PEST Analysis

Prepared By Touseef Hussain

Introduction Key FACTS about Egypt Political Environment Political structure Main political parties Environmental laws Foreign trade Tax Rate Labor force and laws Economical Environment Facts and figures on the Egyptian economy Risk Assessment Performance statistics Sociocultural Environment

Technological Environment

031. asbestos.8% (male 26. rare earth elements.353. iron ore.187. and includes the Asian Sinai Peninsula . limestone.) Age structure: ± ± ± 0:14 years: 32.313/female 2.) total: 24.Introduction Key FACTS about Egypt ‡ ‡ ‡ ‡ Full name: Arab Republic of Egypt Capital: Cairo Population: 82.82 deaths/1. cotton.3 years male: 24 years female: 24.6 years (2011 est.450 sq km & water: 6. petroleum products.921/female 25. phosphates.) ‡ Median age: ± ± ± ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Population growth rate: 1.) Area: 1 million sq km contains land: 995.) Birth rate: 24.282/female 13. Coptic 9% & other Christian 1% Currency: Egyptian Pound Natural resources : petroleum. and the Red Sea north of Sudan.000 population (July 2011 est.7% (male 13.) Death rate: 4.96% (2011 est.157) 15:64 years: 62.112. between Libya and the Gaza Strip. talc. manganese.669.000 population (2011 est.63 births/1.636 million (July 2011 est. natural gas. Textile.725. Metal product and Chemicals.000 sq km Major language: Arabic Major religions: Muslim 90% .947) 65 years and over: 4.079.016) (2011 est. lead.5% (male 1. Geographical Location: Northern Africa. bordering the Mediterranean Sea. zinc Main exports: Petroleum. gypsum.

To make an external scanning on Egypt. P E S T Political Factors Economic Factors Sociocultural Factors Technological Factors . we have to know what characterizes the political. sociocultural and technological environments in Egypt. economic.

note .chief of state: President (vacant). assumed control of the government head of government: Prime Minister Essam Abdel Aziz SHARAF (since 4 March 2011).Political Environment: Political structure ‡ Following a revolution and during a challenging period of political transition. 25 May 2005. Deputy Prime Minister Ali elslme cabinet: a new cabinet was sworn in on 7 March 2011 Constitution :11 September 1971. and 26 March 2007. the Supreme Council of the Armed Forces. headed by Defense Minister Muhammad Hussein TANTAWI.following the resignation of President Mohamed Hosni MUBARAK in February 2011. Vice President (vacant).constitution dissolved by the military caretaker government 13 February 2011 ‡ ‡ ‡ . amended 22 May 1980. note .

Political Environment: Political structure ‡ Legal system: mixed legal system based on Napoleonic civil law and Islamic religious law. 176 members elected by popular vote. has 454 members--444 popularly elected and 10 appointed by the president. 508 members elected by popular vote. mid-term elections for half of the elected members) and the People's Assembly or Majlis al-Sha'b (518 seats. 10 appointed by the president. The constitution reserves 50% of the assembly seats for "workers and peasants. the People's Assembly. 64 seats reserved for women. Egypt's legislative body. judicial review by Supreme Court and Council of State (oversees validity of administrative decisions) The president's term runs for 4 years." The assembly sits for a 5year term Legislative branch: bicameral system consists of the Advisory Council or Majlis al-Shura (Shura Council) that traditionally functions mostly in a consultative role (264 seats. ‡ ‡ ‡ . members serve five-year terms) Judicial branch : Supreme Constitutional Court. 88 appointed by the president. members serve six-year terms.

The Muslim brothers. They were banned but in spite of it. in practice it is the ruling National Democratic Party (NDP) which completely dominates the political arena. a brotherhood created in 1928 by Hassan El Banna is the main opposition party of the country.Political Environment: Main political parties : ‡ The multi-party system was restored in 1976 by the then president Sadate. However. El-Ghad or the Nasserian Party are minority parties and were nearly wiped out in the 2005 elections. . they were able to win 88 seats in the People's Assembly in the 2005 elections. The other opposition parties like Wafd.

‡ The Principal Functions of the Agency Include: ± Formulating environmental policies. At the central level. ± Preparing the necessary plans for Environmental protection and Environmental development projects. EEAA represents the executive arm of the Ministry. as well as Regional and International Organizations. .Political Environment: Environmental laws ‡ According to the Law 4/1994 for the Protection of the Environment. the Egyptian Environmental Affairs Agency (EEAA) was restructured with the new mandate to substitute the institution initially established in 1982. following up their implementation. ± The Agency is the National Authority in charge of promoting environmental relations between Egypt and other States. and undertaking Pilot Projects.

