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ASSESSMENT OF TRADE IN TOURISM AND

TRAVEL RELATED SERVICES IN EGYPT IN


RELATION TO THE GATS

October 2007
Cairo – Egypt

Dr. Adla Ragab

Economic Advisor to the Minister of Tourism

Associate Professor of Economics – Faculty of Economics and Political Science

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Assessment of Trade in Tourism and Travel Related Services in Egypt

In Relation to the GATS

EXECUTIVE SUMMARY

Introduction

The last five years have witnessed a fundamental change in Tourism and
Travel related Services Infrastructure in Egypt. Whereas Government of Egypt GOE
was subject to a structural adjustment program since the nineties: privatization, trade
liberalization, investment liberalization, deregulation and civil service reform. It
started from 2001 to provide various form of incentive in tourism investment, more
liberalization and competition for firms which are actively promoted by regulators
and decision makers. As a result Tourism is showing great potentialities as a
competitive sector.

This study focuses on ways to increase competitiveness of Egypt’s Tourism


and Travel related Services by reducing impediments and other obstacles facing the
sector and costs related to improve services. It describes the results of policies
mentioned above, analyzes the economic significance of tourism in Egypt and
highlighting the current situation to discuss the impact on development and
competitiveness. Three major topics are addressed:

1. What are the strengths, weaknesses, opportunities and threats facing the
sector to improve its relation and linkages with other sectors in the economy?

2. Do we need more legislation and regulation to enhance the sector? And what
could be the main limitations on market access that affects foreign investors
as well as domestic investors in Egypt?

3. What actions are required to facilitate the liberalization of Tourism Sector to


improve the service taking into consideration the current commitments?

Methodology of the Study:

It focuses on studying all tourism and travel economic indicators over the
period 1996-2006, taking into consideration air transportation as an essential mode of
transport to enhance tourism. It relied on interviews on business operators and

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regulators in the sector and conducting questionnaires to other entities such as
Chambers of Tourism Federation Association.

Data on Tourism Competitiveness parameters between Egypt and its


competitors in the region is collected and analysed. These data would be
supplemented by the Travel and Tourism Competitiveness Report 2007.

Evidence of Tourism and Related Services in Egypt

Empirical evidence on development and liberalization strategy implemented


in tourism in Egypt sheds light on the growth of the sector and gives an overview on
macroeconomic indicators such as GDP, Foreign Exchange Earnings, Investment,
Tax revenues, Employment and the market structure and its performance.

Tourism as a principal generator of income and foreign exchange earnings


contributes with 11.3% of GDP directly and indirectly and provides the country with
a share of 28% of Foreign Currency and 41.5% of the non-tradable exports. These
are counted as direct revenues of foreign exchange earnings and give the sector
importance among other exporting services like petroleum exports, remittances, and
industrial and agriculture exports and Suez Canal Dues. It also contributes to 4 % of
total investment and 13 % of the total investments of production services, where the
private sector investments play a major role with around 73% of these investments.
In term of tax contribution, it represents about 5.1% of total direct tax and 13.5% of
indirect effects if the 10% sales tax on all output and 20% average income tax are
counted. Finally, it is considered as a main provider of job opportunities where
tourism employment directly and indirectly is about 12.6% of the total employed
population, where numbers of workers exceed 1.2 million directly more than the
quarter is engaged in hotels; another 1.5 million workers would be added if we take
into account travel and other related tourism services.

Other tourism main indicators illustrate the recent market developments


relating to international tourist arrivals, nights, receipts as well as supply capacity
and occupancy rates. Throughout the period 1996–2006, the Egyptian tourism
industry has witnessed unprecedented growth. The number of international tourist
arrivals in 1996 were 3.9 million and reached 9.1 million in 2006 recording an
average annual growth rate of 13.3% ; Number of nights spent increase from 24

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million to 89.3 million in 2006, implying an average growth rate 27%where the
average length of stay of visitors is around 10 nights during the same period ;
Receipts rose from US $ 3.2 billion in 1996 to US $7.6 billion in 2006 with an
average growth rate of 14% ; and the supply capacity in response to these favourable
developments have expanded from 71 thousand rooms to 177 thousand rooms
recording an average growth rate of 15%.

The Government of Egypt GOE over the last few years has taken positive
steps to reduce and eliminate impediments facing domestic and foreign investors in
tourism. Knowing that the regulatory regime and legal system must encourage fair
competition to facilitate investment and enhance efficiency and productivity, a
number of decrees were issued and some are under reviewing to liberalize the
activities. A new amendment to the Investment Law No.8/1997 granted more
privileges and incentives to private sector especially in tourist development activities.
Other laws and Decrees ( law 1/1998 for liberalizing port- services and ministerial
decree 216/1997 permits licensed air companies to provide apron handling for their
own flights) allowed private investment by participation in infrastructure projects
(e.g., ports, roads, airports, ...) under BOT and BOOT arrangements and adoption of
privatization and other liberal laws and regulations processes. Law 1/1973 related to
Hotels and Touristic Construction, and its executive statutes in the Ministerial Decree
181/ 1973 concerning the Conditions & Procedures of Licensing Hotels & Tourist
Establishments aim to eliminate any remaining restrictions on foreign investment in
the travel agency segment. An amendment to law 230/1996 for organizing the
possessing of buildings and lands for foreigners have been made by a Ministerial
decree 548/2005 to facilitate possession and benefit of residential units for foreigners
in some areas removing any remaining restrictions on residential tourism (the
purchase of holiday residences by foreigners in Egypt).

Ministerial Decrees: 131/1997 Considering Diving centres & Sea Activities


as Tourist activities and 194/1997 Considering activities of Safari Journeys, flying
balloons & hydrofoils as touristic activities permit licensed companies to provide
these services. Other Decrees such as 96/1996 allowed time share systems in Hotels
and Decree 318/2000 permit to provide and to perform scuba-diving centres at hotels.
Other institutional and regulatory framework for investment were provided through

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Tourism Development Policy (TDA) policy of supplying land at a nominal price
ranging from US $ 1 -10 per square meter, depending on infrastructure facilities
provided by the government in the areas and facilitating access to loans for
developing infrastructure projects.

However, Tourism Companies and travel agencies would be even further


encouraged if legislation were developed to make investment, foreign and local,
more transparent and less constraint. Ministry of Tourism MOT has announced that a
Law 38/ 1977 and its amendment 118/1983 for organizing Tourism Companies are
being reviewed to reduce or eliminate most of the eventual restrictions.

Although that many reforms had taken place to enhance tourism in many
areas investors in Egypt encounter some restrictions in terms of liberalising the sector
compared to other countries in GATS such as: the authorized level of foreign equity
holdings; movement of personnel; the multiplicity of administrative authorities in
charge of supervisory functions and the lack of coordination between local
administration and central authorities concerning land allocation and local fees; and
temporary suspension of issuing licenses.

Main Findings:

Egypt is among the less restrictive countries where its schedule of commitments
presents two Horizontal limitations related to specific modes of supply, Market Access
MA and National Treatment NT where about 73.5%" None" is in the schedule
reflecting that most of the sub-sectors are opened. Restrictions which remained in the
schedule are concerned with the items related to training personnel that are left
according to each contract and the number of operations which are connected to ENT.

For MA it is concerning mode 4 (Temporary movement of natural persons)


where the number of foreign personnel necessary to the supply of services in any
entity, regardless of number of its branches, shall not exceed 10% of the total number
of personnel employed. Concerning NT in Mode3 (Commercial Presence),
Authorization is required for the acquisition of land and/or real estate property.

However for the Specific commitments: Sub-sector Hotels and Restaurants


in Egypt are rather liberalized where Egypt's laws and regulations do not restrict on
mode 3 (commercial presence). The few limitations on market access doesn't reflect

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any discriminatory applications, it is more of regulatory or capacity considerations
related to the requirement of economic needs tests ENT which is applied to the extent
of market saturation, or moral and ethic restrictions in the case of Casinos services
(gambling). In Sub-sector Travel agencies and tour operator services, limitations on
both MA and NT are concerning the commercial presence (mode 3). Currently
issuing new licenses for local and foreign companies is temporarily suspended in
anticipation of the enacting of the amendment for law 38/1977 relevant to the
organization of tourism companies. Other Tourism Services such as Tourism
Management Services are opened "Bound" in MA only for representative offices and
the total number of services operations depends on the requirement of ENT. In the
case of Tourism transport Services all commitments are either " none" or "unbound",
except for Inland Water local tours and Cruise ships where it is limited in both MA
and NT for mode 3 as subject to the physical capacity of the Nile and the number of
available dockage capacity. NT in both cases is only limited to training of Egyptian
employees that should be performed by the foreign natural persons within the terms
of the contract. Commitments in Tourism Training Institutions, Tourism Related
Convention and Institutional Food Service Caterers (with the exception of Airport
Catering Facilities which are confined only to the national air carriers) indicate no
restrictions or limitation either on MA or NT on mode 3. Finally, Tourist Guides
Services is not included in Egypt Commitments.

Commitments under GATS had created positive impact on tourism sector in


Egypt which can be easily determined by the increased number of FDI projects in
hotels and accommodations which were reflected in job creation directly in tourism
companies and indirectly in all other activities related to tourism like the
construction, manufacturing industries, and agriculture and transportation sectors.
This was accompanied with training and vocational programmes in order to upgrade
the service which is provided. As an additional benefit to the openness implementing
recent technological tools (Web, internet access, GDS/CRS, e-commerce
penetration, etc....) facilitated operations, it also gave more accessibility to tourists
and operators, and made travel products less costly.

However, costs of Commitments under GATS due to the liberalization of


entry are difficult to measure because statistics of tourism consumption,

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Environmental issues and Financial leakages are still facing difficulties to gather,
and the ways of collecting currently are characterized with inadequacy and
inconsistency and doesn't reflect the real economic contribution of tourism. These
problems would be solved in Egypt when adopting Tourism Satellite Account TSA-
a new tool under preparation not adopted by many countries- which provide a proper
methodological tool for a solid and comprehensive assessment of tourism and
economic significance and impact.

Within the context of its regional trade relations, Egypt has pursued both
trade and investment related commitments with members of Euro-Med, GAFTA and
proceedings negotiations within the context of COMESA.

Egypt's conditional revised offer in tourism was submitted in the context of the
GAFTA, has emphasised on offering a complete explanation on all ENT widely used
without clear defined criteria as a response to the countries' requests presented to
Egypt.

According to a questionnaire conducted with stakeholders in tourism services


directed to the 2 main tourism establishments: Hotels and accommodations; and
Companies and Travel Agencies some recommendations and an action plan was
proposed.

Recommendations and Action Plan:

As Liberalization increase competition and provide services with more


efficiency and lower costs, the benefits of more presence of foreigners in some
tourism fields would overcome any negative impacts of their presence especially in
hotels and accommodation where it improves their competitiveness by increasing
services efficiency and technology transfer especially the use of the internet and the
spread of ATM machines.

To extract all the advantages of issuing new companies and travel agencies, a
defined and transparent ENT has to be announced and clear regulations to the market
access have to be declared to avoid all cut throat competition and monopolistic
actions which could affect quality and services by reducing prices.

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Eliminate the institutional obstacles related to government administrative
procedures, monetary and fiscal policies and reference could be made to the high
cost of doing business (e.g., licensing procedures, land registration, etc.).

Solve all problems concerning the multiplicity of administrative authorities in


charge of supervisory functions especially the municipalities which impose
additional local fees and supervisory rights.

Reduce numbers of regulations by adopting one stop shop system in the


context of an institutional and legislative reform in the sector.

Expand the rail, road, and waterways network and accelerate the schedule for
the upgrading, modernization and constructions of canals, and link these sectors
especially in leading tourist destinations.

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Table of Contents

Acronyms

Executive Summary

Background on Tourism and Related Services in the World economy

An Overview on Trade in Tourism and Related Services

Section One: Egypt's Tourism Sector Profile

1-1 Literature Review on Tourism Development

1-2 Tourism Services and Economic Performance

1-3 Tourism Services and Current Situation

1-4 SWOT Analysis to the Tourism Market

Section Two: Regulatory and Institutional Framework

2-1 Legal Issues and Regulations affecting Tourism Sector

2-2 Policy Reforms

2-3 Vision to the Tourism Strategy through a Tourism Sustainable Development


Plan and its wide economic impact.

Section Three: Potential Impact of Increased Liberalisation of Tourism

3-1 Scope and definition of Tourism within GATS

3-2 Egypt Commitments in WTO

3-3 Implications of Egypt's Commitments in WTO: Cost- Benefit Analysis

3-4 Negotiations on tourism services and existing commitments under the GATS

3-5 Vision and recommendations of business operators addressing their needs of


the future GATS round and increased Tourism liberalization

Section Four: Policy Findings

4-1 Comparing Egypt’s Tourism and Travel competitiveness ranking among


other countries in the region and how to improve it.

