero, the USSR provided nea-rI-y 43 percent of the Gover-miLent s gross 1o-rowirngs and accounted for nearly 1al of loarn repaimnencs. The e4uixvalant proporrIons reported for EEC countries were 12 percent and 21 nercant, es'-sa i - 162. UnfcrtumatLtey n l.t 'was not possible to analyza adecua-ay thl I tem idert4r &fied as t-r in In Tzble VII-!. above. T'Le solme of this item avsracgsd a bruto 'L _2m_ . ;lo.n annuaby in recent years, (excluding SDR allocatIons<%> b4t breakdowns cr cerning sources ane cerms were not available to the missIon. -.elis Item dincles miscellaneous tr-ade cre-dIts and short-tserm crelt'-s tAo-ugh n'S data for 1970/71 are known to Include a TT K14 fIL tKr ' n->-' . e Egyprian Central Bank, it is presusmed that ct'Aer fzuoma -'o - '-s ;.rom Arae sources are also ncmAuded under .ras e. 1/ Greater o.-i.rc ;Li o-r e direetion ofs trade and capital inflows is ,.- rovT&a!eo at 3.3,>S 3 e' .7-i va Qi , and 3.13. - 65 - 163. Foreign private investment has been negligible in recent years. The Law for Arab Capital Investments (noted above) was aimed at attracting mainly Arab, but also Western venture capital. This law provides incentives such as tax exemptions and liberal terms for profit and capital repatriation. Simultaneous with the passage of this Law was the creation of a new Egyptian International Bank, the main function of which is to attract potential Arab and Western investors to take advantage of the new investment and Free Zone laws, Now known as the Arab International Bank for Trade and Development, it is capitalized at GE 30 million, of which E 10 million each will be held by Libya and Egypt, the rest by other Arab investors, This bank is also a partner in the newly founded Arab-European Bank, a joint venture of Arab and European banks based on a holding company seated in Luxembourg. It remains to be seen, of course, whether these new financial entities can have much success in chananeling new investment to Egypt in the face of a tense political situation. Another potential source of capital inflows from the Arab states will be the Arab Fund for Economic and Social Development. 164. The overall prospects for increased capital inflows will be discussed in the following chapter, but it may be noted here that -hose prospects have been enhanced somewhat by certain other recent actions of the Egyptian Government, such as the conclusion of rescheduling agreements with the U.S. and Italy, and the resumption of diplomatic relations with Germany. Modest aid agreements were also concluded in 1971 with the U.K., Italy and Denmark, and closer relations were established with the World Bank Group, which in 1970 extended a $26 million IDA credit for drainage and in 1971 approved a $30 million credit for railway rehabilitation. However the pace of draw-down, particularly on the IDA credits, has been slow. A rapid use of these and potential other future World Bank Group credits which may be extended in fields such as family planning, industrial and agricul- tural development, and perhaps tourism and other sectors could be of great benefit to the economy. 165. According to Egypt's external debt reports (which are considered to be less reliable than balance of payments data), Egypt's undisbursed medium- and long-term credits from the USSR totalling nearly LE 100 million at end 1971 - not including almost another BE 50 million comprising the uncommitted portion of existing frame agreements. 1/ Other major undisbursed commitments at end 1971 included about BE 16 million from Hungary, and in the form of uncommitted parts of frame agreements - LE 33 million from China, BE 35 million from Czechoslovakia, and bE 17 million from East Germany. Altogether, Egypt's credit "pipeline" at end 1971 amounted to roughly bE 300 million, of which 90 percent was from Eastern countries, 1/ These data must be regarded with some reservation, as indicated above in para. 26. - 66 - 166. Egypt's foreign reserve position, having declined by BE 50 mil- lion in 1967/68, remained more or less unchanged in 1968/69 and 1969/70, but weakened considerably again in 1970/71, reaching a net debit position of bE 270 million. The overall balance of payments deficit of bE 60 million in 1970/71 was financed largely by short-term credits (bE 45 million) and an increase in liabilities under bilateral payment agreements (BE 26 million). The reliance on short-term financing in convertible currencies (from foreign commercial banks) has persisted for several years; as of June 1971, the amount of such credits outstanding was over bE 100 million. At the end of 1971, the gross reserve position (including payments agreement assets) amounted to BE 142 million, while the net reserve position was negative to the extent of 6 months? import equivaLent. 167. Egypt has made frequent use of I.M.F. resources. During the last four years, its drawings onl the fuad t:otalled SDR 113 million ($123 mil- lion) 1/ while repayments amount to SD)R 117 million, resulting in a small net outflow of resources. In this period there were SDR 23 million in drawings and SDR 16 million in repayments under the Compensatory Financing Arrange- ments. Egypt's quota in the LMF as of April 1972 was equivalent to SDR 188 million. Outstanding purchases as of this date amounted to SDR 86 million, and Fund holdings of Egyptian pounds were equivalent to 127 percent of the quota (or 115 percent if compensatory financing transactions are excluded). Egypt has received three allocations of Special Drawing Rights totalling SDR 65 million, of which SDR 43 million have been used. Thus, on April 30, 1972, SDR holdings amounLt,ed to SDR 22 million, or 34 percent of net cumulative allocations. External Debt 168. Egypt's total outstanding noni-military foreign debt on December 31, 1971 was reported at US1z.3 billion (disbulrsed) or $1.8 billion including undisbursed credits - equivalent to about one-fourth of GNP. An additional $315 million consisted of the uncommitted parts of frame agreements. The USSR is EgypEts principa] creditor, with a debt outstanding and disbursed of $380 million - 28s percent of the total. 2/ Other major creditor countries are the U.S., with a debt outstanding of $205 million (15 percent of the total); Kuwait $130 mirlion ('9 percent); Italv $122 million (10 percent); and Germany $106 million (8 percent). Foreign governments hold 87 percent of Egyft @ Sreported debt supp>lirs and Drivate institutions 12 percent, and one perce-n- 4s held by the World Bank Group. _ 0nA.e SD .is equivalent to US$,0857. 2/ According to debt reports submitted to the IBRD, Egypt's non-military deb t to RHu sia declined by more thaa $100 million since the end of 1967. AccorOin;7 So these data, gross inflows of capital from the Soviet Union were neg-Ligi2b'e over the past five years. However, such a development is not supported either by the balance of payments or the observable progress of Soviet-financed projects. Hence, there remains considerable imprecisior. 'oncerning the comprehenisive nature of the figures above. - 67 - 169. As described earlier, Egypt's growing debt service burden has been a major factor in the balance of payments situation. According to Central Bank data, debt service payments increased by BE 100 million between 1967/68 and 1970/71, with the consequence that the debt service ratio (defined here as debt service as a percentage of exports of goods and services plus transfer receipts) rose in this period from 16 percent to 32 percent. If transfers were excluded from tne denominator, the ratio for 1970/71 would be 41 per- cent. The following table shows the evolution of Egypt's debt service (as reported in the balance of payments) since 1966/67, and the debt service ratios both including and excluding transfers: 1/ Table VII-6 Debt Service 1966/67 1967/68 1968/69 1969/70 1970/71 (In millions of BE) A. Debt service 74 75 126 145 175 B. Exports, goods and service 439 312 375 422 432 C. Exports, goods and services plus transfers 470 396 500 561 551. Debt service ratios (In percent) A + B 17 24 34 34 41 A + C 16 19 25 26 32 170. While Egypt's reported debt is held in about equal shares by Eastern and Western creditors, the harder average terms on the Western debt result in an estimated two-thirds of reported debt service being paid to Western creditors. It should also be noted that these data refer to payments actually made, which was less than the amounts owed. According to debt re- ports submitted to the IBRD, Egypt's debt in arrears at end 1971 consisted of about liE 6 million in interest owed and about LE 28 million in principal owed. These arrears were mainly to the Federal Republic of Germany, Italy and Japan. A debt rescheduling has meanwhile been arranged with Italy. The details are shown in Table 4.1. In any event, it may be seen that the debt service burden has been very heavy by any measure, and would have been even heavier had not Egypt defaulted on some of its debts in this period. 1/ Debt reports submitted to the IBRD indicate a debt service burden on medium and long-term capital rising only from LE 72 million in 1967 to LE 111 million in 1971, which would imply a debt service ratio of only 20 percent in 1970/71 (including transfers). The balance of payments data are evidently much more comprehensive. Insofar as these data may include some interest (but not principal) paid on short-term debt, the figures in the table above may be slightly overstated as a representation of debt service on medium and long-term debt. However, neither this factor nor differences in reporting periods or principles are sufficient to explain the significant discrepancies remaining between the two sources of data. - 68 - 171, One reason for the growing debt burden in recent years has been the hardening of terms on loans contractied. In the years 1969-71 compared with 1967-68, average interest rates rose while average maturity periods decreased. As a result, the grant eleme;nt (based on a 10 percent discount rate) declined from an average of 29 percent in 1967-68 to 13 percent in 1969 and 17 percent in 1971. The grant element for 1970 would have been similarly low except for an I.D.A. credilt which raised the average grant element for that year to 26 percent. In 1971, average terms on supplier credits received were: interest 7 percent, maturity 6 years, grace period 1-1/2 years. Loans received from Govermnents in 1971 (including resched- uling arrangements) carried an average initerest rate of 6 percent, a maturity of 8 years, and a grace period of 3-1/2 years. The shortening in average maturities between 1967 and 1971 had the effect of increasing the proportions of Egypt's debt due to be repaid within two years from 18 per- cent to 36 percent, within three years from 32 percent to 51 percent, within 4 years from 46 percent to 63 percent, and within five years from 63 percent to 74 percent. 1/ The pressure which these near-term repayment obligations will place on the balance of payments in coming years will be considered in the following chapter. 1/ Calculated as the sum of principal payments owed as percentage of disbursed debt at end 1971. The figuLres are slightly overstated to the extent that some disbursements from the existing pipeline will be included in the repayments. - 69 - VIII. PROSPECTS AND POLICY ISSUES 172. The Egyptian economy has many strengths, advantages and opportun- ities. It also has a number of serious problems -- the conflict with Israel being the dominant cloud on the country's development horizon. Thus far, this report has dwelt largely on the economy's problems. It may now be op- portune to summarize its actual and potential strengths. 173. In comparison with many less developed countries, Egypt is rela- tively favored in terms of: its geographical, natural, and human resources; the size of its domestic market; the extent of its existing infrastructural development; its technical and managerial experience in agriculture, industry, and other sectors; and its importance to major developed countries and to other Arab countries. Egypt may also prove to be one of the few countries which can benefit simultaneously from both the "Green Revolution" and the "Petroleum Revolution" (i.e. the dramatic rise in Arab petroleum earnings consequent upon the Teheran and Tripoli Agreements). 174. Among Egypt's natural resources is an agricultural sector which offers yet unexploited comparative advantages in soil, climatic conditions, (including seasonal factors) and water control that should enable it to become a major supplier of fruits and early vegetables to the European market. There are also great potentialities in existing technologies to improve domestic yields of rice, wheat, and maize, and to develop local livestock production. And when filled in the late 1970's, Lake Nasser promises considerable oppor- tunities for fisheries development. 175. Natural resources offering new prospects for industrial development include deposits of oil, natural gas, limestone, phosphate rock, and some other mineral deposits. The agricultural sector has provided the base for Egypt's well-developed traditional industries -- textiles and food industries -- while the mineral resources offer good growth prospects in industries such as oil extraction, petrochemicals, cement and building materials, phosphate rock mining and beneficiation, and fertilizers. To look on the bright side of the now uneconomic Helwan development, moreover, considerable fixed costs have already been incurred; thus, insofar as marginal production cost can be made reasonable, opportunities will be provided to the metal fabrication and engineering industries as well. The completion of the Aswan Dam and its hydroelectrical installations has also created new opportunities for power- using industries (perhaps including aluminum), and will permit the develop- ment of rural electrification -- a step which will create new production (and consumption) opportunities in the countryside. 176. Egypt has unique assets for tourism and transport development. The winter climate and beaches, historical sites and modern cities, together with its geographical location, give Egypt a vast potential for attracting tourists from Western, Arab and Eastern countries. Concerning transport, Egypt's strategic location astride the Mediterranean and Red Seas has long made the Suez Canal a major asset, and the Sumed pipeline may shortly become - 70 - a significant source of foreign exchange earnings. The rapid growth of world trade may also offer possibilities for enl argening Egypt 's canal and pipeline facilities. There are also significant inexploited opportunities for inlarnd waterway development. 177. More important than these natural and geographical resources are Egypt's human resources. Particularly for a country at its low7 level of per capita income, Eaypt has a remarkably large supply of engineers, agricul- turalists, and other academically trained people needed for economic and social development. Although large numbers of enitrepreneurs and highly trained manpower have enmigrated, there remain large numbers of competent administrators, managers, teachers and ot:her high-level manpower. Despite their lo-w per-capita income, moreover, the population of about 35 million people, with a GNP of some US$7 billion, constitute a large do-mestic market, with considerable opportunity to further develop import--substitution indus- tries. The degree of specialization is not as limited by the extent of the market as in many other less developed countries. 178. Egypt also has a particular advantage vis-a-vis other Arab markets, by virtue of its common language, culture, and other ties with those countries, anc the advanced development of its industry and manpower relative to them. With the 1970 's promising to bring unprecedented oil revenues to many Arab countries, Egypt has a new opportunity to develop exports to tuose markets and to attract new Arab investment into Egypt. Similarly, E,ypt might also offer a staging ground from which foreign investors could seek to expand tiheir trade with the entire Arab world. From the standpoint of locational economics, Egypt's strategic position at the juncture of three continents should also confer certain comparative advantages which re7rain to be recog- nized and exploited. Finally, Egypt's importance in world politics may also confer upon it not only a vulnerability vis-a-vis the large powers, but also a possibility to exploit this importance to economic as well as political advantage. Conditions might be envisaged in which this position could lead to a greater flow of foreign a,d than otherwise miglht be the case. 179. No enumeration of Egypt's econoric strengths should omit certain institutional factors, But here the question of distinguishiing strengths -ro.- wcanesses is subject to a high degree of value-judgment - the criteria of e ficiency and equity being only two measures. Earlier parts o: tnhs report have pointed to various shortcomings in the framework of ieclsion-making: the burgeoning of the blureaucracy, the reliance on cen- tralized and discretionary adrmiinistrative decisions, etc. The report has 9-i nointead to the economic costs of the Government's educational policies, a-. Lon ths' need t further restrain private consumption, if econoomic growth o'Ject' ves are to be achieved. However, these policies sh-ould also be viewed in the context of the country's overall objectives, as broadly enunciated in c Charter of 1962. Relative to other countries at a similar level of ecoromic development, Egypt appears to givre high priority to income distrib- ltiom anid other social objectives. As noted earlier, Egypt's health, edu- cation ac.a social insurance services are extensive, its basic commodities are subsidized, and its wage and price controls are generally designed to 71 - assist lower income groups. The emphasis given to these social needs has -- like the heavy military expenditures -- tended to depress savings and invest- ment rates, but with very different effects on welfare and on long-run eco- nomic progress. 