The Financial Times Report on The Egyptian Economy 25 December 2006…. On its edition of December 13th, The Financial Times issued a special report on Egypt, tackling the major economic issues of concern nowadays, including the following: 1-     Appreciating the growth rate achieved in 2006 as unprecedented since the late 1980s and is mainly driven by  a number of sectors comprising gas, tourism and Suez Canal, together with the boosting of non-petroleum exports which increased by 20%. 2-     The boom in FDI to hit 6.1bn USD in 2005/2006 up from 2bn USD 3 years ago with a forecast of more than 8bn USD in the coming year, in addition to the structural change in FDI towards non-petroleum sectors which increased from 20% of total FDI in 2003 to 70% in 2006. This is partly attributed to the comparative advantages in the Egyptian market comprising cheap labor and energy costs, as well as preferential trade access to Europe, USA, Turkey and parts of the Middle East and Africa provided by the trade agreements that were recently concluded such as the Free Trade Agreement with Turkey and the QIZ agreement. 3-     Underlining the improvement in the business climate as a strong factor in attracting FDI. This was achieved by a number of reform policies undertaken by the government in the last few years, the most important of which are: a-     The managing float of the Egyptian Pound in 2004, which resulted in its competitive devaluation. b-     The recent efforts to cut bureaucratic impediments to investment. c-     Reduction and simplification of both customs tariffs and taxes including the issuance of a new tax law which set the top rate at 20% for both individuals and companies down from 42%. Results of this law were extremely positive as tax receipts witnessed an increase of 17%, reflecting both wider tax base and a buoyant economy. d-     The continuing of the privatization program hitting for the first time critical sectors such as banks- 80% of the Bank of Alexandria was acquired by the Italian San Pablo for 1.6bn USD, to be the first public bank to be privatized. This trend was accompanied by a comprehensive reform in the banking sector aiming at strengthening the sector through acquisitions and consolidation. 4-     Underlining that the sustainability of the early mentioned progress yet remains debatable. On one hand, there is the extremely optimistic vision that Egypt is to be referred to as a "Tiger on the Nile". On the other hand, there is the more cautious vision calling for being careful about the future expectations based on several factors: a-     Presence of external factors playing a significant role in Egypt's recovery since 2003 such as the congestion of the Panama Canal which raised the shipping traffic in the Suez Canal as well as the fact that the expansion of gas production took place at a time of high world energy prices. Absence or weakening of these factors may raise doubts about the momentum of the economic progress in the coming years. b-     The high level of public debt and the large fiscal deficit which although declined to 8% of GDP, still has to decline to 4% by 2011 as per the IMF estimates. However, according to the IMF, the government's efforts cannot be denied as it stepped for the first time into the sensitive area of subsidies, cutting off 6bn EGP of the overall 40bn EGP fuel subsidy. c-     Worries about the decline of mature petroleum basins, thus affecting production. d-     The challenge of stimulation the expansion of domestic investment through encouraging small and medium enterprises (SME) alongside the big businesses that are already doing well. 5-     Despite the early mentioned concerns, it is obvious that the international institutions see the Egyptian economy on the right track. For example, Moody's has recently noted that "although some bottlenecks remain, evidence of a decisive breakthrough is mounting". On a similar note, the IMF points out that although investment has witnessed a significant increase to reach 18% of GDP, it still has to increase more to 25% of GDP in order to ensure a growth rate capable of creating enough jobs and decreasing income and living standards disparities.