4-2 implementing the TSA as a new tool adopted to improve the situation

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Conclusion and Recommendations

Annexes

Bibliography

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List of Acronyms:

ACC American Chamber of Commerce


AWCR Arab World Competitiveness Report
BIT Bilateral Investment Treaties
BSAC Business Studies & Analyses Centre
BOP Balance of Payments
CAPMAS Central Agency for Public Mobilisation and Statistics
CBE Central Bank of Egypt
COMESA Common Market for Eastern and Southern Africa
CRS Computer Reservation system
DDA Doha Development Agenda
ECES Egyptian Centre for Economic Studies
ENT Economic Needs Tests
ETFC Egyptian Tourism Federation Chamber
FCY Foreign Currency Yield
FDI Foreign Direct Investment
GAFI General Authority for Investment and Free Zones
GAFTA Greater Arab Free Trade Area
GATS General Agreement on Trade in Services
GCI Global Competitiveness Index
GDP Gross Domestic Product
GDS Global Distribution System
GOE Government of Egypt
IDSC Information and Decision Support Centre
ISO International Organization for Standardization
MA Market Access
ME Middle East
MFN Most Favour Nation
MOED Ministry of Economic Development
MOF Ministry of Finance
MOT Ministry of Tourism
MSME Micro, Small and Medium Enterprises
NT National Treatment
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OECD Organization for Economic Co-Operation and Development
RRI Regulatory Restrictiveness Index
SICTA Standard International Classification of Tourism Activities
TDA Tourism Development Authority
TSA Tourism Satellite Account
TTCI Travel and Tourism Competitiveness Index
TTRS Tourism and Travel related Services
UNWTO World Tourism Organisation
WTO World Trade Organization
WTTC World Travel and Tourism Council

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BACKGROUND ON TOURISM AND RELATED SERVICES
Services in the World economy
Services represent the fastest growing sector of the global economy and account for
two thirds of global output, one third of global employment and nearly 20% of global
trade. Growth of the services sector is recognised to be an important aspect of
economic development and is strongly associated with income growth and economic
modernisation. The share of services in total GDP indicates the diversification level
of an economy. It also reflects the gradual structural changes in the economy and has
the potential to influence the trade diversification level.

Services currently represent more than two thirds of World Gross Domestic Product
(GDP). The share of services value added in GDP tends to rise significantly with the
countries’ level of income, standing at 71% on average in high income countries
(75% in the United States), against 55% and 47% respectively in middle- and low-
income countries. Even in the latter group, the production of services is generally a
core economic activity, whose contribution to GDP is above that of both industry and
agriculture. Significant differences however exist between countries within the same
income group, as for example for India and Nigeria – two low-income countries
whose respective shares of services in GDP are 49% and 22%. (WTO, 2006)

With respect to trade in services, world exports of commercial services amounted to


US$ 2,100 billion in 2004, after growing on average at around 7.6% per year in value
terms since 1980. Trade in commercial services grew faster than trade in goods
(6.6% on average) during this period, increasing its share in total world trade by 3
percentage points. In 2004, services accounted for approximately 19% of total world
trade. (WTO, 2006)

GENERAL AGREEMENT ON TRADE IN SERVICES

The general agreement on trade in services (GATS) is the first multilateral trade
agreement to cover trade in services. Its creation was one of the major achievements
of the Uruguay round of trade negotiations from 1986 to 1993. This was almost half
a century after the entry into force of general agreement on tariffs and trade (GATT)
of 1947, the GATS counterpart in merchandise trade.

The need for trade agreement in services in controversial and has been debated for
years. Many services sectors traditionally have been considered the rightful domain
of the government (e.g., network services like telecommunications and railway
transport, and public services like health care, education). Such sectors are regarded
by some as purely domestic services that do not lend to the application of
international trade rules, or as sensitive sectors given their social importance.
Nevertheless in recent decade's trade in services has undergone substantive technical
and regulate changes. Formerly state-owned sectors have been opened to private
business. The emergence of the internet has created internationally tradable products
and eliminated trade barriers. The service sector has become the most dynamic
segment of international trade. Since 1980, word service trade has grown faster,
although from a relatively modest basis, than merchandise flows. Given these
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developments, the need for transparent and predictable multilateral rule became
increasingly urgent.

The basic propose of the (GATS), as stated in its preamble is " to establish a
multilateral framework of principles and rules for trade in services with a view to
expansion of such trade under conditions of transparency and progressive
liberalization and as mean of promoting the economic growth of all trading partners
and the developing of development countries" trade in services is thus seen as means
to promote growth and development.

GATS PRINCIPLE
Scope and Application
The GATS applies to measures by Members affecting trade in services regardless of
whether they were taken by central, regional, or local governments or authorities or
by non-governmental bodies exercising delegated powers.1 The measure can be taken
in the form of a law, regulation, rule, procedure, decision, administrative action, or
any other form for
1. Purchase, payment, or use of a service;
2. Access to and use of, in connection with the supply of a service, services that are
required by Members to be offered to the public generally; and
3. Presence, including commercial presence, of persons of a Member for the supply of a
service in the territory of another Member.2
The GATS applies to any service in any sector, with two main exclusions, the most
important is the exclusion of services provided in the “exercise of governmental
authority”3 (Article I:3), the other exclusion relates to measures affecting air traffic
rights or services directly related to the exercise of traffic rights.

Definition of Trade in Service and Modes of Supply


The GATS defines four ways of trading services, or modes of supply, depending on the
territorial presence of the services supplier and the consumer at the time of transaction.
Pursuant to GATS Article I:2, trade in services covers the supply of a service
(a) From the territory of one Member into the territory of any other Member (Mode 1, cross-
border trade);
(b) In the territory of one Member to the service consumer of any other Member (Mode 2,
consumption abroad);
(c) By a service supplier of one Member through commercial presence in the territory of any
other Member (Mode 3, commercial presence);

1
GATS Article I:1 and 3.
2
GATS Article XXVIII:a and c.
3
"a service supplied in the exercise of governmental authority" means any service which is supplied
neither on a commercial basis, nor in competition with one or more service suppliers.

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(d) By a service supplier of one Member, through the presence of natural persons of a
Member in the territory of any other Member (Mode 4, presence of natural persons).

GATS Basic Principles


GATS provisions can be divided into two categories: general obligations and specific
commitments. General obligations apply unconditionally to all services and include:
1. MFN Treatment: A WTO Member cannot discriminate among foreign
services providers by offering more favourable treatment to service providers
of any member. Members are permitted to maintain existing measures which
contravene the MFN obligation, but any exceptions must be clearly stated in a
Member’s MFN exemption list.
2. Transparency: Each member shall make public all measures which pertain to
the GATS agreement. The WTO must be notified of any relevant changes to
government policies, regulations or administrative guidelines which
significantly affect trade in services covered by the specific commitments
under this Agreement. As well, Members must establish enquiry points and
respond promptly to requests for information on their regulatory regimes.

While Specific commitments are conditional obligations that apply only to the
sectors listed in a country’s schedule of commitments, this includes:
1. Market Access: In the sectors listed in a Member’s schedule of commitments,
a Member cannot take measures which are defined in the GATS as restricting
market access. Examples of measures which would restrict market access
include: quotas, economic needs tests, requirements for certain types of legal
entities, and maximum foreign shareholding limits. Any measures which
violate the market access obligation must be clearly inscribed in a Member’s
schedule of commitments.

2. National Treatment: In the services sectors listed in a Member’s schedule of


commitments, a Member cannot take measures to discriminate between
domestic and foreign services providers, i.e., foreign companies must be
treated as favourably as domestic providers. The key requirement is not to
modify, in law or in fact, the conditions of competition in favor of the
Member's own service industry. So any measures which violate the national
treatment obligation must be clearly inscribed in a Member’s schedule of
commitments.
3. Subsidies: Members that consider themselves adversely affected by subsidies
granted by another Member may request consultations.
4. Domestic Regulation: The GATS explicitly recognises in its Preamble “The
right of Members to regulate the supply of services within their territory in
order to meet national policy objectives”. Members’ regulations must be
administered in a reasonable, objective and impartial manner. Qualifications
and licensing requirements and technical standards must be based on
objective and transparent criteria, and not more burdensome than necessary to
ensure the quality of the service.

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5. Monopolies: GATS does not forbid the existence of monopolies or exclusive
services suppliers per se, but subjects them to the unconditional MFN
obligation.

In the event that a member fails to carry out its obligations or specific commitments
under the GATS, other members have recourse to the WTO’s Dispute Settlement
Mechanism.

An Overview on Trade in Tourism and Related Services

Trade in tourism services is one of the largest and fastest-growing


components of trade in services, and tourism is the world's largest employer. As
noted by the World trade Organization WTO Secretariat, tourism ranks in the top
five export categories for 83% of countries; importantly, most of these exports are
generated by private sector participants that are small - and medium -sized
businesses. While services

Tourism services are increasing especially rapidly in the emerging


economies, which benefit from low cost labor, and because it is the leading source of
foreign exchange in at least one in three developing countries, it is used to attract
foreign investment and to enhance economic growth. This growth also stimulates
demand for goods, including primary and food products, for which the emerging
economies maintain a competitive advantage.

With an increased focus on the economics of tourism, trade and the enterprise
it is important to review government and private sector Members in WTO in
determining and pursuing quality-related objectives (UNWTO, 2006).

According to estimates by the World Tourism Organization UNNWTO,


tourism and general travel accounted for 10.7 per cent of world-wide GDP in 1996,
and is predicted to increase to 11.5 per cent by 2006. Worldwide arrivals growth for
2006 turned out to have been slightly higher than expected (WTO, 1998). UNWTO
reports that around 7 per cent of the world's population will be traveling
internationally even by 2020, compared with 3.5 per cent in 1996. UNWTO also
declared that tourist arrivals rose by 5% in 2006 to 842 million and international
tourism receipts reached US$735 in 2006 where growth was only slightly below that
of arrivals which represents a significant improvement on data in 2005 and estimated
2006 (UNWTO, 2007a).

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Nonetheless, international tourism has a very substantial impact on trade
levels, as well on foreign exchange earnings. For developing countries, it is one area
where they run consistent trade surpluses.

Tourism Sector as a whole employed one in ten workers world-wide, making


it the world's largest employer in developed and developing countries. It has three
types of effects on employment: direct effects resulting from expenditures by
tourists; indirect effects, such as the employment generated for the firms which act as
suppliers to tourism-related enterprises; and induced effects on the economy as a
whole resulting from expenditures deriving from the direct and indirect employment
effects.

UNWTO notes, however, "The contribution of tourism to employment and


tourism's potential to generate new jobs ranks as one of the paramount questions
related to the social and economic importance of tourism. However, it is difficult to
make accurate assessments of its volume and impact on the economy. Unfortunately,
reliable and comparable data about tourism employment on the international level is
very scarce"(UNWTO, 2006).

The importance of tourism employment is increasing, due to the high growth


rate of the sector relative to the domestic economy as a whole. Considering the
highly labor-intensive nature of tourism especially in remote and rural areas,
developing and least developed countries would appear to have strong potential
comparative advantage. In developing nations, tourism as a major employer faces
great difficulties in assessing the impact on employment resulting from the problems
of defining and measuring tourism itself, considering that only a few services sectors
are exclusively devoted to tourism.

The supply of tourism services is characterized primarily by the cross-border


movement of consumers -- i.e. the consumer coming to the supplier, rather than the
opposite as is the case with many other services. Tourism is actually composed, at
least partially, of a significant number of services sectors; as a result, its full
economic impact is often not clearly defined within national statistics. Tourism is
also a highly "perishable" commodity, in the sense that unsold airline seats, hotel
rooms, etc. have no residual value. The industry is highly infrastructure dependent,
and relies upon various transport services to deliver clients. Important challenges
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facing the industry include environmental and infrastructure problems, as well as
rapid technological change (WTO, 2000).

Section One: Egypt's Tourism Sector Profile

This section provides an overview on the importance and economic


significance of tourism in Egypt. It explores the development of the sector during the
period 2001/2002-2005/2006 which has witnessed an increasing FDI inflows in
response to the openness of foreign direct investment and the adoption of national
treatment for foreign investors in general investment legislation in line with WTO
recommended best practices.

Literature Review on Tourism Development

By reviewing all reports, available studies, empirical evidence and related


data on tourism in Egypt, including Tourism Statistics, Visitors Surveys, National
Accounts and Balance of Payments Statistics, tourism has been the fastest growing
sector in Egypt recording an average growth rate 21.7% during the period
2001/2002-2005/2006 (IDSC, 2007).

This growth has been reflected by an increase in international tourist nights,


international tourist receipts, hotel occupancy levels, and hotel capacity, particularly
in the Red Sea and South Sinai areas although the events happened during the period
2000-2006. Tourism sector have been affected strongly by political instability either
in the region or worldwide as a highly volatile industry. It has witnessed a decrease
because of the September 11th incident, the war on Iraq, and terrorist's attacks in
some tourist sites in Egypt. To confront these incidents crises management policies
had taken place to comprise measures seeking tourism demand restoration, business
support, workers’ compensation and job stability. Egypt set new strategies to attract
tourists for a range of purposes, mainly recreational, to a variety of destinations, and
from a variety of countries, particularly from Europe.