It imports mainly consumer electronic goods and capital goods. the United States and China. food products and chemical products. and a free trade treaty with the United States. Import volume has doubled and is twice the export volume. a fact which contributed to the deterioration of the country's trade balance. Its three primary import partners are the European Union. nuclear reactors and nuclear-powered boilers. which represents more than a third of the trade. . especially after signing an agreement with the European Free Trade Association (EFTA) in 2006. Egypt mainly exports mineral fuels and oil. cotton. iron and steel. Its three primary export partners are the European Union. United States and Syria. cereals.Political Environment: Foreign trade ‡ The Egyptian market is gradually opening up.

.5% (to be added on the payee's tax liability account.Political Environment: Tax Rate The standard rate of corporate income tax is 66%. The rate is 32% on profits arising from export operations and on profits of an industrial company as long as they arise from its industrial activities. Withholding Tax Any business operating in Egypt must withhold against any payments-made to any contractor or supplier of goods or services-.the following basic percentages: Contracting and supplying: 1% Services: 3% Commissions: 10% Professional fees (under LE 500): 10% Professional fees (over LE 500): 15% Leasing of property or selling of goods for trading or manufacturing: 1% .

royalties. ± For joint stock companies listed in the stock market. a deductible allowance is made that is equal to interest income. ± capital gains are applicable in some cases of asset replacement.8/1997. Also. interest. rent. pension and Egyptian state social insurance contributions. legal expenses. ± Profits of companies located in the free zones. . ± Joint stock companies employing more than 50 employees and maintaining proper books of accounts are granted a tax holiday for a five-year period. ± Ninety percent of income generated by companies from their movable capitals which have been subject to the new tax imposed by Law 187 of 1993. ± All tax holidays granted under Investment Law No. which can be earned on a bank deposit (currently 10. profit sharing payments to employees.Political Environment: Tax Rate ‡ Corporate Tax Exemptions and Deductions ± Almost all business expenses are deductible including depreciation.5 percent). hotels and tourist projects are granted a tax holiday for a five-year period which can be extended to ten years if the project is located in a remote area.

Commercial and industrial profits Income from immovable property Income from movable capital Noncommercial profits.Political Environment: Tax Rate ‡ Personal Income Tax Taxable Income Tax Law No.000 are subject to paying a 20 percent income tax. . ‡ Taxation of Foreigners Foreigners that have been working in the country for more than 183 days with their annual salaries varying from LE 1. 187 of 1993 distinguishes among the following categories of income of individuals (as well as partners in partnerships): ± ± ± ± ± Salaries and wages.000 then they will be liable to pay 32 percent income tax. However.00 to LE 50. if the employee's annual income exceeds LE 50.

E. 500 / month On variable pay (such as production incentive bonuses)up to L.Political Environment: Tax Rate ‡ Social Insurance Contribution Rates Employer(%) On basic monthly salary up to L. 500/month 26 Employee(%) 14 24 11 .E.

) ± 9.) ‡ Unemployment rate: ± 9.) ‡ Population below poverty line: ± 20% (2005 est.4% (2009 est.) ‡ Labor force .7% (2010 est.1 million (2010 occupation: ± agriculture: 32% ± industry: 17% ± services: 51% (2001 est.Political Environment: Labor force ‡ 26.) .

The global financial crisis slowed the reform efforts. improved the transparency of the national budget. Despite the relatively high levels of economic growth over the past few years. In the past year. the government spent more on infrastructure and public projects. the economy is still hampered by government intervention. when it stood at 7%. and energy. In 2010. and bloated public sector payrolls. housing.Economical Environment Occupying the northeast corner of the African continent. where most economic activity takes place. Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth. including manufacturing and tourism. living conditions for the average Egyptian remain poor.6% in 2009. Egypt is bisected by the highly fertile Nile valley. Despite these achievements. predominately due to reduced growth in export-oriented sectors. . but GDP growth in 2011 is unlikely to bounce back to pre-global financial recession levels. the public sector still controls most heavy industry. substantial subsidies for food. revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt's competitiveness. The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed to 4. and Suez Canal revenues. Moreover. Egypt's economy was highly centralized during the rule of former President Gamal Abdel NASSER but opened up considerably under former Presidents Anwar EL-SADAT and Mohamed Hosni MUBARAK. the cabinet economic team has simplified and reduced tariffs and taxes. and exports drove GDP growth to more than 5%.

Economical Environment Facts and figures on the Egyptian economy .

