Improving Egypt’s business climate to revive private sector growth
Weak productivity in Egypt is rooted in deep-seated structural causes that impede
market competition and prevent a more efficient resource allocation. This implies
a number of challenges for economic policy to meet the objectives for long-term sustainable
growth as set out in the National Structural Reform Programme, but the government
is determined to tackle the issues, and is committed to increase the role of the private
sector. Market mechanisms such as business entry and exit, and growth of the most
efficient firms, appear to be weaker than in many similar emerging markets. Recent
reforms have started to tackle heavy regulatory burdens and barriers that hinder market
entry and encourage informality and should be pursued, while the judiciary system
still requires improvement. Competition from abroad, and the attraction of foreign
direct investment are hampered by trade barriers, implying that Egypt does not fully
benefit from global value-chains and spillovers of technology and knowledge that would
help lift productivity. The way state-owned companies are operating across a several
sectors prevents private businesses from competing on a level playing field, although
the government has recently started to take steps to level the playing field for all
firms. Moreover, many businesses still face difficulties in accessing finance, as
banks overwhelmingly prefer to lend to the government. Enhancing access to finance
and improving digitalisation would contribute to a more competitive environment, lifting
business sector growth.
Published on July 16, 2024
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