1-1 Tourism Services and Economic Performance

1-2-1 Contribution to GDP

Tourism sector represents a potential pivot for development; it exerts direct


and indirect impacts on tourism establishments and employment and on sectors
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supplying goods and services for tourist entities and activities, such as agriculture,
fisheries, manufacturing and construction, given that it is a major GDP contributor
estimated at 11.3% of GDP (direct and indirect) in 2006/2007.

Economic impact of tourism is measured in terms of its contribution to GDP


as the proportion of Travel Receipts (Tourism Revenues) to GDP this is because it is
not a clearly defined sector in the national accounts because the data is derived from
limited sources such as "Restaurants and Hotels" which represent 3.2 % of GDP in
2005/2006.

International Travel Receipts constituted directly around 7% of GDP at


market prices as shown in Table 1.1. Receipts are estimated on the basis of the
number of tourist nights (according to Ministry of Tourism MOT data) and the
average spending of a tourist per night estimated in agreement between Central Bank
of Egypt CBE and the Ministry of Tourism MOT. This is a crude measurement as it
takes no account of related services; but is still useful in illustrating the relative
performance of the two components (Receipts and GDP). This marks a significant
departure from its general average of 5 % of GDP recorded in the 1990s. Compared
to other countries and with the exception of island economies, Egypt’s ratio tends in
general to be relatively high In Israel and Turkey, for instance, the corresponding
ratio does not surpass 3%; in Morocco 3.7%; and in Greece 4.7% (Sakr.M, 2005).

Table 1.1 Tourism Contribution to GDP at Factor Costs- Current prices


2005-2006
Gross Domestic
Tourism Tourist Tourist
Exchange Product at Current
Fiscal year Revenues Revenues Revenues
Rate Prices
(US $ mn) (LE mn ) % to GDP
(LE mn)
01/ 2002 ٣٤٢٢S٨ ٤S٦٣٢ ١٥S٩ ٣٧٨S٩ ٤S٢
02/ 2003
٣٧٩٦S٤ ٥S٨٦١ ٢٢S٣ ٤١٧S٥ ٥S٣
03/ 2004
٥٤٧٥S١ ٦S١٩٤ ٣٣S٩ 465.3 ٧S٠
04/ 2005
٦٤٢٩S٨ ٥S٧٩١ ٣٧S٢ ٥٣٨S٥ ٦S٩
05/ 2006
٧٢٣٤S٦ 5.73 ٤١S٢ 581.1 ٧S٠

Source: Ministry of Economic Development, Annual Report several issues.


Central Bank of Egypt, Monthly Statistical Bulletin, several issues.

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Sometimes the real economic contribution of the sector is not easily
determined where it does not cover all other tourism establishments or tourism-
related industries and services in addition to many transactions which are conducted
outside the formal economy like private homes to accommodate visitors, payments to
vendors etc….

Using the Keynesian framework in its simplest form, tourism income


multiplier could be estimated to be in the order of 2.4. This is based on saving and
import propensities equivalent to 10% and 32%, respectively (Sakr. M, 2005).

Moreover, existing literatures suggests a positive relationship between


receipts and GDP contribution if multiplier effect is taken into account. Contribution
of foreign tourists’ spending in Egypt is likely to exceed by far its direct shares in
GDP. It takes into consideration: other business by supplying good and services to
tourist business, household earnings by working in tourism and related services and
finally, Government through various taxes and charges on tourists and business
according to ECES (Egyptian Centre for Economic Studies) study 2000 which imply
the following equation (Tohamy, S. and Swinscoe, A., 2000):

Economic impact of tourist spending = Number of Visitors x Average


spending per visitor x Multiplier.

Applying this equation using the multiplier coefficient calculated in the


previous study to the international tourism receipts would increase the proportion
generated of direct and indirect tourism activities in GDP in 2005/2006.

1-2-2 Contribution to BOP

The sector is also a principal generator of income and foreign exchange


earnings. Secures the major source FCY of inflow to the country, whereby direct
revenues reached US$ 7.2bn in 2005/2006 noting that direct revenues according to
CBE the average daily spending of tourist per night is US$ 85 which constitute only
40% of tourist spending (CAPMAS, 2001/2002).

Foreign exchange earnings made Tourism ranked the second after Petroleum
exports, exceeds Remittances, almost equates to industrial and agriculture exports
and doubles the Suez Canal Dues as shown in the following Table 1.2.

20
Table 1.2 Main sources of Foreign Currency (01/ 2002 - 05/2006)

Data 01/2002 02/2003 03/2004 04/ 2005 05/2006

Tourist Revenues ٣٤٢٢S٨ ٣٧٩٦S٤ ٥٤٧٥S١ ٦٤٢٩S٨ ٧٢٣٤S٦


Remittances of ٢٩٥٢S٥ ٢٩٦٢S٦ ٢٩٩٩S٦ ٤٣٢٩S٥ ٥٠٣٤S٢
Egyptians working
abroad
Suez Canal Dues ١٨١٩S٨ ٢٢٣٦S٢ ٢٨٤٨S٤ ٣٣٠٦S٨ ٣٥٥٨S٨
Petroleum Exports ٢٣٨١S٠ ٣١٦٠S٨ ٣٩١٠S٣ ٥٢٩٩S٠ ١٠٢٢٢S٤
& products
Agricultural ِ ٢٦٨ ٤٨٦S٥ ٦٧٤S٩ ٧٣١S٤ ٦٦٨S٥
Exports
Industrial Exports ٣٤٢٦S٢ ٣٧٠٩S٣ ٤٨٣٦S٨ ٦٣٠٣ ٦٥٦٧S٣
undistributed ١٠٤٥S٦ ٨٤٨S٨ ١٠٣٠S٥ ١٥٠٠S٠ ٩٩٦S٩
Exports
Total ١٥٣١٥J٩ ١٧٢٠٠J٦ ٢١٧٧٥J٦ ٢٧٨٩٩J٥ ٣٤٢٨٢J٧
Tourism ranking First
First First First Secondٍ
( repeated )

Source: Central Bank of Egypt, Monthly Statistical Bulletin, several issues.

According to the figures of CBE, tourism earnings accounted in average for


22.6% of total foreign exchange receipts during the period 2001/2002-2005/2006
compared to a share of 11.8% for Suez Canal dues, 15.7% for workers’ remittances,
and 21.4% for petroleum exports shown in Figure 1.1.

Figure 1.1 Tourism Share in Foreign Currency compared with other sources (01/2002 – 05/ 2006)

Tourist Revenues Remittances of


22.6% Egyptians working
abroad 15.7%

Non Distributed
Exports 4.7%
petrolum & Gas
Exports & its
products 21.4%

Agricultural Exportsِ
2.4%
Suez Canal Dues
Industrial Exports
11.8%
21.3%

Source: Central Bank of Egypt, Monthly Statistical Bulletin, several issues.

As a result of substantial growth in tourism income, services income rose


from 31.2 % in 2001/2002 to 41.5 % in 2005/2006 (Ministry of Economic
Development MOED, 2007). Likewise, the tourism coverage ratio of trade deficit has

21
jumped over the same period from 45.5 % to 60.4 % as shown in Table 1.3. This
growth is stimulated into action by large and small businesses, individual employees,
public sector authorities and agencies, including governmental bodies to generate
tourism activity.

Table 1.3 Tourism Impact on Balance of Payments & Balance of Services


01 /2002 – 05 / 2006
(million $ )
Year Tourist Merchandise Exports of Imports Commercial Tourist Proceeds as a percentage
Revenues Exports services of Deficit
services
Merchandise Service of Service of Commercial
Exports (%) Exports Imports Deficit (%)
(%) ( %)
٣٤٢٢S٨ ٧١٢٠S٨ ٩٦١٨S١ ٥٧٣٩S٨ - ٧٥١٦S٥ ٤٨S١ ٣٥S٦ ٥٩S٦ ٤٥S٥
01/ 2002

02/ 2003 ٣٧٩٦S٤ ٨٢٠٥S٤ ١٠٤٤١S٤ ٥٤٩٢S٨ -٦٦١٤S٩ ٤٦S٣ ٣٦S٤ ٦٩S١ ٥٧S٤
03/ 2004 ٥٤٧٥S١ ١٠٤٥٢S٥ ١٢٩٨١S٠ ٥٦٦٣S٢ - ٧٨٣٣S٨ ٥٢S٤ ٤٢S٢ ٩٦S٧ ٦٩S٩
04/ 2005 ٦٤٢٩S٨ ١٣٨٣٣S٤ ١٥٠٢٩S٦ ٧١٨٧S٤ - ١٠٣٥٩S٤ ٤٦S٥ ٤٢S٨ ٨٩S٥ ٦٢S١
05/ 2006 ٧٢٣٤S٦ ١٨٤٥٥S١ ١٧٤٣٧S٩ ٩٢٤٧S٢ - ١١٩٨٥S٩ ٣٩S٢ ٤١S٥ ٧٨S٢ ٦٠S٤

Source: Central Bank of Egypt, Monthly Statistical Bulletin, several issues.

When comparing Tourism receipts with Tourism payments which reflects the
outbound tourism, we observed that net tourism balance shows positive trends.
During the period 2001/2002-2005/2006 gap between inbound and outbound
tourism flows has significantly showed an increasing surplus.

Figure 1.2 Tourism Balance Of Payments (US $ Billion)

8
7.2
7 6.4
6 5.5
5
5.6
4 3.4 3.8 5.0
3
4.2
2
2.2 2.4
1
1.2 1.4 1.3 1.4 1.6
0
2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Tourist Reciepts Tourist Payments Surplus

Source: Central Bank of Egypt, Monthly Statistical Bulletin, several issues.

1-2-3 Contribution to Investment

22
Tourism contributes close to 4 % of total investment and 13 % of the total
investments of production services, where the private sector investments constitutes
73% ( MOF, 2007). According to General Authority for Investment and Free Zones
GAFI the share of tourism in the issued capital for the existing registered companies
is 26- 30% of total investment ranked as second after industrial sector and before
financial sector during 2004- 2006(ACC/BSAC, 2005; GAFI, 2006)

1-2-4 Contribution to Government Revenues

Government of Egypt GOE Policy aims at optimising the revenue from


Tourism sector that remains in Egypt by encouraging linkages between tourism and
other related service. The changes in the Tax regime and the level of tax incentives
provided by the government by decreasing of the level of tax from 40% to 20% and
cancelling the tax holidays and incentives had a great effect in raising the tax
revenues from the Tourism sector. According to the ECES study (Tohamy, S. and
Swinscoe, A., 2000) Tourism contribution is about 5.1% of total direct tax and
13.5% if indirect effects are included on the assumption of 10% sales tax on all
output and 20% average income tax( Sakr.M, 2005).

1-2-5 Contribution to Employment

As a job provider, tourism is considered as main employment generator,


although there is not an accurate study to confirm the number of tourism direct
employment. Recent literatures estimate that numbers exceed 1.2 million workers
that are engaged in tourist activities as a result of the direct effect of foreign tourist’s
spending; another 1.5 million workers would be added if secondary effects are taken
into account (Tohamy, S. and Swinscoe, A., 2000; Sakr.M, 2005). Other
international organization indicates that employment contribution is nearly 2.2
million jobs, accounting for about 12.6% of the total employed population (WTTC,
2006).

Table 1.4 Tourism Direct and Indirect Employment in Tourism during


2001/2002 –20 05/ 2006

2001 / 2002 2002/2003 2003/2004 2004 / 2005 2005 / 2006 2006/2007

23
Hotels & n.a
Restaurants 217 239 253 279
(only)* n.a
% to Total 1.2 1.3 1.4 1.5

Growth 8.3 7.7 7.1

2001 2002 2003 2004 2005E 2006E

Direct
845.2 908 1.143 1.346 1.296 1.313
Employment**

% to Total 4.8 5.1 6.3 7.2 6.8 6.7

Growth 6.3 23.5 14.3 -5.6 1.3

2001 2002 2003 2004 2005E 2006E

Direct & Indirect


1.670 1.730 2.135 2.488 2.429 2.472
Employment**

% to Total 9.5 9.7 11.7 13.3 12.7 12.6

Growth 2.1 20.6 13.7 -4.5 1.8

Source: *Ministry of Economic Development, Annual Report, several issues.


**WTTC, "Egypt Travel & Tourism Climbing To New Heights" The 2006 Travel & Tourism
Economic Research, 2006.

Despite of the importance of the above figures in showing the growth in the
sector and confirming its economic significance by reflecting the decreasing in direct
employment in 2005 due to the erratic incidence happened according to the WTTC
study (WTTC, 2006) it should be noted that they do not accurately display the actual
weight that tourism enjoys in the economy. The figures and data stated above tend to
underestimate the overall employment contribution of tourism, they depend only on
simulation made and provided by the study based on an estimated multiplier.