130. Turning to Egypt's growth prospects in the coming years, it is evident that growth is likely to be severely constrained both by inadequate domestic savings and by the scarcity of foreign exchange. Savings and in- vestment rates are both quite depressed, and unless both can be raised sub- stantially, it is hard to see how per capita living standards can be raised much in thie years ahead. But raising domestic savings depends cruciallv on the rate of military expenditure, and this depends mainly on the s-.ate of hostilities with Israel. The conflict has led to extensive aid from soviet and Arab sources, but only to a limited extent in support of economic devel- opment. Thus, the Israel conflict is also affecting adversely Egypt's for- eign exchange position. On the current side, it is inhibiting the volume of trade, distorting its composition, and biasing its direction, while the effects on the Suez Canal and on tourism earnings are clearly evident. On the capital side, the political and military uncertainties have discouraged potential foreign investors and creditors, or led them to harden lending or investment terms on whatever capital has been made available. 131. Egypt appears in danger, therefore, of becoming caught in two (inter-related) vicious circles. On the domestic side, low savings are constraining investment, thereby limiting the pace of growth, w4hich in turn permits onlv low savings, etc. On the external side, the history of debt defaults, continuing difficulties in Egypt's external position and other factors are limiting the sorely-needed net capital inflow, tnereby constrain- ing investment and growth (including export growth) and limiting the genera- tion of debt-servicing capacity -- including the capacity to repatriate pri- vate capital and profits. This process has led to a further deterioration in creditworthiness, compounding the difficulty another degree. The problem for Egypt is to break from these vicious circles, and to transform the proc- ess into one in which growth, domestic savings, foreign capital and credit- worthiness become mutually reinforcing in a positive sense. Unlike many other countries, Egypt does not have a serious problem of absorptive capac- ity. Indeed, the investment opportunities are very great. The key problems are essentially those of resource allocation and economic management. 132. The defense burden presumably must be taken as a political parameter by economic decision-makers -- though both the concept of opportunity costs and the tools of cost/benefit analysis are obviously relevant in assessing defense vis-a-vis other areas of expenditure. The role of economic analysis in this field is simply to investigate the econo- mic implications of alternative courses of action. In the 1971 ITRD econo- rnic report, for example, a projection exercise postulated the implications of alternative public and private consunmption growth rates for capital in- flow requirements -- given assumed growth rates for GDP, investment, and exports, and assumed terms on new capital inflows. The basic conclusions of that analysis still stand: One of the conclusions was that a continuation of the present low savings rate should be expected to lead to economic - 72 - stagnation and declining per capita incomes. Another conclusion was that to sustain even a modest GDP growth rate (4-5 percent annually througlh the inid-1970's) -- even assuming a rate of capital inflow substantially 50 per- cent above that received in recent years -- Egypt would haAre to make a very strong savings effort, implying marginal savings rates well over 30 percent. Those illustrations highlighted the nature of macroeconomic allocative deci- sions which the Government would have to make to put the economy onto a dynamic path of development. The 1973-77 Draft Plan 133. Like the First Plan, the 1973-77 draft Plan aims to double Egypt's GNP in a decade, implying a compound annual growth rate of about 7 percent. Since the overall capital output ratio is assumed to be about 2.7-2.9, the required average investment ratio will be -about 20 percent of GNP -- much higher than the ratio of recent years. I'he required investment for the period 1973-77 is estimated at about EE3 billion (in constant prices) dis- tributed amtong the sectors approximately as follows: Table VIII-1 LE Share of Total (Millions) Industry 970 32 Transport/Communications 690 23 Agriculture/Irrigation 390 13 Housing 2 1I Public Ufitilities (incl, ele-tricity) 360 12 Social Services 210 7 Other 60 2 3 ,000 100 1v As may e seety. ts Plan stresses industry, somewhat in contrast to the invi:stmnent -attern of the 1960's which -emnhasized tlie High1 Dam and othi>f a-ricu1tural proiects. In principle. the need for quick-yielding JnptS i5 recognized- b! the Plan's largest investments are scheduled frJr ..avy, canital-intensive, Long-gestation projects such as steel and m I a LM plant-. Alon, with industry, the petroleum sector (including -2troc,nle,_cals) is to receive high priority. The high share of transport 0 'ined la-o.eiy in, tern-s of a large pipeline project and a proposed e-p.- -lso o Egypt's Tiaritime fleet. Drainage projects are expected to _.f-iount for a substancial share of agricultural investment. A major rural lee tr4.a.ior' ipro-rain an.:! imnprovements in telecommunications are also in ,,ros-oet Investments in tourist facilities, however, are planned to be ;--V.y 4 percunt of total in.vestyment. Altogether, the import component of t.e 1nvestments described above is estimated at about EE 750 million -- ;.-out 25 7rercenrt of the total. The sources of financing of the Plan have not v eL en tullPv determined, but the share of net foreign financing (not - 73 - including inflows classified as transfers) is not expected to exceed 10 per- cent of investments. However, the Plan is also apparently premised on a pro- jected growth of public consumption of only 6 percent annually -- less than half the rate of recent years. Such restraint in public consumption would seem to imply a considerable check on military expenditure, but whether this can be achieved remains an open question. 185. The development strategy and investment criteria implicit in this Plan do not appear to have changed much from earlier periods, except for the shifts in sectoral priorities noted above. As noted in Chapter IV, there is also a shift in priorities away from reclamation and other "horizontal" expansion projects in favor of integrated productivity-raising projects. Like its predecessor, this Plan is characterized by a lack of generalized investment criteria, and there is virtually no cost/benefit analysis in the choice of projects. In principle, some weight has been given to the imme- diate need to earn foreign exchange and to broaden employment opportunities, but it is not evident how those criteria have affected the sectoral or proj- ect priorities of the Plan. Shadow prices are not used in project evaluation. A number of the major industrial projects will eventually have a favorable impact on the balance of payments, but not in the short-run. Egypt's tradi- tional self-sufficiency import-substitution criteria are most evident in the largest single project -- the expansion of the Helwan iron and steel works. 186. There is clearly a need for better communication and coordination among the Ministries concerned with Egyptian planning, both at the sectoral and macroeconomic levels. And greater attention also needs to be given to locational factors. Consideration has reportedly been given to the need to disperse industry and to decentralize decision-making, but this is not clearly evident in the Plan. Except at Aswan, there is no regional planning, and urban planning is taking place without clearly defined assumptions con- cerning either locational policy, or more broadly, a framework for project- ing rural vis-a-vis urban development. In general, the urban problem and employment problem do not seem to have affected the Plan's priorities very much. Hlowever, the growing congestion in Cairo is of growing concern, and the improvement of Cairo's mass transit has a high priority for the Govern- ment. Consultants are already undertaking final design of a subway system, but there appear to be many alternative projects which would warrant a prior claim on the scarce resources available for investment. Feasibility of the Plan Objectives 187. Projection exercises undertaken by the 1972 economic mission in- dicate that if the Government is to have any realistic prospect for reaching the growth targets of its 1973-77 draft Plan, then it will need to severely restrain both public and private consumption and make a major effort to ob- tain more foreign capital on softer terms. 188. In contrast to "requirements" analysis undertaken in the previous economic report, projections made for this report were based on an "availa- bilities" model. In this model, the independent variables were: the major components of exports of goods and services; current transfers" and net - 74 - capital transfers. Assumptions were also made respecting the terms on new capital inflows. Assuming that reserve changes and SDR allocations were offsetting, the sum of the above variables determined maximum possible im- ports. Then, via several functions relating imports to components of out- put, the feasible growth rates of five chosen sectors were determined. Both the import and investment functions of the model were based on regression analyses of past relationships. A range of plausible values was also selected for the basic parameters (ICOR's. export growth rates; size, composition and terms of new capital inflows) for purposes of sensitivity analysis. A fuller description of the model and its assumptions (including specific forecasts of exports) is provided in the Appendix to this chapter. 139. Among the advantages of this "availabilities approaclh" is the flexibility it gives to the specificatiori of alternative gross and net capi- tal inflows, and to the analysis of the implications of these flows both for domestic growth prospects and for the evolution of the debt burden. The fol- lowing table provides illustrations of two possible growth paths for the mid-1970's -- one relatively pessimistic, the other relatively optimistic. Projection "A" is based on the assumption that Egypt's gross capital inflow (not including transfers) in the coming years will be totally absorbed by debt servicing obligations. In other words, this projection assumes a "zero net resource transfer", with the resource gap limited approximately to the size of transfers received from other Arab countries. Projections "B", on the other hand, presumes that the net resource transfer wilL ii crease suf- ficiently to permit much faster growth. - 75 - Table VIII-2 Medium-Term Projections (values in LE millions) Projection A Projection B Annual Annual 1978 Growth 1978 Growth FY 1971 Level Rate (%) Level Rate (%) National Accounts (1971 Prices) GNP 3031 3879 3-1/2 4476 5-1/2 Consumption 2870 3552 3 3853 4 Investment 378 469 3 881 12-1/2 Savings /1 279 447 7 744 14 Exports, gnfs 442 659 5-1/2 832 9 Imports, gnfs 600 762 3-1/2 1038 8 Resource Gap 158 103 . 206 Medium and Long-Term Capital Flows (Current Prices) Net Resource Transfer /2 -23 - . 102 Net Capital Inflow 8 44 . 170 Gross Capital Inflow 152 260 8 453 16 Debt Service 175 260 5-1/2 351 10 Debt Service Ratio 32% 28% . 31% /1 Defined as GNP less consumption plus transfers. /2 Defined as gross borrowings less total debt service. 190. In Projection "A", it is assumed that Egypt will continue to con- front the same problems and constraints as in the past five years: high defense spending, negligible foreign investment, a scarcity of official external capital, hard terms on private capital, only moderate tourism growth, and a heavy debt servicing burden. In this scenario, the prospect is for continued low investment (at about 12 percent of GDP) and near- stagnation in per capita incomes. In projection "B", the capital avail- abilities are assumed sufficient to enable Egypt to achieve the draft Plan's LE 3 billion investment target for the period 1973-77. According to this projection, investment would reach nearly 20 percent of GDP by the late 1970's, by which time the GDP growth rate would rise to about 6-1/2 percent annually.1/ As may be see-n, from the table above, this would require a rapicd rise both in nationl.l savings (the margiflal propensity to save in Projection "B" is .32) and in net resource transfers. And these in turn would appear to require a substantial .movement towards peace in the region and/or a dramatic increase in petrolenuri reventues. In the event of a Middle Eastern political settlement, nct only would the national savings benefit by an easing of the defense burden, but the foreign exchange situlation would also stand to improve as Westerna, iapanese and Arab capital wou:ld be expected to flow in greater quantities, tourism would rise, and there would be a greater propensity on the part of tha Western world to provide assistance -- includ- ing possibly through a icuag-term rescheduling of Egyptt's debt. 191. The impending beurden. of debt service is suggested by the figures in both projections above. Projection "'A"? show-s that even if Egypt imports only enough capital to service its existing debt, its debt service may still increase significantly in the coming years. Or to states the problem another way, in order to maintain a net capital inflow sufficial-it only to cover cur- rent interest payments on the debt, the gross capital inflow would have to rise to as much as EE 260 mrl.11ion by 1973. These projec-tions assume that the terms orn net inflows will be approxim.ately the same as the terms avz3il- able in recent years. Transfers are assumed in both projections to continue at about LE 120 miili.on annually. However. witi1 foreigni capital (other than transfers) making no contributn'on to fi.nancing imoorts, and with domestic savings at such a low level, it is not likcely that sufficient investment could be undertaken in export-oriented industry and in agriculture to permit much growth in exports. But even with an export growth rate of 5-1/2 per- cent annually, the debt service ratio (including transfers) would remnain very high into the mid- 970'vs 192. Projectivti "B" shows a similar evolution of the debt service ratio, but with a much higher debt service (owing t,-O the larger borrowing in this case) and a much larger grorvltr-h in exports (owing to the greater investment which the larger caf-pitl xvailalbilities would permit). It shlould be noted, however, that the gr-oss nin.rj et capital inflows correspo nding to Projection B are probably unre.1st:irally high. Thee reason is that the terms onl the aew capital inf].ows - been assuried to remain quite hard (grant element of about 24 percent) F while no new reschedulings have been assumed to take place over the peri3d i jut i.L' this peace - petroleum scenario', it is not unlikely that a niet resource cransfer 1n the order of LE 100 million could , e s3uscained wit,a a muctn lower grons za:j.tal inflow, and. with a correspond- inigly lover de s rercs za.^ . F b ,2/ . . .... ... 1/ Both projectio-ns assu.me a<) aggregate incremental capital/output ratio of 2.9 over the peri._d_ Although in this model exports are treated on an exogenous variable (see the Annex to this Chapter), the relationship between investment and exports h.as been accounted for outside the model. 2/ A further cons>eratio-n aspplicab:Le to both projections is that, owing to the shorte.r average -maturities an.d higher interest rates on credits from Western CouIntr.ies, the debt serviLce ratio applicable to convertible currency countries (i.e. the debt; service payable to the West as a per- centage of export earnings from the West) will be higher than the average dett service ratios shown in the table above. - 77 - 193. What both of these projections highlight is the need for Egypt to make a major effort not only to mobilize savings domestically, but also to seek to improve the conditions on capital inflows. The projections may also suggest to creditors the utility of any relief which would be afforded in the scheduling of existing debt. But the magnitude of the debt problem, the scope of capital needs, and the extent of investmenit opportunities all point to the possible value of broadening the approach to the mobilization of private and public external capital, especially from the oil-rich Arab countries. The recent broadening of the base of the Arab International Bank. is a hopeful sign, but there are many other possibilities. 194. Egypt's growth prospects obviously will depend not only on the amounts of resources mobilized, but also on the efficiency with which they are allocated. Because of Egypt's balance of payments difficulties, it would appear that short-run priorities should emphasize programs or projects having both a short gestation period and an immediate export earning or import-saving impact. And in keeping with long run needs, the criteria of employment creation and location should also be given considerable weight. Consequently, high priority appears to be warranted for agricultural and touristic development, and for industrial development in such lines as petro- leum, textiles, food and leather industries, fertilizers, and light, export- oriented industries. The present investment program, as described previously, is still somewhat biased in favor of heavy industry and infrastructure proj- ects characterized by long gestation periods and low employment content. 