Egypt - Structure, Growth, and Development of the Economy

Infrastructure

In spite of progress in the 1980s, by the end of the decade Egypt still had a long way to go in expanding and improving existing services such as housing, transportation, telecommunications, and water supply. Housing remained inadequate; urban dwellings were often very crowded, and residents lived in makeshift accommodations. Housing was essentially a private activity, and the government tended to underinvest in the sector. The electric grid reached essentially all villages in Egypt by the early 1980s, but blackouts in Cairo and other cities were not uncommon. A major sewage project was under way. It aimed at revamping and expanding the overflowing, antiquated network of sewers, pumping stations, and treatment plants. Some of the work was scheduled for completion by 1991. With help from the United States Agency for International Development (AID), telephone lines doubled at the end of the FY 1982-86 Five-Year Plan.

Because infrastructural improvements and additions were costly and required a long lead time, no relief was anticipated before the mid-1990s. The FY 1987-91 Five-Year Plan allocated more than �E4.1 billion for infrastructure. The problem that faced the government was how to balance the badly needed improvement of the infrastructure against the fact that such investments created only temporary employment and had small impact on industries that served or were served by the infrastructure.

Transportation

Egypt's road and rail network was developed primarily to transport population and was most extensive in the densely populated areas near the Nile River (Nahr an Nil) and in the Nile Delta. Areas along the Mediterranean coast were generally served by a few paved roads or rail lines, but large areas of the Western Desert, Sinai Peninsula (Sinai), and the mountains in the east were inaccessible except by air. The Nile and a system of canals in the Delta were the traditional means of transporting goods, although freight was increasingly carried by truck or rail. The entire system was unable to keep up with rapid population growth, particularly in the large urban areas, and expansion and modernization of all forms of transportation were under way.

In early 1990, Egypt had more than 49,000 kilometers of roads, of which about 15,000 kilometers were paved, 2,500 kilometers were gravel, and the remaining 31,500 kilometers were earthen. The highway system was concentrated in the Nile Valley north of Aswan and throughout the Delta; paved roads also extended along the Mediterranean coast from the Libyan border in the west to the border with Israel. In the east, a surfaced road ran south from Suez along the Red Sea, and another connected areas along the southern coast of Sinai from Suez to the Israeli town of Elat. A well maintained route circled through several western oases and tied into the main Nile corridor of highways at Cairo in the north and Asyut in the south. Large areas of the Western Desert, the mountainous areas near the Red Sea, and the interior of the Sinai Peninsula remained without any permanent-surface roads, however.

The state-owned Egyptian Railways had more than 4,800 kilometers of track running through the populated areas of the Nile Valley and the coastal regions. Most of the track was 1.435-meter standard gauge, although 347 kilometers were 0.750-meter narrow gauge. Portions of the main route connecting Luxor with Cairo and Alexandria were double tracked and a commuter line linking Cairo with the suburb of Hulwan was electrified. Built primarily to transport people, the passenger service along the Nile was heavily used.

Less heavily traveled routes provided connections to outlying areas. A coastal route west from Alexandria to the Libyan border was being upgraded to allow for increased passenger travel. Tracks along the Mediterranean coast of Sinai, destroyed during the June 1967 War, had been repaired, and service was restored between Al Qantarah on the Suez Canal and the Israeli railroad system in the Gaza Strip. New ferry boats allowed passengers at Aswan, the southern terminus of the Egyptian Railways, to connect with the Sudanese system. A new line intended to export phosphates was under construction from Al Kharijah in the Western Desert to the port of Bur Safajah.

The southern leg of the forty-two-kilometer Cairo Metro, the first subway system in Africa or the Middle East, opened in 1987. This line, built with the cooperation of France, linked Hulwan in the south with three main downtown stations, named Sadat, Nasser, and Mubarak. In 1989 the northeast line opened, extending from downtown to the suburbs. The city planned to build an east-west route across the Nile to Giza (Al Jizah). The government hoped that the subway construction would relieve the extremely jammed streets, buses, streetcars, and trains.

Although Egypt had sixty-six airfields with paved runways, only the airports at Cairo and Alexandria handled international traffic. EgyptAir, the principal government airline, maintained an extensive international network and had domestic flights from Cairo and Alexandria to Luxor, Aswan, Abu Simbel (Abu Sunbul), and Al Ghardaqah on the Red Sea. In 1983 EgyptAir carried 1.6 million passengers. A smaller, state-owned airline, Air Sinai, provided service from Cairo to points in the Sinai Peninsula. Zas Passenger Service, the newest airline and the only one that was privately owned, had daily flights from Cairo to Aswan, Luxor, Al Ghardaqah, and points in Sinai.

Alexandria was Egypt's principal port and in the early 1990s was capable of handling 13 million metric tons of cargo yearly. Egypt's two other main ports, Port Said (Bur Said) and Suez, reopened in 1975, after an eight-year hiatus following the June 1967 War. Realizing the importance of shipping to the economy, the government embarked on an ambitious plan in the late 1980s to build new ports and increase capacity at existing facilities, including constructing a facility capable of handling up to 20 million metric tons of cargo just west of Alexandria. Bur Safajah on the Red Sea was being developed to handle phosphate exports, and the first stage of a new port at the mouth of the Nile's eastern Damietta (Damyat) tributary opened in 1986.