1-3 Tourism Services and Current Situation

This sub section provides a brief profile of the tourism sector in Egypt in
2006. It illustrates the current situation and recent market developments comparing
2006 to 2005 in the main tourism indicators: international tourist arrivals; nights;
receipts; supply capacity and its distribution by governorates; as well as occupancy
rates.

24
The following Table 1-5 illustrates the growth rate and development of main
tourism indicators. International tourist arrivals reached 9.1 million in 2006,
recording an average annual growth rate of 6 % compared to 2005 (MOT
Information Centre, 2007). This growth rate exceeds the World average growth rate
which is around 4.5% and the Middle East ME 4%.

Likewise, the number of nights spent rose considerably to 89.3 million in


2006, implying a 5% growth rate where the average length of stay of visitors is
around 10 nights which exerted a positive impact on tourism receipts which
surpassed US $ 7.6 billion in 2006 in contrast to US $ 6.8 billion in 2005, pinpointing
a growth rate of 11.6% (MOT/CBE).

In response to these favourable developments, accommodation facilities have


expanded considerably. The total hotels and rooms capacity in Egypt reveal total
hotels of 1309 distributed among: 1029 (fixed hotels) 280 (floating hotels), and total
number of rooms of 176.933 distributed among: 160351 (fixed hotels) and 16582
(floating hotels) recording a growth rate of 4% relevant to the estimated tourism
arrivals annual rate 10%.

Table 1-5 Development of Main Tourism Indicators 2005-2006

٢٠٠٥ ٢٠٠٦ Growth Rate

Tourist Arrivals ( mn) ٨J٦ ٩J١ 6%

Tourist Nights ( mn) ٨٥J١ ٨٩J٣ 5%

Tourist Receipts ( US $ bn) ٦J٨ ٧J٦ %١١J٧

Hotel Rooms Capacity(000) ١٧٠ ١٧٧ 4%

Source: Ministry of Tourism, 2007.

The breakdown of existing room's capacity across Egypt as shown in Figure


1-3 reflects the concentration of current investments in South Sinai especially in
Sharm El Sheikh and Nabq Bay, Red Sea in such new areas like Marsa Alam and
Great Cairo, implying indirectly stability of investment climate. (MOT, 2007).

Figure 1-3 Distribution of the Hotel Capacity 177 000 rooms in Egypt in 2006

25
Rest of
Canal Cities
Canal,
Alexandria & 5351 lower&
North Coast 3% Upper Egypt
8543 3846
5%
2%
Floating Hotels
16442 Red Sea
9% 51043
28%
Luxor & Aswan
8282
5%
Great Cairo
25731
15% South Sinai
57478
33%

Source: Ministry of Tourism, 2007.

An additional capacity of 132 thousand rooms is planned for the coming five
years. Approximately 73 % of total room's under construction is located particularly
in rapidly growing resort areas along the Red Sea Coast and in South Sinai (TDA,
2007). The detailed breakdown shown in the following Table 1-6 illustrates the shift
away from monument based Nile tourism like in Luxor and Aswan to the recreational
Red Sea sites.

Table 1-6 Room capacity under construction in Red Sea Sites in 2006

Area Room capacity under


construction
Hurghada and surroundings
Hurghada 16000
El Gouna 2679
South Magawish 3929
Makadi 2828
Suma 920
Safaga 4662
Subtotal Hurghada 31018
El Qusair 6373
Marsa Alam 10746
Sharm El Sheikh and surroundings
Sharm El Sheikh 11660
Nabq 9386
Subtotal Sharm El Sheikh 21046
Ras Sudr 15206
Tor 853
Dahab 1257
Nuweiba and Taba 9759
TOTAL 96258

26
Source: Ministry of Tourism, 2007.

The number of rooms under construction exhibits to cover the total capacity in
the government’s plan to reach 240000 rooms to accommodate the expected 14
million tourists by the year 2011 knowing that the occupancy rate is within the
international average between 60-70% during the year.

The following Figure 1-4 represents the evolution of occupancy rates that
have been recorded in hotels and tourist resorts followed by the increasing influx of
tourists in 2006 compared to 2005 where room occupancy rates reached on average
64 % in 2006.

Figure 1-4 Average Occupancy Rate in 2005 and 2006

80
70

60
50
40
30
20
10
0
Sharm El- Hurghada Luxor Aswan Cairo Giza Alexandria Floating Hotels
sheikh

2005 2006

Source: Ministry of Tourism, 2007.

Although this strong growth Egypt accounts only for around 1% of the world
share of tourism arrivals and 25% of the ME share. By this share Egypt is ranked 24
of the top 50 countries in tourism attraction, knowing that UNWTO counts only the
tourists who spent more than 24 hours (according to outbound tourism definition)
and deduct the same day visitors (UNWTO, 2007a).

1-4 SWOT Analysis to the Tourism Market

1-Strengths

• Year-round excellent weather: Egypt's weather gives a comparative advantage to


other touristic destinations that have appealing weather for shorter periods during

27
the year. I f we consider Tunisia and Turkey as closest competitors to Egyptian
tourism market, they would lose the winter season due to relatively cold weather.
• Proximity to Europe and to Arab countries: Very near from the European market
and Arab market if compared to other touristic destinations, South East Asia and
the Caribbean Sea. It takes only few hours (2-4) by plane to get to the country.
• Largest number of heritages sites in the world: Egypt possesses around 30% of the
world’s monuments & antiquities from the historical level.
• Spectacular Beaches and Desert: Egypt's beaches extend over both the
Mediterranean and Red Sea costal lines. It has a fascinating rocky landscape
desert equipped for Safari and Bird watch trips.
• Diversified tourism product: Cultural and Historical Monuments, day and night
recreation, diving, therapeutic, shopping, and residential and eco-tourism.
• Purchasing power Parity: Competitive prices in hotel rooms and money value
compared to other country in the region, especially in charges and ticket taxes.

2- Weaknesses

• Proximity to ME Conflicts.

• Services quality: Shortage in the standards of service and specifically the levels
of expertise. The quality of training and skills of the workforce in hotels is
inefficient and remains low as compared to international peers. As a reflection of
the inadequacy of tourism education, it becomes unable to satisfy markets needs.

• Pollution / cleanliness: Weak Environmental Regulations and Pollution of many


areas.
• Transportation and Infrastructure: The rail and road sectors need to be more
developed. Egypt’s railway network is underdeveloped and is under reforming
procedures, as the existing network is only used by Egyptians and some freight
activities. In addition, the levels of roads leading to tourist destinations is very
poor and without sufficient sign-posts for tourists. On the other hand some roads
linking Red Sea Coast with Upper Egypt are still under construction.
• Restriction of Operating Low Cost Carriers: Cairo International Airports restrict
the new trend of Low cost carriers which could facilitate tourist travel.

28
• Non Tourism – Friendly culture: In historic/culture tourism areas e.g. urban
Cairo, some tourists may face some harassment.

• Structural and Institutional Impediments: The lack of proper coordination


between local administration and central authorities concerning land allocation,
local fees and supervisory rights which could obstruct investments; and, the
issuance of ministerial decrees without prior consultation with MOT and other
stakeholders.

• Small Size of Tourism Companies in the market: This increases the cost of doing
business: licensing procedures, land registration, etc…and decrease the efficiency
when negotiating with foreign counterpart or foreign tour operators which results
in fierce competition, price war and low quality of service delivery.

3- Opportunities

• Untapped resources: There are new areas within the vicinity of North Coast and
Marsa Matrouh, Red Sea Area and some governorates in Upper Egypt like
Sohag and Assuit can benefit from the successful marketing efforts and well-
established infrastructure (international airports) and the improvement of new
roads facilities.

• Increasing Traffic diverted from Asia and Eastern Europe: Target higher yield
tourism segments.

• Encouraging Yacht and shopping tourism: facilitating rules governing Marina's


investment and setting new customs regulations to ease importing goods.
• Environmental regulation: Improving waste management activities and systems
are under re-organization in some touristic areas. Quality standards becoming
among the most important factors influencing destination choice.
• Strong government support: Preparation of National Tourism Sustainable
Development Plan. Enhancing infrastructure especially airports and aviation
regulation by allowing to Charter flights to operate in all Egyptian Airports by
adopting and Open Skies policy for Charter.

• Effectiveness of Marketing and Promotional Strategy: Branding Egypt needs


marketing efforts, participating in the main international fairs, and creating a

29
sound of integrated marketing plan which will correctly communicate with
external markets to appropriate segments with correct messages.

• Improving business Climate: Rules and regulations governing foreign direct


investment and foreign ownership restriction imply the growing interest of
foreign investments and particularly Arab capital from Saudi Arabia and the Gulf
States confirmed by the purchase of state-owned hotels under the privatization
program.

• Airports Expansion: A comprehensive scheme of airport modernization where the


existing airports are subject to development and expansion according to
international standard. Contracts for private sector airports are signed under a
BOT concept for infrastructural development.

• Awareness Campaign: By creating awareness in the Egyptian society of the


economic importance of the tourism.

• Human resources Development Program: Development of human skills and


improvement of quality services form today is considered to be an integral part
of any tourism strategy seeking sustainable development. This project stems
from the joint commitment of the government and private sector Egyptian
Tourism Federation Chamber ETFC to improve vocational training and upgrade
the unskilled personnel in sites by a mobile trainer system in three sectors,
namely tourism, construction and manufacturing.

4- Threats

• Continuity of Political Instability, Terrorist acts and War in ME.

• Competitiveness of countries in the region: The growing regional competition


from other destinations (Turkey, Dubai, Tunisia) pricing and marketing
policies of other destinations tending to cut prices.

• Internal Price competition: Excessive recourse to price cuts especially in


destinations with oversupply capacity Red Sea and South Sinai areas which
results in fierce competition, price war and low quality of service delivery.

• Increasing tendency towards mergers, consolidation and alliances: Such


practices are quite common among tour operators, travel agencies, hotel
30
groups, airlines, restaurants and entertainment companies. They constitute a
potential threat to domestic firms by controlling tourist markets and
distribution channels.

• Weak Transportation Infrastructure: Progress of Road infrastructural


development is still slow. Limited number to the available dockage capacity
and the number of the berth on the Nile; the inadequacy of taxi services;
Facilities of the roads leading to tourist destinations; and, the restrictions
imposed on private airline companies for scheduled international services and
for domestic flights to main destinations (e.g., Luxor, Aswan and Abu
Simbel).

• Interference of municipalities and Central Authority: Lack of proper


coordination between the local authorities in governorates and Ministry of
Tourism and other Ministries providing Tourism related services.

Section Two: Regulatory and Institutional Framework

In our analysis we try to examine the relation between tourism and related
services and laws and regulations governing the function of tourism establishments
in order to explore means and conditions for maximizing the contribution of tourism
in GDP and to employment, and to pinpoint the temporary suspension of issuing
licenses and the main limitations on market access that affect foreign as well as
domestic investors in Egypt.

This section reviews the legislation and the regulations affecting tourism
sector. It also examines the policy reform adopted to enhance tourism investment
and evaluates the positive and the negative impacts of these reform policies,
providing an economic assessment of the tourism sector in Egypt.

2-1 Legal Issues and Regulations affecting Tourism Sector:

After the descriptive analysis of the situation of Tourism and its economic
impact, we have discovered that GOE made major changes and reform procedures in
tourism by setting new strategy based on:
- Increasing tourism investment in untapped areas such as
Mediterranean coast.
31
- Effective international promotional to attract visitors.
- Encouraging repeat visits of tourists in Egypt.
- Ensure vocational training programs and capacity building programs.

The main mechanisms used by GOE is to ensure transparency through the


effective use of the internet and the establishment of the one-stop shop which deals
with all regulatory requirements applicable to investors from all branches of
government.

The legal and regulatory framework for investment could be made even more
transparent through Tourism Development Policy (TDA) policy of supplying land at
a nominal price ranging from US $ 1 -10 per square meter, depending on
infrastructure facilities provided by the government in the areas. TDA also facilitates
access to soft loans for developing infrastructure projects according to a number of
General Principles4:

1. 27% is paid in advance; the rest land value is paid over 7 years with permitted
period about 3 years.

2. Variety and integration of activities and uses.

3. Flexibility of Time Schedule.

4. The investor deals with one Authority to achieve performing of his project.

5. Providing technical assistance to investors when needed.

6. Freedom of dealing with the project stocks.

7. Freedom of dealing with project units and land.

This is in addition to the privileges granted to private concerns operating


under the Investment Law No.8/1997.

The main important legislation (Laws, Presidential, Ministerial Decrees and


Regulations) governing the Tourism activities are the one related to regulating Hotels

1- After filling possessing application, presenting the investor financial state and presenting
previous experience in the tourism field.
• The project assumes a legal form as an Egyptian Joint Stock Company.
• Issued Capital not less than 50% of the investment expenses of the proposed project.
• Project Stages: Preliminary approval stage; Final stage; Executive stage.
• Registration stage and property transfer.
• Land attachments should be represented in the form of selling or renting or benefit rights.
32
and Companies issuing and licences. Law 38/ 1977 and its amendment 118/1983
consists of the essential law ruling the issuance of tourism companies it is being
reviewed by the government to reduce or eliminate most of the eventual restrictions
to facilitate the process of entry and exit of companies and to regulate the market for
either incumbent and potential companies.

