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Country Commercial Guides for
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CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS & INVESTMENTFY 2000 BEST PROSPECTS LISTING FOR U.S. EXPORTS: (IN RANK ORDER)
MED Medical Equipment PCK Packaging Equipment OGM Oil and Gas Field Machinery APS Automotive Parts and Maintenance Equipment CON Construction Equipment & Building Materials CPT Computers and Peripherals PAP Paper and Paperboard AGE Agricultural Equipment TEL Telecommunications Equipment & Services ENV Environmental Equipment & Services FRA Franchising EPS Electrical Power Systems PMR Plastic Materials and Resins FPP Food Processing Equipment AGE Architectural, Construction & Engineering ServicesFY 2000 BEST PROSPECTS LISTING FOR U.S. EXPORTS: (IN RANK ORDER)(Exchange Rate: 1996/$1=LE 3.4; 1997/$1=LE 3.4; 1998/$1=LE 3.4) (All figures are in millions of dollars and are estimates)
Rank: 1 Name of Sector: Medical Equipment ITA or PS&D: MED
1997 1998 1999 A. Total Market Size 175 390 650 B. Total Local Production 15 18 24 C. Total Exports 0 0 0 D. Total Imports 160 372 626 E. Total Imports from U.S 82 103 145Comment:There is little medical equipment manufactured in Egypt and total expenditures for such equipment are still small for a country of 60 million. The use of sophisticated medical equipment, however, is growing. The GOE has an ambitious plan to upgrade more than 60 general hospitals, clinics, and laboratories in rural areas in addition to building ten new hospitals in the coming two years.
The most promising subsectors include dialysis equipment, lasers, laboratory equipment, and ICU monitoring equipment.
Rank: 2 Name of Sector: Packaging Equipment ITA or PS&D Code: PCK
1997 1998 1999 A. Total Market Size 462 577 721 B. Total Local Production 139 173 216 C. Total Exports 0 17 21 D. Total Imports 323 560 700 E. Total Imports from U.S. 16 20 25Comment: The packaging industry in Egypt is linked to the rapidly growing food processing, pharmaceutical, and chemical manufacturing industries. The packaging market is expected to reach $721 million in 1999, with an expected annual growth of 25% for the next three years. Approximately 30% of Egypt's packaging equipment is manufactured locally, while the remainder is imported, mainly from Italy, China, and Germany. The U.S. has a small share of 5%, but there is substantial opportunity for greater market penetration.
The food processing industry purchases 60% of the packaging equipment, while the pharmaceutical and chemical industries account for the balance. The packaging industry is developing rapidly due to recent legislation that has made packaging required for many industries. The law is expected to affect all industries and products by the year 2000.
Best subsectors include corrugated carton making machinery ($135 million), semi-automatic vertical and horizontal packaging equipment ($53 million), and filling machinery for edible oil and mineral water bottles ($15 million).
Rank: 3 Name of Sector: Oil and Gas Field Machinery ITA or PS&D Code: OGM
1997 1998 1999 A. Total Market Size 642 772 926 B. Total Local Production 100 120 144 C. Total Exports 0 0 0 D. Total Imports 542 650 780 E. Total Imports from U.S. 162 195 236Future growth in the oil and gas field machinery sector lies in new offshore gas exploration projects and equipment for both new and existing refineries and petrochemical plants. Several billion dollars will be invested in this sector in the medium- to long-term, mainly by the private sector.Most oil and gas field machinery used in Egypt is imported. Only plastic pipes, iron, steel sheets, and metal pipes are produced locally.
The Ministry of Petroleum, through its quasi-governmental company, Egyptian General Petroleum Corporation (EGPC), has invested several million dollars in the following projects: a hydro-cracker project; the Middle East Oil Refinery (MIDOR), now under construction; and private companies that produce ethylene, polyethylene, lubricant, and oil additives. The Ministry has approved the construction of a new $1.2 billion petrochemical refinery in the Suez area. The government is expected to issue tenders to equip this refinery in 2000.
Total petroleum projects are expected to exceed $2.9 billion.