195. Egyptian planning still appears to be carried out in a piecemeal fashion, with many investments decided upon in accordance with administrative preferences rather than on the basis of comparative advantage and the maxi- tTization of economic returns. Recent moves by the Government to study the price structure, to liberalize some controls and to decentralize some deci- sions and activities all appear to represent steps in the direction of greater economic efficiency. But progress in these areas has to be accelerated if substantial gains are to be realized. 196. In sum, it may be concluded that Egypt's natural, geographic, human and infrastructural resources are such as to create many growth opportunities, and if these are exploited in accordance with appropriate economic criteria and with improved economic management, then Egypt's over- all development prospects could be excellent. There remain, however, the very difficult political and economic problems which, unless overcome, may preclude the possibility of Egypt's realizing its long-run potentialities. - 78 - APPENDIX TO CHAPTER VIII The Projection Model and its Assumptions Statistical Problems 197. Like many-other countries, Egypt lacks a consistent set of statistics necessary for economic analysis and informed decision making. In some cases, the problem stems from statistical series on the same subject which cannot easily be reconciled with each other. Other problems arise from incomplete series or from long delays in producing data which are more valuable if available quickly. As the report has pointed out in many places, there are major statistical problems in Egypt's national accounts, public finances, foreign trade, balance of payments and external debt data. 198. Adjustments were made by the mission in the national accounts where official series were obviously discontinuous. Since a long-term series for expenditure in GNP in constant prices was not available on a consistent basis, this series was constructed by the mission, by applying deflators from various sources. The methods are described in the "Notes to Tables 2.1-2.7" in the Statistical Annex. 199. There are four series pertaining to the balance of payments: customs data, Central Bank data, external sector series in the national accounts, and the Foreign Exchange Budget prepared by the !inistry of Economy and Foreign Trade. These proved difficult to reconcile with each other. Moreover, data on capital flows (in particular from Eastern coun- tries) showed wide discrepancies between balance of payments and debt sources. One third of the total imports reported in the balance of payments are not described by commodity breakdown, which is, however, known to vary from year to year. In evaluating the mission's projections, these data limitations should be taken into account. The Models 200. The model used for the projections is an "availability model". in th.is model, exports of goods and non-factor services, factor services, transfers and net capital transfers 1/ are given as independent: variables; reserve -Ihanges are assumed to be limited' to SDR allocations. The sum of these variables is the net available foreign exchange, which determines maximum possible imports (M*). Given the terms of old and new debt, the 1/ Net capital transfers are defined as gross capital receipts less total debt service payments. In other words, net capital transfers are equal to net capital inflows less interest payments. - 79 - model calculates -- via the debt routine -- the gross capital inflow ne- cessary to achieve the assumed net yearly capital inflow. Or alternatively, gross capital inflows (rather than net capital transfers) could be defined as a predetermined variable. Merchandise imports are divided among con- sumer goods, intermediate goods, capital goods, non-factor services, and other imports. Each category is related to a relevant national income component. Thus, imports of consumer goods are related to consumption; imports of intermediate goods to GDP; imports of fuel to value added in manufacturing; imports of capital goods to gross domestic investment; and other imports to GDP. Imports of non-factor services are calculated as a function of merchandise imports. Gross fixed investments -- allocated among five sectors of the economy -- determine (via sectoral incremental capital output ratios) the sectoral growth rates and hence, total GDP growth. 201. The five sectors comprising the economy are: agriculture, manu- facturing, electricity and construction, distribution, and services. From output and investment data for the period 1960-70, sectoral capital output ratios were calculated by regression analysis, applying a one year lag. However, the High Dam investments were excluded, because of the long lag involved between the investment and the full output consequences. Import functions were also calculated on the basis of historical data, also by re- gression. Imports under the temporary admission procedure were assumed to remain at about one-third of total imports. 202. Starting with targeted initial sectoral growth rates, the invest- ment requirements of each sector were determined by the ICOR's. Then, via the import function for capital goods, the required capital goods imports were calculated. Imports of intermediate goods, fuel, consumer goods and other imports were derived from the sectoral and/or total GDP growth rates. Adding these up, the model calculated a first estimate of total required imports, "MR". When MR exceeded M*, the growth rates of output were in- creased accordingly; conversely, if M* exceeded MR, the growth rates were increased. Through an iterative process, the model selected that GDP growth rate equating M* and MR (ignoring 1% error). GDP changes, of course, also change investment requirements which in turn change savings and consumption. And these affect the various categories of imports. The simultaneous deter- mination problem is solved by iterations, which carry on until the feasible GDP growth rate is achieved -- given the assumed foreign exchange avail- ability constraint. - 80 - Balance of Payments Projections - Commodity Exports 203. Crude petroleum - These projections were based on three alter- native assumptions. In all cases, production was projected to drop some- what during 1972 and 1973 from its 1971 level of 16.4 million tons (because of pressure problems in the Morgan field:s). In the pessimistic case, the pressure decline was projected to continue or even spread to other fields, and newly discovered fields were assumed to be not very productive. In this case, output was projected to drop continuously to 12 million tons in 1974, then to resume a gradual upward trend, but not to reach the 1971 level until 1980 or 20 million tons until 1987. Both the medium and optimistic assumptions assumed solution of the pressure problem by enl-1973. The medium case projected production to drop to 15 million tons in 1972 and 1973, then to rise to 44 million tons in 1980 and to 58 million tons in 1987. The optimistic case assumed production of 15 million tons in 1972 and 1973, 54 million tons in 1980, and 70 million tons in 1987. The optimistic variation was based on the expectation that new fields would prove to be prolific and productive. However, if a very major oil strike (say of Libyan dimensions) should eventuate, even the optimistic assumption would be on the low side. 204. The three alternatives imply average annual growth rates of pro- duction between 1972 and 1987 of 2.4 percent, 9.4 percent, and 10.8 percent, respectively. In view of the petroleum processing industry's investment plans, domestic consumption is expected t:o increase by 5 percent per year over the 15 year period. However, the shiare of domestically produced crude oil in total consumption is likely to increase from about 50 percent at the present time to 60 percent in 1976 -- when the new refineries will become operative. It has also been assumed that: the Egyptian share in oil produc- tion will increase (from around 60 percent to 65 percent in the early 1980's, and to 70 percent beginning in 1985). Based on these assumptions, export earnings from crude oil (in constant 1972 post-Teheran agreement prices) would maintain the 1972 level in the pessimistic case, increase in the period 1977-87 by 11 percent ner year in the medium case, and rise by 13 percent annually in the optimistic case. Assumirng an annual 3 percent price increase, the grow th rates of foreign exchange earnings from oil would rise to 3 per- cent, 14 percent and 16 percent per annumn, respectively. 2) 51 Industrial Exprts. As discussed in Chapter V and in Annex I of this report, the prospects are good for accelerating growth in industrial exports -- proNzided that sufficient and well-directed investment is under- taken. The mission forecast an overall rate of growth of industrial exports in the order of 7 percent annually (in real terms) for the period 1972-77. 1/ The assumptions of the Egyptian Government underlying its own export projections were not made available to the mission. lte following assumptions were based on the mission's appraisal, in the light of discussions with Egyptian officials. - 81 - If external market conditions were favorable and domestic allocation effi- cient, industrial export growth might well reach 10 percent or more. If both of these were unfavorable, or if there were substantial shortfalls in capital availabilities, then industrial export growth might be as low as 3-4 percent annually in the mid-1970's. The following table summarizes the mission's projections of growth in the main branches of industrial exports: Table VIII B-1 Industrial Export Growth Projections, 1972-77 (average annual growth, in %, in constant prices) Medium-High Range Low Range 1970/71 Exports (MEm.) Textiles 9 - 13 5 - 6 60 Yarn 3 - 3 1/2 2 1/2 Garments/knitwear 18 - 25 10 Textiles 10 - 14 6- 8 Food Industries 2 - 5 - 45 Bleached rice 0 - 1 Sugar 10 - 15 5 Woodworking & Leather 10 - 15 6 - 7 8 Furniture 10 - 15 6- 8 Shoes 10 - 15 6 Building Materials 8 - 10 3 - 6 4 Cement 8 - 10 3 - 6 Chemicals (ind. fertilizer) 6 - 10 3 - 4 3 Engineering 13 - 20 8 - 10 2 Metallurgical 15 - 20 10 - 12 T Mining 15 - 20 6 - 10 1 Total 7 - 10 3 - 4 124 206. The high range for branches such as textiles, clothing and leather industries represents a normative projection insofar as higher priority is assumed for these industries than presently appears planned to be given them. The projections are also based on the assumption that import-substitution will continue in certain lines (fertilizers, fuels, petrochemicals, en- gineering and metallurgical industries). 207. Cotton. An expansion of cotton production will depend heavily on Government land allotment and pricing policies, while the volume of ex- portable surplus will also depend on the growth of the domestic yarn, tex- tile, and garment industries. As described in Chapter IV, the trend in land - 82 - use has been away from cotton in favor of rice, wheat, and maize. The mis-- sion's projection is based on the assumption that the current trend will continue, with land allocated to cotton decreasing by 2 percent annually. However, if it is also assumed that yielcds per feddan can be raised by 4 1/2 percent per year, then total cotton production would increase by 2 1/2 per- cent annually. And taking into account expected increases in domestic con- sumption, exports might increase by 1-2 percent annually through the mid- 1970's. Since not much change in prices is forecast, both current and constant price projections are the same. 208. Rice. If, as assumed above, there is some decline in the land area devoted to cotton, the shift will most likely be to rice. But since the land shifted is likely to be of inferior quality, rice production might only increase by around 2 percent per year in 1972-73. How.ever, Egypt has not yet changed to high yielding varieties, and if these were introduced after 1973, yields might increase substantially. On the other hand, increasing popu- lation and shifting consumption patterns (from wheat and ma:tze to rice) may increase domestic consumption of rice. On balance, the mission's projection assumes that rising production will be absorbed mostly by increasing domestic consumption, leaving ri ce exports unchanged in constant prices. But an expected decline in rice prices may result in an average fall in rice export earnings of 2-3 percent yearly over the next several years. 209. Other Agricultural Exports. With agricultural priorities shifting to high-value crops -- and in view of Egypt's comparative advantages in fruits and vegetables -- the export prosp,ects are good for coimnodities such as onions, potatoes, vegetables and citrus. Taken together, exports of these goods are projected to increase by 8-10 percent in constant prices and 10-12 percent in current prices. 210. Tourism and Other Invisibles: Receipts from tourism are obviously extremely sensitive to the political climate. Assuming that tensions in the M4iddle East do not worsen, tourism is projected to increase by 35 percent in 1972 and at an annual rate of 10 percent between 1973 and 1977. In csurrent prices the growth rates may be assumed to be 3 percent higher. Other invisible receipts are projected on the basis of recent trends, excepting a M'.ggher gE-iowth rate is assumed for shipping receipts. 212> kdditional invisibles earnings will also be derived from Sumed, -he fi:-l p.eline to be constructed betweern Suez and Alexandria. Following a three year construction period, operations are expected to begin by end i975. The original capacity will be 80 million tons, to be increased to l20 mfllion tons by 1980. Earnings are assumed to amount to US $1.50 per :ocn. N7et receipts (after deducting debt service) are projecited to begin at LE 22 T7ilion in 1976 and to rise annually by about 12 percent (in con- stant -vrices) for the following several years. 2 1, . Transfers: These consist of contractual payments under the Khar- t' IM Agreement plus som.e other Arab aid. Total transfer receipts are pro- 7.eerea here remain unchanged at LE 120 million -- slightly above the 1971 - 83 - level. In the event that the Suez Canal were reopened, it is assumed that the Suez revenues would lead to an equivalent drop in transfer receipts, i.e. would have no net effect on the balance of payments. 213. Capital Inflows. The projections of capital inflows were made on the basis of: a) maintaining net capital transfers at a given level; or b) achieving targeted rates of gross inflows. For purposes of manageability, only four classes of creditors were specified: the World Bank Group, official lenders from convertible currency countries, suppliers from convertible currency countries, and non-convertible country creditors. Direct foreign investment was assumed either to be zero or to be subsumed under the cate- gories for convertible currency capital (for purposes of evaluating its net balance of payments' effects). 214. A variety of combinations of composition and terms were applied. In the projection exercise reported in this chapter, for example, the gross capital inflows from each source were assumed to equal the debt service owed to that source (as reported in Table 4.2, adjusted for the Russiarn debt as noted in the text). The terms assumed for these inflows were about the same as applied in recent years. Bilateral official capital from convertible currency countries was assumed to be provided at a 7 percent interest rate, 5 years maturity, and 1 year grace period. Suppliers credits from the same areas were assumed to have terms of 7 1/2 percent interest, 3.2 years matu- rity and 1 year grace. Loans from countries with non-convertible currencies were projected at 2 1/2 percent interest, 14.3 years maturity and 3.4 years grace period. Bank Group inflows were projected at the terms applicable on these loans and credits in mid-1972. I STATISTICAL ANNEX Table of Contents 1. Population and Employment 1.1 Demographic Indicators, 1950-70 1.2 Population, Rates of Birth, Death and Natural Increase, and Age Structure 1.3 Urban Growth, 1947 - 1970 1.4 Population Density in Census Years, 1882-1966 1.5 Family Planning Data 1.6 Employment, by Sectors 1.7 Output per Worker, by Sector (Constant Prices) 1.8 Output and Wages per Worker, by Sector ( urrent Prices) 2. National Accounts 2 1 Expenditure on Gross National Product 2.2 Expenditure on Gross Domestic Product (Constant Prices) Note to Table 2.2 2.3 Industrial Origin of Gross Domestic Product 2.4 Industrial Origin of Gross Domestic Product (Constant Prices) 2.5 Gross Fixed Investment, by Sector 2.6 Savings and Investment 2.7 Savings and Investment, Alternative Calculation 3. Balance of Payments and External Trade 3.1 Balance of Payments: Current Account 3.2 Balance of Payments: Capital Account 3.3 Loans Received by Central Government 3.4 Commodity Composition of Exports 3.5 Commodity Composition of Imports 3.6 Trade Indices: Voliune and Prices 3.7 Direction of Trade 3.8 Trade Balances with Principal Western Trading Partners 3.9 Trade Balances with Principal Eastern Trading Partners 3.10 Exports of Raw Cotton by Destination 3.11 Exports of Cotton Yarn and Textiles, by Destination 3.12 Petroleum Balance of Payments 3.13 Balances on Clearing and Other Accounts 3.14 Foreign Exchange Reserves 4. External Debt 4.1 External Debt Outstanding as of December 31, 1971 4.2 Commitments, Disbursements and Service Payments, 1967-71, and Estimated Service Payments (on Existing Debt) to 1985. 