Economic Openness: Egypt Case Study

The Legatum Institute’s mission is to create a global movement of people committed to creating the pathways from poverty to prosperity and the transformation of society. Our research work is focused on understanding how prosperity is created, and to that end, with the generous support of the Templeton World Charitable Foundation, we have published a Global Index of Economic Openness to rank countries’ ability to interact with, and benefit from, both domestic and international commerce.

You can download the report here.

Executive Summary

This report explores the extent to which Egypt has the fundamental characteristics of open economies, and where the opportunities lie for further development.

It reveals that Egypt ranks 102nd overall in the Global Index of Economic Openness, and 13th in the Middle East and North Africa region.

Egypt performs most strongly in Enterprise Conditions, ranking 81st, up 27 places from a decade ago. In recent years, there have been several reforms in the Environment for Business Creation which have led to an improvement over the last decade, and the country’s Labour Market Flexibility has seen a continuous and strong improvement in the last 10 years. However, the state owns and provides extensive subsidies to a large number of public enterprises, including in sectors that compete directly with the private sector which reduces Domestic Market Contestability.

Egypt ranks 88th for Market Access and Infrastructure, up 12 places over 10 years. The country has seen improvements and expansions in its communications, electricity, and transport infrastructure across the decade, and has a significant opportunity to benefit from a well-functioning and extensive multi-modal transport network due to its strategically advantageous geographic position for trade. The country has also reduced barriers to international trade over the past decade, but border administration still imposes high financial and non-financial burdens on imports.

Egypt ranks 103rd for its Investment Environment, a fall of two places compared to a decade ago. Although the ranking has not changed significantly, there have been several developments over the decade. The adoption of new laws on bankruptcy and investment have been important steps in providing investor protection and confidence, and these laws have aimed to enhance sustainable economic development as well as providing a safety valve for financial failures. However, Contract Enforcement is a weak point for Egypt where, despite the introduction of the new investment law in 2017, it ranks 163rd globally.

Egypt ranks 146th on Governance, having fallen 30 places over the last decade. Executive Constraints deteriorated during the three years of political instability that started with the Egyptian Revolution; and over the past decade the country has fallen 37 places to rank 158th. Equally, Political Accountability, Government Effectiveness and the Rule of Law have all deteriorated, and Regulatory Quality in Egypt is also poor. Despite this, the report highlights a range of initiatives that have been implemented to tackle corruption in Egypt, which was one of the grievances of the 2011 protests.

The report identifies a number of areas of opportunity to increase Economic Openness in Egypt, including the following recommendations:

1. Reduce dependence of the economy on public expenditure and benefit from the efficiency, skills, and financial resources of international businesses.
2. Deepen trade agreements and focus on measures that foster exports rather than limit imports.
3. Foster the business environment for small and medium sized enterprises to ensure the formal private sector becomes capable of generating more and better jobs that can boost shared prosperity and reduce poverty.
4. Improve public sector governance to reduce barriers to business growth.

• Note: The Egypt case study report uses data from the Legatum Prosperity Index, so some rankings and other statistics may differ from the previously published Global Index for Economic Openness and related country profile datasheets.