Machinery with greatest sales potential in Egypt includes centrifugal pumps and compressors, power generators, gas turbines, and equipment that allows motor vehicles to run on both natural gas and gasoline.
Rank: 4 Name of Sector: Automotive Parts and Maintenance Equipment ITA or PS&D Code: APS
1997 1998 1999 A. Total Market Size 224 269 323 B. Total Local Production 23 30 35 C. Total Exports 0 0 0 D. Total Imports 201 239 288 E. Total Imports from U.S. 45 54 65Comment:The number of registered vehicles in Egypt, including passenger cars, trucks, buses, and motorcycles, is expected to exceed 4.7 million in 1999. The increase in vehicles has resulted in an increased demand for automotive service centers with modern equipment. The high cost of new vehicles places a premium on the need for after-sales service.
Automobile users prefer to use authentic parts. The main suppliers of automotive parts and maintenance equipment are the U.S., Germany, Italy, and East Asian countries.
Rank: 5 Name of Sector: Construction Equipment & Building Materials ITA Code: CON
1997 1998 1999 A. Total Market Size 850 1,040 1,200 B. Total Local Production 85 95 114 C. Total Exports 25 30 36 D. Total Imports 780 965 1,158 E. Total Imports from U.S. 110 357 428Comment:The construction industry is one of the fastest-growing sectors of the Egyptian economy, with an average growth rate of 20-22% annually. Much of this growth is fueled by an increasing demand for housing. Private sector construction of tourist resorts on the Red Sea, the Sinai, and the North (Mediterranean) coasts has also contributed to the demand for construction materials and equipment.
New industrial zones and outlying residential areas, such as Al-Shorouk, Al-Obour, and 6th of October City, located 17 miles from downtown Cairo, are expected to grow by 22% each year. A large land reclamation project in the New Valley and new airport construction along the Red Sea are expected to provide opportunities for U.S. suppliers of construction equipment and building materials. The main foreign competitors in this sector are France, Germany, and Spain.
The demand for earthmoving equipment, in particular, continues to be strong. In 1998, $203 million in earthmoving equipment was imported to Egypt, including $121 million of new and $81 million of used equipment. These figures are expected to grow by at least 40% annually over the next five years as Egypt begins work on several large projects that depend heavily on earthmoving equipment. U.S. suppliers dominate the market for earthmoving equipment with a 65% market share.
Rank: 6 Name of Sector: Computers and Peripherals ITA or PS&D Code: CPT
1997 1998 1999 A. Total Market Size 219 274 328 B. Total Local Production 0 0 0 C. Total Exports 0 0 0 D. Total Imports 219 274 328 E. Total Imports from U.S. 87 104 124Comment:The computer market has experienced strong growth in recent years and will continue to expand. Egypt is the fastest-growing Internet user in the Arab World. Demand for computers and peripherals is expected to increase as more people become aware of commercial and personal uses for the Internet and e-mail. The current Five-Year Plan (1998ž2002) estimates that equipping primary/secondary schools and universities/higher education institutions will cost $4.6 billion and $1.7 billion, respectively.
U.S. computers and peripherals are regarded highly in Egypt.
Rank: 7 Name of Sector: Paper and Paperboard ITA or PS&D Code: PAP
1997 1998 1999 Total Market Size 644 746 850 Total Local Production 131 149 170 Total Exports 2 2 3 Total Imports 515 599 683 Total Imports from U.S. 52 60 68Comment:Egypt imports all of its pulp and 80% of its paper. The paper and paperboard market for 1999 is estimated at $850 million, with an expected annual growth of 14% for the coming three years. Pulp is imported mainly from the U.S. and Russia; paper and paperboard are imported mainly from Indonesia, the U.S., Sweden, and Canada. The U.S. share of the paper and paperboard market is 8%.
The paper industry in Egypt is largely in the hands of the public sector; however, there is an increasing number of newly established private sector entities, especially in the paper-converting field.
In 1998, the U.S. dominated the market of pulp and kraftliner board with few competitors due to its high quality products. The market for all other paper and paperboard products in 1998 was dominated by inexpensive imports from Indonesia, a temporary situation caused by the Asian economic crisis. The market returned to normal in 1999 with the return of traditional suppliers of paper and paperboard products.