The other important laws that have an impact on the investment in tourism are
Law 1/1973 related to Hotels and Touristic Construction, and its executive statutes
the Ministerial Decree 181/ 1973 which explained the Conditions & Procedures of
Licensing Hotels & Tourist Establishments. Both have been under consideration
which would aim at eliminating any remaining restrictions on foreign investment in
the travel agency segment (Table 1 in appendix). For example an amendment to law
230/1996 for organizing the possessing of buildings and lands for foreigners have
been made by a Ministerial decree 548/2005 to facilitate possession and benefit of
residential units for foreigners in some areas removing any remaining restrictions on
residential tourism (the purchase of holiday residences by foreigners in Egypt).

2-2 Policy Reforms:

By examining and analysing the above laws and regulations beside many
others related to the issuing and establishing of some institutional entities and
tourism authorities, we could realize that many reforms had taken place to enhance
tourism.

The latest report published by OECD in 2007 evaluated Egypt's investment


climate and openness to FDI in 9 sectors (tourism, construction, distribution,
business services, telecommunications, manufacturing, finance, transport, electricity)
using the FDI Regulatory Restrictiveness Index RRI. Three main categories of
restrictions where measured in a cross-sector comparison between Egypt and OECD
and Non-OECD countries: the authorized level of foreign equity holdings (0-100%);
Screening and discriminatory notification requirements; Other restrictions including
limitations for foreign participation in boards of directors, on movement of
personnel, and operational restrictions, such as domestic contents requirements. It
indicates that Egypt index was much higher than both the OECD and the non-OECD
averages in seven of the nine sectors covered: tourism, construction, distribution,

33
business services, telecommunications, transport, and electricity. The highest score of
RRI was for the construction sector, tourism was ranked less restrictive (the fifth)
due to limitations on market access in tourism industry that affect foreign investors
(as well as domestic investors) which includes the temporary suspension of issuing
licenses since the government has temporarily stopped issuing licenses for tourist
operators while the tourism law is Regulation of Tourism Enterprises Law 38 /1977
is being reviewed (OECD, 2007).

In this respect, we can identify both positive and negative impacts of the
policies legislation reforms, and regulations affecting the investment:

Positive Impacts: Many regulations and laws were very significant in


tourism sector especially in the hotels and accommodations branch, in the diversity
of the tourism products (diving, safari, entertainment facilities) and in foreigners’
possession of land and buildings. The later amendment allowed foreigners to be
treated as Egyptians in terms of possession of new residential units after obtaining
the approval of the concerned authorities indicating some areas: Sidi Abdul Rahman,
Ras El – Hekma in Marsa Matrouh area and Hurghada in Red Sea area. It is also
premised by a Decree from concerned authority and approval of the concerned
authorities that foreigners have the right to obtain Residential units for approximately
99 years in Sharm El Sheik city; this is beside the right to use of land and building
(usufruct law) and not to own properties only in Sinai.

Other steps taken by GOE have eased the issuing of building permits for
hotels and tourist establishments, and allowed private investment by participation in
infrastructure projects (e.g., roads, airports, ...) under BOT and BOOT arrangements
at an accelerating pace through deregulation, privatization and adoption of liberal
laws and regulations processes ( Ragab, 2005).

As for monetary policies, despite of some obstacles that may face investors
concerning a tight credit policy and the reluctance to finance SME (e.g., lengthy and
cumbersome procedures for loan approval) there is a trend to decrease high cost of
finance in terms of interest rates, collateral, maturity and grace periods.

Negative Impacts: On the other hand, investors encounter many


administrative impediments as we can mention the multiplicity of administrative

34
authorities in charge of supervisory functions, the lack of coordination between local
administration and central authorities concerning land allocation and local fees
where they could impose new fees without adequate prior notice period. In this
respect other ministries (e.g., finance, aviation, culture and environment….) have
also supervisory rights by issuing ministerial decrees without prior consultation with
MOT, EFTC and other stakeholders (imposition of airport departure tax; increase in
municipalities’ levies above the approved 2%; abolition of tax incentives under the
amendment Law 13/2004 of Law 8/1997 where they were previously granted).

These negative impacts imply policy interventions within the framework of


a tourism development strategy taking into consideration the liberalization of
international transactions in tourism services. These interventions have to include
identification of roles and responsibilities of various government bodies and
agencies both at the central and local level. A long- term tourism sustainable
development plan has to be prepared to review the existing legal and regulatory
processes currently applied within the principal objective of achieving 25 million
tourists by the year 2020.

Specific regulations applying to the tourism sector might have such objectives
as consumer protection, ensuring financial responsibility, or the development of the
local economy and the domestic tourist industry. A lack of regulatory transparency,
or the denial of national treatment, might also act as general barriers to international
trade in tourism services.

2-3 Vision to the Tourism Strategy through a Tourism Sustainable Development


Plan and its wide economic impact

According to UNWTO, sustainable tourism is roughly defined as the meeting


of the needs of present tourists and host regions, while protecting and enhancing
opportunities for the future. "Tourism Sustainable development" can be defined as a
continuous improvement in the fulfillment of the needs of a population without
exerting a negative impact on the environment or the future generations.

Although mass tourism has often been blamed for undermining the socio-
economic basis of "traditional" local life, positive effects of tourism can actually

35
include the revival of local arts and handicrafts. Strong motivations for
environmental protection exist at both the industry and client levels.

To develop tourism as a major engine of socio-economic growth with a view


to maximising the economic impacts of tourism through the creation of sustainable
livelihoods and, using tourism as a means to protect and preserve the country's
heritage a Strategic Tourism Development Plan was recommended by UNWTO and
the Earth Council. Such a plan have to include a long-term vision for tourism
development to the year 2020 and present a detailed action plan not only to set
standards and measures as a contribution to sustainable development but also to help
in poverty alleviation.

Egypt starts to design its plan where it covers such issues as waste
utilization, energy and non-renewable resource conservation, water management,
local community involvement customer awareness and staff education and training.
Also includes mechanisms for the development of consultative arrangements
between government, industry, local communities and environmental interests. In
addition tourism topics are included: market research branding and promotion;
product development and diversification; conceptual zoning and land use
developments plan for new priority areas; infrastructure development; human
resources management; crisis management; and, SME business development
strategy.

By reviewing and evaluating the existing range of techniques and incentives to


encourage private sector investment in tourism, there are many recommendations for
the development of a revised set of incentives, especially the obstacles that hinder
current small and medium scale enterprise development at community level.
However, it needs also an appropriate and transparent regulatory framework, as well
as the establishment and recognition of mandatory or voluntary standards and best
practices. These small-sized domestic enterprises move to the formation of strategic
alliances to face the increasing tendency of trans-national corporations towards
mergers, consolidation which could compete with locals in the market through
General Agreement on Trade in Services GATS commitments and trade
liberalization in tourism, especially with the adoption of investment law 8/1997 and
its amendment by Law 13/ 2004 which opened up several domestic and foreign

36
tourism projects besides other services sectors for investments (Ragab& Sakr. H,
2005).

Section Three: Potential Impact of Increased Liberalisation of Tourism

In the present global and rapidly changing market, the capacity of countries
to compete in tourism and travel related services (TTRS) lies at the heart of efforts
aimed to attract national and international visitors. The ability to supply tourism
services is highly dependent upon infrastructure improvements and therefore should
continue to grow given the increased commitments of WTO Members, including
emerging economies, to liberalize and improve access for basic sectors such as
transport, telecommunications, energy, etc. Therefore this depends on the
investments made to create an attractive and safe product, enhance its quality and
provide a friendly and encouraging competition in environment.

It brings into picture the tourism enterprise and hence trade in tourism
services, as well as tourism destinations whose quality "tourism product" is the sum
of contributions and processes resulting from many stakeholders, both private and
public. The concept of quality of tourism product includes the following:

• Trade in tourism services, including access to tourism markets,


competition and globalization;
• Safety and security, including health issues;
• Guidance, harmonization and recognition of quality-related standards,
where the International Organization for Standardization (ISO) has formed
a working group to examine standards on terminology for hotel
accommodations; and
• Movement of natural persons and human resource quality.

This section explores the effect of liberalization of tourism and its related
sectors in the context of GATS. First sub-section identifies the scope and definition
of tourism within the GATS. Second, it discusses Egypt's commitments where most
evidence has showed that tourism in Egypt was liberal on each sub sector. Third, it
presents a cost-benefit analysis of liberalization of tourism. Fourth, it negotiates
opportunities and challenges of the bilateral requests presented among Arab
Countries in GAFTA and competitors in the region in the context of Conditional
37
Revised Offer in GATS where the section presents the institutional and regulatory
aspects that government look forward to adopt to reduce trade policy uncertainty, to
increase predictability for investors and to facilitate integration into global markets.
Finally, it discusses the questionnaires and interviews done with a sample of Tourist
establishments

3-1 Scope and definition of Tourism within GATS:

Tourism, broadly defined, is regarded as the world's largest industry and one of
the fastest-growing, accounting for over one-third of the value of total world-wide
services trade as mentioned before. Tourism demand, both domestically and
internationally, is directly related to income levels, and therefore has prospered as
global wealth has increased.

3-1-1 Classification of Tourism and Travel Related Services under GATS

Under GATS, the term TTRS is introduced and tourism activities are of prime
interest to foreign enterprises which can easily enjoy market access through
commercial presence and movement of personnel.

Tourism and Travel Related Services in GATS category 9 of the Services


Sectoral Classification List (MTN.GNS/W/120) based on "Standard International
Classification of Tourism Activities" (SICTA) of the UNWTO. The SICTA
identified approximately 70 specific activities related to supplying tourism services;
in addition, another 70 activities at least partially concerned with the supply of
tourism services), is distinctly limited in scope where the main items of world-wide
tourism expenditure, were accommodation, meals, local transport, entertainment and
shopping.

The list is divided into four sub-sectors, the first three of which have
associated listing under the United Nations' "Provisional Central Product
Classification" (CPC). These sub-sectors, and their CPC numbers, are as follows:

A. Hotels and restaurants (including catering) (CPC 641-643);


B. Travel agencies and tour operators services (CPC 7471);
C. Tourist guides services (CPC 7472); and,
D. Other.

38
Each of these sectors is divided to sub-activities providing related sections
dedicated to supplying services. No further sub-classifications are currently provided
for under W/120.

GATS leaves out many tourism services activities, such as computer reservation
systems, transport, hotel construction, and car rentals, and recreational, cultural and
sporting services which are have typically been placed within those general services
categories and are regarded by the UNWTO as key tourism-related industries (WTO,
2000).

Under the Provisional Central Product Classification itself (WTO, 1998):

- CPC 641 (Hotel and other lodging services) is divided into:


- CPC 6411 (Hotel lodging services)
- CPC 6412 (Motel lodging services)
- CPC 6419 (Other lodging services including holiday camp services,
youth hostels, etc..)
- CPC 642 (Food serving services) is divided into:
- CPC 6421 (full restaurant services self-service facilities
-CPC 6422 (catering services)
-CPC 6423 and other CPC 6429.
- CPC 643 (Beverage serving services for consumption) is divided:
-CPC 6431 (composed of services without entertainment)
- CPC 6432 those with entertainment.
- CPC 7471 (Travel agencies and tour operators' services) is not further
subdivided but it is composed of three categories: travel agency (r 67811), tour
operators (r67812) and tourist information services (r67813).
- CPC 7472 (Tourist guides services) is not further subdivided.

This may possibly encourage commitments to be made on those sub-sectors


as they would no longer have to be taken as a block. The aim is to relate tourism
policies and strategies to multilateral negotiations designed to achieve progressively
higher levels of liberalization with a view to promoting economic growth and the
development of developing countries. Briefings and debate on trade in tourism are
held periodically to help Members carry out comprehensive and informed trade
policies.
39
3-1-2 Modes of Supply:

GATS distinguish between four modes of supplying services: cross-border


supply, consumption abroad, commercial presence, and presence of natural persons
where their role in tourism liberalization can be as follows (WTO, 2007; Sakr. H,
2004):

- Cross-border supply is defined to cover services flows from the territory of


one Member into the territory of another Member (e.g. CRS5 and GDS 6). Tour
operators and travel agents in this case provide services by means of a
telecommunications network. In this context, GATS specific provisions are supposed
to facilitate trans-border flow of information by guaranteeing foreign suppliers fair
and non discriminatory access to, and use of, telecommunications network.

- Consumption abroad refers to situations where a service consumer moves


into another Member's territory to obtain a service. Tourism is the best known
example of this mode of supply, knowing that GATS have not any role to eliminate
impediments faced by international tourists in some countries concerning any
restrictions for traveling7. It also provides cover, inter alia, for measures necessary
to: protect public morals or maintain public order; protect human, animal or plant life
or health; or secure compliance with laws or regulations not inconsistent with the
Agreement including, among others, measures necessary to prevent deceptive or
fraudulent practices.