4.3 Term of Debts Contracted in 1967-71 I 5. Public Sector Finance 5.1 Central Government Current Expenditure 5.2 Central Government Revenues 5.3 Public Sector Investments 5.4 Financing Capital Expenditure, Budget Deficits and Debt Service 6. Money, Banking, and Capital Markets 6.1 Summary of Factors Affecting Liquidity 6.2 Credit to Nongovernment Sector 6.3 Monetary Survey 7. Agriculture 7.1 Acreage of Major Crops 7.2 Cropped Area By Season: Changing Pattern 7.3 Production of Major Crops 7.4 Average Yields of Major Crops 7.5 Gross Value of Agricultural Production 7.6 Net Value of Agricultural Production 7.7 Farm, Export, Import and Domestic Selling Prices Selected Commodities 7.8 Investments of the Agricultural Sector Executed (1967/68-70/71) and Target (71/72) Distributed among the Major Projects 7.9 Agricultural Credit 8. Other Sectors 8.1 Gross Value of Industrial Output by Industries 8.2 Industrial Production Index Numbers 8.3 Manufacturing and Mining Production (Selected Items) 8.4 Public Investments by Main Industrial Subsectors 8.5 Main Plan Targets by Industrial Subsector 8.6 Size of Industry According to Employed Persons 8.7 Labor Force Employed in Public Sector Enterprises and Wages by Subsectors 8.8 Electricity: Capacity and Production 8.9 Net Profits and distribution for Industry Subsectors 8.10 Tourist Arrivals by Nationality Group 8.11 Tourist Nights by Nationality Group 8.12 Estimated Traffic Volume by Principal Modes 8.13 Selected Statistical Information on the Egyptian Railways 8.1J4 Port of Alexandria 8.15 Highway Network 8.16 Distribution of Highway Traffic Between Different Carriers 8.17 School Enrollments 8.18 iarollment in Universities and Higher Institutes 9. Prices and Wages 9.1 Cost of Living and Wholesiale Prices 9.2 Wholesale and Consumer Price Indices 9.3 Implicit Price Deflators, by Sector 9.4 Import and Local Prices for Agricultural Commodities 9.5 Wage Bill, by Sector Table 1.1: DEMOGRAPHIC INDICATORS, 1950-70 l950 1960 1970 Total population (thousands) 20,461 25,832 33,329 (of which % urban) (34.6%) (38.2%) (42.2%) Birth rate per 1,000 44.2 43.1 35.6 1/ Death rate per 1,000 19.0 16.9 15.0 1/ Rate of population growth (% per annum) 2.5% 2.6% 2.1% Rate of growth of urban population (% per annum) 3.6 3.9 3.2 Infant mortality per 1,000 live births 129 109 119 (1969) Age at marriage (median maternal age) 19.3 19.8 19.7 Life expectancy Males 51.6 (at birth) Females 53.8 Dependency: Population under 15 years of age (%) 39.1% 42.8% 40.3% 1/ Provisional. Source: Data provided by the Egyptian authorities. Table 1 .2: POPULATION, RATES OF BIRTH, DEATH AND NATURAL INCREAS]E, AND AGE STRUCTURE (rates per thousand population) Rate of Population Birth Death Natural Year (thousands) Rates Rates Increase 1952 21,437 45.2 17.8 27.4 1953 21,9143 42.6 19.6 23.0 1954 22,460 42.6 17.9 24.7 1955 22,990 40.3 17.6 22.7 1956 23,532 40.7 16.4 24.3 1957 24 087 38.0 17.8 20.2 1958 24,655 41i.1 16.6 24.5 1959 25,237 42.8 16.3 26.5 1960 25,832 43.1 16.9 26.2 1961 26,579 44.1 15.8 28.3 1962 27,257 41.5 17.9 23.6 1963 27,947 43.0 15.5 27.5 1964 28,659 42'.3 15.7 26.6 1965 29,389 41.7 14.1 27.6 1966 30,139 41.2 15.9 25.3 1967 30,907 39.2 14.2 25.0 1968 31,693 3El.2 1 6.1 22.1 1969 32,501 36.8 14.4 22.4 1970 1/ 33,329 35.6 15.0 20.6 1971 2/ 34,076 n.a. n.a. n.a. 1/ Provisional. 2/ Estimate. AGE STRUCTU:RE (population in thousands) Population % distribution Aged- 1960 1965 1970 in 1970 0~-1L 11,013 12,458 14,019 42.1% 15-24i 4,915 5,576 6,350 19.1% 25-49 7,175 8,143 9,276 27.8% 50o-4 2,014 2,288 2,611 7.8% 811 924 1,073 3.2% 100.0% 35oarce: Central Agency for Public Mobilization and Statistics. Table 1.3: U1tBAN GROWrH, 1947 - 1970 Total Population Urban Population Number Annual Rate Number Annual Rate % Urban (000) W (000) (2Q Population 1947 19,021 6,203 32.6 2.3 3.6 1960 25,832 9,864 38.2 2.6 3.9 1966 30, 139 12, 385 41.1 2.6 3.2 1970 33,329 14,049 42.2 Source: Data provided by the Central Agency for Public Mobilization and Statistics. Table 14: POPULATION DENSITY IN CENSUS YEARS, 1882-1966 Density of Total Area Inhabited Area Density of Inhabited Area Per Per Per Per Index Census Square Square Square Square Square Square of Year Population Mile Kilometer Mile Kilometer Mile Kilometer Density 1882 6,806,381 17.6 6.8 13,402 34,701 507.9 196.1 100.0 1897 9,714,525 25.2 9.7 13,[407 341716 724.6 279.8 142.7 1907 11,287,359 29.2 11.3 13,405 34,710 842.0 325.2 165.8 1917 12,750,918 33.0 12.7 13,284 340397 1,431.6 370.7 189.0 1927 ,14217,864 36.8 142 13,404 34,708 1,060.7 1O0.6 208.9 1937 153932n694 la.3 1-6.0 13,202 34.,185 1,206.8 466.1 237.7 1947 19,021,840 49.3 19.0 13,1446 34h815 1,414.7 546.4 278,6 1960 26,085,326 67.5 26.1 13,741 35,580 1898.4 733.2 373.9 1966 30,083,419 77.8 30*0 13,741 35,580 2,189.3 845h5 431 1 Source: Central Agency for Public Mbbilization and Statistics. Table 1.5: FAMILY PLANIING DATA I. Beneficiaries of Birth Control Devices t/ (monthly average users, in thousands) Pill IUD Total 1966 256.4 19.4 275.8 1967 289.7 60.4 350.1 1968 328.8 92.0 420.8 1969 376.5 126.6 -503.1 1970 462.8 170.8 633.6 II. Indicators of Family Planning 1970 Number of females aged 15-44 7,040,000 of which: married 4,793,000 Family planning acceptors as % of married population 14-16% Oral Contraceptives Monthly average of cycles distributed by: Government Health Units 314,000 Private Pharmacies 106,000 Estimated maximum proportion of women aged 15-44 accepting oral contraceptives 6-66% - IUDe Estimated maximum number of IUD's in situ 130,000 Estimated maximum incidence of IUD acceptance among women aged 15-44 2% Total Estimated maximum proportion of women 15-44 accepting oral contraceptives and IUDs 8-% 1/ Sources Central Agency for Statistics and Public Mobilization E/ Based on data reported to the IBRD family planning sector mission by the Supreme Council for Family Planning. Tabl . EPLOMENT, BY SECTORS (in thousands) 1959/60 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 CooIty Sectors 0437 4,93902 508 5,213.9 .8 Agriculture 3,24;.0 3,751.0 3, 77.2 3,964.6 382 3,92.4 3 ,964.9 4,04 .3 4,05 .9 Industry 601.8 825.0 841.7 846.7 867.3 890.7 916.1 940.2 Electricity 11.9 18.0 18.5 18.3 18.5 20.3 22.8 30.4 Construction 185.0 345.2 328.0 307.6 259.8 338.0 387.9 346.3 Distribution Sectors 854.3 1 013.6 1,060.3 1,092.2 1,116.2 1,130.0 1 148.9 1 165.7 Transport and communication 213 3277 350.1 Trade and finance 635.7 729.7 752.5 767.7 785.8 794.3 801.7 815.6 Services Sectors 1 208.5 1 527.1 1 587.3 1 613.6 1 673.4 1 707.3 1 750.7 1,782.5 Fiblii uiinl'ities 25.2 30,3 31.2 31.6 32.2 32.4 33.7 35.5 Other services 1,066.8 1,369.8 1,427.7 1,450.0 1,506.9 1,539.1 1,580.7 1,610.0 Total 6 106.5 7 479.9 7 713.0 7 743.0 7 827.6 8 051.2 8 274.7 8,322.0 of which: non-agricultural (6) (3) (835.8) (3,78i ) (3,35542) (I T 0 (1 :) (4,275.1) 1/ According to official sources, employment in the housing sector jumped from 22,600 in 1966/67 to 134,300 in 1967/68. Evidently a change in coverage effective irom 1967/68 was not applied to earlier years. In this table, it has been assumed that productivity remained unchanged in the period 1959/60-1966/67, although earlier series imply a decline in productivity in this period. Thus, the employment in housing as reported above is constructed from Table 2.4. Source: Statistical Abstract (various issues) and the Ministry of Planning. Table 1.7 : OUTPUT PER WORER, BY SECTOR (CONSTANT PRICES) (value added per worker at constant 1964/65 factor cost) Average Annual Average Annual 1959/60 1960/61 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 % Increase % Increase 1959/60-1965/66 1965/66-1970/71 Commodity Sectors Agriculture 152 137 155 152 149 153 152 157 156 2.1 2.1/ 0.5 Industry 468 502 513 515 516 1499 513 531 581 1.6 2.4 Electricity 849 962 1,289 1,3114 1,377 1,519 1,803 1,943 1,632 7.5 4.4 Construction 255 266 268 289 288 296 270 294 317 2.1 1.9 Distribution Sectors Transport & Communication 474 452 620 633 620 343 343 368 414 4.9 -8.1 Trade and Finance 227 244 230 239 248 244 250 261 261 0.9 1.8 Services Sectors Housing 841 -- 841 841 841 841 849 866 876 - 0.9 Public Utilities 270 296 270 292 297 311 333 347 349 1.3 3.7 Other services 266 270 302 314 319 330 339 354 364 2.8 - 3.0 Total 238 239 268 272 267 263 269 279 290 2.3 1.3 j/ Based on period 1960/61-1965/66; there was a substantial adjustment made in the agricultural employment data in 1960/61, compensating for the failure to record any increase in such employment in the previous five years. Hence, the use of 1959/60 data here as a base would have distorted calculation of productivity growth. Source: Calculated from Tables 1.6 and 2.4 and from supplementary data for other years. Table M .a O iFU,T AND WAGE PE WORM, B SECTOR (CURRET PRICES). (outp-ut prti ;orker measuied as average value added -.n current prices per employed worker; wages are ailo average per worker, in current prices) 1959160 900/61 1964/65 1 965/66 1966/67 1967/68 1968/69 1969/70 1970/71 % Change Average 1959/60-1 969/70 1964/65-1969/70 Commodity Sectors Agriculture Output/Worker 125 t11 155 157 158 165 174 191 1 91 / 14.3 Wage 30 27 44 51 53 52 53 54 1 -4.2 Industry Output/Worker 426 456 513 548 563 531 566 592 660 3.3 2.9 Wage 1148 125 181 183 183 184 187 192 " 2.6 1.1 Electricity Output/Worker 824 931 1,289 1,313 1,377 1,897 1,759 1,833 1,345 8.3 7.3 Wage 202 252 261 265 273 254 291 276 3.1 1.1 Construction Output/Worker 255 266 268 289. 306 311X 326 319 31 2.3 3.7 Wage 162 1614 156 171 180 182 183 185 5 1.3 3.5 Distribution Sectors Transport and Cosseunication Output/Worker 425 404 620 638 631 349 346 377 420 -1.2 -9.5 Wage 180 171 226 240 233 237 245 246 is 3.1 1.7 Trade and F'inance Output/Worker 203 219 230 241 255 261 272 286 287 3.5 4.4 Wage 110 116 139 141 144 150 152 158 it 3.7 2.5 Services Sectors Housing Output/Worker 895 - 841 841 841 842 851 867 877 -0.3 o.6 Wage 52 .. 68 82 84 79 79 79 14.3 3.0 Public Utilities Output/Worker 254 280 271 295 297 307 333 347 357 3.2 5.1 Wage 214 197 231 240 244 248 247 261 2.0 2.4 Other Services Output/Worker 249 253 302 320 332 347 353 369 380 4.0 4.2 Wage 201 201 249 264 266 268 285 302 14.2 4.0 Total Output/Worker 216 214 264 283 290 279 290 309 322 3.6 3.4 Wage 91 87 120 129 131 132 137 143 14.6 3.6' 1/ The values calculated from official data differ markedly depending on the-base year for the calculation. For the period 1959/60-1969/70, the growth rate for output per worker is 4.3% annually and that for the average wage is 6.0% annualy. Over the period 1960/61-1969/70, however, the respective rates of growth are 6.2% and 8.0%. The disparity stems from a major adjustment made in 1960/61 in the data for agricultural employment. Source: Calculated from Tables 1.6, 2.3, and 9.5 and from supplementary data for other years. Table 2.1: EXPENDITtRE ON GROSS NATIONAL PRODUCT (in millions of 1R, in carrent prices) 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Total consumption 917.1 1285.5 2097.1 2153.1 2324.9 2451.7 2656.6 2869.9 Private consumption 1/ (717.1) (1029.6) 1615.2 (1664.7) (1762.5) (1807.1) (1939.6) (2066.3) Public consumption (2Q33.0) ( 255.9) 481.9) (488.4) ( 562.4) ( 644.6) ( 717.1) ( 803.6) Gross investment 166.8 225.6 446.2 385.6 342.2 318.2 416.1 377.6 Fixed investment i/ (166.8 218.2 377.4 358.8 292.2 332.2 350.3 335.6 Change in BtOCks ( 74 68.8 26.8 50.0 -15.0 65.8 42.0 Exports, goods and non-factor services ( 280.4 409.4 429.1 309.9 379.9 425.5 442.1 (0.0 3/ Imports, goods and non-factor services ( 299.0 531.5 452.8 443.4 445.5 547.0 599.9 Statistical discrepancy -0.8 - 13.6 -2.3 -o.6 -7.9 20.1 - GDP (market prices) 1083.1 1492.5 2434.B 2512.7 2533-0 2696.4 2971.3 3089.7 Net faetor income from abroad 1 77. -- 14 i7 -21.8 ; 1 ; 7 *U 5 Receipts - (5.4) ( 11.1) ( 7.7) ( 8-3) ( 9.3) ( 11.4) ( n.a.) Paynesnts - (-3.6) ( -25.8) ( 29.3) ( -31.6) ( -46.7) ( -55.9) ( n.a.) ONR (market prices) 10756 1494.3 2420.1 2490.9 2509.7 2660.0 2926.8 3030.5 Net indirect taxes 81.6 95.8 278.8 300.3 345.2 357.0 418.5 410.0 GN? (factor cost) 994.0 1398.5 2141.3 2190.6 2164.5 2303.0 2508.3 2620.5 (in percentages of GNP at market prices) Total consumption 85.3 86.o 86.7 86.4 92.6 92.2 90.7 94.7 Private consumption ( 66.7) ( 68.9) ( 66.8) ( .66.8) ( 70.2) ( 67.9) ( 66.3) ( 68.2) Public consumption ( 18.6) ( 17,1) ( 19.9) ( 19.6) ( 22.4) ( 24.3) ( 24.4) ( 26.5) Gross investment 15.5 15.1 18.4 15.5 13.6 12.0 14.2 12.5 Fixed capital formation (1 s ( 15-1) ( 15.6) ( 14.4) ( ii.6) ( 12.5) C 11.9) 11.1) Change in stocks (2* ( - ) ( 2.8) 1.1) ( 2.0) ( -0.5) ( 2.3) ( 1.4) Exports, goods and non-factor services ( 18.8 16.9 17.2 12.3 14.3 14.5 14.6 Imports, goods and non-factor services ( 20.0 22.0 18.2 17.7 16.7 18.7 1I.8 Statistical discrepancy - 0.6 -0.1 - -0.4 0.7 - Net factor income from abroad -0.8 0.1 -0.6 -0.8 -0.8 -1.4 -1.4 2.-, Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 / Private enausption data kare born adjusted to reflect the revised new series on housing as in Table 2.3. 2/ Includes the expenditure in purchase of laid, as reported in 'able 2.5. Net figure. Source: Central Agency for Pablic Mobilization, and Statistics and Ministry of Plarning. Table 2,2: EPENDITURE ON GRDSS DQ STIC PRODUCOT (CONSTANT PRICES)* (in millions of RE., at 1964/65 prices) 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Total consumption 1495.4 2067.9 2060.0 2170.0 2280.3 2491.1 2679.7 Private consumption 1/ ( 273.4) (1601.4) (160o.8) (1648.3) (1679.0) (1827.8) (1940.4) Public consurption (1222.0) ( 466.5) ( 458.2 ( 521.7) ( 601.3) ( 663.3) ( 739.3) Gross investment 238.0 427.0 349.9 307.2 284.6 360.9 316.8 Exorts, goods and n.f. sarvices 324.2 403.7 415.8 283.0 330.3 347.3 363.6 Imports$ goods and n.f. services 313.1 541.8 475.6 462.5 471.3 577.7 650.0 GDP at market grioes 174i.5 2356.8 2350.1 2297.7 2423.9 2621.6 2710.1 Annual Growth Rates (% change) 1960/61- 1965/66- 1964L65?/ 1970/71g/ 1966/9 7 1967/68 1968/69 1969/70 1970/71 Total consutption -0.4 5.3 5.1 9.2 7.6 Private consumption 1/ ( 4.8) (4.1) ( - ) ( 2.9) ( 1.9) ( 8.9) ( 6.2) Public consumption (12.8) (9.5) (-1.8) (13.9) (15.3) (10.3) (11.4) Gross investment 14.9 -3.9 -18.1 -12.2 -7.4 26.8 -12.2 l,xorts, goods and n.f. 5.7 -3.2 3.0 -31.9 16.7 5.1 4.7 services Irports, goods and n.f. 11.2 4.0 -12,2 -2.8 L.9 22.6 12.5 services GWD at market prices 6.5 2.9 -0.3 -2.2 .5 8.2 a JXf D esWImates. For the methods employed in constructing this table (and the shortcomings thereof), see the note following. I/ Includes statistical discrepancy. f! Period growith rates obtained by regression, with one year added to beginning and end (if possible) of period for which trend is calculated. Table 2.3: INDWSTEIAL ORIGIN OF GROSS DOMESTIC PRODUCT (in millions of IE, at current factor cost) Sector 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Commodity sectors, total -509.0 - 1188 8 1209.2 1,2215 2 Agriculture 312.0 6TW36 6444 719~-37!jT Industry & Mining 170.0 285.6 461.1 477.4 46o.3 503.9 542.0 620.2 Electricity -- 12.2 24.3 25.2 35.1 35.7 41.8 48.9 Construction 27.0 44.2 94.9 94.3 81.7 110.3 123.7 119.0 Distribution sectors, total i54.0 247.3 378.1 4oo.7 2 -32 359.9 381.3 Transportation/conmmnication 62.0 1022 .6 5.6 6.3 109 T47.2 Trade & finance 92.0 145.1 181.5 195.9 205.0 215.9 229.0 234.0 Services sectors 338.5 404.7 574.7 602.5 645.7 669.o 713.5 744.2 Housing 94.0 107.0 108.0 111.0 113.1 115.5 Public utilities -- 6.8 9.2 9.4 9.9 10.8 11.7 12.3 Other services 244.5 290.9 457.5 482.1 552.7 542.6 583.6 611.7 Statistical discrepancy -- -- 14.4 0.0 -- -- -- -- GDP at factor cost 1,001.5 1,396.7 2.156.0 2.212.4 2,187.8 2.339.4 2,552.8 2.679.7 As o Of GDP at Annual growth rates ) currenlt factor cost 1955/5ant 6_6 197eest 1966/f,7 1967/68 1968/69 1969/70 1970/71 Commodity sectors, total 50.8 4 4 o 1.0 9 10.6 ___ Agriculture 31.2 28.2 2. 9 0 .. 6 12. -0.3 Industry & Mining 17.0 21.4 23.1 3.5 -3.6 9.5 - 7.6 14.4 Electricity -- 1.1 1.5 3.7 39.3 1.7 17.1 -2.2 Construction 2.6 4.4 4.5 -o.6 -13.4 35.0 12.4 -3.8 Distribution sectors, total 17.5 14.2 a -201 3.8 83 Transpw'tation/communication 6.2 9. 5.257 12 Trade & tinance 9.2 8.4 8.7 7.9 4.6 5.3 6.1 2.2 Services sectors, total 33-8 t6 27.8 iL& 7.2 6,6h Housing 9.4 5.0 4.5 2.8 1.9 2.1 2.3 1.7 Public utilities -- 0.4 0.5 2.3 5.3 9.1 8.3 5.1 Other services 24.4 21.2 22,8 5.4 8.4 3.8 7.6 4.8 Statistical discrepancy -- 0.8 -- -- -- -- -- -- Total 100.0 100.0 100.0 2.6 _1.1 6.9 9.1 5.0 Source: Central Agency for Public Mobilisation and Statistics and Ministry of Planning. ior 1955/56 see D. Mtead, 'Growth and Structural Change in the Egyptian Economy", 1967. 2 .1_ ,I 'RI, QRlT lN OC GROSS .D0O23STIC PRODUCT (in mIllions of L2, at 1964/65 factor cost) 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Commodity sectors, total 67.0 862. 141 -1127.3 2 12004. 1 2 Agriculture 41J.5 491.4 588.1 576.7 595.2 601.5 640.8 632.2 industry & Minimng 21.4.2 314.1 433.8 436.9 416.3 457.2 486.9 546.6 Electricity n.a. 12.6 24-3 25.2 35.4 3606 44.3 49.6 Construction 28.3 I44.2 94.9 88.5 76.9 105.0 114.1 109.8 Distribution sectors, total 206.2 276.1 37L.9 392.0O 3014.8 314 .1 IIL-4 358.0 Trsanport/Communioation 72.9 114.1 194.7 201.3 113.3 115e2 127.8 145.1 Trade & Finance 133.3 162.0 180.2 190.7 191.5 198.9 209.6 212.9 Services sectors 3)-.6 41.8 564.8 582.8 620.1 648.5 680 8 718.4 Housing 87.8 100.0 108.0 111.0 112.9 115.3 118.0 120.0 Public Utilities n.a. 7.2 9.1 9.4 10.0 10.8 11.7 12.4 Other Services 254.8 310.6 447.7 462.4 497.2 522.4 559.1 586.0 Statistical discrepancy -- 3.0 14.4 -- -- -- -- -- GDP at factor cost 1,205.8 16.2 2,095.2 2.102.1 2,048.7 2,162.9 2.312.1 2.414.6 Average Annual. Growth Rate ( Annul GothRtes W) 1956-61 19 1- 6 1966-71 1966/67 19q7/8l q6816q L96970 1 Q70/71 Commodity sectors, total 5,6 5.8 1.3 - 1.2 = 2 1 1 7.1 Agriculture 3.5 3.7 1.6 - 1.9 3.2 1.1 6.5 - 1.3 Industry & Mining 8.0 6.6 4.7 0.7 - 4.7 9.8 6.5 12.3 Electricity n.a. 14.0 15.3 3.7 40-5 30.2 21.0 12.0 Construction 9.3 16.6 3.0 - 6.8 -13.1 36.5 8.7 - 3.8 Distribution sectors, total 6.0 6 LL. -22.2 6.1 Transportation/communication 9.4 113 - 6.0 3,4 -43-7 1-7 10.9 13.5 Trade & Finance 4.0 2,2 3.4 5.8 0.4 3 R B 1.6 Services sectors 6 2 _,3 HOUSJng 2.6 1.5 2.1 2.8 1.7 2.11 7 Public Utilities n.a. L.R 6.4 3m3 6.4 8.0 / 6.o Other Services 4.0 7.6 5-6 3.3 7.5 5.1 4,8 Statistical discrepancy -- 37.0 -- - GDP at factor cost 6.1 2. 