Best subsectors include white wood free writing paper ($158 million) and testliner board ($52 million).
Rank: 8 Name of Sector: Agricultural Equipment ITA or PS&D Code: AGE
1997 1998 1999 A. Total Market Size 385 475 543 B. Total Local Production 90 90 100 C. Total Exports 25 15 17 D. Total Imports 300 400 460 E. Total Imports from U.S. 15 25 28Comment:Extensive government-led land reclamation projects and private sector involvement in agricultural development and agribusiness have increased the demand for sophisticated agricultural equipment. Three factors have influenced the growth in this market: active liberalization efforts in agricultural policies, the New Valley land reclamation project, and the opening of El-Salam Canal that irrigates the eastern coast of Egypt. As a result of these policies and projects, the market for agricultural machinery is expected to expand.
Rank: 9 Name of Sector: Telecommunications Equipment & Services ITA or PS&D Code: TEL
1997 1998 1999 A. Total Market Size 935 1,028 1,130 B. Total Local Production 165 182 199 C. Total Exports 79 88 97 D. Total Imports 770 847 931 E. Total Imports from U.S. 666 733 806Telecom Egypt, Egypt's state telecommunications company, plans to add one million telephone lines each year until 2002. This project is expected to cost $1 billion annually and will be self-financed by Telecom Egypt and the National Bank of Egypt.The U.S. Agency for International Development will finance the supply and construction of additional telephone lines, cables, switches, and network operation centers by 2001 at a cost of $300 million.
Two private sector companies will maintain and provide all services for the country's GSM 900 cellular telephone system and are expected to increase the existing 420,000 lines to 2 million lines in the coming two years, and up to 5 million lines within the next ten years. This indicates a significant demand for GSM cellular telephones and related equipment.
Telecommunications equipment with best sales potential in Egypt includes wireless equipment, telephone switches, fiber-optic cable, copper cable, satellite communications equipment, pagers, caller identification equipment, and antennas. The telecommunications equipment and services sector is expected to grow 10% annually in the next three years.
Rank: 10 Name of Sector: Environmental Equipment & Services ITA or PS&D Code: ENV
1997 1998 1999 A. Total Market Size 779 856 941 B. Total Local Production 75 82 90 C. Total Exports 0 0 0 D. Total Imports 704 774 851 E. Total Imports from U.S. 281 310 341Egyptian companies were given until February 1998 to comply with the Environmental Law of 1994. After an additional grace period expired in December 1998, the Ministry of Environmental Affairs began to levy fines, both financial and operational, against companies not in compliance with the Law.The Government has allocated $2.6 billion to implement its environmental plan through the year 2007. The plan is expected to be implemented in two stages: the first stage will include Cairo, Alexandria, Aswan, the southern portion of the Sinai Peninsula, and Luxor governorates; the second stage will cover the rest of Egypt.
Environmental equipment and services with best sales prospects in Egypt include incinerators, industrial filters, recycling plants, solid waste management, and conversion kits that allow motor vehicles to use natural gas. The growth rate for the environmental equipment and services sector is expected to be 10% for the next three years.
Rank: 11 Name of Sector: Franchising ITA or PS&D Code: FRA
1997 1998 1999 A. Total Market Size 536 565 593 B. Sales by Local Firms 247 260 273 C. Foreign Sales by Local Firms 57 60 63 D. Sales by Foreign-Owned Firms 31 33 35 E. Sales by U.S.-Owned Firms 258 272 285Comment:Franchising is spreading quickly in Egypt, especially in the fast-food sector, where thirty-three U.S. and seven non-U.S. chains are operating.
Non-food franchises are still largely unexplored. A small number of U.S. companies have Egyptian franchises in the following areas: car rental, education, health and fitness, do-it-your-self stores, electronics, clothes, and cosmetics.
