An overview of industrialization in Egypt

By Ritu Tiwari on July 10, 2014

Egypt’s economy relies on public sector enterprises. In the 1991 reform sectors which needed reform were privatizing public sector, export development, trade liberalization, and promotion of technology. Three dimensions required major attention which are economic, social and environmental (Mobarak 2001). Industrialization in Egypt is faces big problems in the manufacturing sector. Development of industries goes through three stages:

  1. Early stage to generate surplus from primary sectors to increase funds for manufacturing industries, enhance export to generate revenues which can be spent on different directions.
  2. Next stage is import substitution to decrease protection from import promote competition (Hawash 2007). Many industries substitute their import due to high number of unskilled labor and industries that do not require sophisticated technology. This facilitates industries to produce products which generates more income and reduces consumption.
  3. Promote exports to generate revenues which enforce economic growth and employment  (Hawash 2007).

Historical background to industrialization in Egypt

In 1921, Egypt’s population was 13 million and only half a million people were engaged in industrialization.  As Egypt’s economy was known as an agricultural economy due to relatively high production of cotton (Hawash 2007). The revolution of 1952 gave birth to industrialization in Egypt. The Government invested in industries like textile, iron, steel, fertilizers, paper and minerals (Hawash 2007). The goal was to attain a self-sufficiency level and improve industrialization. In 1961, industrialization speeded up, however due to high import of raw material in 1965; Egypt faced problems like domestic fiscal and exchange crisis. The war periods in sixties and seventies further limited the flow of funds which resulted in increased recession (Hawash 2007). From 1975 to 1985, Egypt’s government initiated “open door policy” which encouraged domestic and foreign investments. In 1985, ERSAP was also implemented by the Egyptian government for industrial development but it decreased the growth of revenues. Many entrepreneurs who were indulged in imports had shifted towards the industrial development due to import restriction policies by the government (Hawash 2007).

Challenges faced to industrialization in Egypt

Industrialization in Egypt depends on natural resources and improved technology but it had very limited resources and technology to support industrialization. Unemployment is another big challenge for Egypt as it slightly decreased in 2011. And after the 2011 revolution unemployment dramatically increased. This resulted in decreased Share of wages from 28 to 25%. Unskilled human resource, limited use of technology and economic constraints are also considered as major challenges in the industrialization of Egypt.

Rate of growth for the public and private sector in Egypt and the total as a percentage of MVA over the years.
Rate of growth of industrialization for the public and private sector and the total as a percentage of MVA over the years.

How is the Government coping up?

In 2011, Egypt was considered as the fourth largest country in Arab after Saudi Arabia, United Arab Emirates and Algeria (Loewe 2013). In 2004, it signed partnership agreement with the European Union. In the same year, Egypt signed another agreement with the EFTA (European free trade association) (Loewe 2013). Egypt also improved its infrastructure to compete in the global trade. The GDP growth in 2007 increased by 7.2% but it decreased in 2008 by 5%. From 2004 to 2008, the average GDP growth was estimated at 6% (Loewe 2013).



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