Egypt had about 3,500 kilometers of inland waterways. The Nile constituted about half of this system, and the rest was canals. Several canals in the Delta accommodated ocean-going vessels, and a canal from the Nile just north of Cairo to the Suez Canal at Ismailia (Al Ismailiyah) permitted ships to pass from the Nile to the Red Sea without entering the Mediterranean Sea. Extensive boat and ferry service on Lake Nasser moved cargo and passengers between Aswan and Sudan.

The Suez Canal was Egypt's most important waterway and one of the world's strategic links, being the shortest maritime route between Europe and the Middle East, South Asia, and the Orient. Serious proposals for a canal between the Mediterranean and the Red Sea had been made as early as the fifteenth century by the Venetians, and Napoleon ordered the first survey of the region to assess a canal's feasibility in 1799. After several subsequent studies in the early nineteenth century, construction began in 1859. After ten years of construction and numerous unforeseen difficulties, the canal finally opened in 1869.

The canal extends 160 kilometers from Port Said on the Mediterranean to a point just south of Suez on the Red Sea. It can handle ships with up to sixteen meters draught; transit times through the length of the canal averaged fifteen hours. Passing occurs in convoys with large passing bays every twenty-five kilometers to accommodate traffic from opposite directions. Traffic patterns have changed considerably over the last century, reflecting different global priorities: passenger transit has dropped while the movement of goods, especially petroleum, has increased dramatically. It was estimated that before the 1967 ArabIsraeli War, 15 percent of the world's total sea traffic passed through the canal.

By necessity if not by design, the revolutionary regime gave considerably greater priority to economic development than did the monarchy, and the economy has been a central government concern since then. While the economy grew steadily, it sometimes exhibited sharp fluctuations. Analysis of economic growth is further complicated by the difficulty in obtaining reliable statistics. Growth figures are often disputed, and economists contend that growth estimates may be grossly inaccurate because of the informal economy and workers' remittances, which may contribute as much as one-fourth of GNP. According to one estimate, the gross domestic product (GDP), at 1965 constant prices, grew at an annual compound rate of about 4.2 percent between 1955 and 1975. This was about 1.7 times larger than the annual population growth rate of 2.5 percent in the same period. The period between 1967 and 1974, the final years of Gamal Abdul Nasser's presidency and the early part of Anwar as Sadat's, however, were lean years, with growth rates of only about 3.3 percent. The slowdown was caused by many factors, including agricultural and industrial stagnation and the costs of the June 1967 War. Investments, which were a crucial factor for the preceding growth, also nose-dived and recovered only in 1975 after the dramatic 1973 increase in oil prices.

Like most countries in the Middle East, Egypt partook of the oil boom and suffered the subsequent slump. Available figures suggest that between 1975 and 1980 the GDP (at 1980 prices) grew at an annual rate of more than 11 percent. This impressive achievement resulted, not from the contribution of manufacturing or agriculture, but from oil exports, remittances, foreign aid, and grants. From the mid-1980s, the GDP growth slowed as a result of the 1985-86 crash in oil prices. In the two succeeding years, the GDP grew at no more than an annual rate of 2.9 percent. Of concern for the future was the decline of the fixed investment ratio from around 30 percent during most of the 1975-85 decade to 22 percent in 1987.

The post-World War II growth was accompanied by a certain degree of diversification of the economic structure, although not without serious flaws in the diversification. By 1952 agriculture's share of GDP at fiscal year (FY) 1959 market prices was 33 percent, industry's (including mining and electricity) share reached 13 percent, and the service sectors' share amounted to 54 percent. The diversification resulted from the decline of agriculture's contribution to the GDP and the ascendancy of industry and, particularly, of government services. Agriculture's share in the GDP dropped by more than half from 1952, stabilizing near 15 percent through most of the 1980s. Industry's share moved in the opposite direction: from only 13 percent in 1952, it hovered around 35 percent in the 1980s.

Although the industrial sector's contribution to the GNP rose during this period, that growth was due to the increase in energyrelated activity, especially oil-drilling. Manufacturing stagnated and may even have declined. In 1974 (when data for the subsector became available), manufacturing accounted for 15 percent of GNP, but its share fell to 12 percent in 1986 and remained there in early 1990. The lackluster performance of manufacturing was one of the main reasons for the Egyptian economy's inability to become self-sustaining, and for its dependence on oil and external financing.

The services (including construction) held relatively steady, comprising around one-half of GDP, a figure that included the contributions of the various subsectors. An important subsector from a developmental viewpoint was the one entitled "other services"--mostly government services. These averaged 14.2 percent of the growth in GDP in the years from 1952 to 1959 and 32.7 percent of the growth in the years from 1959 to 1969. The increase resulted primarily from the expansion in the bureaucracy that followed the 1961 decree guaranteeing government jobs for all university graduates. The trend continued under Anwar as Sadat (1970-79), and slowed, or may have reversed under Husni Mubarak as the state became financially incapable of hiring the many new jobseeking graduates. Although government employment may have encouraged economic growth temporarily, it impeded it over the long run, competing for scarce investment funds and exacerbating the trade deficit.

Communications

In addition to its radio and television facilities, which were well developed, Egypt had a domestic telephone system that in 1984 counted approximately 600,000 telephones, most of them located in Cairo or Alexandria. Although improvement to the system was under way in the early 1990s, domestic service was still unreliable. The quality of international service was better, as international calls traveled over a variety of high-quality links: submarine cables to Lebanon and to southern Europe; radio-relay links with Libya and Sudan; and a ground satellite station just south of Cairo with two antennas for worldwide telephone, television, and data transmissions. Egypt was to be a focal part of the Arab Satellite (Arabsat) communications network linking the various Arab states, scheduled to be inaugurated in 1991.

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