Egyptian Economic Performance (28-11-2006) A.     JP Morgan Report on the Egyptian Economy: The Egyptian embassy in London has informed that JP Morgan has issued its recent report on the MENA region in November including the following information on the Egyptian economy: 1.      The growth rate is expected to reach 7% in the current fiscal year 2006/2007 versus       6.8% in the previous fiscal year 2005/2006. 2.      The report refers to the recent financial sector reforms as impressive pointing out to the success achieved by the government in restructuring the banking sector thus resulting in decreasing the number of banks from 60 to less than 40 and is expected to reach 34 banks by the end of 2007. 3.      Regarding the privatization program, the report points out that during the last 2 years the program managed to reach the point of gained momentum and that about 50% of the acquisition transactions were undertaken by Egyptian investors, leaving the other 50% to be equally shared by investors from developed countries and Arab countries, whereas investors from emerging markets could not acquire more than 1% of these transactions. 4.      On a similar note, the report praises the significant increase in FDI to reach 6.1 bn USD in 2005/2006 , which is expected to increase to 7 bn USD in 2006/2007 and 8 bn USD in the following fiscal year. 5.      Regarding the current account, the report points out that in spite of its continuous   decrease, yet the current account has been witnessing surplus for the last 4 consecutive years and is expected to continue this trend in the current year as well, thus enabling the government to adopt an aggressive reform policy approach. B.    Oxford Business Group Assessment of the Egyptian Economy: 1.      In its recent publication on the Egyptian economy “Emerging Egypt 2007”, the Oxford Business Group predicted that by the end of next year Egypt’s position will improve from the 2nd to the 1st in terms of FDI directed to Africa, precedent to South Africa. The report projects the FDI to Egypt to reach 8 bn USD in the current fiscal year 2006/2007, pointing out to the increase in FDI from 700 million USD in the fiscal year 2000/2001 to 6.1 bn USD in 2005/2006, thus accounting for 5.8% of the GDP, which is attributed to the new rules and regulations adopted by the government to improve the investment climate. 2.      On a similar note, the report highlights the structural change in FDI in favor of non-petroleum sectors which witnessed an increase of 214% to amount to 4.28 bn USD in the fiscal year 2005/2006, meanwhile the FDI in the petroleum sector as a percentage of total FDI declined from 65.1% in 2004/2005 to 30% in 2005/2006. C.    Cooperation with Italy : 1.      During his visit to Egypt on November 20th, the Italian prime minister agreed with his Egyptian counterpart on the Italian support to the Green Corridor Agreement, which will result in an increase in the Egyptian agricultural exports to the European market. 2.      On the other hand, there was an elaboration on the Italian contribution in training the Egyptian labor through the agreement signed between the 2 countries according to which Italy is committed to train 7000 young Egyptians to be qualified to work in Italy as well as the Italian support to the Egyptian technical education. 3.      It is worth mentioning that Italy is considered to be one of Egypt’s most important trade partners after the USA with a trade value of  2.65 bn USD in 2005, of which 1.384 bn USD are Italian exports and 1.265 are Egyptian exports. Moreover, Italy managed to be ranked the first in terms of banking investments in Egypt due to the Bank of Alexandria transaction, which amounted to 1.6 bn USD thus increasing the Italian investments in Egypt to about 15 bn USD. D.    The Egyptian Participation in the World Economic Forum: 1.      The Prime minister participated in the World Economic Forum held in Turkey on the 23rd of current November in which several economic and trade issues related to Europe and the Mediterranean and the Middle East were discussed. 2.      On the sideline of the conference, the prime minister held meetings with several heads of governments as well as Turkish officials and businessmen in which the investment opportunities in the Egyptian market were elaborated in view of the Turkish interest in investing in Egypt to benefit from the agreements between Egypt and other countries especially the QIZ agreement with the USA in the textile industry. 3.      It is worth mentioning that the Egyptian and the Turkish sides have already signed a free trade agreement which has been ratified form the Egyptian parliament and will soon be ratified by the Turkish parliament with the aim of increasing the trade value between the 2 countries which now amounts to 950 million USD. E. American Express reenters the Egyptian Market:-                                                 1-     Today November 28th, the representative office of American Express Bank will be inaugurated with the participation of a large number of bank and capital market leaders as well as heads of other financial and investment institutions.  2-     It is worth mentioning that American Express is considered to be one of the largest American banks and used to play a significant role in the Egyptian market 2 years ago through the acquisition of 40% of the capital of Egyptian American Bank (EAB), however due to the restructuring of its activities worldwide, it decided to withdraw from the Egyptian market, yet the re-inauguration reflects Egypt’s importance in terms of FDI attraction.