English - Human Development Reports - United Nations ...

Egypt’s Social Capital and Arab Economic Integrationthe different sectors of the Egyptianeconomy. It highlights the contribution ofArab aid to enhancing economic development,providing job opportunities, and meetingEgyptians’ basic needs for medical servicesand safe water. In addition, aid also servedregional integration among Arab countries.Figure 7-1Arab Direct Investment in Egypt 2000Kuwait27%Emirates10%Lybia8%Saudia35%Arab Direct Investment to EgyptKuwait and continued to fall due to the tightpolicies associated with the economicreform program in Egypt, reachingUS$308.1 million. However, as the businessenvironment in the Egyptian economyimproved, Arab investment started to growagain, reaching US$3.5 billion in 2000, anamount equivalent to 11 per cent of totalcumulative investment in Egypt up to thisdate.Arab Countries Investing in EgyptWith respect to the share of total Arabinvestment, the four top Arab countries, asillustrated in Figure (7.1) are Saudi Arabia(33.5 per cent), Kuwait (26 per cent), theUnited Arab Emirates (9 per cent) andLibya (8 per cent). Qatar, Jordan, Bahrain,Lebanon, Syria, and Palestine togethercontribute nearly a fifth of total Arabinvestment. The individual shares of otherArab countries are less than 1 per cent.Sectoral Distribution of ArabInvestments in EgyptArab investmentflows were primarilyassociated with theimprovement in theinvestmentenvironment in Egypt.Arab investment flows were primarilyassociated with the improvement in theinvestment environment in Egypt. In theearly 1970s investments increased inresponse to the Open-Door Policy, then fellby the late 1980s, to grow once more afterthe implementation of the economic reformpolicies. The stability of the domesticenvironment and opportunities for profitabilityproved to be more effective determinants ofinvestment than the special incentivesprovided to foreign investors. The share ofArab investment in Egypt has been steady at15 per cent of total investments during thepast twenty years. The following sectionshows the development of flows of Arabinvestment into Egypt, the relativeimportance of investors by country, thesectoral distribution of these investments,and the factors that might help Egypt attractfurther investment.During the 1970s, Arab investment in Egyptincreased after the rise in oil prices,reaching US$300 million in 1980. With thepeace treaty between Egypt and Israel, thisfigure fell, but rose again after 1988,reaching US$922.6 million in 1991 as aresult of the Gulf War. Arab investmentdecreased in 1992 after the liberation ofMost Arab investment is concentrated in theservices and industry sectors, with about 52per cent and 25 per cent of total Arabinvestment respectively. Free zone projectsattract 19 per cent of total Arab investment,while the agricultural sector attracts only 4per cent. In terms of their share of totalsectoral investment, the main sectors withshares higher than 10 per cent are thefinancial, agricultural, tourism, and freezone sectors (see Table (7.3).The preparation of the economic environmentin Egypt to absorb private investmentthrough huge projects such as the SouthValley Development Project and the SinaiDevelopment Project, in addition tostrengthening political stability in thecountry, could have the positive impact ofattracting more Arab investment.Trade with Arab CountriesGiven the challenges imposed byglobalization and by world economic blocks,one might argue that Arab inter-trade is ameans towards Arab integration, which inturn, would mitigate the negative impact ofthese challenges. Enhancing trade in theArab region would result in a new outlet for112 -Egypt Human Development Report 2000/2001