5
CRS are typically proprietary systems used to check flight availability, make reservations and often
to issue tickets. The same systems often can also be used for hotel reservations and car rentals. GDS,
on the other hand, are systems for "neutrally" grouping and displaying information from a range of
CRS systems (WTO, 1998).
6
Developing countries face significant cost and technical barriers to GDS access: small airlines and
tour operators find the booking fees of individual CRS prohibitively high, and the "back office
systems" in developing countries are also often insufficiently developed. Grouping into associations
could provide the necessary economies of scale for the CRS. Also, GDS could be developed on a
national basis (WTO, 1998).
.

7
In this respect, Growth and development of international tourism might be considerably affected by
restrictions on the tourist's ability to leave the country. GATS is likely to have only an indirect effect
on liberalization of such restrictions, as those related to visa and frontier/customs requirements for exit
and entry fall outside the agreement.(Handszuh, 1994).

40
- Commercial presence implies that a service supplier of one Member
establishes a territorial presence, including through ownership or lease of premises,
in another Member's territory to provide a service (e.g. domestic subsidiaries of
foreign hotel chains and tour operators and travel agents). In this respect GATS can
be beneficial in this area as it is designed to identify and then progressively eliminate
obstacles which affect companies providing services to ease travel, thus facilitate
investment in tourism services. There is a need therefore for careful consideration of
regulations on foreign participation in investment in tourism related services,
particularly hotels and restaurants and travel agents (Onguglo and Mucave, 2001).

- Presence of natural persons consists of persons of one Member entering


the territory of another Member to supply a service (e.g. tourist guide, accountants,
doctors or teachers). The Annex on Movement of Natural Persons specifies,
however, that Members remain free to operate measures regarding citizenship,
residence or access to the employment market on a permanent basis (WTO, 2007). In
common with many services, successful provision of tourism services depends to a
large extent on expertise and technical skills of company owners and employees.
Although GATS provide the ability to move personnel from a country to another for
a temporary entry and stay for a specific purpose, the Agreement can not guarantee
this free movement of labor across borders. It always depends on Labor and
Immigration laws and regulations set by the countries controlling the admission and
stay period of foreigner tourists and workers.

In regard to the level of market access and national treatment provided within
Member schedules, commitments by mode of supply vary widely for the Tourism
sector as a whole. The percentage of Members placing no restriction on market
access (i.e. a "None" entry in their schedule for all sub-sectors where commitments
are made) is highest for consumption abroad (at 49 per cent), and lowest for the
presence of natural persons (at 1 per cent). Regarding national treatment, the pattern
is similar, with the percentage of Members having no restrictions on their
commitments at 52 per cent for consumption abroad and 11 per cent for the presence
of natural persons. Regarding "Unbound" modes of supply, i.e. those for which no
commitments are made, the level in respect to both market access and national

41
treatment is highest for cross-border supply, due to primarily a lack of technical
feasibility, at 27 per cent and 24 per cent, respectively.

Table3-1 illustrates the extent of commitments in tourism of the 112


members in terms of market access and national treatment by mode of supply till
1998.

Table 3-1 Number of Countries by Mode of Supply, Tourism and Travel


Related Services (112 countries)

Mode of Supply Market Access National Treatment

Full Part No Full Part No

Cross-border supply 33 49 30 37 48 27

29% 44% 27% 33% 43% 24%

Consumption abroad 55 47 10 58 42 12

49% 42% 9% 52% 38% 11%

Commercial presence 25 86 1 49 61 2

22% 77% 1% 44% 54% 2%

Presence of natural persons 1 105 6 12 90 10

1% 94% 5% 11% 80% 9%

Source: Sakr. Hala, (2004) , "GATS Potential Impact on Tourism ( Egypt: A case Study)", PhD
Thesis, not published, presented to Faculty of Economics and Political Science, Cairo University,
p.85. WTO, 1998

The above Table 3-1 shows the difference of the importance that Members
give to liberalize their tourism sector concerning each mode. First, we can notice that
commitments to full national treatment are exceeding market access in all modes
reflecting the reluctance in market freeing. Second, Mode 2 consumption abroad and
Mode 3 commercial presence are demonstrating that Members are willing to make
commitments with higher degree of liberalization than Mode 4 presence of natural
persons. Considering the commitments by main activity and sub-sector activities we

42
could identify that hotels and restaurants collected the greatest number of
commitments followed by travel agencies and tour operator services.

3-2 WTO Members' Commitments in Tourism:

Some 140 economies UNWTO Members at present are at the same time
Members of the GATS and, to varying degrees, have assumed commitments in
individual service sectors. Tourism commitments have been made by 125 members
more than in any other services sector; it reflects their desire to expand their tourism
sectors and to increase inward FDI as part of efforts to promote economic growth. In
the view of UNWTO, the tourism sector was already highly liberalized before the
Uruguay Round negotiations and a few major obstacles remain.

Reviewing the current situation of other Members' commitments we find


that 12 have made commitments in all 4 sub-sector, 52 have made in just 3 sub-
sectors, 40 made in two sub-sectors and 21 made only commitments sub-sector in
hotels and restaurants (WTO, 2006).

The number of commitments made also varies widely by sub-sector. Hotels


and restaurants (sub-sector A) shows the greatest number, with 125 Members (i.e.
all) making commitments, followed in order by sub-sector B, Travel agencies and
tour operators services with 102, sub-sector C, Tourist guides services, with 63, and
sub-sector D, Other, with only 15 commitments(WTO, 2007). Under "Other", a
number of Members have given no description in their GATS schedule of what is
included; other Members have listed specific activities, in one case including
transport-related commitments. In other words, nearly one-half of the Members
making commitments have done so in three or more sub-sectors. This indicates
Members benefit to expand tourism, reduce and eliminate barriers to market access,
and provide national treatment around the world ( Sakr.H, 2004).

3-3 Egypt's commitments in Tourism:

3-3-1- Horizontal Commitments

Horizontal commitments: are commitments that apply across all sectors that
have been scheduled in the members' schedule of commitments.

43
According to Egypt's schedule of commitments (Table 2 in appendix), there
are only two limitations related to specific modes of supply, a fact that puts Egypt
among the less restrictive countries. These are:

- Market Access MA: Concerning mode 4 (Temporary movement of natural persons)


according to the Labor law 137/1981 and its executive regulations the number of
foreign personnel necessary to the supply of services in any entity, regardless of
number of its branches, shall not exceed 10% of the total number of personnel
employed therein, unless otherwise specified in a Sectoral entry of this schedule.
Egypt's conditional revised offer specifies certain categories of mode 4 that are
allowed to enter and stay in Egypt on temporary basis as well as identifies the duration
of stay and required qualification of these categories which are; Business Visitors and
Intra- Corporate Transferees (senior managers and specialists).

National Treatment NT: Concerning Mode3 (Commercial Presence),


Authorization is required for the acquisition of land and/or real estate property.
Applications in this respect are considered on the basis of the evaluation of the
specific projects for which land acquisition is requested and in accordance with
national policy objectives.

In general, Egypt's commitments are very few, there is no argue that market
access is not restricted on the commercial presence, and for the entry and stay of
foreign personnel it is open for scarce and skilled profession on condition of
providing adequate training to domestic employees, rather than simply setting a
maximum percentage of total workers.

3-3-2 Specific commitments:

A. Hotels and Restaurants:

Sub-sector Hotels and Restaurants in Egypt are rather liberalized where


Egypt's laws and regulations do not restrict on mode 3 (commercial presence) and/or
MA and in NT. Foreign enterprise and hotels chains are given licences according to
the law 8/1997 and its amendment by law 13/2004.

The granting of licences for the establishment of new hotels is monitored by


Ministry of Tourism MOT based on general principles implemented by TDA where
they differentiate between 2 types of projects: Limited Development Project and
44
Integrated Development. The first type is applied upon areas less than 500 thousand
m2 to construct tourism projects or various residential units or recreational project.
The investor has the right to sell and deal freely with these units. The Integrated
Development is applied upon areas more than 500 thousand m2 to construct an
exemplary project and supply rest area by infrastructure. The investor can deal freely
with these areas that have been supplied by infrastructure and residential units (e.g.
Hotel activities, Sport activities, Commercial activities, Recreational activities,
Service activities, and Residential units).

There are only some limitations on market access but it doesn't reflect
discriminatory applications, it is more of regulatory or capacity considerations related
to the requirement of economic needs tests ENT which is applied to the extent of
market saturation. The issuing of licenses for Nile Cruises and the number of tourist
boat operator licenses are limited to avoid overcrowding and other problems related
to environmental issues (e.g. sewage, safety,). Concerning infrastructure, there are
obstacles related to the available dockage capacity, boat routes, depth of the Nile in
some areas, bulk traffic due to the limited number of locks and the current number of
the berth on the Nile.

Other limitations on MA and NT concerning mode 3 could be mentioned:

- Providing Casinos services (gambling) are only allowed for foreigners (to
protect public morals and/or maintain public order) in 5 stars hotels and in 4
stars hotels in touristic sites.

- Authorizing limited foreign equity contribution to a maximum of 49% in


projects provided in Sinai, although a Ministerial decree in late 2006 have
removed any remaining restrictions on residential tourism (the purchase of
holiday residences by foreigners in Egypt) in the law No. 230 of 1996 for
organizing the possessing of buildings and lands for foreigners and allowed
foreigners to have the right to obtain and usufruct Residential Units for
approximately 99 years in Sharm El Sheik city.

- Training Egyptian employees as a condition of establishing a Hotel or


restaurants provided by the foreign natural persons within the firm during the
duration of contract. In this respect, such restriction should be cleared

45
identified with the number of employees to be trained and the duration of
training.

B. Travel agencies and tour operator services:

There are limitations on both MA and NT concerning the commercial


presence (mode 3). For MA, it implies limitations on the total number of services
operations depend on the requirement of economic needs test ENT. Licenses have
also been restricted in the tourism sector to reflect non-discriminatory applications
of regulatory or capacity considerations. In addition a temporary suspension of
issuing new licenses for companies because of the MOT reviewing of tourism
enterprise law 38/1977 and its amendment 118/1983 where most of the restrictions
and the limitations on foreign investment in the travel agency segment would
eventually would be reduced or eliminated.

Regarding limitations on NT, it implies training of Egyptian employees


should be performed by the foreign natural persons within the terms of the contract.

Other Tourism Services:

- Tourism Management Services: this includes Tourism property


management and rental lease tourism property: limitations to MA for mode 3
are opened "Bound" only for representatives offices. The total number of
services operations depends on the requirement of ENT. As for NT, it is only
limit to training of Egyptian employees should be performed by the foreign
natural persons within the terms of the contract

- Tourism Transport Services which includes 2 types, First type: land


transport services: Long distance tour buses; Short Distance tour buses;
Second type: Inland Water Ways: Inland Water Passenger transport; Inland
Water local tours; Cruise ships. All commitments are either " none" or
"unbound", except for Inland Water local tours and Cruise ships type for the
second type where it is limited in both MA and NT for mode 3 as subject to
the physical capacity of the Nile the number of tourist boat operator licenses
is limited according to the available dockage capacity and the number of the
berth on the Nile.

46
- Tourism Training Institutions, Tourism Related Convention and
Institutional Food Service Caterers (with the exception of Airport
Catering Facilities which are confined only to the national air carriers).
Egypt's commitments indicate no restrictions or limitation either MA or NT on
mode 3.

- Tourist Guides Services is not included in Egypt Commitments.

In conclusion, by reviewing Egypt's commitments we could discover that


tourism is rather liberalized, where about 73.5%" None" is in the schedule reflecting
that most of the sub-sectors are opened. Restrictions which remained in the schedule
are concerned with the items related to training personnel that are left according to
each contract and the number of operations which are connected to ENT.

These findings imply to ask two questions that can be answered in the following
section:

• How far tourism performance in Egypt has been affected by openness?

• What could be the next steps to increase benefits or decrease costs?

3-3 Implications of Egypt's Commitments in WTO: Cost- Benefit Analysis

The implication of Egypt's commitments in WTO and evaluation of GATS


impact have to be considered in relation to the sector's performance to identify
whether these commitments have benefited the sector in Egypt by enhancing tourism
activities or hindered it by increasing tourism costs for the country. The below
results will draw up to discuss the impact on the sector development

3-3-1 Tourism Achievements:

Over the last few years, tourism has been the fastest growing sector in Egypt
as mentioned before, looking throughout the period of the past 10 years: 1996-2006,
we discover that as Table 3-2 presents: Number of tourist arrival has tripled;
number of nights has recorded an increase around 270%; receipts has more than
doubled, tourism investment in hotels has grown and rooms capacity has risen with
148%, number of enterprises and travel agencies has more than doubled and number
of guides has increased by 64%.

47
Table 3-2 Tourism Achievements in Egypt (1996- 2006)

1996 2006
Tourist Arrival (million) 3.9 9.1
Nights (million) 24 89.3
Receipts (US $ billion) 3.2 7.6
Rooms( thousand) 71 176
Companies 4676 9946
Guides 816 1340

Source: Ministry of Tourism, 2007.

