Youssef Boutros-Ghali Minister of Finance

The most important element that has improved in Egypt is the general attitude,” says Youssef Boutros-Ghali, Egypt’s Finance Minister, of the leap in FDI, “the government has become much more investor-friendly.” Since 2004, the Egyptian government has implemented reforms in the finance sector which have contributed to a 6.9 per cent rise in GDP. According to Mr Boutros-Ghali, “The business environment in Egypt today has fewer complications, fewer problems and less bureaucracy.” The basic reforms have been a reduction in income tax and a reduction in Egypt’s corporate tax rates from 42 per cent to just 20 per cent. The system has been simplified, introducing practical concepts like self-assessment and sample auditing. “We wanted to transform our tax authority into a modern, contemporary tax authority, as opposed to an antiquated predatory function of the state,” explains Mr Boutros-Ghali. These reforms also apply to Egypt’s customs laws; tariff lines have been reduced from 13,000 to 6,000 and tariff brackets have been lessened to only six.

Egypt’s modern economy is now healthier than ever and the world community has quickly taken notice. Domestic investments have increased to 21 per cent of GDP over the past three years, and balance and payment accounts are in a $3.3 billion surplus, boasting a stable exchange rate. The only increase has been in the inflation rate, due to adjustments in domestic prices in response to subsidies in this year’s budget.

Egypt’s Central Bank has been modernised and is now free to establish its monetary policy independently from the government. By privitising select public sectors, “We are cleaning up the banking portfolio,” explains Mr Boutros-Ghali. “We have already pumped in 10 billion pounds and are ready to pump in another 10 billion.”

As Hassan Abdalla of Arab African International Bank states, “"There has been a clear change in policy, starting with taxes, customs, the procedures to establish a company, the ability to have a properly functioning foreign exchange market and the restructuring of the financial market. Confidence in local currency has been noticeably restored. More importantly, these reforms have, to a considerable extent, addressed the mindset of the people. "

In 2005, British investments in Egypt reached $18 billion, and FDI is expected to reach $25 billion by 2011. Mr Boutros-Ghali predicts broad potential for investment in sectors such as petrochemicals, gas, textiles, retail, trade and insurance. “By simplifying procedures, we have addressed about 80 per cent of corruption and obscurity in the tariff system, and we have managed to eliminate 80 per cent of the problems investors encountered with customs and taxes,” making investment in Egypt easier than ever. Mr Boutros-Ghali sees great potential in Egypt’s cooperation with the UK. The UK treasury has established Public Private Partnerships (PPPs) with Egypt in a concerted effort to lift some of the burden from Egypt’s national budget. The PPPs are a means of accelerating economic growth. So far, it has worked, with Egyptian exports increasing by 25 per cent, exceeding the growth of government investments. In addition, the British are helping to institute the PPP model in the construction of 50 schools in Egypt, with a view to expanding the PPP model into areas such as hospitals, roads, bridges, water treatment and sewage plants. “There is a symbiotic relationship between addressing a problem and finding its solution, and the government is fully equipped to handle these issues,” asserts Mr Boutros-Ghali. Predictions for the next 20 years are that Egypt will be “the Italy of today” thanks to furtherbureaucratic reforms. “Until recently, we used the inherited classification of the Ottoman Empire, but,” Mr Boutros-Ghali explains, “times have changed.”