CAIRO (Reuters) – Egypt’s private sector has been blocked from taking on a bigger role in the economy despite aggressive macroeconomic reforms over the last four years, and government help is needed, the World Bank wrote in a report released on Monday.
Exports remain below those of competing countries even after Egypt cut the value of its currency by about half in November 2016, the bank said.
A lack of access to imported inputs, technology and logistics has prevented local industry from moving to more complex manufacturing activities or attracting significant foreign direct investment (FDI) outside of oil and gas.
“Despite Egypt’s growing domestic market and proximity to international markets, Egypt is yet to attract strong FDI inflows,” the bank wrote.
These and other hurdles have prevented private companies from absorbing waves of new entrants into the labour force.
“An estimated 800,000 graduates enter the job market every year, yet the employment rate among working-age people fell from 44.2% to 38.9% between 2010 and 2019,” the report said.
Under a November 2016 agreement with the International Monetary Fund (IMF), Egypt also imposed a 14% value-added tax and eliminated most energy subsidies.
The World Bank recommended Egypt form a high-level committee with private and public representatives to push regulatory reform.
More financial and operational information on state enterprises needed to be released to allow private investors to make decisions, and the ability of the non-commercial activities of state enterprises to cover the costs of their commercial arms needed to be limited.
The World Bank also said customs procedures should be simplified and maximum tariff rates be reduced to 40%.
The COVID-19 crisis has exacerbated problems facing private companies and may well force many into bankruptcy.
“The presence of SOEs (state-owned enterprises) in almost every sector feeds a perception of widespread activity and even overstretch,” the World Bank said.
(Reporting by Patrick Werr; Editing by Hugh Lawson)