V.

Economy

For most of Egypt’s history, its economy was based almost entirely on farming, despite the fact that more than 95 percent of the country’s land area is infertile desert. Long an exporter of cereals, in the 19th century Egypt began to specialize in growing cotton, which is still an important cash crop. The first significant industries were set up only in the 1930s. Industrialization increased in the 1960s after much of the industrial sector was brought under state control. In the late 20th century other important sources of revenue included tourism, oil production, and remittances from the 3 million Egyptians working in the Persian Gulf states. Despite its economic and social development in the 20th century, Egypt was a relatively poor country in world terms, with a gross domestic product (GDP) in 2005 of $89.4 billion, or $1,207.20 per capita.

A.

Government Role in the Economy

The Egyptian economy was dominated by private capital until the revolution of 1952, which replaced the monarchy with a republic. The new government began to reorganize the economy along socialist lines in the late 1950s. The state played an increasing role in economic development through its management of the agricultural sector after the land reforms of 1952 and 1961. These reforms limited the amount of land an individual or family could own. In the early 1960s the government nationalized much of the industrial, financial, and commercial sectors of the economy.

In the 1970s poor performance by much of the state sector and growing shortages of investment capital persuaded the country’s leadership to introduce more liberal economic policies. However, not until 1990 did the government become committed to fundamental economic reforms involving the reduction of subsidies, the removal of price controls, and the privatization of some state-owned industries. These policies were successful in reducing inflation from 20 percent in 1991 to 5 percent in 1997 and in allowing the economy to recover partly from a recession in the early 1990s. Progress toward a purely market economy was slow, however, and huge problems remained. Exports remained sluggish, and in 2003 unemployment stood at 11 percent.

B.

Labor

Egypt’s labor force of 22.9 million is 78 percent male and 22 percent female. The largest proportion of the labor force works in agriculture or fishing, which employ 28 percent of all workers. The services sector employs 52 percent, and industry (including manufacturing and construction) employs the remaining 21 percent. There are few skilled workers, since training is usually rudimentary and one-third of the adult population is illiterate. Workers in the state sector are represented by the Egyptian Trade Union Federation, which was established by the regime in 1961 and remains under government control.

C.

Agriculture

In 2005 the agricultural sector (including fishing) contributed 15 percent of the GDP. Before industrialization, agriculture provided most of Egypt’s exports, but by 2002 it contributed less than one percent of the exports. The most important crops include cotton, cereal grains, fruits and vegetables, and animal fodder. Egypt’s area of cultivable land is small but highly fertile. It is located for the most part along the Nile and in the Nile Delta. Yields are high, and almost every piece of land grows at least two crops a year. The country ceased to be self-sufficient in cereals at the beginning of the 20th century, although it still exports some poultry, fruits, vegetables, sugar, and rice. It now imports about a quarter of the cereals it needs and a much higher proportion of the meat and dairy products.

D.

Fishing

Fishing is a significant industry in Egypt. Large quantities of fish live in the Nile, the Mediterranean Sea, and the Red Sea.

E.

Manufacturing

Industry, including manufacturing, mining, and construction, contributed 36 percent of the GDP in 2005. The main manufactured goods are textiles, chemicals, metals, and petroleum products. More liberal economic policies have led to the establishment of a number of private companies involved in automobile assembly, electronics, consumer durable goods such as refrigerators and other appliances, and pharmaceuticals. The majority of factories are concentrated around the two major cities of Cairo and Alexandria and in industrial zones along the Suez Canal.

F.

Mining

Petroleum is Egypt’s most important mineral product. It is a major source of export earnings. In the 1980s the government developed the production of natural gas to supply domestic energy needs. It began exporting natural gas in the 1990s. The main oil and gas fields are located along the Red Sea coast and in the Libyan Desert. Other minerals produced in Egypt include phosphate rock (a source of fertilizer), iron ore, and salt.

G.

Services

Services contributed 49 percent of the GDP in 2005. Important services include government social services such as health and education, financial services, and personal services.

H.