9 0.3 5 i .6 Source: Central Agency for Public Mobilization and Statistics, Ministry of Planning. Table 2.5k GROSS FIXED ESTME, BY SECrOR (in millions of LE, at current prices) Sector 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Commodity sectore, total 78.2 111.6 208 .8 202.2 201.6 2. 212.4 Agriculture 7.0 ;5 3.7 .3 24.9 2.27. Irrigation & Drainage 11.3 14.8 32.6 34.4 25.1 32.5 29.1 22.0 High Dam 0.4 6.8 19.0 16.5 12.5 9.5 5.2 6.o Industry & Mining 49.8 67.8 loo.6 98.4 85.8 101.1 123.1 126.1 lrectricity 9.7 5.6 61.1 69.3 52.9 31.9 27.3 21.9 Coxstruction n.a. n.a. 6.8 3.9 1.0 2.6 3.4 8.9 Distributicm sectors, total 25.1 74.8 55.8 48.7 39.0 72.2 75.0 69.6 Transportation/comunication 25.1 68.9 4 9.4 4 . 69. 71.4 65.3 Suez Canal n.a. 5.9 3.7 3.5 - - - - Trade & Finance n.a. 2.7 2.6 0.7 2.7 3.6 4.3 Services sectors 73.6 9.2 77.2 63.3 56.8 68.1 65.4 58.9 Hcuing 54.6 19. 1j n23 71: E6.6 Public Utilities 5.1 7.7 12.4 8.6 4.2 5.8 10.9 16.8 Other servicee 13.9 12.4 17.3 12.4 10.9 15.4 18.0 15.6 Expenditure for Purchase of Land n.a. -7.4 -6.4 -7.0 -5.8 -10.3 -5.2 5.3 1/ Total fixeT investsent 176.2 218.2 377.4 3588 2922 .2 350.3 335.6 of which - - - - Public Sector .. .. 349.6 329.4 289.8 290.9 312.6 307.6 Private Sector .. .. 27.8 29.4 28.6 42.3 37.7 28.0 (As percentages of total fixed investment) Commodity sectors, total 2 51.1 66.6 70.7 69.2 - 6 61.h 63.3 Agriculture . i 7. 1 8 .7 7.7 T Irrigation & Drainage 6.4 6.8 8.6 9.6 8.6 9.8 8.3 6.6 High Dam 0.2 3.1 5.0 4.6 4.3 2.9 1.5 1.8 Industry & Mining 28.1 31.1 26.7 27.4 29.3 30.3 35.1 37.6 Electricity 5.5 2.5 16.2 19.3 18.1 9.6 7.8 6.5 Construction n.a. - 1.8 1.1 0.3 0.8 1.0 2.6 Distribution sectors, total 14.2 34.3 14.8 13.6 13.3 21.6 21.4 20.7 Transportation/communication 14.2 3 13.1 1 13.1 20.6 20.4 i9.5 Suez Canal n.a. 2.7 1.0 1.0 - - - - Trade & Finance n.a. - 0.7 0.7 0.2 1.0 1.0 1.2 Services Sectors 41.6 17.9 20.5 17.6 19.4 20.4 18.7 17.6 Housing 30.8 10 12.6 F 3 1741 i 7.9 Public Utilities 2.9 3.4 3.3 2.4 1.4 1.7 3.1 5.0 Other Services 7.9 5.7 4.6 3.5 3.7 4.6 5.1 4.7 Expenditure for purchase of LAnd n.a, -3.3 -1.8 -1.9 -1.9 -2.5 -1.5 -1.6 1/ 1959/60 through 1963/64 include change in stocks. Soucet Central Agency for Public Mobilization and Statistics and Minu"tr4 of Plwniur, TIable 2.6: SAVINGS AND IlTVENTEflT (in millions of LE, at current prices) 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 DP (market prices) 1083.1 1492.5 2434.8 2512.7 2533.o 2696.4 2971.3 3089.7 et factor income - 7.5 1.8 -14.7 -21.8. -23.3 -36.4 -144.5 -59.2 HP (market prices) 1075.6 114914.3 2420.1 2490.9 2509.7 2660.0 2926.8 3030.5 otal consumption 917.1 1285.5 2097.1 2153.1 2324.9 2451.7 2656.6 2869.9 esource gap 1/ 0.0 18.6 122.1 23.7 133.5 65.6 121.0; 157.8 ,ross domestic savings 166.8 207.0 324.1 361.9 208.7 252.6 294.6 219.8 ,ross investment 166.8 225.6 446.2 385.6 342.2 318.2 416.1 377.6 urrent account deficit 2/ 8.3 16.8 123.2 47.8 157.4 109.9 145.9 217.0 ross national savings 158.5 208.8 323.0 337.8 184.8 208.3 270.2 160.6 ,tatistical discrepancy 0.8 - 13.6 -2.3 -0.2 -7.9 20.1 - (in percentages) a % of VP1 Gross investmnt 15.3 15.1 18.3 15.3 13.5 11.8 14.0 12.2 Resource gap -- 1.2 5.0 0.9 5.3 2.4 4.1 5.1 Gross domestic savings 15.3 13.9 13.3 14.4 8.2 9.4 9.9 7.1 . % of aNP Gross investment 15.5 15.1 18.4 15.5 13.6 11.9 14.2 12.5 Current account deficit 0.8 1.1 5.1 1.9 6.2 4.1 5.0 7.2 Gross national savings 14.7 114.0 13.3 13.6 7.4 7.8 9.2 5.3 / The resource gap is defined as the difference between gross investment and domestic savings; it is also identical to the difference between imports and exports of goods and non-factor services. Hence, a negative sign indicates a savings (or export) surplus. / The current account deficit is defined as the difference between groBs investment and national savings; it is also identical to the difference between imports and exports of goods and all services. A negative sign indicates a savings (or export) surplus. ource: Calculated from Table 2.1. I Table 2.7: SAVINGS AND INVESTMENT, ALTERNATIVE CALCULATION* (in millions of LE, at current prices) 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 GDP at market prices 1083.1 1492.5 2434.8 2512.7 2533.0 2696.4 2971.3 3089.7 Unrequited transfers, (net) - - - 31.1 83.6 125.2 139.3 118.3 GDP* at market prices 1083.1 1492.5 2434.8 2543.8 2616.6 2821.6 3110.6 3208.0 Net factor income from abroad -7.5 1.8 -14.7 -21.8 -23.3 -36.14 -44.5 -59.2 GNP* at market prices 1075.6 1494.3 2420.1 2522.0 2593.3 2785.2 3066.1 3148.8 Resource gap* 1/ 0.0 18.6 122.1 -7.4 49.9 -59.6 -17.8 39.5 Gross domestic saving* 166.8 207.0 324.1 393.0 292.3 377.8 433.9 338.1 Gross investment 166.8 225.6 446.2 385.6 342.2 318.2 416.1 377.6 Current account deficit*(- - surplus) 2/ 7.5 16.8 136.8 14.4 73.2 -23.2 26.7 98.7 Gross national savings*3/ 158.5 208.8 309.4 371.2 269.0 341.4 389.4 278.9 Statistical discrepancy (-0.8) - (13.6) (-2.3) (-0.6) (-7.9) (20.1) - As % of GDP* (in percentages) Total investment 15.4 15.1 18.3 15.2 13.1 11.3 13.3 11.8 Resource gap*(- - surplus) - 1.2 5.0 -0.2 1.9 -2.1 -0.6 1.2 Gross domestic savings* 15.4 13.9 13.3 15.4 11.2 13.4 13.9 10.6 As % of CNP* Total Investment 15.5 15.1 18.4 15.3 14.7 11.4 13.6 12.0 Current account deficit* 0.8 1.1 5.7 0.6 3.1 -0.8 0.9 3.1 Gross national savings* 14.7 14.0 12.7 14.7 11.6 12.2 12.7 8.9 * In this calculation, unrequited transfer receipts (mainly Khartoum Agreement payments from Arab countries as compensation for losses of Suez Canal dues) are included as part of GDP* as the Suez dues would have been included were the Canal open. 1/ The resource gap is defined as the difference between gross investment and domestic savings; it is also idential to the difference between imports and exports of goods and non-factor services. Hence, a negative sign indicates a savings (or export) surplus. 2/ The current account deficit is defined as the difference between gross investment and national savings; it is also identical to the difference between imports and exports of goods and all services. A negative sign indicates a savings (or export) surplus. 3/ The savings data were calculated as a residual from gross investment and the resource gap or current account deficit. Hence, the savings data above vary from the difference between consumption and GNP or GDP to the extent of the statistical discrepancy. Source: Ministry of Planning. A Table 3.1: BALANCE OF PAYMENTS: CURRNT ACCOUNT (in millions of BE) 1966/67 1967/68 1968/69 1969/70 1970/71 A. Exports, goods 263.9 253.4 307.3 348.0 358.0 B. Imports, goods 414.4 386.8 384.o 473.1 531.0 C. Trade Balance (A-B) -150.5 -133.4 -76.7 -125.1 -173.0 Services, receipts Suez Canal dues 95.2 -- -- -- -- Other shipping 10.9 4.1 3.4 3.9 14.7 Interest, dividends and other revenuesl/ 8.7 10.6 12.3 15.1 12.7 Travel 61.1) 43.8) 51.5) 23.6 28.0 Other receipts ) ) ) 31.0 28.7 D. Total service receipts 1714.9 58.5 67.2 714.0 74.4 Services, payments Shipping 11.9 5.8 4.9 7.4 8.7 Travel & remittances 11.1 6.5 9.0 8.4 8.3 Interest, dividends, and other payments 19.0 16.4 26.2 28.6 31.1 Government, n.i.e. 35.7 25.5 25.6 33.8 33.4 Commercial payments 5.2 7.0 8.6 11.3 11.3 Other 20.8 18.8 18.6 19.8 21.0 E. Total service payments 103.7 80.0 92.9 109.3 113.8 F. Services balance (D-E) 71.2 -21.5 -25.7 -35.3 -39.4 G. Transfers, net 31.1 83.6 125.2 139.3 118.3 H. CURRENT BAlNCE (C+F+G) -48.2 -71.3 22.8 -21.1 -94.1 Memorandum Items I. Current account balance, national acounts basis 2/ -47.8 -157.2 -109.9 -145.9 -217.0 J. Current account balance, excluding transfers (H-G) -79.3 -154.9 -102.4 -160.4 -212.4 K. Adjustment (J-I) 31.5 2.3 7.5 14.5 5.0 L. EXPorts of goods and ser- vices (A+D) 438.8 311.9 374.5 422.0 432.4 M. EFports of goods and ser- vices plus net trans- fers (A+D+G) 469.9 395.5 499.7 561.3 550.7 N. Imports of goods and ser- vices 518.1 466.8 476.9 582.4 644.8 1/ Includes remittance of mandatory percentage of salaries earned by Egyptians abroad. 2/ The national acounts do not classify the unrequited transfers (mainly Arab assistance in compensation for lost Suez revenues) as a part of the GNP. Source: Central Bank of Egypt. Table 3.2: BALANCE OF PAYMENTS: CAPITAL ACCOUNT * (in millions of LE) 1966/67 1967/68 1968/69 1969/70 1970/71 A. Current balance -48.2 -71.3 22.8 -21.1 -94.1 (Table 3.1, line H) Cap2ital.Movements Long & medium term loans, net 45.2 -2.8 -29.3 -7.9 7.9 Loans received (100.0) (55.7) (76.7) (108.2) (151.7) 4mortization (-54.8) (-58.5) (-106.0) (-116.1) (-1h3.8) Other capital flows, net 23.5 23.8 14.8 37.6V/ 26.80/ B. Total capital move- ments, net 68.7 21.0 -14.5 29.7 34. C. Overall balance 20.5 -50.3 8.3 8.6 -59 (A+B) D. Monetary Movements - 50.3 -8.3 -8.6 59.4 Net IMF Position -3 .2 -8.3 -7 T SDR holdings --- -3.9 Monetary gold (increase-) 20.0 - - - 3.7 Net foreign exchange position (increase -) -51.7 35.0 -2.5 6.9 Wh.8 Payments agreements 10.0 12.6 -o.8 -7.5 25.9 Other liabilities 6.1 2.0 1.2 2.1 -1.7 Errors and omissions 0.3 -3.7 2.1 -2.1 -10.8 * Note. 4'11 a'ata have been converted at the official rate of 6E = US $2.30 _ Tnc&u..les g 11 million allocation of SER's. 2f In,ludes a 'lE 24. mi-lion foreign deposit with the Central Bank of Egypt. Scurce. Central Bank of Egypt. Table 3.3: LOANS RECEIVED BY CENTRAL GOVERNMT (in IE millions-/, by calendar year) 1965 1966 1967 1968 1969 1970 Drawings from: E.E.C. countries 12.2 10.0 11.3 22.2 4.8 11.7 U.S.S.R. 37.8 38.7 36.1 23.9 22.2 27.4 United States 2/ 38.3 3.5 - 0.9 0.9 - Other countries 16.1 314.8 34.3 27.8 27.4 40.4 Total drawings 1014.4 -7 - 77- -79 Repayments to: E.E.C. countries 8.7 7.14 2.6 9.1 14.8 11.3 U.S.S.R. 7.8 12.2 12.2 15.2 21.7 36.5 United States 5.2 7.0 - 7.8 4.3 0.4 Other countries 19.6 20.9 10.4 18.3 17.8 18.7 Total repayments 471 .375 Net drawings from: E.E.C. countries 3.5 2.6 8.7 13.1 -10.0 0.4 U.S.S.R. 30.0 26.5 23.9 8.7 0.5 -9.1 United States 2/ 33.1 -3.5 - -6.9 -3.4 -0.14 Other countries 3/ -3.5 13.9 23.9 9.5 9.6 21.7 Total net drawings 63.1 39.5 -3.3 1/ Original data in U.S. dollars, converted at IE1 = $2.30. 2/ Including transactions in loans made out of U.S. Government holdings of Egyptian pounds. 3/ Including amounts for the specified countries when details are not available. Source: I.M.F., Balance of Payments Yearbook. Table 3.4: CCHMODITY COMPOSITION OF EXPORTS (in thousands of LE) Fiscal year ended June 30 1966/67 1967/68 1968/69 1969/70 1970/71 Fuels 1/ 114,732 67o 8907 6,813 14,178 Raw materials Raw cotton 127,6(3 109,659 119,9314 161,113 161,202 Fresh onions 8,380 51165 6,328 5,756 3,800 Potatoes 1,716 810 2,607 3,629 1,9014 Oranges 915 1,860 4,327 5,791 6,748 Rice, husked & unbleached 1,507 2,382 4,174 1,4144 729 Groundimts 1.,155 1,757 2,175 2,001 2,134 Others 7,9',6 6,856 8,120 7,119 7,024 Total 149232 128,489 147,665 186,853 183,541 Semi-finished commodities Cotton yarn 32,3142 30,548 36,162 33 ,135 33,393 Othbrs 3',35 2,353 3,529 3,231 8,963 Total 35,6 j7 32,901 39,691 36,366 142,356 Finished commodities Rice, husked &.bleached 24,1433 35.,262 48,367 36,244 29,149 Dehydrated onions 988 1,077 1,155 1,643 1,626 Cane sugar, refined 251 1,239 2,657 3,908 14,628 Cement 1,826 3,784 5,683 1,1468 4,015 Shoes 170 844 4,108 4,572 3,583 Cotton textiles 13,821 14,.009 16,837 15,179 18,707 Textile 2,192 2,670 5,264 5,482 7,616 Alcoholic beverages 118 703 2,501 2,1469 2,2147 Others 9,236 10,586 14,876 18,714 27,460 Total 53,085 70,174 101,448 89,179 99,031 Unclassif'ied 512 6 .341797 __8 69 Grand Total 257,828 244,655 303,508 327,909 339,106 I/ f heliding off-shore transactions not reported in oustcms statistics. Data therefore differ from balance of payments (Table 3.1) and petroleun balance of payments (Table 3.10). Source: Cantral Agency for Public Mobilization and Statistics. Table 3.5: COMMODITY COMPOSITION OF IMPORTS 1/ (in thousands of IE) Fiscal year ended June 30 1966/67 1967/68 1968/69 1969/70 1970/71 Fuels 28,959 19,986 15,312 27,911 28,026 Raw materials Wheat 2/ 49,972 56,930 33,430 25,769 58,134 Maize 3,192 7,354 460 1,695 2,110 Tobacco 8,367 7,136 7,124 7,347 8,123 Coffee, unroasted 933 1,777 1,167 1,066 1,150 Wool, combed and not combed 3,047 2,322 3,423 4,449 4,969 Unwrought aluminum, waste and scrap 922 3, 849 480 1,810 1,626 Others 14,266 12,795 11,946 18,549 8,159 Sub-total 80,699 92,163 58,030 60,685 84,271 Intermediate commodities Wheat flour 2/ 23,054 22,658 14,085 8,557 9,475 Animal fats and vegetable oils 13,642 17,555 9,725 14,623 5,745 Lubricating oils 3,651 3,020 1,609 1,426 .,415 Chemicals 8,329 11,665 11,778 16,842 17,550 Synthetic organic dyestuffs 1,687 1,941 2,739 4,300 3,564 Fertilizers 4,733 6,237 6,162 4,286 3,929 Wood and plywood 12,999 8,056 3,625 7,010 12,844 Pulp for paper making 3,030 3,766 3,954 4,890 4,931 Paper for newspapers, printing & writing; paper kraft & paperboard 6,456 4,748 3,411 3,790 2,70C Bars and rods 3,729 2,955 1,504 2,494 5,12C Sheets and plates of iron or steel 2,560 4,604 2,784 5,481 6,518 Others 37,288 26,764 29,338 36,311 74,616 Sub-total 121 ,158 113,969 90,714 110,010 1512407 Capital commodities Parts of locomotives 1,950 1,186 844 1,202 865 Tractors 1,462 3,151 340 170 822 Motor vehicles for the transport of persons 1,566 454 2,439 2,350 1,019 Motor vehicles for the transport of goods 2,315 1,979 1,648 3,595 9,883 Parts for motor vehicles 7,509 3,844 6,675 5,808 8,016 Mechanically propelled railway and tramway coaches 2,289 5,116 2,416 1,319 1,004 Aircraft and parts thereof 2,301 1,040 8,103 8,469 2,004 I I I* Table 3.5: (Cont'd.) CGOMODITY COMPOSITION OF IMPORTS (in thousands of LE) Fiscal year ended June 30 1966/67 1967/68 1968/69 1969/70 1970/71 Parts for piston engines 2,576 1,190 1,709 1,935 ?2,?18 Pumps for liquids and airpumps 3,626 4,141 3,245 4,860 2,062 Extracting machinery 2,953 2,425 2,320 2,067 723 Electrical generators, trans- formers and converters 4,905 2,752 2,165 1,756 2,)457 Apparatus for making and breaking electrical circuits 3,737 3,936 3,041 2,547 2,570 Others 39,559 39,835 24,392. 37,222 50,645 Sub-total 76,748 711,049 59,337 73,300 84,788 Consumer commodities Durable commodities Automobiles 891 1,302 l,)411 3,555 6,796 Others 3,978 2,271 3,266 4,690 6,029 Sub-total 4,869 3,573 4,677 8,245 12,825 Nondurable commodities Preparations of meat and fish 1,161 726 825 1,521 704 Lentils 794 1 ,054 1,518 2,475 334 Tea 14,)426 8,791 3,674 6,691 6,939 Dairy produce 999 830 1,337 1,894 2,038 Medicament for human beings 3,1t46 2,936 2,738 3,028 3,730 Disinfectants and insecticides 8,658 6,835 6,694 3,157 8,260 Sub-total 2991884 21,222 16,786 18,763 21?995 Other commodities 34,843 23,558 16,650 19,518 26,968 Grand Total 376,460 345,520 261,506 318,435 41o,280 1/ Data are based on customs statistics. They differ from those in the balance of payments (Table 3.1), which are based on the exchange record. The difference is due to imports under the "temporary admission procedure" which are not reported in customs statistics. 2/ The relatively small wheat imports in 1968/69 and 1969/70 are due to exceptional large imports under the "temporary admission procedure" in these years, not reported in this table. Source: Central Agency for Public Mobilization and Statistics. Table 3.6: TRADE INDICES: VOLUME AND PRICES (Base 1963 = 100) 1964 1965 1966 1967 1968 1969 I,orts Price index 104 103 100 97 94 93 Volume index 100 96 116 91 76 67 Eports Price index 107 113 110 117 124 129 Volume index 96 102 105 90 92 103 Terms of Trade Index 103 110 110 121 132 139 (percentage change from previous year) Imorts Price index 4 -1 -3 -3 -3 -1 Volume index - - 21 -22 -16 -12 Exports Price index 7 6 -3 6 6 4 Volume index -4 6 3 -14 2 12 Terms of Trade Index 3 7 - 10 9 5 Source: United Nations, Ccamodity Trade Statistics, 1971. Table 3.7: DIRECTIOIT OF TRADE (in percent) 1955/56-1959/60 1960/61-1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Annual Average Anmual Average Imports from: Arab countries 7.9 7.6 6.6 7.0 6.1 4.3 6.2 6.5 Eastern Europe 24.7 21.0 24.9 30.1 41.4 34.8 32.9 32.1 Western Europe 41.2 33.4 33.3 27.2 32.3 41.1 36.1 30.2 The Americas 13.2 26.1 20.0 22.3 6.2 6.8 2.0 10.2 Far East 10.1 9.2 12.5 11.7 8.6 10.4 13.8 11.5 Other 2.9 2.6 2.7 1.7 6.4 2.6 3.0 9.5 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Exports to: Arab countries 11.3 10.1 8.9 9.0 12.3 9.3 7.0 9.0 Eastern Europe 41.0 43.9 51.2 49.9 42.3 52.3 59.9 59.8 Western Europe 22.8 22.9 18.8 18.9 21.8 19.0 15.1 12.8 The Americas 4.1 6.9 4.5 2.9 2.5 2.7 1.5 1.8 Far East 18.1 13.4 14.7 15.3 15.0 14.2 13.4 14.2 Other 2.6 2.8 2.8 4.0 7.1 2.5 3.1 2.4 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Cormputations on the basis of data of the Public Agency for Mobilization and Statistics - Annual Bulletin of Foreign Trade - The Central Bank of Egypt and the General Organization for Trade. Note: Percentages do not always add up because of rounding of the figures. Table 3.8: TRADE BALANCES WITH PRINCIPAL WESTERN TRADING PARTNERSI/ (in millions of LE) Country 1965 1966 1967 1968 1969 1970 France Exports to: 6.4 502 6.3 5.5 7.5 6.5 Imports from: -21.1 -22.59 -15.7 -33.2 -28.5 -25.3 Balance - -17.7 ' -2947.7 -21.0 -18. Gerny,F.R. Exports to: 1h.9 10A.1 8.2 10.6 13.3 8.9 Imports from: -38.3 -38.2 -24.o -19.1 -19.3 -26.7 Balance -234. -27.8 -15. 7 0 -17.7 Italy Exports to: 11.6 10.5 9.5 9.1 12.7 11.0 Imports from: -23.5 -19.2 -12.1 -1h.5 -16.3 -22.6 Balance -11.9. W 77 T-2.6 7-55 -11.6 Spain Exports to: 2.7 4.7 6.3 6.6 5.6 5.3 Imports from: -6.4 -14.1 -11.5 -13.0 -13.3 -12.2 Balance -3.7 -9T2 6T. 7-7.7 69 United Kingdom Exports to: 7.4 7.3 7.1 6.4 6.7 6.2 Imports from: -20.7 -23.1 -13.0 -8.8 -12.1 -13.5 Balance -13.3 -5.8 -1. - 5. 