Rank: 12 Name of Sector: Electrical Power Systems ITA or PS&D: ELP
1997 1998 1999 A. Total Market Size 730 912 1,140 B. Total Local Production 35 50 80 C. Total Exports 0 0 0 D. Total Imports 695 862 1,060 E. Total Imports from U.S. 460 530 742Comment:There is little manufacturing of electrical power systems in Egypt. The Egyptian Electricity Authority (EEA) is expected to spend $4.5 billion over the next six years to upgrade the country's power generation system. Upcoming investment opportunities include several BOT/BOOT conventional energy power plants as well as wind-powered systems. Projects for regional inter-connectivity of power grids also offer opportunities for U.S. firms.
The most promising subsectors include turbine generators, power converters, and transformers.
Rank: 13 Name of Sector: Plastic Materials and Resins ITA or PS&D Code: PMR
1997 1998 1999 A. Total Market Size 1,054 1,265 1,518 B. Total Local Production 211 253 304 C. Total Exports 0 0 0 D. Total Imports 893 1,072 1,286 E. Total Imports from U.S. 446 535 642Comments:The plastics industry in Egypt is growing steadily and becoming increasingly modernized. In 1998, Egypt consumed plastic materials and resins worth nearly $1.3 billion. Demand is expected to grow at 20% annually for the next three years. U.S. market share currently stands at 30% and there is substantial opportunity for greater market penetration.
83% of Egypt's plastics market is supplied by imports and 17% from domestic sources. The main suppliers are Saudi Arabia, the United States, Italy, Germany, and Spain. Recently, however, the market has shifted to less expensive Far Eastern resin and raw materials. Polyvinyl chloride suspension resin and thermoset plastics are manufactured locally.
Plastics and resins from Saudi Arabia are exempt the 5% Egyptian customs duty, a partial explanation for Saudi Arabia's 35% market share.
Most promising subsectors include polyethylene ($610 million), polypropylene ($72 million), polyethylene terephthalate (PET) ($48 million), and high impact polystyrene ($35 million).
Rank: 14 Name of Sector: Food Processing Equipment ITA or PS&D Code: FPP
1997 1998 1999 A. Total Market Size 338 376 402 B. Total Local Production 0 41 44 C. Total Exports 0 29 31 D. Total Imports 338 364 389 E. Total Imports from U.S. 20 22 24Comment:The total market for food processing equipment in 1998 is estimated at $364 million with an expected annual growth of 7% over the next three years. The government of Egypt plans to modernize food-processing facilities that produce for export and to privatize successful food processing entities. Privatization of the food industry sector is expected to lead to renovation of existing equipment and machinery.
Most of the food processing equipment used in Egypt is imported, mainly from Germany, Italy, France, Switzerland, the U.K., the U.S., and Denmark. The majority of U.S. equipment on the market is financed through USAID's Private Sector Commodity Import Program (CIP). During 1998, imports to Egypt through the CIP totaled U.S. $20 million.
It is recommended that U.S. firms appoint local agents, offer adequate after-sales service, and sell at competitive prices.
Most promising subsectors include sugar beet processing equipment ($250 million), dairy processing equipment ($45 million), and winery and distillers ($30 million).
Rank: 15 Name of Sector: Architectural, Construction and Engineering Services ITA or PS&D Code: AGE
1997 1998 1999 A. Total Market Size 680 730 811 B. Total Sales by Local Firms 120 130 156 C. Total Exports 25 30 35 D. Total Imports 560 600 690 E. Total Imports from the U.S. 250 300 315Comment:The construction industry as a whole has been growing rapidly and is one of the most dynamic sectors of the economy, growing at an average rate of 25% annually.
Demand for construction materials and engineering services has been high since 1995 due to extensive private sector construction of resorts on the Red Sea, Sinai, and north (Mediterranean) coasts. The increasing demand for U.S. know-how is focused on major land reclamation projects in the New Valley and on new airport construction along the Red Sea Coast. Foreign competition is mainly from France, Germany, the U.S., and Spain.
MY 1999/2000 BEST PROSPECTS FOR AGRICULTURAL GOODS & SERVICES:
1. Wheat (including Wheat Flour)
2. Corn
3. Soybean Meal
4. Frozen Red Meats, primarily offals
5. Vegetable Oil and TallowTotal Exports: Of all best prospects, only local cotton is exported.
Exchange Rate Used:
1995 $1 = LE3.39
1996 $1 = LE3.40
1997 $1 = LE3.40
1998 $1 = LE3.44Egyptian Imports of Agricultural Goods: (No 1999 figures available. Figures expressed in million of US dollars.)