) Industries: textiles. construction.) Imports: $46. wheat. goats GDP .8% (2010 est.200 (2010 est.82 billion expenditures: $64.products: cotton.) 12.) 4. vegetables.6% (2010 est.6 billion (31 December 2010 est.93 billion (31 December 2009 est.41 billion (31 December 2010 est.real growth rate: 5.) Labor force .4 (2008).331 billion (2008 est.5% of GDP (2010 est.5. corn.) Agriculture .33% (31 December 2008 est.5.composition by sector: agriculture: 13.56 billion (2009 est.272 billion (31 December 2009 est $12.) Stock of broad money: $166.) $146.) Industrial production growth rate: 5.) Investment (gross fixed): 18.5 billion (31 December 2009 est.) $4.000 (2009 est. chemicals.52 billion (2010 est. tourism.) $6.) $66.) $-1.500 (2007 est. sheep.5.71 billion (31 December 2009 est.61 billion (31 December 2010 est.5% (2010 est.) $45.67 (2007). cattle.7% (2010 est. pharmaceuticals.95 billion (31 December 2009) $85.5% (31 December 2008) Stock of domestic credit: $145.9% (2009 est.) Exports: $25.) Population below poverty line: 20% (2005 est.4 billion (2009 est. water buffalo.34 billion (2010 est.6124 (2010).1% (2007 est. hydrocarbons. metals.) $33.) $473. light manufactures Central bank discount rate: occupation: agriculture: 32% industry: 17% services: 51% (2001 est.) Reserves of foreign exchange and gold: $35.) $23.) Distribution of family income .9% of GDP (2009 est.) Exchange rates: Egyptian pounds (EGP) per US dollar 5.6% (2005) Public debt: 80.66 billion (31 December 2009 est.13 billion (31 December 2008 est.5 billion (2010 est.7 billion (31 December 2009 est.9% highest 10%: 27.) Current account balance: $270 million (2010 est.) Debt .at home: $72.) $5.9 billion (31 December 2010 est.) $452.72 billion (31 December 2010 est.) Budget: revenues: $46.1 million (2010 est.900 (2008 est.) 7.08 billion (31 December 2008 est.725 (2006) . food processing.) Market value of publicly traded shares: $89.4% (2009 est.external: $30.1% (2010 est.) $131.) $5. beans.) 80.8 billion (2010 est.195 billion (2009 est.) $29.) 9.2% (2008 est.19 billion (2010 est.) $33.4% of GDP (2010 est. rice.) $-3.) Stock of direct foreign investment abroad: $4. fruits.) Inflation rate (consumer prices): 12. cement.4 (2001) GDP .) $59.) Commercial bank prime lending rate: 11.) Unemployment rate: 9.per capita (PPP): $6.5.) note: data are in 2010 US dollars GDP .3 billion (2008 est.3 billion (31 December 2007) $93.) Stock of direct foreign investment .9% services: 48.545 (2009).8 billion (31 December 2010 est.98% (31 December 2009 est.5% industry: 37.GDP (purchasing power parity): $497.48 billion (31 December 2006) Household income or consumption by percentage share: lowest 10%: 3.) GDP (official exchange rate): $218.Gini index: 34.5% (31 December 2009) 11.42 billion (31 December 2009 est.) Labor force: 26.2 billion (31 December 2010 est.89 billion (31 December 2008) $139.) 7.7% (2009 est.) Stock of narrow money: $37.) 11.09 billion (2009 est.

Controlling public spending and reducing the debt necessitates a spending overhaul that will take time. However. Debt service is low and Egypt is building up foreign exchange reserves.0 and 7. The economy has also benefited from oil country boom via their investments and emigrant worker remittances. . In this context. Regional conflicts and poverty have strengthened Islamist opposition movements. The government's liberal approach since 2004 has fostered a climate of confidence conducive to consumption and investment. manufacturing. tourism. the business environment is improving with the Coface payment incident index remaining below the world average. and communications have achieved excellent performance.5 per cent. construction. The outlook for 2008 is bright with growth likely to reach between 7. . While the gas sector has continued to develop. In this context social climate is tense and officials have exercised caution in pursuing reforms. the fiscal deficit and public sector debt remain a source of concern.Economical Environment Risk Assessment The economy grew strongly in 2007 driven by domestic demand. The external financial situation remains healthy amid the good trend on foreign currency earnings and the increase in foreign direct investment fuelled by the privatizations.