9 -7.3 United States Exports to: 8.3 6.7 5.6 5.8 4.8 2.7 Imports from: -82.0 -92.3 -30.2 -16.2 -19.6 -20.9 Balance -73.7 -8.6 -727. -510. -TI77 -T592 Total of above countries Expowts to: 51.3 44.8 43.0 44.0 50.6 40.6 Lzmcrts from: -192.0 -210.8 -106.5 -104.8 -109.1 -121.2 Balance -1470.-7 7 --- 3 7 0 -53.5 -6806 All countries Exports to 263.1 263.1 246.1 270.3 323.9 331.2 IWorts from 405.9 465.5 344.4 289.6 277.2 342.0 _/ The import data are incomplete. They are derived from customs records, and do not include imports entering under the "temporary admission? procedure. Table 3.9: TRADE BALANCES WITH PRINCIPAL EASTERIN TRADING PARTNERS1/ (in millions of LE) Country 1965 1966 1967 1968 1969 1970 USSR Exports to: 56.7 62.0 61.3 76.0 107.0 122.4 Imports from: -36.6 -hO.4 -71.8 -46.2 -37.6 -1.5 Balance 20.1 21.3 -10.5 29-.8 69. BO.9 Czechoslovakia Exports to: 27.0 26.2 18.3 14.2 15.3 15.8 Imports from: -13.8 -13.9 -10.7 -10.4 -8.9 -13.6 Balance 3~.2 12.3 7.6 2.2 Baac 73 .3 .4 German Democratic Republic Exports to: 10.0 10.5 11.3 9.8 14.6 19.7 Imports fromt -10.4 -16.7 -14.3 -14.1 -12.2 -15.5 Balance - 7 -3.0 -4.3 T27T -2 Poland Exports to: 7.0 5.6 5.7 8.7 12.3 7.5 Imports from: -4.6 -6.9 -7.6 -7.6 -6.0 -9.9 Balance -139 .3 -1 .9 1 31 Romania Exports to: 8.1 8.0 6.1 7.7 6.0 8.1 Imports from: -6.2 -7.4 -18.7 -18.6 -5.5 -11.3 Balance 1.9 J-12.6 -10.9 -3.2 China (mainland) Exports to: 19.6 14.1 8.2 7.2 6.1 7.7 Imports from: -11.6 -17.5 -10.1 -8.9 -5.6 -6.7 Balance 6.0 _3T . -1.9 -1.7 77- 1.O Bulgaria Exports to: 2.7 2.5 3.3 3. 4.4 5.0 Imports from: -1.9 -4.o -4.4 -4.9 -4.0 -3.5 Balance T7 -T- -1.1 -1.9 Total of above countries Exports to: 131.1 128.9 114.2 126.6 165.7 186.2 Imports from: -85.1 -107.1 -137.6 -110.7 -79.8 -102.0 Balance 46.0 21.8 -23.4 15.9 85.9 84.2 1/ The import data are incomplete. They are derived from customs records, and do not include imports entering under the "temporary admissions" procedure. Table 3.10: EXPORTS OF RAW COTTON BY DESTINATION Marketing season ended 1966/67 :L967/68 1968/69 1969/7c 1970/71 August 31 Value (in millions of LE) 12t.9 113 2 120.5 167.6 156.,1 Unit value (in LE per kantar) 20.2 21.8 25.3 26.9 25.7 Volume (in thousand kantars) 6,043 5,194 4,760 6,438 6,073 Convertible currency areas 1 810 1 682 177 I 68 Austria 176 3- 3 Belgium 37 44 35 Eo 27 France 197 213 204 187 169 Germany, Fed.Rep. of 166 267 291 137 254 Italy 362 327 287 304 289 Japan 423 472 524 484 578 Switzerland 127 99 91 59 78 United Kingdom 109 126 91 58 102 United States 122 141 10 l 37 33 Other 42 45 94 101 58 Under bilateral agreements 4398 ,84 3,078 4 961 4 i415 Mainland China 402 172 131 21 29 Czechoslovakia 481 363 265 349 427 Eastern Germany 162 95 49 88 74 Hungary 123 85 46 126 65 India 621 652 360 594 647 Poland 205 140 116 223 224 Rumania 209 247 179 298 224 Spain 204 364 246 124 112 U,S.S.R. 1,450 844 1,261 21j1W0 1,945 Yugoslavia 272 190 143 206 82 Other 269 232 282 297 298 Sourve: Egyptian Cotton General Organization. Table 3.11: EXPORTS OF COTTON YARN AND TEXTILES, BY DESTINATION (in tons) I. COTTON TEXTILE EXPORTS Destination 1964 1965 1966 1967 1968 1969 1970 1971 Arab League 4,155 3,916 6,343 5,491 6,344 6,102 6,857 7,628 Eastern Bloc 2,699 3,555 3,700 5,478 6,050 5,991 6,558 5,147 E.E.C. 691 674 1,523 1,266 1,711 2,373 1,791 2,151 E.F.T.A. 1,610 1,576 404 75 1,157 1,036 1,341 1,467 Dollar Zone 2,561 2,134 1,293 2,682 3,445 3,558 3,841 3,993 Other 1,579 2,641 1,348 1,264 1,467 2,914 2,353 1,795 Total 13,295 14,496 14,611 16,935 20,174 21,974 22,749 22,181 II. COTTON YARN EXPORTS Destination 1964 1965. 1966 1967 1968 1969 1970 1971 Arab League 1,297 1,362 1,029 708 762 1,489 1,756 2,692 Eastern Bloc 13,520 25,662 27,930 26,899 24,638 24,388 25,924 25,160 E.E.C. 7,740 7,029 4,485 2,305 4,625 8,324 6,504 4,154 E.F.T.A. 3,435 4,465 3,514 2,625 2,545 2,583 2,542 3,265 Dollar Zone 191 286 608 978 1,735 1,393 723 319 Other 1,407 2,352 3,171 4,461 4,971 9,541 5,992 6,613 Total 27,590 41,156 40,737 37,976 39,276 47,718 43,441 42,133 Source: The Central Agency for Public Mobilization and Statistics. Table 3.12: PETROLEUM BALANCE OF PAY2ETS (in million LE) 1 965/66 1 966/67 1 967,/68 1968/69 1 969/70 -970/71 Kx ot5 1 / .7 16.3 7.2 13.1 27.2 32,- Crude oil 2/ 6.1 5.6 2.4 8.2 25.3 9. 6 Petroleumproducts 9.7 10.7 4.7 4.9 1 9 2.4 Imports 28.9 30,4 33.9 29.4 ' 4l 49 - Crude oil 3/ 22.4 24.1 13.8 7,3 8.1 1L.8 Petrolewa products 6,5 6.3 20.1 22.1 3. 2 34.7 Balance (Exports- Imports) -13.2 -14t.1 -26.7 -16.2 -16.2 -17.5 Crude oil -16.4 -18,5 -11.3 + 0.9 +17.2 +14.7 Petroleum products+ 3.2 + 4.5 -15.4 -17.1 -3 i._ -32,3 1/Ex port and Import data differ from those in tables 3.6 and 3.,7 Eports (in million LE) 114,7 6.7 8.9 i6.8 14.2 Imports (-i.n million LE) 29,0 20.0 15.3 2 7.9 28.0 Balance (in million LE) 14.2 13.2 6.14 ll 121,8 This difference is probably due to off-shore transactions wlhich are not included iin the custom data, 2/ Egyptian share only. 3/ i ncludes Partners' share purchased for local refineries. Sour deanerall Organization for Petroleuvn Table 3.13: BALANCES ON CLEARING AND OTHER ACCOUNTS (in nillions of LE) End of Period June December 1968 1969 1970 1971 1968 1969 1970 1971 Developing Countries Algeria 1.5 2.6 4.5 4.5 1.7 3.6 4.1 4.4 Cameroon - - - - 0.1 - - - Ceylon -0.3 -0.7 -1.8 -4.2 -0.5 -1.5 -2.7 -3.2 Ghana 0.3 0.8 -0.4 -1.2 o.6 0.3 -1.0 -0.1 Greece -1 .7 -3.2 -4.6 -4.6 -3.4 -4.5 -4.8 -4.1 Guinea 1.8 1.8 1.9 1.9 1.9 1.9 1.9 1.9 India -2.6 -0.7 -4.7 -2.3 -0.8 -3,5 -3.3 -2.6 Indonesia 1.0 1.4 1.24 1.5 1.0 1.4 1.4 1.5 Iraq 0.2 2.9 1.4 0.3 1.8 1.7 1.2 0.4 Jordan - - - 0.2 - - -- 0.4 Lebanon -0.8 -0.7 -0.7 -2.0 -o.6 -0.9 -0.8 -1.8 Libya 0.7 - - - 0.2 - - - Mali 5.4 4.8 5.4 5.6 5.2 5.2 5.5 5.7 Morocco -0.3 0.2 0.3 -0.1 -0.3 0.2 0.3 -0.5 Saudi Arabia -1.2 -0.8 -0.3 - -1.0 -0.6 - -2.2 Somalia -o.6 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 Spain -5.9 -6.6 -7.6 -10.1 -5.9 -7.8 -8.8 -11.1 Sudan -4.4 -3.2 -2.6 0.7 -3.4 -2.4 0.1 3.0 Syria -4.2 -5.2 -4.7 1.6 -5.0 -5.5 -4.5 -0.6 Tunisia -0.1 -0.1 0.1 0.2 -0.1 - 0.1 - Yemen -16.5 -16.6 -16.4 -16.6 -16.4 -16.5 -16.4 -16.4 Yugoslavia -2.6 -2.6 -5.3 -6.4 -4.5 -4.7 -5.7 -6.9 Sub Total -30.3 -26.3 -34.6 -35.1 -29.9 -34.1 -33.9 -34.4 Eastern Bloc Albania -0.2 -0.1 - - -0.2 -0.2 - - Bulgaria -o.6 -1.5 - -1.6 -1.5 -0.2 -1 .1 -0.9 China P.D.R. -5.4 -7.4 -7.4 -5.0 -7.0 -10.0 -8.2 -7.2 Cuba 1.4 1.2 0.1 0.6 0.1 -0.3 -0.7 -0.4 Czechoslovakia 1.8 1.8 -0.3 -14.1 -1.5 -2.6 -7.2 -24.5 Eastern Germany -1 .3 -1.3 3.6 0.2 -3.5 0.4 0.2 -2.0 Hungary 1.1 0.5 1.3 -0.4 - -0.2 1 .2 -3.0 North Korea - -0.1 0.2 0.4 -0.1 -0.2 -0.1 0.3 Poland -0.5 2.2 - -2.2 -1.3 - -4.2 -4.3 Rumania -4.5 -0.5 1.2 -0.9 -1.7 -3.3 -1.3 -4.7 U.S.S.R. -35.9 -37.0 -30.0 -45.5 -27.2 -31.7 -38.1 -59.3 North Vietnam -0.1 - - - - _ - . Sub Total -44.2 -42.2 -31.4 -68.4 -43.9 -48.3 -59.7 -106.0 Developed Countries Denmark -0.1 -0.1 -0.3 -0.9 -0.1 -0.2 -0.7 -1.2 Switzerlauid -0.4 -0.1 -0.1 -0.1 -0.2 -0.1 - - Sub Total -0.5 -0.2 -0.4 -1.0 -0.3 -0.3 -0.7 -1.2 Others -0.4 -0.1 -0.1 -0.1 -0.2 -0.1 _ _ Balances under loan agreements of past bilateral accounts -32.9 -40.0 -36.4 -41.5 -39.8 -38.7 -46.7 -50.2 Grand Total -108.3 -108.8 -102.9 -146.1 -114.1 -121.5 -1241.o -191.8 Source: Central Bank of Egypt Table 3.1I: iGN EXCR'GE RVS2RVIS 1955 1960 19455 1966 1967 1968 1 969 1970 1971 (in mllion of U.S. $, End of Period) Aseets A. Central bank reserves 617 264 19?3 156 195 168 i45 167 154 O79 T71 182 7*057 21I239 1473 35,575 35,575 7 ' 7,415 2P125 9*540 197i: 28ffi160 28!o16Q 46Q60 16739 6p699 1 o7r, 232?00 23J200 - 4q960 1*436 6 396 6 1976, 16,240 18p240 A 1,560 1i 167 5S727- 1477 13*680 1 3h680 - 4,560 900 5,460 9J0120 9120 ' 4,560 657 5*217 - 197Q 4560 4,560 Li560 559 5*119 TABLE hed ARAB REP. OF EG;YPT EXTERNAL P'U8LIC DEST AS OF DECEMBER 31t1971 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF U.S. DOLLARS LOANS FROM INTL. ORGANIZATIONS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINtItlG nF PERIOD CANCEL- LATIONS, DISBURSED INCLUDING COMMITl DISBURSE SERVICE PAYMENTS ADJUST YEAR ONLY UNDISBURSEO) MENTS MENTS PRINCrPAL rNTEREST TOTAL MENTS t1) (2) (3) C4) (5) (6) (7) (8) 1568 35,500 35s 5i,, - 4 O00 20093 6#093 1565 31,500 31,50') #A 4.000 1,830 5A30 - 1570 27,500 27,#501) 96,0ou - o 9 5 1,647 7'147 1571 22,000 4 J)() 0 171 5.500 1O306 6P806 1572 16,671 42,50 ) 4,984 50 0 91 6'415 1573 16,155 37jou0t 7 03? 5.'iO' 629 boi29 1974 17,687 31,90 0) 5 S ,455 5.'-oO 35C 5.85O 1575 17,6)42 ?6., 0 0' 3,6013 14 0 140 1976 21,250 M6,OW) ?'7241 164 164 1577 23,491 26,0OJ 0) 11 325 17J 179 1978 24,816 26,00) 726 1., I 188 1579 25,542 2 6.o 0O') 329 13( 192 322 1980 25,741 25A870 a 120 260 i9; 453 1581 25,601 ?9,61') . Q 260 192 452 - 1582 25,350 25 35') P 60 190 450 1583 25,Oso ?5i090 - - 260 1 b 448 1984 2L),880 ?4P83( - l(8, 446 - 1585 2)4,570 7a,57f) - 26" 184 444 - 1586 24,310 ; 1 e 6r) 12 442 - TABLE4.2.' ARAB REPS or [4YPT 0a,r12 EXTERNAL PUBLIC DEBT AS OF DECEMBER 3i#1971 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF U.S. DOLLARS LOANS FROM GOVERNMENTS DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING nF PERIOD CLATNCEL DISBURSEn INCLUnING COMMIT- DISBURSE SERVICE PAYMENTS ADJUST YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL HENTS (1) (2) (3) C4) (5) C6) (7) (B) 1967 1,159,932 i 1,s527,583 160,331 133p61? 53p3340 16 i,54 69,924 545707 1967 1,212,618 -5593o33 59,376 109,804 79,940 17#017 96fi957 i701 1969 1,235,646 1,572,o72 69,799 77?595 100,586 22s17 123s4O3 18s?07 1970 1,213,955 1,523,O7', 1l8,832 791729 143p626 29Av427 173PO53 -63 1971 121h9,395 1,523O221 104,991 15 17 166,569 34,866 201.434 54,46? 1972 1,145,9034 1P5,0111'J - 130, 03 206A105 45,707 251#812 -25P722 1973 1,065,5945 1.269,2ff3 86,45 184 9 33 33,364 218P297 1974 966,847 1 0 4,127 7 49P,980 164,138 762,28 190,966 1975 852,689 .l9, 92 34,974 134,437 200992 165S429 1976 7i43,330 775 55 ' 15o317 135.44? 20.362 1553834 - 1977 623,204 6540,51 13,366 121t140 17.096 138.236 1978 515,2430 53,097 I 3,541 115J604 13,481 129 085 - 1579 5403,367 51,9 371 . 129 jOO044 98S 1 73 1980 315,238 319,2441 66 79.o22 7,667 847489 7 1981 235,417 235,419 3 - 7 66, 6 5,514 71,7?18. 1982 169,210 1649?10 9 31,716 3.702 35,418 1983 137,494 137,40q - - 29,979 2876 32.452 - 1983L. 107,917 - 107,91.' - 25P641 2,137 27.777 1985 82,273 82,23 7 3 21,709 1,568 232.77 -3 1986 60,564 6,P564 a a 21,277 1,086 22.363 ECONOMIC AND SOCIAL DATA DIVISION KONOM-IC PROOGRAM D3PARTMENT I I Table 4.3: TERMS OF DEBTS CONTRACTED IN 1967-71 1967 1968 1969 1970 1971 Total Interest (%) 2.5 3.4 6.4 5.0 6.o Grace (years) 1.7 2.1 1.8 2.7 3.4 Maturity (years) 9.2 8.9 6.8 12.6 8.0 Grant element for a discount rate of 10% (in %) 31 27 13 26 17 Loans from Governments Interest (%) 204 3.0 6.o 5.7 5.8 Grace (years) 1.6 1.9 2.1 1.4 3.5 Maturity (years) 9.6 908 7.4 5.6 8.2 Grant element for a discount rate of 10% (in %) 32 30 15 13 18 Suppliers Credits Interest (%) 4.3 3.9 6.4 6.3 6.8 Grace (years) 2.5 2.3 1.7 1.0 1.5 Maturity (years) 4.3 7.1 6.5 3.6 5.6 Grant element for a discount rate of 10% (in %) 16 23 12 8 9 Source: External Debt Section, I.B.R.D. I Table 5.1 CENTRAL GOVERNHZNT CURRENT FXPFUDITURE!' (LE million) 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 'Actual Actual Actual Actual Actual Actual Actual Actual Badget Organizational Services- Defense 2/ 176.8 213.5 175.0 166.7 223.8 267.6 386.1 422.9 464.1 of whibh Emergency Fund (70%) - - - - 42.o 89.6 89.0 184.8 208.6 Security and Justice 37.3 39.1 41.0 42.0 43.2 46.1 48.8 51.0 55.8 Others 2/ 24. 25.8 _2 28.8 45.4 110.8 107.7 121.0 Subtotal 23 2 23 .31 T2.4 379.0 3T.7 W z0 Economic and Social Services Agriculture 9.7 11.2 11.4 11.8 14.8 16.1 17.5 19.2 21.5 Irrigation and Drainage 14.1 13.8 16.8 16.7 17.7 19.7 19S. 20.4 29.2 Education 82.0 91.7 90.0 99.8 103.4 107.8 117.0 125.6 136.3 Health 20.9 24.2 23.3 29.4 31.8 35.0 37.6 39.7 42.5 Transport and Counmnication 10.2 9.3 9.7 10.7 3.4 7.5 9.2 9.1 10.4 Culture 11.2 12.3 12.2 10.5 12.0 9.5 13.2 14.3 19.0 Others 29.14 37.0 63.72 50.9 37.1 14/ 35.8 140.0 44. 64. Subtotal T7T - k5 223- Z 4/ 323.2 Other Expenditures Domeatic Debt Service 28.7 35.2 40.5 64.0 17.2 2/ 6.1 5.7 5.6 4.5 Pensions and Remuneration ,6/ 15.8 17.6 19.6 21.7 25.2 26.5 29.3 37.1 42.5 Cost of Living Subsidies 10 32.4 65.0 9X6.2 41.0 8.0 - - - Subtotal 797. 111.1 131.9 oT'0 35b,0 Ui7 70 Settlement of Arrears - - 105.7 65.0 - - - - TOTAL CUMRRST EXPENDITURE 492.9 575.7 ffi 8 664.2 616.0 51.2 835.0 897.0 1011.0 Memo Item: Emergency Fund 2/ - - - - 60.0 5/ 128.0 270.0 264.0 298.0 Total Central Government Expenditure / 862.3 869.9 985.0 934-2 883.1 963.5 1187.4 1255.3 1361.0 3 Includes operations of the Emergency Fund. T The Emergency Fund has been olassified as current expenditure (even though some of its expenditures might be considered as investments). While the specific allocation of the Emergency Fund is not known, it has been created for financing defense expenditures; however, some of its expenditures are reportedly devoted to other purposes (resettlement of refugees, general infrastructure). For purposes of classification it has been assumed in this table that 70 percent of the Emergency FYund is devoted to defense; the remaining 30 percent are classified under "Others". Data concerning the Emergency Fund are not act-ia7ls b but budget data. / No longer including repayment of principal, as in the past. E $xcluding IE 60 million for "emergency appropriations" which in later years were financed through the Emergency Fund. C Classified in offiaial figures under "Others"r see footnote 4 of thi5 iahl__- / Pensions and remunerations to Treasury employees who were covered under the pre-1956 Treasury Pension Plan. LInuludine invesbmaeaL e.xpenditure. Reported on a gross basis through 1967/68, thereafter on a net basis. Source: Ministry of Treasury. Table_5,2s CENTRAL GOVERNMT REVENUES (LE million) 1963/614 1964/65 1 965/66 1966/67 1967/63 1968/69 1969/70 1970/71 1971/72 Actual Actual Actual Actual Actual Actual Actual Actual Budget A. ORDINARY REVENUES Tax Revenues Taxes on immovable property 7.6 6.7 7.1 10.2 9,5 13.8 16.1 16.8 22.9 Perso al incone taxas 14.5 16.9 18.4 21.2 21,6 23.0 26.1 28.2 27.2 Business profit taxes 32.8 53.8 70.5 93.0 68.5 87.9 104.3 115.3 100.9 Estate duties 3.6 2.0 2.1 2.0 2.2 2.2 2.7 2.4 2.7 Excise on consumption duties 1/ 49.6 48.5 45.9 115.0 127.5 145.1 161.4 173.9 167.9 Custom duties 144.3 164.5 172.2 154.2 144.3 134,0 173.9 196.3 171.9 Stamps duties 110-1 14.3 17.0 15,3 24,3 28.0 31.7 34.3 33.0 Other 8.5 10.6 8.6 12.1 16.1 17.3 7.7 5.0 4.7 Subtotal 271.9 317.3 A 423.0 414, l5.3 523.9 572.2 5 Non-Tax Revenues Services revenues 43.4 36.9 54,1 67.7 17,4 16.8 22.1 24.3 27.0 Miscellaneous receipts 53.6 76.1 77.8 105.9 52.6 65.4 72.0 38.9 63.9 Subtotal 97,0 113.0 131.9 7 o 971 732 909 TOTAL, 2M 43% j71 596,6 .8 618.p2 6 5 B. EXTRAORDINARY REVENUE3 2/ 60o0 128.0 27Q0e 264,0 298.0 CG TOTAL REVENUES (A+B) 368.9 1430,3 473.7 596.6 544 ) 66105 888,0 9 .4 920.1 D. TOTAL CURREINT EXPENDITURES 1492.9 575.7 6814.8 663.0 616o0 651.2 835.0 897.0 1011 .0 SURPLUS (+), DEFICIT (-) (C - D) -61 -1454 -211.1 -66.14 -72.0 +10.3 +53.0 + 2.14 -91.0 1/ From 1966/67 onwards it includes revenues fromi "price di.ffe):tentials"1, a specific levy oi certain consumer durables introduced in 1965. 2/ Emergency Fund revenues which include replacement of Suez Ce al. Oe un ler the Khartoum Agreement, other Arab assistance and a small. but undetermined amount of local resources. Source: Ministry of Treasury. Table 5.3: PUBLIC SECTOR INVESTEtMS (LE willion) 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 Actual Actual Actual Actual Actual Actual Actual Actual Budget Commodity sectore Agriculture ) 48.6 43.2 49.1 47.5 35.0 31.3 29.0 29.8 38.0 Irrigation & Drainage ) High Dam 62.9 47.8 59.8 57.2 45.5 27.1 13.2 7.3 0.9 Electricity 18.8 19.8 27.4 24.2 17.9 16.8 19.1 18.9 24.1 Industry 1029 80.2 4 1.5 93.7 118.9 140.8 155.7 121.6 Subtotal 240.1 191.0 200.1 170j4 192.1 194,1 202.1 211.7 184,6 Distribution sectors Transport & Commnication 20.2 20.3 22.8 14.6 24.9 43.3 35.9 33.2 50.7 Suez Canal 5.6 7.1 5.3 8.0 3.9 1,8 1.6 1.3 1.4 Trade & Finance 3.3 2.2 2.1 1.3 1.1 2.3 3.7 2.9 2-2 Subtotal 29.1 29.6 30.2 23.9 29.9 47.4 41.2 37.4 55.3 Services sectors Housing ) 16.5 12.8 16.4 13.2 6.3 7.6 17.1 20.4 17.2 Public Utilities ) Other services (Health, Culture & Tourism, Supply & Storage) 16.6 13.4 13.1 6.5 6.8 8.2 11.4 11.5 8.8 Services Budget Investments 1/ 67,1 47.4 40.4 42.6 32.0 55.0 58.5 48.4 51.1 Subtotal 100.2 73.6 69.9 62.3 45,1 70,8 87.0 80.3 77.1 Unspecified Allocation - - - 14.6 - - 22.1 28.9 33.0 TOTAL 369.4 294.2 300,2 271.2 267.1 312.3 352.4 358.3 350.0 1/ Including investments of governorates. Source: Ministry of Treasury Table 4s FINCINDf APr2AL EZPENDITUS,, BUDMET DEFICITS AND DST SERVICE (Iz i lion) 1967/68 1968/69 1969/70 1970/71 1971/72 Actual Actual Actual Actual Budget A. Uses 1. Public Inestment 267.1 312.3 352.4 35i83 350,0 2. Current Deficit of Central Gov t Ser7ices Budget 72 - 91.0 Current DeficIt of Public Auth. & Econ. Organizations !4.6 6.4& -- 3e Foreign Debt Servios / 340 4502 58.3 !568 68.6 4. Others - - 4.3 33.9 - TOTAL 85600 .0 S096 B. Sources 1a Domestio Resources Currant Surplus of Gentral aovt. Budget - 10S3 53.0 2.4 Current Surplus of Local Govt. Budget 15.6 9,1 17.1 106 10.8 current Surplus o- Public Auth. & Econ. Crg. _ - 29.9 448 54e.3 Depreciation of Public , 61 Auth, & BEon. Org 78.x J u).,6 36.0 40.O 43.4 Surplus of Social I.ssra n. & Pension Matds 144 ,9 15'.0 159.1 '187*7 187.2 Sars Ca3fricXatas 13,6 i5.3 22,0 22.l 18,0 Post 2. 0.9 4.9 4e8 3.3 3.6 2. GetC -Bank Knang h49 48.0 80.0 78.0 80,0 3. &aaaUAM=Lz Rs@0ote-S 26.. 