1997 1998 Total Agriculture Imports 3,781 4,233 - Agriculture as % of total Imports 36% 26% Total agricultural imports from U.S. 974 912 -U.S. Market share of Ag imports 26% 22%Principal U.S. Exports to Egypt: wheat, corn, soybean, vegetable oil and high value productsPrincipal U.S. Imports from Egypt: Spices, processed fruit and vegetables, and fruit/vegetables juices and some other high value food products.
Wheat (Marketing Year Data: MY96 = Oct 1996 - Sept 1997, etc.)
(000 MT)
Wheat MY95 MY96 MY97 MY98 Market Size 11,550 12,080 13,100 13,070 Local Product 5,735 5,750 6,000 6,093 Total Imports 6,328 6,330 7,120 6,300 Imports From U.S. 2,600 3,900 4,850 4,200Comment:Egypt continues to espouse a policy of self-sufficiency in wheat production by encouraging the expansion of acreage and the use of newly developed, high-yielding wheat varieties. The average yield in MY 1998 was slightly higher than in MY 1997, mainly because of better weather conditions. Although total planted area did not increase in 1998, production of wheat is estimated to be higher than MY97. Purchases of locally produced wheat by the Ministry of Supply this are reported to be 30% higher than last year. The GOE is buying local wheat at prices 60-70% higher than imported wheat but it pays for it with local currency. Total Egyptian wheat consumption in MY 1998 is estimated to be almost the same as in the previous year around 13 million tons. With total Egyptian wheat purchases during the period July 98-May 99 significantly lower than the same period the year before, it projected that total Egyptian wheat imports in MY 98 will be about 6.3 million MT. U.S. wheat exports in MY 98 are estimated at 4.2 million MT.
Corn (Marketing Year Data: MY96 = Oct 1996 - Sept 1997, etc.)
(000 MT)
Corn MY95 MY96 MY97 MY98 Market Size 8,090 8,950 9,400 9,340 Local Product 5,440 6,010 6,300 5,760 Total Imports 2,650 2,700 3,010 3,230 Imports From U.S. 2,235 2,000 1,847 1,950Comment:Corn production in Egypt decreased in MY 1998, due mainly to a decline in the area planted to corn to the benefit of the area planted to rice, which has a relatively higher return. The demand for feed corn rose significantly in MY 1998 because of an expansion in poultry and cattle production, but also as a result of increased production of corn oil and corn-based food products. As a result, corn imports continued to be strong. The United States is the main supplier of corn to Egypt. In 1997/98, U.S corn held about 60% of the Egyptian market. This is expected to continue in 1998/99. Argentina is the main competitor to the U.S. in the Egyptian corn import market.
Soybean Meal (Marketing Year Data: MY96 = Oct 1996 - Sept 1997, etc.) (000 MT)
Soybean Meal MY95 MY96 MY97 MY 98 Market Size 559 706 787 713 Local Product 129 146 200 133 Total Imports 540 540 580 570 Imports From U.S. 50 200 220 180Comment:South America (Brazil and Argentina) dominates Egyptian imports of soybean meal, although U.S. meal is preferred when U.S. prices are competitive. Most of the soybean meal consumption is directed to poultry industry which also the main consumer of imported feed corn. Egyptian soybean meal imports in MY 1998 is projected to be 570,000 MT, mostly from Argentina. In MY 1998/99, total soybean consumption is estimated to decline by about 11%, due to expected decrease in imports following the GOE changes in import financing regulations requiring 100% deposit on letters of credit. The new regulations have affected some poultry producers who were receiving 45 days supplier credits. Local meal production also is expected to jump to 300,000 MT in MY 99, due to the construction of a new soybean crushing plant in Alexandria.