± The tourism sector. private transfers.Economical Environment Risk Assessment ‡ STRENGTHS ± The business climate has benefited from an active reform program and a regional economic boom. tourism. ± Foreign exchange reserves are high. ± Egypt boasts diversified sources of foreign exchange (the Suez Canal. ± The banking system is not yet capable of meeting the economy's needs. whose revenues are of fundamental importance to the current account balance and economic growth. ± The country enjoys the political and financial support of Western countries. and oil and gas exports). remains vulnerable to the terrorist menace . ‡ WEAKNESSES ± The interest on public debt and the cost of subsidies weighs on public finances limiting the capacity for infrastructure development.

Economical Environment Performance statistics .

762.51 100.44 1.049. deflator Gross domestic product per capita.30 64.03 378.54 2.182.76 4.38 135.00 67.38 106.932.35 617.20 3.68 137.68 1.740.48 262.93 4.70 191.70 2010 570. constant prices Units National currency Annual percent change National currency U.71 127.393. dollars Current international dollar Current international dollar Percent Scale Billions 2000 354.209. average consumer prices 100.04 2. end of period consumer prices Inflation.474.77 333.83 1.27 289.64 0. current prices Gross domestic product.54 102.39 1.50 Gross domestic product.S.26 4.60 187.90 3.203.740.80 132.51 1.45 443.68 5.70 5.44 4.09 2008 521.09 15.57 1.67 8.20 4.70 95.62 1.282.09 6.30 68. 2000=100 Annual percent change Index.47 2006 454.91 5.02 2.95 164.38 2001 367.06 8.24 .00 2.62 4.48 11.50 7.42 247.76 417.12 5.809.70 107.116.00 4.933.88 358.25 10.62 0.371.35 153. average consumer prices Inflation.60 0.76 744.610.75 20.57 1.00 3.540.26 7.S.00 71.81 13.17 5.41 471. current prices Gross domestic product.29 7.10 99.78 5.65 538.96 4.71 4.36 8.32 11.59 0.39 7.52 Units 3.00 2.36 Inflation.86 1.30 73.21 117.59 0.45 Inflation.97 6.67 6. dollars Index National currency National currency U.50 89.372.96 367.038.24 148.65 6. current prices Gross domestic product per capita.52 2002 378.37 1.84 2.23 105.70 66.162.896.513.162.00 5.692.71 309.25 Units Units Units Billions 5.17 2009 545.36 8.28 3.544.20 147.074.62 208.663.71 2.97 5.675.20 16.119.16 95.921.43 2.73 8.37 1. current prices Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP Gross domestic product based on purchasing-power-parity (PPP) per capita GDP Gross domestic product based on purchasing-power-parity (PPP) share of world total Implied PPP conversion rate Billions Billions 340.55 9.00 405.450.18 196.05 1.505.91 1.05 11.43 104.59 0. constant prices Gross domestic product per capita.46 207.24 5.00 Population 63.57 1.30 78.85 102.771.910.566.664.32 7. 2000=100 Annual percent change Persons Millions 1.80 130.19 2004 407.60 70.50 81.303.40 97.96 212.66 0. constant prices Gross domestic product.12 6.60 0.23 2.95 6.147.09 2005 425.19 2003 391.55 178.148.88 4.81 6.27 8.60 0.62 171.20 76.01 7.67 National currency per current international dollar Index.36 2.11 127.11 896.43 108.01 122.75 109.504.63 485.84 2007 486.325.79 126.90 87.38 1.074.24 207.85 274.157.95 7.47 5.20 2.05 10.25 4.Subject Descriptor Gross domestic product.43 1.80 119.34 1.94 0.89 4.60 0.115.52 5.70 78. end of period consumer prices 100.60 75.50 162.96 190.30 6.291.92 2.603.41 500.


Economical Environment Performance statistics Real GDP Growth Rate 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2016 Series 1 .


Economical Environment Performance statistics Consumer Prices 18 16 14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Consumer Prices .


Economical Environment Performance statistics Balanced on current account 5 4 3 2 1 0 -1 -2 -3 -4 -5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2016 Series 1 .