Tourism

In 2005, 8.2 million tourists visited Egypt, providing $6.9 billion in revenues. The majority of visitors make a simple tour that includes Cairo, the great pyramids nearby, and the sites of other ruins and artifacts of ancient Egypt up the Nile. Many tourists also visit Egypt’s Red Sea resorts to take advantage of the warm winter weather. In 1992 attacks on foreigners by Islamic extremists scared off most tourists, but the industry soon recovered. The tourism industry is made up entirely of privately owned businesses.

I.

Energy

Egypt is self-sufficient in energy. Its main sources of electricity are hydroelectric power plants at the Aswān High Dam and steam-driven power plants that burn natural gas. Egypt’s own oil and natural gas provide almost all of the country’s fuel needs. Pipelines supply gas to all major urban centers.

J.

Transportation

Egypt has 5,150 km (3,200 mi) of railroads, all of which are owned by the state. The principal line links Aswān and towns north of it in the Nile Valley to Alexandria on the Mediterranean coast. The inland waterways of Egypt are used extensively for transportation. These waterways include the Nile, which is navigable throughout its course in the country; about 1,600 km (about 1,000 mi) of shipping canals; and more than 17,700 km (11,000 mi) of irrigation canals in the Nile Delta.

Two highways connect Cairo with Alexandria. Other highways connect Cairo to Port Said, Suez, and Al Fayyūm. The total length of highways and roads in Egypt is 64,000 km (40,000 mi). International airlines provide regular service between Cairo and Alexandria and major world centers. EgyptAir, the government-owned airline, also provides domestic and foreign service. The country has about 80 airports and airfields. The major seaport is Alexandria, followed by Port Said and Suez, all of which are served by numerous shipping companies. The Suez Canal produces substantial annual toll revenues. In the early 2000s about 18,000 vessels used the canal each year.

K.

Communications

Egypt’s press, publishing, and media facilities are the largest and most developed in the Arab world. Much of the press was taken over by the government soon after the revolution of 1952, when the daily newspaper Al Ahram became the regime's principal mouthpiece. Party and private newspapers are permitted but are subject to censorship. The government controls the national radio and television services, as well as the basic telephone system. Foreign companies have installed cellular telephone networks and operate private payphone systems.

L.

Foreign Trade

Before the revolution of 1952, Egypt’s foreign trade consisted mainly of exports of raw materials, particularly long-staple cotton, and imports of manufactured goods. After the revolution, the regime pursued a policy of discouraging imports by using high tariff barriers to protect its growing industries. It also brought most of the country’s commerce under government control. More liberal policies were introduced in the 1970s. However, it was only in the 1990s that steps were taken to open up parts of the Egyptian market to foreign competition. There was also a new emphasis on exports. Apart from exports of crude petroleum and refined petroleum products, this policy has not alleviated trade imbalances. In 2003 exports were sold for $6.2 billion while imports cost $10.9 billion. As a result, the country runs a trade deficit. Part of this deficit is offset by the money Egypt earns from tourism, Suez Canal tolls, and remittances from Egyptians working abroad.

Petroleum and petroleum products contribute roughly 40 percent of Egypt’s export earnings, although the percentage changes from year to year. Other exports include textile yarn and fabrics, fruits and vegetables, clothing and accessories, and aluminum products. The principal imports are machinery and transportation equipment; basic manufactures, particularly iron, steel, and paper; food products, primarily cereals; and chemicals. The United States is Egypt’s main trading partner, followed by Italy, Germany, and France.

M.

Currency and Banking

Egypt's currency is the Egyptian pound, consisting of 100 piastres (5.80 Egyptian pounds equal U.S.$1; 2005 average). The Central Bank was created in 1961, when all the country's private banks were nationalized. Several specialized state-owned banks were also set up. Foreign banks were allowed to reenter the country as joint ventures with Egyptian investors in 1974 after having been forced to leave during the nationalization period. In the late 1990s the government agreed to partially privatize Egypt’s four giant state-owned banks. More than 80 domestic and foreign banks operate in the country.

Roger Owen contributed the Economy section of this article.