As the site of one of the oldest civilizations, Egypt held many unique attractions for tourists. In addition, the country has some of the finest beaches on the Mediterranean, modern cities, an attractive climate, moderate prices for services, and a reputation for hospitality to foreign visitors.
Whereas tourism was not an exogenous resource to the extent that oil or remittances were, it had been affected by politics and external developments in which Egypt had little say. The number of tourists reached a peak of 578,734 in 1966 before the June 1967 War. The number dropped sharply for several years afterward and then began to rebound. The figure in 1972 was 541,000, and it increased steadily thereafter. The only exception was in 1986 when the number fell to about 1.3 million from about 1.5 million in the preceding year. The decrease was attributed to the hijacking of the Italian liner, the Achille Lauro, toward the end of 1985; security police riots in Cairo in February 1986; and the United States air raid on Libya in April 1986. The growth rate in numbers of tourists arriving in Egypt between 1975 and 1985 was a respec; table.7 percent per annum. In 1988 the minister of tourism anticipated that about 2 million tourists would visit Egypt that year.
The nationality composition of tourists fluctuated. The main groups were Arabs and OECD nationals. Between 1975 and 1980, the major increase came from OECD countries. Sadat's separate peace accord with Israel discouraged Arabs from spending time in Egypt. Between 1980 and 1984, the annual growth rate of tourists from both groups was approximately the same, 5.5 percent. Since 1978 the number of Arabs has averaged 80 percent of the number of OECD citizens.
Tourism earnings were difficult to trace because earnings fluctuated while the number of tourists kept rising. Economic and statistical reasons accounted for these difficulties. After 1982, income from EgyptAir, the national airline, was moved to nonfactor services, causing tourist receipts to seem lower in 1983 and 1985 than they were in 1979. Furthermore, the increase in the number of average tourist nights spent in the country did not necessarily correspond to the number of visitors. The value of the Egyptian pound also continued to depreciate, dropping by about 30 percent against the dollar in 1986 and adding another discrepancy to the accounts. Finally, tourists preferred to exchange their money in the free market, with its higher exchange rate, rather than in the official market. As a result, the records did not reflect actual income, which was believed to be much higher. Tourism income had risen fairly steadily, and was forecast to reach about £E1.17 billion in 1988, placing it next to the Suez Canal as a source of foreign exchange, or fourth among exogenous resources.
In the 1980s, the government initiated various measures to attract tourists and encourage them to use official exchange channels. It intensified marketing efforts and added tourist offices to its diplomatic missions in key countries. Tourist sites were developed in such places as the Sinai Desert. Since 1985 the minister of tourism had sought to privatize hotel management and to improve EgyptAir services. Encouraged by both the potential rise in tourism and privatization, several foreign companies won large contracts to build new and varied types of tourist centers. For example, in 1990 an Algerian investment group was completing a US$120-million development project on 1.2 million square meters at Al Ghardaqah on the Red Sea. In the late 1980s, applications for permits to establish floating hotels on the Nile surged.
To lure tourists into exchanging their foreign currency through its banks, the government lowered the official tourist value of the Egyptian pound vis-à-vis the United States dollar. For example, the tourist rate rose from £E0.83 = US$1 to £E1.12 to the United States dollar in March 1984. In January 1985 it went to a flexible rate that stood at £E1.25 to the United States dollar in the first half of 1986. Analysts generally thought that the tourist sector, given appropriate policies and incentives, could sustain rapid growth.
In sum, although petroleum, remittances, the Suez Canal, and tourism were crucial resources to Egypt's economy and balance of payments, their long-term potential was limited. Oil prices fluctuated, and Egypt could deplete its exportable oil within twenty to thirty years. The growth of remittances and Suez Canal revenues was likely to be moderate, and although tourism could achieve high growth rates, it had a ceiling. Economists, therefore, stressed that sustained economic growth and development required the expansion and increasing productivity of the country's own commodity-producing sectors, especially industry and agriculture.
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