News •
Compared with the physical size of the country and the level of its population, Egypt has scanty mineral resources. The search for petroleum began earlier in Egypt than elsewhere in the Middle East, and production on a small scale began as early as 1908, but it was not until the mid-1970s that significant results were achieved, notably in the Gulf of Suez and portions of the Western Desert. By the early 1980s Egypt had become an important oil producer, although total production was relatively small by Middle Eastern standards.
The bulk of Egypt’s petroleum comes from the Morgan, Ramadan, and July fields (both onshore and offshore) in the Gulf of Suez, which are operated by the Gulf of Suez Petroleum Company (commonly known as Gupco), and from the Abū Rudays area of the Sinai on the Gulf of Suez. Egypt also extracts oil from fields at Al-ʿAlamayn (El-Alamein) and Razzāq in the Western Desert. Active drilling for oil, involving several international interests, including those of the United States and several European countries, has continued in both the Eastern and the Western deserts, with marked success during the 1990s and early 21st century.
In the process of searching for oil, some significant natural gas deposits have been located, including substantial deposits in the delta and in the Western Desert, as well as offshore under the Mediterranean Sea. Wells have been established in the Abū Qīr area, northeast of Alexandria. A joint Egyptian-Italian gas discovery was made in the north delta near Abū Māḍī in 1970; this was developed partly to supply a fertilizer plant and partly to fuel the industrial centres in the north and northwest delta. In 1974 Abū Māḍī became the first Egyptian gas field to begin production. Other natural gas fields are located in the Western Desert, the delta, the Mediterranean shelf, and the Gulf of Suez, and by the early 21st century natural gas production had begun to rival that of oil, both as a source for domestic consumption and as a commodity for export.
Egypt has several oil refineries, two of which are located at Suez. The first of Egypt’s twin crude pipelines, linking the Gulf of Suez to the Mediterranean Sea near Alexandria, was opened in 1977. This Suez-Mediterranean pipeline, known as Sumed, has the capacity to transmit some 2.5 million barrels of oil per day. The Sumed pipeline was financed by a consortium of Arab countries, primarily Saudi Arabia, Kuwait, and Egypt. In 1981 a crude oil pipeline was opened to link Raʾs Shukhayr, on the Red Sea coast, with the refinery at Musṭurud, north of Cairo. Additional oil pipelines link Musṭurud with Alexandria, and fields near Hurghada to terminals on the Red Sea.
Several of Egypt’s major known phosphate deposits are mined at Isnā, Ḥamrāwayn, and Safājah. Coal deposits are located in the partially developed Maghārah mines in the Sinai Peninsula. Mines located in the Eastern Desert have been the primary source for manganese production since 1967, and there are also reserves of manganese on the Sinai Peninsula. Iron ore is extracted from deposits at Aswān, and development work has continued at Al-Baḥriyyah Oasis. Chromium, uranium, and gold deposits are also found in the country.
The Nile constitutes an incomparable source of hydroelectric energy. Before the completion of the Aswān High Dam power station in 1970, only a small volume of Egyptian electricity was generated by hydropower, with thermal plants burning diesel fuel or coal being the principal producers. For several years after the High Dam station went into operation, most of the country’s electricity was generated there. Its original 12 turbines have a generating capacity of about 2 million kilowatts; the Aswān II hydroelectric power station (completed 1986) has added another 270,000 kilowatts of capacity to the system. Actual power production from the High Dam has been limited, however, by the need to reconcile demands for power with the demands for irrigation water. Moreover, Egypt’s booming population and growing need for energy has forced the government to construct additional thermal plants, many of them fueled by the country’s abundant reserves of natural gas. Thermal plants now generate some four-fifths of the country’s electricity.
Manufacturing of Egypt
During the 20th century, manufacturing grew to be one of the largest sectors of Egypt’s economy, accounting (along with mining) for roughly one-fourth of the GDP by the 21st century. Domestic manufactures were weak from the late 19th century until about 1930 because of free trade policies that favoured importing foreign products. Motivated by the need to increase national income, to diversify the economy, and to satisfy the aspirations of nascent nationalism, the government imposed a customs tariff on foreign goods in 1930 that promoted the development of Egyptian manufactures. The Bank of Egypt also extended loans to Egyptian entrepreneurs in the 1920s and ’30s to help stimulate Egyptian domestic production. A succession of companies were founded that engaged in printing, cotton ginning, transport, spinning and weaving (linen, silk, and cotton), vegetable oil extraction, and the manufacture of pharmaceuticals and rayon. Egypt was a major Allied base during World War II (1939–45) but was largely cut off from European imports; this situation further fueled the development of manufacturing, particularly of textile products.