Beef and Veal (Marketing Year Data = Calendar Year) (000 MT)
Beef and Veal 1995 1996 1997 1998 Market Size 540 550 496 520 Local Product 430 450 425 440 Total Imports 110 70 100 80 Imports From U.S. 22 23 25 20Comment:Egyptian production of buffalo and beef cattle covers the bulk of domestic demand. Ireland, Germany, France and the Netherlands are the main suppliers of imported live animals, carcass and boxed beef. Most of U.S. exports to Egypt is frozen beef liver, with a very small quantity of high quality beef cuts. U.S. beef prices are not competitive with subsidized frozen meat sales from Europe, but the U.S. does dominate the beef liver and offal import market. The opportunity for U.S. exports of both live cattle and high quality meat should have improved measurably in the wake of the BSE ("Mad Cow Disease") outbreak in Europe. However, the Egyptian requirement that imported beef contain no more than 7% fat content still represents a major barrier to U.S. sales.
Vegetable Oils/Tallow (Marketing Year Data: MY95 = Oct 1995 - Sept 1996, etc.) (000 MT)
Vegetable Oils 1995 1996 1997 1998 Market Size 826 793 799 855 Local Product 109 100 94 90 Total Imports 743 693 705 854 Imports From U.S. 50 40 50 35Comment:The annual consumption of vegetable oil in Egypt averages slightly more than 10 Kg. per person. Given the importance of vegetable oil in Egypt cuisine, this low consumption figure strongly suggests that vegetable oil is often used well after its optimal life span (particularly in popular restaurants). The GOE's slow but steady move towards privatization should lead to reduced government spending on vegetable oil procurement and distribution. Palm stearin and tallow are used in the production of soap. Malaysia is the source for all of the stearin, 310,000 MT in 1998, and the United States supplies the tallow. Product sales are a function of price. Most imports are handled by the public sector Food Industry Holding Company. Domestic vegetable oil production was stable in 1998, but imports increased by 7%.
Egyptian Imports of High Value Products January - December 1997 * (In Thousands of dollars)
Year 1997 Total Import U.S. Import Market Value Value Share (%) Processed meat 2,558,770 n/a Prepared sauces and dressings 807,406 430,867 53% Nuts 16,220,959 1,067,726 7% Dried fruits 3,546,124 43,053 1% Canned fruit and vegetables 4,185,836 166,193 4% Corn chips and breakfast cereals 827,327 60,861 7% Juice 1,064,033 176,687 17%*Source: Central Agency for Public Mobilization and StatisticsINVESTMENT OPPORTUNITIES
The Egyptian Government's Project list presented at the 1996 Cairo Economic Conference offers a useful list of investment opportunities supported by government policy. There are myriad private sector-initiated investment proposals, as well as those from the government. More than 150 projects were identified in the 1996 list in a wide variety of sectors, including agriculture, electricity, environment, finance, information, mining, petroleum, textiles and tourism. The Egyptian government has since taken steps to bring several of these plans to fruition and has in the last year awarded three BOOT power plant projects (each for 650 MW), one to predominantly U.S. interests, the other two to the French. Many more are planned. Airport BOTs have also been awarded.
At that time, the government also announced its interest in soliciting bids for several BOT/BOOT projects, including: a 650 MW thermal power plant, a pump/storage power plant at Mt. Ataka near Suez, a windmill power farm at Zafarana, new airports on the Red Sea at Marsa Alaam and possibly further south at Ras Banas, turnpikes from the Mediterranean to Aswan and from the Nile west to the central oases of Kharg and Dakhla.
In October 1998, the U.S. Trade and Development Agency (USTDA) sponsored a major conference in Cairo in which investment and privatization opportunities in Egypt were identified mainly in the fields of energy, transportation, water/wastewater, and chemicals.
Note: The Government of the United States acknowledges the contribution that outward foreign direct investment makes to the U.S. economy. U.S. foreign direct investment is increasingly viewed as a complement or even a necessary component of trade. For example, roughly 60% of U.S. exports are sold by American firms that have operations abroad. Recognizing the benefits that U.S. outward investment brings to the U.S. economy, the Government of the United States undertakes initiatives, such as Overseas Private Investment Corporation (OPIC) programs, investment treaty negotiations, and business facilitation programs, that support U.S. investors.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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