3210 11,2 4.0 43.3 , - terXL. svoues 53.2 3l,7 42,9 5501 69.0 TOTAL 9, 456, i4 9.0 509,6 f peratios of te Eergency Fund are included in the Current Budget, see Tables 1 ru-id 21C.f :/ Fcreit. dbt- sr. of ptuib; enterprises is excluded, Excsl-des etean-nal assis ntae Lrom the Ehartou=n Agreement and Arab Aid. Includes cVreclation of econoedo enterprises which in later years is excluded. I ncludes pmtis from foreign cwrency operations of Central Bank, retentions fron the 25 percent share of wage and salary earners in profits of state organizatianii and enterprises, capital revenues of services budget and other less inor1e ts items; for th rem part this is a residual in this table. Table 6.1: SUMAR OF FACTORS AFFECTING LIQUIDITY (in mdllions of LE) Fiscal Years July-Decenber Changes During Period 1966/67 1967/68 1968/69 1969/70 1970/71 1969 1970 1971 Mney and quasi-money 18.5 8 71.2 100.8 -1.9 62.6 19.9 58.7 oney 1.5 -9 3. 7307 13,- 42 2 1.3 70.8 Quasi-money 17e0 ll, 33.8 27.1 -1509 4,4 -1.4 -12.1 Foreign assets (net) -9.o.1 Za.2 ill 7.2 -10. 344 -86. Domestic assets (net) 27.6 42.8 70.1 93,6 1ll.6 97.0 105.9 124.4 Claims on Governnnt (net) 7.7 92.9 '7 92 '7 93.7 Claims on nongoverrnment sector 2/ -21.9 29.6 30,1 21.2 34.7 1/ 83.5 66.7 58.5 Other itemns (net) -22e0 -150 3.6 -2o5 -14,6 -13.2 7.14 -27.8 Changes in percent Money and quasi-mney 2 -1 8 10 0 6 2 5 Domestic assets (net) 3 4 7 8 8 9 9 10 Claims on nongovernment sector -6 8 7 5 8 19 15 12 1/ Includes the effeots of the January 1970 and 1971 allocation of SDR 25.2 milion and SDR 20el millionp equivalent to ]6E 8,8 million and LE 7.0 million respectively (at par value). The SDR allocation irproved the net external position and exaggerated the contractionary effect of "other items (net)e" 2/ Including affiliated conpanies, Sources Based on data provided by the Central Bank of Egypt. Table 6.2: CR[T TO NONGOVERNNT SECTOR (in millions of LE) Fiscal Years July-December Changes During Period 1966/67 1967/68 1968/69 1969/70 1970/71 1969 1970 1971 Agricultural banks -29o7 3.4 12.2 7.6 -3.2 -31.7 -3602 -410 Other specialized banks 4k2 L.9 2.6 3.0 9.2 1.0 3.3 4cb Cotton financjing -116 -20 0,.h 1.5 -1.l. 89.5 75.5 70 Rice financing 0.9 2*7 7-7 5,9 -0e2 21.7 13,3 17.7 Affiliated corrpanies I/ 17,0 18,5 -24,8 9,7 25.5 9.8 12,8 8.0 Private sector and cooperatives = 5,1 32.8 6 -6.8 -2*0 -0.8 Total -21,9 29.6 30.1 2102 34,8 8305 6607 58.6 . ~~~~~ ~- - 1/ Excluding those handling cotton and rice, Sources Based on data provided by the Central Bank of Egypt, Table 6.3 (concluded): MO)NETARY SURVEY! (in millions of LE) End of Month 1966 1967 1968 1969 1970 1971 Dec. June Dec. June Dec. June Dec. ie Dc June Dec. LIABILITIES Money supply 681.7 669,3 705.4 6)49.8 720.2 687.2 745.4 760~9 782.2 774.8 845.6 Central Bank notes 432,2 41T7,.1 I37.3 701-.0 7;179 72-0.3 U07 '1j 17 1 59,4 49-0.T 30 Treasury currency and coins 15.5 15.5 15.5 14.9 14.9 14.9 14.9 14,9 14.9 14.9 141.9 Demand deposits 234.0 236.7 255.4 233.3 260.4 251.8 .250.1 286.,6 257.9 269.5 287.5 Private sector and cooperatives (120.7) (111,0) (118.0) (110.0) (121.0) (116.7) (123.7) (16.11) (135.7) (135.8) (153.1) Affiliated companies (108.8) (115,9) (124.5) (122.4) (132.6) (134,1) (125.3) (1 5a,9) (113.7) (132.6) (123.1) Specialized banks (4.5) (9.8) (12.9) (0.9) (6.8) (1.0) (1 .1) (11.6) (8.5) (1.1) (11,3 Quasi-money 254.4 273.0 275.5 284.1 290.2 317.8 322.4 345,0 343.6 329.2 317.1 Time and savings deposits, 1 7U 7 9T9B'6 _205. _21'6,3 21 9.9 -247.6 _24W9 71.1 267.1 2179.3 236. of which: affiliated coimpanies (74,3) (78.2) (91,5) (99.3) (106.0) (133,9) (135,1) (148.5) (136.7) (112.1) (93.9) Post Office savings deposits 75.7 73.2 69.0 67.8 70,3 70.3 72.5 73.9 76.5 79.7 81.1 Government deposits 102.5 96.6 106.3 107.8 98.9 112.8 102.0 122.0 119.9 137.5 143.8 Counterpart funds 130.7 131.7 131.4 135.2 143.4 144,6 145.7 147.2 145,8 149.1 150.1 Capital accounts 83.8 85.6 90.0 95 .1 97.7 96.5 101.8 102,4 103.3 107,0 113.2 Unclassified liabilities (netted for interbank float) 44.1 43,3 52.0 49.7 58.2 42.3 61.5 67.0 77.2 89.7 113.4 Liabilities -Assets l_,297.2 1L299,5 1,360,6 1,321.7 1,.408,6 1,4401,3 1j478.8 1 544-5 1,1572.0 1,587.3 1i63? 1/ Provisional ~/Includes public authorities and Treasury IMF accounts. Source: Central Bank of Egypt. I I I Table 7.1: ACREAGE OF MAJOR CROPS (In thousands of feddans) Crop Year Ended October 31 1952 1960 1965 1966 1967 1968 1969 1970 1971 1972 Winter crops 1/, of which: 4 364 4 808 4 624 4 739 4 776 4 929 4 849 4 836 4 871 Clover (Berseem) 2,0 '7T F 27 mT7 Whieat 1,402 1,456 1,145. 1,291 1,245 1,413 1,246 1,304 1,349 1,239 Horse beans 355 377 433 398 300 306 338 330 288 335 Barley 137 148 125 98 107 117 103 83 70 94 Onions 26 49 51 58 42 39 56 33 37 Vegetables 63 126 144 147 148 172 181 174 175 Summer crops 2/, of which: 3 026 3 533 4,697 4 794 4 857 4 945 5 049 5 052 5 012 Cotton 9 2 1,900 X Rice (paddy) 362 695 842 841 1,072 1,192 1,187 1,140 1,135 Maize 27 128 931 1,053 1,095 1,169 1,143 1,153 1,170 Millet (sorghum) 378 387 441 463 482 486 438 465 462 Sugarcane 92 111 129 133 137 156 170 186 193 Vegetables 118 241 304 325 325 342 343 333 335 Nili crops 3/, of which: 1 824 1 898 762 760 622 646 601 616 610 Maize 39 0 3370 75 371 7T :3I Millet (sorghum) 55 67 59 55 40 46 36 36 32 Rice (paddy) 12 11 6 3 3 5 5 3 2 Vegetables 71 117 160 162 155 182 191 198 197 Fruit, of which: 94 131 178 195 207 225 233 243 249 Citrus 03 77 iT ii im :3 137 T1i TTX Total cropped area 9,308 10,370 10,261 10,488 10,462 10,745 10,732 10,747 10,742 1/ Other winter crops include other pulses and flax. 2/ Other summer crops include groundnuts and sesame. 3/ The term "Nili"? refers to the former flood period in July and August (short season summer crops). Sources: Ministry of Agriculture and Statistical Abstract of the UAR (various issues). Tal7 2 CROPPED AREA BY SEASOs CHANGING PATTEFtJ Average Arnual Charge % Charge in Area Cropped % Gross Value of Area Cropped In Area Cropped Over Period: Crop Production (1000 Feddans) (I 0W Feddas) 5eYars YeYears 2 Years (Current Prices) Season 9 2 1971: L9- 53` -J93 19- 9 969 1952-60 1960-65 1965-69 1969-71 -T90 95 6 Winter 4,364 4,871 55 37 56 11 10.2 - 3.8 4h.9 0.4 331. 291/ 321Y Summer 3,026 5,012 63 233 88 -19 16.7 23.3 7.5 -0.7 471/ 4991/ 461/ Nili 1,824 6-10 9 8-227 -40 4 4.0 -59.8 -21.1 0.15 iou 1( 31/ Orchard 94 249 4 9 13 9 39.4 30,3 ,12/ 122/ ,92J 2/ Total 10 75O 10 742 133 22 118 5 11.2 2.2 4.6 0.1 100 100 100 100 1/ Eccluding vegetable crops. 2/ Including vegetable crops. Source: Ministry of Agriculture Table 7.3: PRODUCTION OF AJOR CROS (In thousands of metric tons) Crop Year Ended October 31 1952 1960 1965 1966 1967 1968 1969 1970 1971 Cotton Raw (unginned) 1,296 1,380 1,501 1,289 1,208 1,210 1i,180 1,404 1,418 Ginned (lint) 446 478 521 455 437 437 541 509 510 Cottonseed 842 888 961 820 758 758 921 885 935 Cereals Rice (paddy) 491 1,485 1,788 1,679 2,279 2,586 2,557 2,605 2,534 Maize 1,506 1,691 2,141 2,166 2,163 2,297 2,366 2s393 2,342 lbeat 1,089 1,499 1,272 1,465 1,291 1,518 1,269 1,516 1,729 Millet (sorghum) 522 603 806 858 881 906' 813 874 854 Barley L18 156 130 102 100 121 105 83 72 Pulses Horse beans 250 290 344 381 188 283 297 277 256 Other 81 117 119 87 68 68 56 45 82 Onions 243 504 670 701 587 479 445 437 490 Vegetables 1,834 3,424 4,636 4,928 4,505 5,1h1 5,323 5,254 5,279 Sugarcane 3,265 4.,545 4,739 5,200 5,269 6,083 6,878 6,945 7,333 Fruits Citrus 375 313 482 629 697 622 785 706 883 Dates 248 424 386 317 319 264 355 294 340 Other 271 322 352 388 370 378 383 384 462 Sources: Ministry of Agriculture and Statistical Abstract of the U.A.R. (various issues). Table 7e4: AVERAGE YIELDS OF MAJOR CROPS (In kiclograms per feddan) 1/ Crop Year Ended October 31 1952 1960 1965 1966 1967 1968 1969 1970 1971 Cotton Raw (ungimned) 660 737 791 693 743 822 912 874 929 Ginned (lint) 227 256 274 245 269 298 33)4 313 334 Cottonseed 428 474 505 442 467 518 568 544 589 Cereals Rice (paddy) 1,314. 2,107 2,107 1,985 2,1117 2,145 2,145 2,277 2,230 Maize 883 928 1,476 1,375 1,256 1,478 1,595 1,592 1,539 Wheat 777 1,029 1, 112 1,136 1,037 I,074 2,019 1,163 1,283 Millet (sorghum) 1,207 1,330 1,610 1,659 1,686 1,701 1,715 1,7h7 1,729 Barley o63 0043 13,038 1,042 929 1,35 1,019 1,001 1.,00 Horse beans 702 801 856 956 628 922 880 919 980 Sugarcane 1/ 35.33 4ho95 36.81 39.06 38-48 38.93 4o.46 37.31 38,07 L/ Sugarcane in metric ton per feddar. Sources: Ministry of Agriculture and Statistical Abstract of the U.A.R. (various issues). Table 7.5: GROSS VALUE OF AGRICULTURAL PRODUCTION Calendar Year 1969 Revenues Cash Value % of Total (EE 1000) Crop Production: Field Productsi/ 596794 61.8 Vegetables2/ 104258 10.8 Fruits3/ 43799 4.5 Medical Plants and Aromatic Seeds 1268 0.1 Total 746119 77.2% Animal Production:, Meat Production 101027 10.5 Dairy Products 73891 7.6 Poultry Products. 43318 4.5 Honey and Bees Wax 1250 0.1 Raw Wool 912 0.1 Total 4 220398 22.8% Grand Total - Cash Value of Agricultural Production 966517 100.0% 1/ Includes LE 91,000 value of cotton production from Liberation Province. 2/ Includes JE 51,000 value of nursery plants and vegetables seeds. 3/ Includes LE 217,000 value of nursery plants, fruit and wooden trees. 47/ Includes LE 1,282,000 value of animal production from Liberation Province, Natron Valley and New Valley. Source: Department of Agricultural Economics, Ministry of Agriculture, The Value of Agricultural Production at Current Prices 1969. Table 7.6: NET VALUE OF AGRICULTURAL PRODWJCTION (Calendar Year 1969) Cash Value % of Total (;E 1000) __ __ __ _ Gross Value of Agricultural Products: Value of Crop Production 746,119 77.2 Value of Animal Production 220,398 22.8 Total 966,517 100.0 Value of Agricultural Production Requisites: Green Fodder 110,198 45.7 Chemical Fertilizers 40h,735 16.9 Seeds 28,459 11.8 Concentrates lh, 930 6.1 Hay 114,004 5h8 Fuel and Oil 12,682 .3 Insecticides 11,604 4.8 Depreciation of Agricultural Machinery 4,147 3.0 Other Supporting Materials 1J536 0.6 Total Value of inputs (Exclusiveofland5nd labor) 22 100.0 Net Caeh Value of Agricultural Production 725,522 Source: Department of Agricultural Economics, Ministry of Agriculture. Table 7.7: FARM, EXPORT, IMORT AND DONETIC SELLING PRICES SELECTED COMM0DITIES 1965 1966/67 1967 1968 1969 1970 1971 Con- ver ion Cotton Av. Farm Price L/cantar 16,120 16,052 17.042 17.463 18.040 18.190 18.390 Av. Export Price c/eantro 20.1 21.8 25.3 26.1 25.7 Wheat iv. Fam Price L/Ardeb 4.530 4.370 5.50o 4.830 4.905 5.800 5.310 150 kgs Av. Inport Price W/ton Grain 30-553 29.376 24.361 23.703 30,940 29.380 'Aton Flour - 36.443 35,568 29.200 28.900 35,438 35.554 Av. Selling Price L/ton Grain - 29.500 29.500 30.500 -29.500 29.500 29.500 L/ton Flour 46.2oo 46.200 51.900 51.900 51.900 51.900 Maize Av. Farm Price I/Ardeb 3.777 4.500 5.160 4.050 4.575 4.690 4.680 140 kgs Av. Import Price L.ton - 30.532 25.856 - 24.420 32.383 24.825 Av. Selling Price ;6/ton - 25.714 33.333 33.333 30.000 30.000 30.000 Rice Av. Farm Price L/dariba (paddy) 20.119 25.325 28.462 29.840 29.290 26.850 26.030 945 kg8s iv. Export Price I/ton 'white rice - - 75.780 74.400 54.730 48.660 - Av. Domestic Selling Price I/Kalo - - 0.055 0.055 0.055 0.055 0.055 Broad Bean 1965/6 1966 -v. Farm Prlces 1/Ardeb 8.ooo o000 8.330 7.690 6.460 7.370 8.920 155 Kge Lentila Av. Import Price L/ton - 77.979 77.940 90.250 70.323 76.270 82.740 Av. Selling Price L.ton - 75.675 75.675 79.580 69.000 69.000) 79.000 79.000) Av. Iport Price I/ton - 30.565 26.613 - 44.089 - - Av. Selling Price I/ton:Ration - 66.ooo (66.ooo 70.000 70.000 70.000 70.000 (70.000 Free - 160.000 160.000 160.000 160.000 160.ooC) 150.000 150.0cc) SeBme iv. Import Price I/ton - 117.388 107.564 97.000 111.844 120.859 132.215 Av. Selling Price I/ton - 107.000 107.000 107.000 107.000 107.000 110.000 1966/67 1967/68 1968/69 1969/70 1970/71 1 971,/72 Animl Products Av. Invport Prices: Cattle Ihead 31.0 40.0 31.0 51.5 47.2 58.2 Camels n' 50.7 50.0 50.0 50.2 50.7 50.7 Frozen beef I/ton 238.5 242.5 - 245.3 300.8 334.3 Frozen MNutton I/ton 168.7 - 180.1 183.7 192,2 203.8 Edible Fats I/ton 102.5 94.4 76.5 107.5 130.5 119e8 Sources: Av. Farm Prices: Ministry of Agriculture; Selling and Import Prices: The Oeneral J-zthority for Suppl;r Comodities. Table 7.8: INVI(ENITS OF THE AGRICULTURAL SECTOR 1/ xrwTlED(2967/68-70/71) AND TARGET (71/72) ESTRIBUTD AMONG THE MAJOR PROJECTS Executed Investments Invest. Major ProJects 1967,/68 968/69 969/70 970/71 971/72 Ministry of Agriculture Research & lprovement Programs 1.,3 2.2 1.9 1.2 1.1 Land IzProvement Programs 1.9 3.0 1.6 0.4 2/ Aimal Production 0 , 8 0.4 o.3 C). 2 0Q3 Poultry Production 014 0.5 1.8 2.7 5.7 Acquatic Resources 1.,1 0.14 0.1 3.0 0.7 Sub-Total 3.6 5.4 7.1 8.7 8.2 Minis try of Land Reclamation Land Reclanation 17.6 16.0 12.1 E8.7 8.2 Exploitation of Reclaimed Lands 15.1 14.2 13.8 114.3 15.7 Sub-Total 32.7 30.2 25.9 23.2 20.7 Sub -otal (Xinistry of Agriculture and Ministry of Land 36.3 35.6 33,0 31.9 28.9 Reclamation ) Ministry of Irrigation Basin Conversion 3.9 2.8 200 1.0 0.5 Drainage 14.8 6.3 8.1 6.8 12.7 2/ Horizontal expansion 6.4 12.4 11.0 7.7 4.5 Replacement 0,7 0X,9 0.7 003 o.6 Iprovement of irrigation 1.3 2e0 1,6 1.7 1.3 Sub-Total 17,1 24.14 23.4 17.5 19.6 Serwices (Survey Department) 0.1 0.2 0,2 0.2 0.2 aub-Totvl (fiLx-d as.sts) 17,2 24.6 23.6 17.7 19.8 Current expenditures 3/ o.8 0.9 1.0 1.0 1.3 Sub-Tota]. (imtnistry- of Irrigation' 18.0 25.5 24.6 18.7 21,1 Grand Total (All Yinistrie3) 54.30 61.10 57.60 50o60 50.00 1/ Soaroes of data : Ministry of Planning, the following-up reports submitted from the Ministries of Irrigation, Agriculture and Agrarian Reform and Lar1 Reclamation. (collected by Upper Egypt Drainage Project Mission) 2/ lhclrding 1,0 million LE to be embodied in the Ministry of Agriculture's budget for drainage projects of Upper .Egypt. 31 Figures related to operating expenses of the construction period, and axpenses for studying of the Upper Nile projects. Table 7 A9 RICULTMIAL r DIT (LaI I ion) (a) Lon term Year Total Loans Medium Term Short Term ;959/60 .36.6 1.5 35.1 1960/61 39.14 1.2 38.2 1961/62 42.14 .9 141.5 1962/63 53.9 2.1 51.8 1963/64~( -0u 1963/65 535 3.2 56.3 1965/16 65.4 2.6 62.8 1966/67 79.4 1.3 78.1 1966/67 ~~~~~~~~.86.14 2.2 814.2 1967/68 78.6 2.3 76.3 1968/69 ~~~~~68.8 1.9 66.9 1969/70 80.8 1.8 79.- 1970/71 (b) Loans by Input Classification Tractora Machinery Livestock Seede Inseeticides Fertilizere (Cattle) 1960/61 - .8 0.6 1.9 -12.6 1960/61 .7 o.6 2.3 - 16.4 1961162 .5 .7 0.2 2.8 1.6 17.1 1962/63 .1 1.5 o.6 7 9 20.3 1963/614 - .. 102.7 69- 20.14 1965/66 1.2 .9 1.9 14.6 7.8 3F4.7 1966/67 .9 1.8 2.3 5.8 9.6 38. 1967/69 8 . .9 8.9 7.2 35.9 196 8/6 9 7 S3980"**36.2 1.6 .9 7.5 6.3 32. 1969/70 .6 - .5 2.3 7.3 9.2 35. 1970/71 1971/72 (c) Loan by Crops Total cottoan Rice 1grit Maims Other Onions Other Vegetables LZoJ) a Field And fruits crops 1959160 27.3 9.6 2.7 5.3 5.5 2.6 .2 1.14 1960161 .32.5 11.5 2. 6. 7.6 2.8 .6 2. 1961/62 .36.7 11.5 2. 9.9 7.6 3. .7 2. 1962/63 146.3 19.7 14.6 6.9 7.6 14.9 .3 2.3 1963/614 5o.6 23.2 5.5 7.5 5.14 5.8 .1 3.1 19614/65 58.6 25.6 8.3 7.5 7.3 6.14 .2 .3.3 1965/66 71.3 3476.7 10.2 9.2 7.5 .14 2.6 1966/67 79.1 62.1 7.2 8.7 10.14 7.9 .14 2.14 1967/68 73.3 35.3 7.8 8.2 10.2 7.8 .8 3.2 1968/69 65.3 30.5 8. 7. 8.8 7.3 .9 2.8 1969/70 75.5 38.5 8.8 8.8 8.8 7.6 .7 2.3 1970/71 1971 /72 Source: EyPtian Gnar-al Organization for Agricultural and Cooperative Credit. I Table 8.1: GROSS VALUE OF INDUSTRIAL OUTPUT BY INDUSTRIES (in million LE) Industries 1967/68 1968/69 1969/70 1970/71 Spinning & Weaving 413.9 430.0 468.2 503_9 Public 300 o313.9 352.8 380. 0 Private 109.9 116.1 115.4 123.9 Food 353,5 404.7 438.5 465.4 Public 26370 304T.5 336.6 362 .3 Private 90g5 100.2 101.9 103.1 1/ Chemicals- 89.7 105.3 114.4 130.7 Public 72.9.3 99.4 Private 17.7 21.2 25.1 31.3 2/ Engineering & Electronics- 87.3 91.1 107.5 130.1 Public 76.9 99.2 Private 27.3 28.0 30.6 30.9 Ruilding materials & ceramics 34.2 44.6 49.4 57.3 Public 2U.0 37.3 70 Private 6.2 7.3 8.5 9.3 ?Seta43ilurgical (public)2 42.0 45.1 54.0 72.8 Mining (public) 3/ 7.0 6.0 6.o 8.o Petroleum. (public) 91.0 125.9 118.0 148.8 Woodworking (private) 4/ 26.1 27.8 32.4 35.6 Leather (private) / 14.6 17.8 19.4 25.4 Rural industries & handicrafts 8.0 13.5 15.8 17.9 Subtotal 1167.3 1311.8 1423.6 1595.8 Public 8 67 . 97908 1074.5 1218.5 Private 292.3 318.5 333.3 359.4 Rural 8.0 13.5 15.8 17.9 Other industries and 6/ statistical discrepancies -/ 768.1 760.1 828.8 804.2 Total industries_/ 1935.4 2071.9 2252.4 400.08/ Total electricity (public) - 53.2 54.7 60.4 17 Dcluding drugs ald pharmaceuticals. 2/ Several sector activities are excluded and complated under other industries. 3/ Excluding value of private sector's output and of iron ore mining. 1/ Excluding value of public sector's output which is included in the chemical industry and the building material industry respectively. 5/ Excludes the production of military factories, cotton ginning, flour mills and bakeries, tea packing, printing & publication, pharmaceuticals, iron-ore mining and electricity production. See footnotes 2-4. 6/ Computed as a residual. Ineludes the industries of footnote 5, but electricity is excluded. 7/ Gross value as used in national accounts. 9/ Preliminary data from the Ministry of Industry. Sources: General Organization for Industrialization, Federation of Egyptian Industries, Central Agency for Public Mobilization and Statistics. Table 8. 