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1 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

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

Tourist Revenues % to GDP

Gross Domestic Product at Current

Prices (LE mn)

Tourist Revenues (LE mn )

Exchange Rate

Tourism Revenues (US $ mn)

Fiscal year

٤S٣٧٨ ٢S١٥ ٩S٤ ٩S٣٤٢٢ ٦٣٢S٨ 01/ 2002

٥S٤١٧ ٣S٢٢ ٥S٥ ٣S٣٧٩٦ ٨٦١S٤ 02/ 2003

٧S٠ 465.3 ٣٣S٦ ٩S٥٤٧٥ ١٩٤S١ 03/ 2004

٦S٥٣٨ ٩S٣٧ ٥S٥ ٢S٦٤٢٩ ٧٩١S٨ 04/ 2005

٧S٠ 581.1 ٤١S٢ 5.73 ٧٢٣٤S٦ 05/ 2006

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.

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

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

٧٢٣٤S٦٤٢٩ ٦S٥٤٧٥ ٨S٣٧٩٦ ١S٣٤٢٢ ٤S٨ Tourist Revenues٥٠٣٤S٤٣٢٩ ٢S٢٩٩٩ ٥S٢٩٦٢ ٦S٢٩٥٢ ٦S٥ Remittances of

Egyptians working abroad

٣٥٥٨S٣٣٠٦ ٨S٢٨٤٨ ٨S٢٢٣٦ ٤S١٨١٩ ٢S٨ Suez Canal Dues

١٠٢٢٢S٥٢٩٩ ٤S٣٩١٠ ٠S٣١٦٠ ٣S٢٣٨١ ٨S٠ Petroleum Exports & products

٦٦٨S٧٣١ ٥S٦٧٤ ٤S٤٨٦ ٩S٢٦٨ ٥ Agricultural Exports

٦٥٦٧S٤٨٣٦ ٦٣٠٣ ٣S٣٧٠٩ ٨S٣٤٢٦ ٣S٢ Industrial Exports٩٩٦S١٥٠٠ ٩S١٠٣٠ ٠S٨٤٨ ٥S١٠٤٥ ٨S٦ undistributed

Exports

٣٤٢٨٢J٢٧٨٩٩ ٧J٢١٧٧٥ ٥J١٧٢٠٠ ٦J١٥٣١٥ ٦J٩ Total

Second First First First First

( repeated ) Tourism ranking

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)

Remittances of

Egyptians working

abroad 15.7%

petrolum & Gas

Exports & its

products 21.4%

Industrial Exports

21.3%

Agricultural Exports

2.4%

Suez Canal Dues

11.8%

Non Distributed

Exports 4.7%

Tourist Revenues

22.6%

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

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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 $ (

Tourist Proceeds as a percentage Commercial Deficit

Imports of

services

Exports of services

Merchandise Exports

Tourist Revenues

Year

Commercial Deficit (%)

Service of Imports ( %)

Service of Exports ( % )

Merchandise Exports (%)

٤٥S٥٩ ٥S٣٥ ٦S٤٨ ٦S٧٥١٦ ١S٥٧٣٩ - ٥S٩٦١٨ ٨S٧١٢٠ ١S٣٤٢٢ ٨S٨ 01/ 2002

٥٧S٦٩ ٤S٣٦ ١S٤٦ ٤S٦٦١٤ ٣S٥٤٩٢ -٩S١٠٤٤١ ٨S٨٢٠٥ ٤S٣٧٩٦ ٤S٤ 02/ 2003

٦٩S٩٦ ٩S٤٢ ٧S٥٢ ٢S٧٨٣٣ ٤S٥٦٦٣ - ٨S١٢٩٨١ ٢S١٠٤٥٢ ٠S٥٤٧٥ ٥S١ 03/ 2004

٦٢S٨٩ ١S٤٢ ٥S٤٦ ٨S١٠٣٥٩ ٥S٧١٨٧ - ٤S١٥٠٢٩ ٤S١٣٨٣٣ ٦S٦٤٢٩ ٤S٨ 04/ 2005

٦٠S٧٨ ٤S٤١ ٢S٣٩ ٥S١١٩٨٥ ٢S٩٢٤٧ - ٩S١٧٤٣٧ ٢S١٨٤٥٥ ٩S٧٢٣٤ ١S٦ 05/ 2006

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)

5.6

7.26.4

5.5

3.83.4

1.61.41.31.41.2

5.04.2

2.42.2

0

1

2

3

4

5

6

7

8

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

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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

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

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n.a

n.a 279 253 239 217

Hotels & Restaurants

(only)*

1.5 1.4 1.3 1.2 % to Total

7.1 7.7 8.3 Growth

2006E 2005E 2004 2003 2002 2001

1.313 1.296 1.346 1.143 908 845.2 Direct

Employment**

6.7 6.8 7.2 6.3 5.1 4.8 % to Total

1.3 -5.6 14.3 23.5 6.3 Growth

2006E 2005E 2004 2003 2002 2001

2.472 2.429 2.488 2.135 1.730 1.670 Direct & Indirect Employment**

12.6 12.7 13.3 11.7 9.7 9.5 % to Total

1.8 -4.5 13.7 20.6 2.1

Growth

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.

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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

٢٠٠٦ ٢٠٠٥ Growth Rate

Tourist Arrivals ( mn) ٨J٩ ٦J١ 6%

Tourist Nights ( mn) ٨٥J٨٩ ١J٣ 5%

Tourist Receipts ( US $ bn) ٦J٧ ٨J١١ ٦J٧%

Hotel Rooms Capacity(000) ١٧٧ ١٧٠ 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

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Rest of

Canal,

lower&

Upper Egypt

3846

2%

Canal Cities

5351

3%

Alexandria &

North Coast

8543

5%

Floating Hotels

16442

9%

Luxor & Aswan

8282

5%

Great Cairo

25731

15% South Sinai

57478

33%

Red Sea

51043

28%

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

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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

0

10

20

30

40

50

60

70

80

Sharm El-

sheikh

Hurghada Luxor Aswan Cairo Giza Alexandria Floating Hotels

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

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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.

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• 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

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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

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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.

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- 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.

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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,

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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

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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

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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

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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

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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.

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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.

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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). .

7In 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).

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- 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

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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)

Market Access National Treatment Mode of Supply

Full Part No Full Part No

33 49 30 37 48 27 Cross-border supply

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

55 47 10 58 42 12 Consumption abroad

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

25 86 1 49 61 2 Commercial presence

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

1 105 6 12 90 10 Presence of natural persons

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

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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.

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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

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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

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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.

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- 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%.

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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

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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

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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

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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

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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).

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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

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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

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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

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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

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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.

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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:

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• 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

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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

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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,

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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.

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- 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".

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- 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.

REFERENCES:

• American Chamber in Egypt, (2005), “Tourism Sector Developments in Egypt”, Business Studies Series, BSAC, Cairo, January.

• Alford, Philip., (1999), "The Impact of Technology on Tourism Marketing,

E-Commerce and Database Marketing", in Francois Vellas & Lionel Becherel (Edit.) The International Marketing of Travel and Tourism, A Strategic Approach, Edwardo Fayos-Sola, Britain.

• Central Agency for Public Mobilisation and Statistics CAPMAS, ( 2007), “Characteristics of Hotels and Touristic Villages Activities in Republic

Arab of Egypt in 2005”, July.

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