Most large-scale manufacturing establishments were nationalized beginning in the 1950s, and emphasis was placed on developing heavy industry after a long-term trade and aid agreement was reached with the Soviet Union in 1964. Another aid agreement with the Soviets in 1970 provided for the expansion of an iron and steel complex at Ḥulwān and for the establishment of a number of power-based industries, including an aluminum complex that uses power generated by the High Dam. An ammonium nitrate plant was opened in 1971, based on gases generated in the coking unit of the steel mill at Ḥulwān. There is also a nitrate fertilizer plant at Aswān.
By the beginning of the 21st century, most large manufacturing enterprises were still owned or operated by the state, although the government had begun to sell substantial holdings to the private sector. Major manufactures included chemicals of all sorts (including pharmaceuticals), food products, textiles and garments, cement and other building materials, and paper products as well as derivatives of hydrocarbons (including fuel oil, gasoline, lubricants, jet fuel, and asphalt). Iron, steel, and automobiles were of growing importance to the Egyptian economy.
Finance
Modern banking activities date from the mid-19th century. The Bank of Egypt opened in 1858 and the Anglo-Egyptian Bank in 1864. The French bank Crédit Lyonnais began operations in Egypt in 1866, followed by the Ottoman Bank (1867) and then other French, Italian, and Greek banks. The National Bank of Egypt (1898) and the Agricultural Bank of Egypt (1902) were founded with British capital. The first purely Egyptian Bank was the Banque Misr (1920).
From its inception the National Bank of Egypt assumed the main functions of a central bank, a status that was confirmed by law in 1951. In 1957 all English and French banks and insurance companies were nationalized and taken over by various Egyptian joint-stock companies; thereafter, all shareholders, directors, and managers of those financial institutions were bound by law to be Egyptian citizens. Banque Misr, long responsible for controlling a number of industrial companies in addition to conducting ordinary banking business, was nationalized in 1960. As of 1961 the National Bank of Egypt—which had also been nationalized in 1960—was divided into a commercial bank that maintained the original name and the Central Bank of Egypt, which functioned as a central bank. Later that year, all remaining financial institutions were nationalized, and their operations were concentrated in five commercial banks, in addition to the central bank, the government-sponsored Public Organization for Agricultural Credits and Co-operatives, the Development Industrial Bank, and three mortgage banks. The national currency, the Egyptian pound (Arabic: ginīh), is issued by the central bank.
The government again reorganized the banking system in the early 1970s, merging some of the major banks and assigning special functions to each of the rest. Two new banks were created, and foreign banks were again permitted in the country as part of a program aimed at liberalizing the economy. Of particular interest were joint banking ventures between Egyptian and foreign banks. In 1980 Egypt’s first international bank since the revolution was opened and a national investment bank was established. Islamic banks have been set up in Egypt, paying dividends to their investors instead of interest, which is proscribed under Islamic law. In 1992 the stock exchanges at Cairo (1903) and Alexandria (1881), which had been closed since the early 1960s, were reopened, and in 1997 they were fully merged as the Cairo and Alexandria Stock Exchange.
The supply of money has, in general, followed the development of the economy; the authorities have aimed at tolerable increases in the price level, although some prices soared during the 1970s and ’80s. Long pegged to the U.S. dollar, the pound was allowed to float in January 2003.
Egypt is a member of the International Monetary Fund (IMF). Since World War II the international liquidity of the Egyptian economy, including the Special Drawing Rights, added in 1970, has been depressed. In the late 1970s both internal and external debts rose, primarily because of large government subsidies to the private sector. In the 1980s and ’90s the government gradually introduced price increases on goods and services, effectively reducing (though not eliminating) subsidies for food and fuel. In 1991 Egypt signed an agreement with the IMF and the World Bank called the Economic Reform and Structural Adjustment Program, which reduced the fiscal deficit, removed consumer subsidies, eliminated price controls, liberalized trade, reformed labour laws, and privatized state-owned enterprises. Although the program strengthened Egypt’s economy during the 1990s, economic growth slowed in the early 21st century.