3-3-2 Benefits of Commitments under GATS:

No one can argue about the benefits and the positive impact of GATS on
tourism sector which can be easily determined by the sector's performance in terms
of inbound tourism growth as mentioned above. Figures confirm that liberalization
of tourism services through the different modes of supply and the horizontal
commitments related to MA and NT had a great effect on growth in tourism flows.

FDI and Tourism Investment Projects:

The increased number of hotel rooms (including tourist villages and floating
hotels) reflects Egypt's commitments in GATS and the liberalization of tourism
sector. On the other hand, the unrestricted access to foreigners in the tourism market
confirms the significant increase of FDI inflows not only in hotel accommodation,
but also in tourism related services, due to the positive policy reforms that have been
undertaken to promote investment, and the removal of many obstacles to foreigners'
entry (OECD, 2007).

In addition, the privatization program which includes 20 public hotels -with


the exception of those with historical values- encourages investors through an
investment promotion policy sponsored by GAFI.

As a result of, the number of companies (travel agencies and restaurants) and
tour guides has risen as shown in Table 3-2 above which had an impact on the
tourism contribution in GDP by 11.3% directly and indirectly (MOT, 2007).

Job Creation:

Another benefit could be added is the increasing job creation trend directly in
lodging, restaurants, and tourism companies and indirectly if we broadened the
concept of tourism activities to include the tourism related services in the
48
construction, manufacturing industries, agriculture and transportation sectors. This
expansion of number of jobs implies upgrading manpower skills in tourism activities
to improve the quality of tourism labour. This is done through designing training and
vocational programs for the short term with the cooperation of ETFC to develop the
tourism labour market and ameliorate the service especially in the kitchen, food and
beverages services, housekeeping and drivers. In the long term, MOT has signed
several protocols with many entities, e.g.: Cornell University, for upgrading the
managerial level. In addition, to create a sustainable competence in service delivery,
steps towards revising the academic curriculum (faculties, institutions, and schools)
of tourism and hotelier in Egypt and increasing the number of tourism education
facilities as well as structured training programs are subject to coordination with both
Ministry of Higher Education and Ministry of Education. Also, there are negotiations
with Ministry of Labour and the syndicate of tourism workers to improve their
working conditions and formalizing the informal.

In this respect, Egypt's commitments tried to exploit the potential


opportunities of upgrading human skills and the provision of technical assistance
offered by developed countries to others in GATS. Management contracts include a
clause necessitating provision of training local personnel; however, this commitment
was always a request from other countries to be more detailed and more specified by
defining the concept of training, selecting the number of trainees and deciding the
duration. Some other Members in the GAFTA suggest excluding management
contracts especially in CPC 641 (hotels and accommodation) from this commitment.

Technology:

Enhancing capacity building in information and telecommunication


technology relating to tourism business is an important target to developing countries
to upgrade their employment skills and improve the quality of services. The
implications of technology development and the increasing power of electronic
tourism (e-tourism) are reflected on the destination choice, the business practices, the
tourism product and the service delivery as a new technology adopted in hotels,
travel agencies and other entities ( Alford, 1999). Using recent technological tools
(Web, internet access, GDS/CRS, e-commerce penetration, etc....) facilitates
operations, gives more accessibility to tourists and operators and make travel

49
products globally accessible at a much lower cost. Unlike most other tourism-related
services where a physical presence is required, CRS and GDS and are characterized
by supply of the service on a cross-border basis. This becomes one of the main
criteria and indicators of improving tourism competitiveness where the benefits could
be extended to developing countries as their telecommunications systems improve
and standardization of electronic systems and interfaces could also reduce costs.

Poverty Alleviation:

As rapid growth in poor and developing countries has not always reduced
poverty as much as hoped, tourism is beginning to be viewed as a promising area of
economic activity that could become a structural part of poverty alleviation and
sustainable development programs. In addition, it has a role that has been previously
recognized in the fostering of global competitiveness of international trade, wealth
creation and regional development (UNWTO, 2007b). Market opening in tourism
sector when achieving universal service offers a considerable number of job
opportunities for the poor, the geographically disadvantaged people and women; it
also helps them to develop their economy as a necessary reform to improve growth.
Increasing tourism investments in remote areas ensures the integration of the
inhabitants by providing new jobs especially by utilising their economic potentials
and using the natural resources. Accordingly, women in these areas are empowered
and provided with new marketing opportunities that help them earn an income to
sustain their family responsibilities which ensures and maintains security and
stability. ILO estimates dating back to 1983 indicated that a third of the global
workforce in tourism was made up of women. According to more recent estimates,
the proportion of women in the tourism industry has risen to 46%, while in catering
and accommodation they represent over 90% of all employees (ILO, 2001). For
example, in Austria, women account for 65% of the (H&R) labour force while the
comparable figure for the United Kingdom is approximately 60% (ILO, Oct. 2003).

In the case of Egypt, there are plenty of tourism occupations that are held by
females. In fact, the catering and accommodation services encompass a multitude of
jobs that are often dominated by women. At least 25% of the (H&R) work force is
estimated to be female workers; and this proportion is likely to increase over time
with the spread of education and growing awareness of the importance of women

50
work. In fact, female participation rates had been rising in the past decade and this
trend is likely to continue as a result of increasing school enrolments, growing
tendency to delay marriage, declining fertility with mounting deliberate birth control
practices as well higher persistence to remain in the labour force after marriage. Also,
there is a direct correlation between the degree of socio-economic development and
women's access to this section of the labour market (Sakr.M, 2005)

According to CAPMAS Hotels Statistics (CAPMUS, 2007), women are


accounted for 22%-28% of total tourism workforce distributed in the three main cities
Cairo, Giza and Alexandria, where 60% of female workers are employed in lodging
facilities located in these cities. Another 20 % work in the 4 main tourist destinations:
Luxor, Aswan, South Sinai and Red Sea areas (mainly Sharm El-Sheikh and
Hurghada).

In 3 and 4 star hotels; technical services’ jobs account for 15% of total male
employment against only 4% in the case of women; whereas for general services and
assistant works, the share of male employment is 48% compared to 60% for females.
The distribution of hotel female employment by educational level indicates that almost
25% of women employees hold university degree and another 60% with intermediate
and above intermediate education levels.

The 3-5 star hotels are the main providers of female jobs with relatively high
educational qualifications. Most women are confined to low-level jobs, and they are
often relegated to traditional professions or support functions. Women tend to be in
occupations with low career development prospects whereas managerial positions are
male-dominated. As a result, the degree of occupational segregation by gender is quite
apparent in the tourism labour market.

Concerning wages, there is no wage differential by gender for the same


occupation in the formal hotel business according to (Article 35) in Labour Law
12/2003 which does not permit gender discrimination in remuneration (Sakr.M, 2005).

Newly emerging resort in South Sinai, Red Sea, New Valley and Northern
West Coast of Alexandria will attract native women living in these areas, because they
would have their proper amenities, (e.g., local transport, accommodation, social

51
services and other social facilities which (Articles 88-92) of Labour Law12/2003
request.

3-3-3 Costs of Commitments under GATS:

Difficulty arises when we need to identify quantitatively the costs of tourism


liberalization which is not an easy task. The scarcity, inadequacy and the
inconsistency of statistics concerning tourism consumption in general affects
measuring the costs of tourism; as a result it doesn't reflect the real economic
contribution of tourism. Tourism is a demand driven activity strongly influenced by
services' purchasers rather than suppliers, implying no barriers for tourism
consumption. The Tourism Satellite Account TSA is likely to provide a proper
methodological tool for a solid and comprehensive assessment of tourism and
economic significance and impact, although it is still a new tool under preparation
not adopted by many countries (UNWTO, 2006; Tohamy, S. & Swinscoe, A., 2000).

Mergers and alliances:

Economics, technology and logistics are said to be promoting mergers within


the tourism industry. In the United States, three-fourths of all hotels are part of a
chain, whereas the figure is only about one-fourth for the rest of the world (WTO,
1998). The increasing tendency towards mergers include takeover and acquisition of
local firms in the hotel business; long-term contracts between local hoteliers and
hotel groups, restaurants and entertainment companies; and consolidation and
alliances among tour operators, travel agencies and airlines which enabled them to
provide low prices and allow discriminatory access to networks in GDS/CRS. These
actions constitute a potential threat to domestic firms by controlling tourist markets
and distribution channels establishment of branches and offices in tourist
destinations. On the other hand, these new patterns in Egypt8 with a positive impact
on the number of tourists' inflow and increasing of FDI have a considerable reflect
on the workforce, where the implementation of mode 4 could create pressure on
skilled local workers and on unemployment, which could affect wages.

8
International tour operators started mergers/partnerships with local subsidiaries (Abercrombie and
Kent), or with local travel agents (TUI with Egyptian agent Travco, NICKERMAN with Egyptian
agent Blue sky, ITS with Noor El Hoda).

52
Environmental issues:

Resource damage and deterioration of historical and cultural sites, coral reefs,
beaches etc.., are considered a negative impact of the increasing openness of
international markets and an adverse effect of full liberalization due to the misuse of
these assets over time which would lead to the depreciation of some attraction
(Eraqui, 2005).

Financial Leakages:

Tourism liberalization implements many financial leakages such as: informal


currency exchange transactions, improper handling of fund transfers from
international tour operators to hotels, off-shore savings and investment, tax
avoidance, and an increasing providing of non registered sales (without invoice to
avoid tax sales) to tourists especially in shops and bazaars.

In addressing the above threats and costs, we could argue that:

• Mergers of domestic micro, small and medium enterprises MSMEs


and formation of strategy alliances to face trans-nationals’ practices
could be advocated as an effective mitigation measure (Sakr.M,
2005). The development of human skills and improvement of quality
of services in local jobs in the industry which the MOT has
undertaken as a top priority in its new strategy could form a crucial
step for sustainable development.

• Resource damages could be reduced by enforcing current regulations


and laws of environment and by adopting in tourism projects proper
maintenance and amortization program under the supervision of the
concerned authorities. In addition a public awareness program of
environmental issues has to be implemented to avoid losses and to
ensure sustainability. Promote eco-tourism places as quality
standards are becoming among the most important factors
influencing destination choice.

• Financial leakages could be minimized by measuring the real value


added of tourism and continuing addressing reform actions to
monetary and fiscal policies such as further improvements of the
53
customs administration; implement the tax refund system which
could facilitate tracing most of all unregistered transactions of sales
in shops and bazaars; enforcement of the intellectual property rights
law; and intensifying the fight against corruption.

3-4 Negotiations on existing commitments in tourism:

3-4-1 Egypt and GATS (WTO)

Egypt is one of the 30 countries to have submitted a conditional Revised


Offer in 2005 where its schedule of horizontal as well as sector-specific
commitments expands during the Doha round. At the horizontal level, Egypt
conditional Revised Offer proposes a relaxation to the entry and temporary stay of
natural persons. Further sector-specific commitments on market access are proposed
in construction and related engineering services, insurance and Insurance-related
Services, computer services, courier services and air transport services.

3-4-2 Egypt and Regional negotiations

Within the context of its regional trade relations, Egypt has pursued both
trade and investment related commitments with members of Euro-Med, GAFTA and
proceedings negotiations within the context of COMESA.

Egypt and Euro-Med: This association agreement is mainly focussed on


trade issues and provides for the establishment of a free-trade area by 2010. Egypt is
negotiating GATS plus within the Euro-Med Agreement beside the Bilateral
Investment Treaties (BITs) with EU countries where agreements provide
commitments (OECD, 2007).

Egypt and GAFTA, although, the safeguard provision in many trade aspects
which has been liberally used to lodge exceptions that render the GAFTA irrelevant
in real terms, there are several efforts especially in tourism to enlarge the size of
intra-regional investment and trade in services. In this respect Egypt is participating
in several negotiations within GAFTA, try to strength its bargaining power and to
maximize the benefit of its liberalization process. In the other hand, laws and
regulations in travel agencies are currently make reference to certain reciprocity

54
requirements. These requirements are specific to certain bilateral relationships within
the MENA region.

Concerning the request-offer process, many countries have sent their request
to Egypt, by reviewing most of these requests; we could find that most of these
requests focused on the following:

• Remove ENT requirements when issuing licences of Hotels and Restaurants,


Travel agencies and Tour operator, and Waterways Transports.

• Specify ENT with a greater clarity.

• Cancel restrictions on foreign equity and ownership, especially the constraint


on foreign equity limitation to a maximum of 49% in Sinai.

• Cancel screening and approval requirements for the numbers of board


members of directors.

• Remove restrictions on the number of operations in market access according


to the ENTs.

• Cancel the limitations on casino services in hotels and restaurants except in 5


stars hotels.

• Clarify the clause of training Egyptian employees in Hotels and Companies'


contracts and specify the number, the nature of contract and if it has to be set
out in the employment contract, the time and the type training to be provided.