which has averaged more than 10% over a decade.8% per annum.7% of the total state budget. a nodal government agency that works for the welfare of women in Egypt. Only about 58% of the population is literate and there is a big difference in the literacy rates for males and females.079. The high rates of unemployment and population growth coupled with meager wages in most of the public sector companies contribute to the poverty levels. aims to completely eradicate illiteracy among females. The education indicators of Egypt project a poor image of the education system. The unemployment rate. as the population within the 20 45 age-group constitutes around 65% of the total population.636 million. the rise in unemployed population has been much higher during the same period averaging around 8%. with the government committing only around $1 billion in 2005 06 for upgrading the healthcare sector.4% is not enough to curb the unemployment rate. the economic growth of 4. The healthcare system in Egypt is underdeveloped with only around 29% of the population covered by governmental health insurance. While the average growth in employed population during the last five-year period stood at 2. The National Council for Women.Sociocultural Environment ‡ Egypt s total population stood at 82. A big challenge for Egypt in the near future will be to create jobs. Most of the population inhabits the area near the Nile River and almost half of Egypt s population is urban. living in the densely populated cities such as Cairo and Alexandria. Egypt s public healthcare system is under-funded. One of Egypt s biggest socio-economic problems is the high unemployment rate which has been growing over the years. The ministry of health is the largest institutional financier providing free healthcare services in Egypt but its reach is limited. Almost 65% of the Egyptian people pay for their own insurance through private and other health insurance organizations. with close to 20% of Egypt s population below the poverty line. while female literacy rate is just about 47%. Out of this approximately 90% are Muslims while the remaining are Christians.3%. increased to over 12% in 2005 06. With the population growing at 1. The total spending on healthcare in Egypt is only about 4% of its GDP. indicative of gender disparity. which represents a meager 2. ‡ ‡ ‡ . Male literacy rate is around 68%.

Egypt's computer hardware sales are projected at US$821mn in 2010 and are forecast to reach around US$1. Hardware accounted for an estimated 62% of Egypt's IT spending last year. Overall spending on software remains rather low. tenders delayed from 2009 and higher incomes boosted by pay raises for civil servants and other groups should help to keep sales on an upwards trajectory. with the illegal software usage rate. finance and telecoms sectors. .5mn households said to possess a computer at present.In 2008. which account for more than 25% of Egypt's total spending. . ‡ ‡ ‡ ‡ . with spending on PCs sustained by initiatives like the 'Computer for Every Student' and 'PC for Every Home' programs. which followed the award of 3G licenses to three mobile telecoms service providers in 2007. with almost 1-1. The Egyptian minister of state for administrative development has said that 200 government services will soon be available online through a new egovernment portal. with the award of a second national fixed license. including local employment subsidies. A number of policies have been implemented to attract foreign investment in IT outsourcing. Egypt continued liberalization of the telecoms market. While large corporations have long understood the business case for deploying technology. This development. falling a further 1% to 59% in 2008. but economic recovery. The Egyptian IT services market is dominated by demand from government. One market driver has been a significant fall in software piracy. According to the Ministry for Administrative Development. as measured by the Business Software Association. is likely to drive new opportunities for IT vendors.1bn by 2014 and the Egyptian IT market growth is forecasted to remain below pre-economic crisis levels in 2010. . lower corporate taxes and deductions for training costs. The portal will offer 70 services in both English and Arabic. which reflects the relative immaturity of Egypt's IT market. small and medium-sized enterprises is increasingly beginning to see such investments as important if they are to avoid being overtaken by more tech-competent competitors. . more than 20 government agencies currently offer services and licenses online.Technological Environment ‡ Egypt's IT spending is expected to increase from US$1.3bn in 2014. . . the spread of internet should provide a boost to the PC market over the next few years.3bn in 2010 to US$2.Egypt's IT market will stay hardware dominated. As well as generating additional spending on IT products and services from the telecoms sector. Households account for 20-25% of unit sales.

state-run radio operates about 70 stations belonging to 8 networks.352 million (2009) Telephone system: general assessment: underwent extensive upgrading during 1990s. as of 2010 there were three mobile-cellular networks with a total of more than 55 million subscribers international: country code . microwave radio relay to Israel.main lines in use:10. Suez.20.136 million (2009) ‡ ‡ ‡ ‡ ‡ ‡ . about 20 private satellite channels and a large number of Arabic satellite channels are available via subscription. tropospheric scatter to Sudan.313 million (2009) Telephones .197 (2010) Internet users:20. a participant in Medarabtel (2009) Broadcast media: mix of state-run and private broadcast media. Al Mansurah.Technological Environment Communications ‡ ‡ ‡ ‡ ‡ ‡ ‡ Telephones . and 1 Inmarsat). and Tanta are connected by coaxial cable and microwave radio relay domestic: largest fixed-line system in the region. satellite earth stations .Atlantic Ocean and Indian Ocean. the SEA-ME-WE-3 and SEA-ME-WE-4 submarine cable networks. principal centers at Alexandria. state-run TV operates 2 national and 6 regional terrestrial networks as well as a few satellite channels. 1 Arabsat. 2 privately-owned radio stations operational (2008) Internet country code:. landing point for Internet hosts:187. Link Around the Globe (FLAG) Falcon and FLAG FEA. Cairo.4 (2 Intelsat . cellular:55.

References ‡ CIA the world fact book USA ‡ The international Monetary Fund .

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