2 s IK.)USTRIAL PEUODUCTION INUEX NTMBERS (1959 - 100) Economic Activities 19655 1966 1967 1968 1969 15970 Mmingarnd quarrying 223.4 235.8 229.6 361.5 1499.9 598.4 Metal mining 1l0.6 9147 89.7 208.5 181.9 161.7 13 - Crude petroleum, natural gas 221B.4 267.8 244.2 411.2 555.4 663.2 11-4 -Stone quarrying, clay, sand pits 174.1 187.1 200.3 151.2 127.5 132.7 15 --Salt miniing 157.0 170.8 192.4 1714,0 1714.1 191.2 19 - Other Non-Metallic mining, quarrying 284.2 232.7 256.8 302,14 240.1 354.6 'an:iP ~turing Industries 276.6 2614.9 249.9 284.,7 317.9 322.3 20 Food Manufacturing 138.0 119.9 120.2 131.14 165.2 191.1 21 - Beverage Industries 2C4.9 230.1 182.1 183.9 215.7 241.2 22 - Tobacco Industries 1511.4 204.1 211.0 200.2 223.5 222.3 23 Spinng and aring 162.3 159.3 165.6 174.5 175.3 184.14 24 - manufacturing of footwear, other wearing apparel and made uptextile goods. 300.1 279.8 278.4 276.9 250.9 253.7 25 - Wood, ratton bamboo, cork 137.5 992.3 610.6 778.14 577.4 979.9 26 - Furniture and fixtures 114.1 119.4 103.3 104.6 120.0 124.0 27 - Paper, articles of paper . 561.2 614.6 562.1 699.3 749.3 856.3 28 - Printing, allied industries 268.8 240.6 159.4 246.9 234.4 243.7 29 - Leather, leather products 202.6 210.9 215.6 246.3 279.9 287.0 ;30 -,7bber products 1130.9 169.1 168.5 1.-8.2 192.1 1774.5 31 nida1- , chemical products 410,7 455.2 387.3 43&814 483.0 501.0 3 2 Prcducta of petroleum and coal 1,65.1 167.0 162.4 17,5.3 109.6 1.27.6 >3 a i.Curin.z-g of non-metallic mineral products 173.2 213.8 183.6 221.0 288.3 218.1 >.a Jaosindustries 270.6 364.5 295.9 361.3 373.8 331.8 Astal - ~ -Oduaza >3vL 190.2 216.2 2514.3 308.5 518.9 513.9 v.; ae,t_ring and reproduction of n5n-:,- a'55Jt>iil manuias. 394.4 1079,9 1187.2 1250.2 1850.14 11490.3 M7 anacturing and reproduction of e.J.sIctrsal mchines 686.4 699.5 703.0 74:3.2 879.6 961.2 -' _zSDt equipment and supplies 7'11.0 664.6 411.4 627.1 7014.3 8147.7 . aturig Ind-ustries not else 1Das'f. e5 983.3 980.3 732.8 924.3 10514.9 1027.8 - -B^>> Zit*s3D;< C, snr jja6 277 282.8 324 .2 346.4 ,~zeralE Total 271.2 262.9 248.9 293.2 338.3 355.14 -- _ ,txal Agency for Public Mobilization and Statistics. Table 8.3-.: MANUFACTURING AAD MINING PRODUCTION (SELECTED ITEMS) (In thousands of metric tons unless stated otherwise) Fiscal Years 1960/61 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 Spinning & Weaving Cotton yarn 108 142 152 160 163 164 169 Cotton textiles 73 97 104 95 96 97 107 Wool yarn 8 10 9 8 9 10 11 Wool textiles 3 4 3 2 3 3 4 Jute yarn 18 21 14 21 27 27 28 Jute textiles 16 19 13 20 24 24 25 Foodstuffs, etc. Sugar 329 366 363 379 495 533 663 Confectionary 55 142 42 55 59 63 85 Cheese 101 121 122 124 125 132 129 Cigarettes 13 17 18 17 15 16 18 Vegetable conserves 1 6 6 5 3 5 6 Beer (million litres) 13 26 25 20 21 23 27 Alcoholic beverages (million litres) 2 2 2 4 9 10 9 Building materials Cement 2,067 2,542 2,915 2,799 3,488 3,500 3,851 Building bricks 830 936 836 634 708 801 Gypsum & plaster 152 273 308 254 273 231 41 Chemical products Sulphuric acid 101 209 215 227 25 22 37 Paper 60 105 97 93 124 121 137 Fertilizers: Superphosphate 185 253 262 304 323 353 447 Calcium nitrate 265 225 263 140 111 Ammonium nitrate - 370 394 438 370 377 380 Tires (thousands) 270 697 604 781 813 695 770 Mechanical & electrical Cars (units) 360 1,814 193 791 2,734 3,139 4,271 Trucks (units) 907 296 756 362 1,165 1,117 1,201 Busses (units) 272 1,155 191 361 310 336 407 Tractors (units) - 984 895 729 459 1,071 1,072 Bicycles (thousand) 8 55 60 50 53 51 63 Radios (thousands) 83 153 150 121 108 136 157 Televisions (thousands) - 54 64 29 38 59 63 metallurgical Reinforced steel 160 171 165 193 205 212 190 Sections 31 99 80 106 135 126 108 Steel billets 56 4 12 40 20 20 23 Other steel products 90 103 96 103 116 112 Minerals Phosphate 570 643 699 748 729 530 539 Iron ore 240 553 360 423 460 499 460 Manganese 276 198 147 3 3 5 4 Salt 507 484 544 447 380 410 . Petroleu 1 roducts Crude oil (thousand cubic meters) 3,443 7,056 7,029 6,519 12,636 16,611 18,911 Gasoline 354 843 853 655 675 452 617 Kerosene 434 872 933 625 547 418 655 Fuel oil (Mazout) 2,781 4,426 4,202 2,296 2,746 1,353 2,155 Diesel oil 210 323 302 105 83 118) 672 Solar 351 959 1,214 740 736 358) Source: Central Agency for Public Mobilization and Statistics. Table 8.4: PUBLIC INVESTMENTS BY MAIN INDUSTRIAL SUBSECTORS (in million L. E.) Subsector 1968/69 1969/70 1970/71 Spinning and Weaving 5.9 106 7.7 Food 10.5 7.4 6.3 Chemicals 18.5 8.5 10.4 Engineering 6.8 5.0 Metallurgical Ind. ..0.5 (53 Steel Complex 19.4 29.0 40.0 Building Materials & Geramios 6.3 6.3 5.4 Geological Survey & Mining 4.7 4.2 o.6 Petroleum 25.2 42.2 34.4 Rural Industries & Handicraft 0.1 0.2 . * Total public investments 97.6 113.9 110.2 Other investments 9.7 8.5 2.8 Total 1/ 107.3 122.4 113.0 1/ Capital transfers are excluded; thereTore this table has lower investment data than shown in the budget (see Table 5.3). Source: General Organization for Industrialization. Table 8.5.: MIN PLAN TARGETS BY INDUSTRIAL SUBSECTOR Output-/ Investments (in million L E.) (in million L.E.) Increase 27 1970/71 1973-77 1970/71 1973-77 Spinning & Weaving 380 87 7t7 12146 Food 362 5 6.3 69.9 Chemical 99 102 10.4 193,2 Engineering & Electronics 99 214 5.3 146.0 Metallurgical 73 105 2.8 109,4 Steel Complex - 106 40.0 141.8 Building Materials & Ceramics 48 26 5.4 66.5 Petroleum & Petrochemicals 149 118 34.4 322.4 Mining 8 4 .6 12.3 Rural Industries 18 1 . 3.3 Others . . 2.8 _ Total 1402 813 113.0 1,189.4 1/ Public sector enterprises only. 2/ Estimated additional production of the planned projects. 3/ Investment costs for the ?ive-Year-Plan projects. Source: General Organization for Industrialization. Table 8.6:. SIZE OF INDUSTRY ACCO1MDIN TO EMPLOYED PERSONS 1! Number of persons in enterprises 10-49 50-99 100-499 500 & over Total Industry Number of Establishments 1961/1962 3173 377 390 111 405l 1966/1967 4250 458 409 193 5310 1967/1968 4130 412 384 202 5128 2/ Number of Employed Persons 196i/1962 66698 26143 83867 191966 .368679 1966/1967 78169 31153 84915 379171 5734G8 1967/1968 77249 28086 78343 387383 571S61 Value Added(in 000 L.E.) 1961/1962 15600 9700 37900 107600 1708C0 1966/1967 17305 6863 40920 199922 265010 1967/1968 19154 6603 50351 201680 277788 Value of Output(in 000 L.E.) 1961/1962 83400 38300 107600. 325600 554900 1966/1967 106053 68191 156571 697879 1.028694 1967/1968 112462 59529 161911 720155 1054057 1/ Including all public sector establishments and private sector establishments engaged 10 persons or more, 2/ Excluding working proprietors and activre business partners. .-Turce: General Organization for Industrialization Industrial Census 1961/62 and 1967'/68. Table 8.7: LABOUR FaRCE EMPLOYED IN IUBLC SECTCR ENTERPRISES AND WAGES BY SUBSECTORS Increase Average Number of Wages Average Wage Output per worker of output Workers for worker Output: Wages-1 per worker Subsector (In Thousands) (In thousand LE) (in LE) (In thousarid LE) (In percent 1969/70 1970/71 1969/70 1970/71 1969/70 1970/71 1969/70 1970/71 1969/70 1970/71 1970/71 Spinning and weaving 221 233 56736 59963 257 258 6.2 6.3 1.6 1.6 2 Chemicals 43 44 11600 12500 269 284 7.7 8.0 2.1 2.3 9 Food 84 88 21509 22933 256 261 15.72/ 15.8Z/ 4.0 4.1 3 Metallurgical 24 26 9438 10543 393 406 5.7 6.9 2.2 2.8 24 Building materials and ceramics 22 22 6815 7350 310 334 6.0 6.5 1.9 2.2 17 Engineering and electronics 48 53 13014 16230 271 306 5.9 6.1 1.6 1.9 17 Petroleum 25 26 14400 14700 576 566 8.2 10.1 4.7 5.7 21 Total 467 492 133512 144219 286 293 8.0 8.4 2.3 2.5 8 (Public Sector) 1/ Gross value of output see table 8.1 2/ The value of output includes a substantial amount of taxes and duties. Source: General Organization for Industrialization. Table 8.8: ELECTRICITY: CAPACITY AND PRODUCTION Installed Power Net Generated Energy Net Peak Mw Million kwh Load Year Hydraulic Thermal Total Hydraulic Thermal Total MW 1960/61 345 1219 1564 627 2504 3131 641 1965/66 345 1482 1827 1773 3904 5677 531 1966/67 345 1554 1899 1806 4154 5960 945 1967/68 1045 1701 2746 2446 3753 6199 1000 1968X69 1395 1922 3317 3347 3749 7096 930 1969/70 2445 1922 4367 4365 3008 7373 1022 1970/71 2445 1922 4367 4845 3070 7915 1099 Note: These data include Power stations belonging to The General Electricity Corporation, Industrial Firms and Municipal Boards. Data on installed power and net generated energy in 196$8/69 and thereafter, relate to unified power system only. Source: General Electricity Corporation /1 Table 8.9 Net Profits kid Distributions for Industry Subsectjjs (in thousand LE) Profits E ES E; R V E S Distribution brought Increase in forward replacement Balance from Goverrnment prices of snare 10% due to Other carri ed Organization Year Net Profit last year Statutory bonds assets holders Employees Organization reserves forward Spinning & Weaving 64/65 12,100 87 1,200 600 - 5,031 1,677 20 3,189 73 65/66 16,800 73 835 835 835 5,507 1,836 1,242 5,618 75 66/67 18,962 75 952 952 952 6,243 2,061 1,1404 6,374 79 67/68 18,567 79 929 929 929 9,547 3,182 1,3814 1,719 - 68/69 19,322 - 965 965 965 10,345 3,448 1,431 1,182 21 69/70 20,813 - 21 1,041 1,041 1,041 11,218 3,739 -,582 1,222 6 70/71 24,808 6 1,240 1,240 1,240 13,085 4,362 1,860 1,770 17 Food Industries 64/65 8,5C0 325 478 408 - 2,377 792 288 3,838 326 65/66 8,600 322 414 414 414 1,957 652 621 4,019 109 66/67 9,168 D 464 464 464 2,140 713 713 4,279 40 67/68 11,345 40 167 567 567 6,581 2,194 893 16 - 68/69 13,823 - o91 691 691 7,974 2,658 997 121 - 69/70 13,856 - 689 689 689 7,635 2,541 1,004 5U5 104 70/71 13,852 104 698 698 698 7,828 2,686 1,004 344 - Chemical Industries64/65 10,600 35 989 529 - 3,064 1,021 637 4,350 33 65/66 12,300 31 615 615 615 3,144 1,048 839 5,435 27 66/67 10,872 27 545 545 5145 3,005 1,002 718 4,539 - 67/68 13,121 - 656 656 656 7,559 2,520 935 139 27 68/69 15,785 27 791 791 791 9,083 3,028 1,152 176 _ 69/70 16,255 - 779 779 779 9,015 2,895 803 542 662 70/71 17,242 662 868 868 868 9,537 3,179 1,306 7148 530 Bailding Materials 64/65 1,500 10 87 76 _ 690 230 100 300 43 & Refractories Ind.65/66 1,700 43 83 83 83 669 223 108 394 17 66/67 2,442 17 123 123 123 1,056 352 156 526 - 67/68 2,365 - 118 118 118 1,184 395 128 304 8 68/69 3,040 8 152 152 152 1,1467 489 187 449 - 69/70 4,163 - 208 208 208 1,941 647 277 670 4 70/71 5,411 1 264 264 264 2,508 835 362 922 - Metal Industries 64/65 1,400 25 84 69 105 353 118 63 585 26 65/66 1,600 26 80 80 80 201 67 105 982 27 66/67 1,449 27 '14 74 74 273 91 94 796 - 67/68 2,509 - 10( 101 101 1,126 375 141 64 - 68/69 2,113 - 106 106 106 1,192 397 142 64 - 69/70 2,983 - 149 149 149 1,742 581 213 - 70/71 3,708 - 185 185 185 2,122 706 257 68 - a&gineering & 64/65 Electric Ind. 65/66 66/67 2,710 - 197 197 197 644 201 163 1,104 7 67/68 2,632 7 139 139 139 1,404 462 172 176 - 68/69 5,100 - 254 254 254 2,1499 833 381 614 11 69/70 8,252 11 340 340 340 3,327 1,056 480 1,090 1,290 70/71 9,633 1,290 456 456 456 4,618 1,540 666 928 1,803 Petroleum 64/65 Industries 65/66 * 66/67 3,359 - 168 168 168 B94 298 172 1,491 - 67/68 4,322 - 216 216 216 2,418 806 204 246 - 68/69 4,553 - 228 228 228 2,558 852 219 240 - 69/70 5,o56 - 253 253 253 2,652 884 238 523 - 70/71 6,647 - 332 332 332 3,214 1,071 353 1,013 - Total 64/65 33,200 42t 2,838 d I9 IT7TZ 3,535 T,.07 12,263 502 65/66 41,000 496 2,028 2,028 2,028 11,479 3,826 2,915 16,448 255 66/67 48,962 255 2,523 2,523 2,523 14,255 4,738 3,420 19,109 126 67/68 54,361 126 2,726 2,726 2,726 29,819 9,934 3,857 2,664 35 68/69 63,736 35 3,187 3,187 3,187 35,118 11,705 4,509 2,846 32 69/70 71,378 32 3,459 3,459 3,459 37,530 12,343 4,543 4,551 2,066 70/71 81,301 2,066 4,043 4,043 4,043 24,908 14,349 5,808 5,793 2,350 /1 Net Profit equals Value of Production minus 1. Wages 2. Raw materials 3. Depreciation 4. Change in stocks 5. Provisions 6. Expenses Source: Ministry of Industry. Table 8.10: TOURIST ARRIVALS BY NATIONALITY GROUP TOURIST ARRIVA]3S TOURIST ARRIVALS _______ % Change Over YEAR ARABS EUROPEANS AMEIEICANS OTHERS TOTAL Previous Year 1961 107,316 106,054 42,581 28,006 283,957 - 0.5 1962 116,112 87,280 40,347 47,441 291,180 + 2.5 1963 151,393 132,682 60,984 59,050 (04,109 +38.8 1964 208,205 165,091 66,353 57,733 1497,382. +23.1 1965 246,027 179,299 62,723 54,051 5142,100 + 9.0 1966 255,642 196,657 73,237 53,198 578,734 + 6.8 1967 167,412 111,846 31,451 34,245 344,954 -40.4 1968 184,420 82,077 22,446 28,678 317,621 - 7.9 1969 193,977 85,463 32,769 33,134 345,343 + 8.7 1970 230,803 65,985 25,427 35,446 357,661 + 3.6 1971 260,169 94,540 30,051 43,302 28,062 +19.7 Source: Ministry of Tourism Table 8.11: TOURIST NIGBTS BY NATIONALITY GROUP Tourist Nights % Tourist Re- Average Year Change from ceipts in Earnings/ Arabs Europeans Americans Others Total Previous Year Millions of Tourist *'BE Night 1961 2,256,483 1,667,880 358,096 362,608 4,645,067 n.a 23.3 L 5.0 1962 1,963,812 1,349,149 303,095 550,421 4,166,477 -10.3 17.8 4.3 1963 1,869,223 1,311,303 434,377 608,472 4,223,375 + 1.4 26.8 6.3 1964 3,856,175 1,986,236 425,955 755,898 7,024,264 +66.3 37.5 5.3 1965 7,067,489 2,327,739 394,927 610,576 10,400,731 +48.1 50 4.8 1966 6,439,250 2,326,750 423,662 593,693 9,783,355 - 5.9 54 5.5 1967 3,959,598 1,596,990 395,574 417,482 6,369,644 -34.9 37 5.8 1968 3,436,308 625,145 125,441 188,914 4,375,808 -31.3 27 6.2 1969 3,341,049 686,536 147,567 220,496 4,395,648 + 0.4 28.5 6.5 1970 3,676,298 537,447 126,312 233,652 4,573,709 + 4.0 28.8 if 6.3 A/ 1971 4,619,464 817,457 188,710 353,684 5,979,315 30.7 36.0 6.o i/ Estimate Source: Ministry of Tourism Table . 12: ESTJJIVA!PD TRAPElO VOIUDES BY PRINCIPAI MODES Millions o f To P Ton-Ens Percent Increase and Avera1e A/nual Growth8 1964/65 to 1968/69 1967/68 to 1968/69 _2~Ri~3.0 .18569. 3/7( .6L65/66Lj 1 9 i 6/6 6S /66 66/67 67/68 68/69 8 6 /0 QToZB Ton-Kms Tons Ton-En -lailways 13-3 12.6 11.6 11.4 10.6 11.6 11.2 3,431 3,361 3,046 2,975 2,643 3,312 3,324 20.4 (-5.5) - 22.8 (-6.3) - 7.1 -11.2 Hiighwayei/ 21.8 24.0 28.0 33-0 33-5 1,767 2,063 2,501 3,074 3,157 53-7 (11-3) 78.7 (15.6) 1.5 2.7 Highway.2// 1.3 1.7 1.7 1.6 1.5 n.a. n.a. 800 1,030 1,261 1,407 1,446 n.a. a.a. 23.1 ( 5-5) 80.7 (16.0) 0.0 2.8 TOIAL U6.L 38. L1.3 6., 9 _ l_ 5.998 6.454 6.808_ 7.L46 7.2h6 ft2.5 _ 20.8 ( 4.9) - 0.6 _:. Millions af Pas re __ _ Millions of Passenger-mse Peroent toease and Averae Annuz l G;rowth () 1964/65 to) 1968/69 1967/68 to, 1968/69 Pa_ser Trafic 164Lj5 66 /66/ 6 68/9 69/ 70/71 1964/65 65/66 6 68 68/69 69/70 Pass. Pass.-Ens Pass. Pas -iKms Railways 172.0 189.5 198.6 189.4 206.3 215.9 239.2 5,788 6,170 6,268 5,512 5,796 6,259 6,772 19.9 ( 4-7) 0.0 (0.0) 8.9 5.1 Hig4ways/ 1,308.0 1,393.0 1,468.0 1,438.0 1,470.0 n.a. n.a. 11,208 11,492 12,052 12,061 12,506 n.a. n.a. 12.4 ( 3-0) 11.6 ( 2.8) 2.2 3-7 TAUAL 1.480.5 e 982.5 L.66.6 627.4_1,676.3___2A0_70/71 16,.29_ 11.662 1B.320 17573 102 _I_ 7.7 1.9) ... 3._ LA. Freiiht Tistrrlbtion __ Ps De r tbutionuBeweenModedes A7erage Length ofJ Paul (KMS) YearsB _ailwgays Ye wars z Paterays Ye ars Railways s3 s Years Railwy Water T TKm T TMM T TKm Pass Pass-Ens Pas Pass-Kma Frei:t Passer Freight Passe Iret 1964/65 3 3 7. 2 S 29.5- 3.6 13.3 1961/65 11.6 34.1 88.4 65.9 1964/65 34 1965/66 32.9 52.0 62.7 32.0 4.4 16.0 1965/66 12.0 34.9 88.0 65.1 1965/66 267 33 86 8 606 1966/67 28.1 W;.7 67.8 36.8 4.1 18.5 1966/67 11.9 34.2 88.1 65.8 1966/67 263 32 89 8 742 1967/68 24.8 39.9 71.7 41.2 3.5 18.9 1967/68 11.6 31.4 88.4 68.6 1967/68 261 29 93 8 879 1968/69 23.2 36.5 73.3 43.5 3.5 18.9 1968/69 12.3 31.7 87.7 63.3 1968/63 I9 28 94l 9 904 1/ Includes f oir public frolgbt coapres, othe po9^Plic tragckitA's o . i9N, L-nhing scoWe9e 6 primta tr=kars. L/ Onny nationallis%a comaUnies. Additiona.ly K.)nz 3 e tuns arLe Stta-34i ro8 1 d for shoLr diuenoes reinly by privstely 01Led salboetAs, / Ton-kws are not real but virtual. The real dimtnce 1. o rts.cI ecouCding t!o in illCer o' 1 c. z and b1iegaes, for ezmrple, bstqsen 0airo sod klb,oadrla the virtual distance is e.bout four tims the re&l, whereas, betwemn Ca.ro and Aan the virtual ditanre isi sr,aind 20 ptoroer;x high&, 9tatZ the real cn,. Includes the Cairo and Alexandria Public Transports, Helliopolie Metro (tora) and inter-clty bus serviese. Sourcest Kiniftry of Planning. Table 8.13z S?LECTFZ STATISTICAL 1170C3.AION7 ON T:E EGYP?I.11 PUIL'JATYS A. Route and raeck Length (koe) 64/65 65/66 66/67 67/68 68/63 69/70 70/71 Single 2,608 2,608 2,603 2,608 2,608 2,608 2,608 Double 926 926 926 926 926 926 926 3)ouble (electrified) 25 25 25 25 25 25 25 Sidinges 2,146 2,154 2,162 2,166 2,166 2,166 2,166 Auxiliary 451 451 455 455 455 455 455 Total 6,256 6,1613 6,176 6,180 6,180 6,180 6,180 Track 7,109 7,115 7,128 7,131 7,131 7,131 7,131 b. Rolling Stock Steam Looonotives 46 46 46 46 46 46 39 Diesel Locomotives 566 566 566 565 565 567 535 llailoare 463 471 3476 470 477 473 470 Passenger Care 1,070 1,123. 1,143. 1,140 3,138 1,155 1,135 Freight Cars 18,346 18,617 18,689 19,000 19,417 18,783 78,555 C. jaaeen,er Traffic Millions of Pasenger. 172 190 199 189 206 216 239 Pa3s-Ktme (millions) 5,788 6,170 6,268 5,512 5,796 6,259 6,792 D. Seat-Ktms Offered Suburban (millions) 1,343 1,247 1.311 1,290 1,344 n.a. n.a. MSain Line 11,266 12,061 12,593 12,313 12,377 Total 12,609 13,308 13,904 13,603 13,721 E. 3reight Traffic Ton (millions) Commeroial 12,185 11,499 10,509 10,568 9,945 10,790 10,425 Service 1,163 1,066 1,076 785 660 764 839 Total 13,348 12,565 11,685 11,353 10,605 11,554 11,264 Ton/tm (millions) Coummeroial 3,287 3,225 2,921 2,854 2,548 3,197 3,180 Cattle 27 26 22 25 ( 21 16 Service 13.3 136 125 122 ( 100 115 144 Total 3,458 3,387 3,068 3,001 2,648 3,333 3,340 F. Averac Net Loading Per Preight Train Freight Tons 369 368 341 367 345 G. Average Cacoity Of Freight Cars (tons) 17.6 18.1 18.0 18.5 19.5 n.a. n.a. E. Average Load of Freight Cars Loades & Empty (tons) 5.6 5.5 5.0 5.0 5.2 n.a. n.a I. Average Load of Freight Care Loaded (tone) 7.3 7.2 6.6 6.5 7.4 n.a. n.a. J. eain Characteristics of the System Ruling Gradient 4% Minimum Radius of Curves: Main Lines 500 m Aux. Lines 300 m Rail Weight 46,47.52 and 54 kg/m Gauge 1.435 m. Locomotives: in service 459 awaiting repairs 152 Railoarse in service 269 awaiting repairs 204 Source: Egyptien Railways Table 8.114: PORT OF ALEXANDRIA ACTUAL INCOMING-OUTGOITG CARGO 1969-70 AND PtiOJECTI