• Remove all restrictions to Mode 4 where the number of foreign workers


allowed in any enterprise- regardless the number of branches- not exceed
10% of the total number of persons employed and especially rare
specialization.

• Adoption of a GATS visa, to facilitate the entry of Mode 4 workers and


remove all detailed and long procedures required.

• Apply full bound in tourist guides services.

Egypt's conditional revised offer in tourism (Table 3 in appendix) that was


submitted in the context of the GAFTA, has emphasised on offering a complete

55
explanation on all ENT widely used without clear defined criteria as a response to the
countries' requests presented to Egypt.

To clarify ENT Egypt has undertaken several steps as follows:

 Issuing licenses for tourist operators for both foreigners and locals is temporary
suspended while the Regulation of Tourism Enterprises Law 38/1977 is being
reviewed to eliminate any restrictions. Other licenses are also restricted in the
tourism sector to reflect non-discriminatory applications of regulatory or capacity
considerations, where number of tourist boat operator licenses is limited
according to the available dockage capacity and the number of the berth on the
Nile.

 The limitation on the total number of services operations depends on the inbound
tourist company's turn over for the past 3 years, which is decided to not less than
US $ 3 million yearly.

For the limitations of foreign equity:

 Law 8/1997 and its amendment in Law 95/2005 in addition to the reviewed
and proposed amendment to law 38 for the tourism companies would
eliminate remaining obstacles on foreign investment in travel agencies.

 Foreign investors can acquire land and real estate for business purposes
except in Sinai and border land zones without prior approval (law 94/2005),
however, they have an exception in Sharm El Sheikh concerning the usufruct
of residential units.

 For the limitation of foreign equity in Sinai, the same joint venture 49%
equity limit applies for all sectors for strategic and national reasons.

For Mode 4:

 Adoption GATS visa is a main requirement for Egypt and start to proceed
within GAFTA.

 Training Egyptian employees as a condition of establishing a hotel or


restaurant provided by the foreign natural persons within the firm during the
duration of contract. Despite that this limitation is not to a great extent
56
operative in practice, where there is no factual commitment to training from
the part of many hotel mangers and few of the management's companies stick
to the training clause in the contract especially training few professions, it is a
common request. In this respect, such restriction should be cleared identified
with the number of employees to be trained, the targeted professions and the
duration of training.

3-5 Vision and recommendations of business operators addressing their needs


of the future GATS round and increased Tourism liberalization

A questionnaire was conducted with stakeholders in tourism services directed


to the 2 main tourism establishments: Hotels and accommodations; and Companies
and Travel Agencies (Annexe 3) to evaluate their opinions towards increasing
liberalization in tourism and related services within GATS and if there is a possible
relaxation of any or all of the 4 modes of provisions in the revised offer of Egypt and
the responses to the requests from other countries9.

Limitations on Market Access: It was divided to 2 questions referring to what


extent they prefer that Foreign Service suppliers enter the Egyptian market and what
could be the legal form of their access where these questions were according to the
modes of supply especially mode 3 and 4

• For Hotels: an acceptance with no restriction on all modes, on the equity


level and the ownership ventures which according to the Investment Law
8/1997 and its amendment 13/2004 allow 100% foreign ownership.

• For companies and travel agencies: a refusal of the third mode (commercial
presence) with the exception for some related services; and an acceptance for
the fourth mode (temporary movement of natural persons) according not to
exceed the percentage mentioned in Labour Law 12/2003.

9
Several appointments were held with representatives of tourism establishments ( Companies, Hotels,
Floating Hotels, Travel agencies, ETFC, Ministry of Tourism) where 8 questions were asked about the
importance of liberalization of tourism and related services and its impact on growing business and
economic significance after a brief presentation about GATS; definitions of mode of supply and the
status quo of applicable regulations in Egypt; currently scheduled horizontal commitments in Egypt;
and the expected further commitments within GATS, GAFTA, EUROMED, and COMESA.

57
Concerning Modes of supply answers were as following:

• First mode of supply (cross border supply): No limitations and an


acceptance for further liberalization in both tourism establishments.

• Second mode of supply (consumption abroad): No limitations and an


acceptance for further liberalization in both tourism establishments.

• Third mode of supply (commercial presence):

- Number of Foreign Service suppliers allowed entering the


Egyptian market: Hotels' sector welcome entry of foreigners, there
is no specific number for suppliers; although Companies and
Travel Agencies refused the openness without regulating the entry.

- Type of appropriate legal entity of Foreign Service Supplier in


the market: Hotels accepted the liberalization in all 3 types
proposed, thus companies and travel agencies have refused any of
these types.

- Number of services operations that are allowed: Both hotels and


companies and travel agencies accepted with no limitations.

• Fourth mode of supply (temporary movement of natural persons):

- Categories allowed supplying services: it differs from the hotels' sector point
of view than from the Companies and Travel agencies vision. Despite that the
mode is accepted through the intra-corporate transferees for the first group, it
is refused for the second group except when it is consistent with the 10%
limit of foreign personnel of the total workforce in the labour law.

- In attracting high skill labour or qualified employees in areas where are


characterised with shortage of supply especially in junior jobs more than the
executive and high level profession to increase competitiveness and upgrade
the quality of the service.

Technology transfer: There were not any restrictions and special regulations in
transferring technology, in contrary all answers were positive to the use of new tools
of technology.

Limitations on National Treatment: for the Modes 1, 2, 3 and 4:


58
• There are no limitations on National Treatment, although registrations
procedures for any enterprise have been simplified in large part, some
licensing procedures remain lengthy and complex for both foreign and
domestic investors.

• Foreigners can obtain or possess land and/or real estate property with
no restrictions except in Sinai where it is limited to 49% of ownership
in accordance with the national policy objectives. In Sharm El Sheik
city foreigners have the right to obtain Residential units for
approximately 99 years after an approval from the concerned
authorization.

Section Four: Policy Findings

4-1 Egypt’s Tourism and Travel competitiveness:

Competitiveness is the degree to which a nation can, under free trade and fair
market conditions, produce goods and services that meet the test of international
markets while simultaneously maintaining and expanding the real income of its
citizens. An assessment of the impact of information and communication technology
(ICT) can improve the development and competitiveness of a country. Lets have a
look to the current ranking of Egypt: we would find that Egypt in the Travel and
Tourism Competitiveness Index TTCI 2007 was ranked 58, in Global
Competitiveness Index GCI 2007 was ranked 63 and in Arab World Competitiveness
Report AWCR 2007 was ranked 5

Many advantages distinguish Egypt’s competitiveness ranking where the


most important of these are : Low comparative price generally, in fuel prices, low
ticket taxes and airport charges, government prioritization in T&T10 industry and
high government spending in presence in tourism major fairs, and easy visa
requirements.

Although the efforts that have been done especially the Economic, Structural
and Political Reforms was reflected in an improvement and development in many
sector in FY 2005-2006 such in Travel and Tourism – as mentioned before- , in
addition to Oil and Gas, Industry, Agriculture, ICT (20% in internet users, falling of
10
Travel and Tourism
59
40% fees of ADSL connections), Housing and Real Estate, Construction and
Banking Services, we still need to adopt best practices to achieve the desired
development. These practices should be supported by a strategy capable to determine
the needs of beneficiaries and understand the potential barriers to reform. We need
reliable data to quantify the contributions of both tourism and environmental to the
economy.

What are the Barriers and the Impediments:

• Lack of innovative environment due to the low tendency to invest in R&D(


Research and development ) from both private and public sectors.

• Rise of business cost of terrorism which decreases the potential of doing


business.

• Poor level of healthcare and education as they are still inconsistent with the
international standards although significant improvement in primary
education but the quality and the Secondary and University levels are far
behind.

• Limited procedures of enforcing environmental regulations.

• Slow developments in infrastructure and transport system.

Other barriers could be addressed as the shortage in detailed information that are
necessary to identify strategies to strengthen the tourism industry and the
environment. The country also needs to ensure that investments in tourism actually
benefit Egyptians through increasing employment opportunities and income. At the
same time we have to promote tourism activities which do not harm the natural and
cultural assets, through overuse, uncontrolled land development, or aquatic or
terrestrial habitat destruction.

How to achieve these targets?

First, we have to move from policy making to investment and from planning
to implementation to build the foundation of a robust and sustainable economy.

Second, Egypt has to focus not only on traditional markets but to diversify
tourism products to satisfy new markets and new segments of tourists; to sustain our

60
tourism growth by giving a greater weight to build skills and human capital by
providing good education and training in all fields.

Third, MOT and other related authorities have to play the role of regulator not
managing the investments but facilitating business and improving governance and
especially in public owned companies through corporate governance which enhance
accountability and transparency to be able to compete globally.

What do we need?

We need to integrate successfully into the global economy and strengthen the
economic links among other countries.

This implies a long term vision by creating a policy environment that will
enable and encourage a fare competitive economic performance with a strong flow of
domestic and foreign investment intra-regionally.

4-2 Tourism Satellite Account TSA as a new methodological Framework:

In 2000, since the Ottawa Conference many countries -following Canada-


have begun to develop their TSA tables. It should be explicitly mentioned that there
is no obligation for countries to produce a TSA. Rather, its compilation is to be
understood as an important step in a process that aims to further develop the tourism
statistic system and the macroeconomic analysis of tourism in a country (UNWTO,
2007 b).

The completion of TSA as a new tool was adopted to improve tourism and to
measure its value added to the economy, it could be viewed as a guide to countries in
their further development of tourism sector. It describes the real size of tourism
contribution

n in GDP, where a clear classification of all transactions in tourism is made


for: the intermediate consumption (agriculture, fishing, transportation, storage,
manufacturing, construction, financing, etc ….); the production (including data on
employment, linkages with other productive activities and capital formation); and,
the final consumption of visitors met by import and domestic supply. In addition to
the above information a non- monetary data based on the number of visitors, trips,

61
duration of stay, purposes of visit and modes of transport is required to assess
tourism productive activity in relation to other industries in the economy.

Conclusion and Recommendations:

Sustaining Growth means to invest in sectors which will ensure correcting the
current situation and reducing poverty more effectively which applies that we have to
make access for the poor to health care, education, jobs, capital, and secure land
rights, among others. This access is related to adopt a political reform, breaking
down discrimination, improving access by the poor to justice systems and
infrastructure and ensure an efficient use of resources with more effective institutions
which means improving regulatory structure.

Tourism is one of the most liberalized sector in Egypt and because


liberalization of tourism offers several opportunities although the challenges that can
be accompanied with its advantages, further liberalization of the sector has to be
carefully adopted and according to the more efficient use of resources and more
attracting foreign investment as mentioned by the stakeholders in the questionnaire
which focused on:

- Confirming the relaxation of the commitments in hotels and accommodation


and improve their competitiveness by increasing services efficiency and
technology transfer especially the use of the internet and the spread of ATM
machines.

- Applying a defined and transparent ENT in the case of liberalizing the issuing
of new travel agencies, tour operators and companies to avoid cut throat
competition actions which could affect quality and services by reducing
prices.

- Regulating the market access of mega companies in a way that they don’t
monopolize the market in both sides demand and supply where they play the
role of provider the service and the tour operator provider of inbound tourism.

- Creating a consortium under the auspices of MOT for the non-chain hotels to
market their product to confront the competition of mega chain hotels.

62
- Imposing clear rules and regulations to protect areas of particular historic
artistic interest as done in many countries such as Greece, Italy, Portugal and
Spain (H. Sakr, 2004).

- Enacting the reviewed law of tourism as the pending of issuing new


companies' licenses till enforcing this new legislation for investors -foreign
and domestic alike- at present appears at tourism sector an impediment which
calls for rapid resolution.

- Ameliorating rail and road sectors especially in leading tourist destinations


and developing the sign-posts for tourists.

- Decreasing the number of procedures related to other entities and


municipalities for doing business in this sector.

- Identifying sustainable tourism mechanisms used as an effective tool to


reduce the level of poverty by: Employment of the poor in tourism
enterprises; Supply of goods and services to tourism enterprises by the poor;
Direct sales of goods and services to the visitors (informal); Establishing new
MSMEs employing the poor; and Investing in infrastructure stimulated by
tourism also benefiting the poor in the locality, directly or through support to
other sectors (UNWTO, 2004).

- Benefiting from the new tools of technology, by joining the mega enterprises
in the business and forming domestic mergers to confront the international
trend.

- Assisting governments MOT and CAPMAS in compiling the TSA tables, by


providing guidance to develop the methodological design of TSA tables, the
comparable national statistics and tourism statistics.

- Ensuring training programs as quality standards is becoming among the most


important factors influencing destination choice, thus, steps taken by MOT to
provide best service push Egypt to stress on its right as a developing
economy to benefit from GATS principles according to Article IV:
"Increasing participation of developing countries relating to strengthening of
domestic services capacity and access".

63
- Enhancing eco-lodge facilities, raise awareness for decreasing pollution,
apply cleanliness standards and enforce environmental regulations in many
areas as the environmental issues consists an essential indicator in tourism
and travel competitiveness of Egypt.

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