1st QUARTER 2018 2nd QUARTER 2018 3rd QUARTER 2018 4th QUARTER 2018

International

Trade

Report

2018

Index

1. General Trends & Drivers of World Trade in 2017 & Forecast page 3-5

2. UK Export Performance & Trade Confidence Index page 6-9

3. UK Trade with the MENA Region and Egypt page 10-12

4. UK Trade with the MENA Region & Egypt: Product Breakdown page 13-20

2

1. General Trends & Drivers of

World Trade in 2017 & Forecast

• Growth in the volume of world merchandise trade in 2017 was the

strongest since 2011.

• World GDP growth increased by 3% in 2017 and is projected to grow

by 3.2% in 2018

• The pick-up in world trade can mainly be attributed to increased

investment spending and household consumption; investment is the

most trade-intensive component of import demand.

• Growth in merchandise trade was stronger in value than volume terms

in part as a result of higher primary commodity prices.

GENERAL TRENDS & DRIVERS OF WORLD TRADE IN 2017

Prices of primary commodities, Jan. 2014 - Feb. 2018

Indices, January 2014=100 Strong Trade Growth in 2017

Trade volume growth in 2017, the strongest since

2011, was driven mainly by cyclical factors,

particularly increased investment and consumption

expenditure. Looking at the situation in value terms,

growth rates in current US dollars in 2017 (10.7% for

merchandise exports, 7.4% for commercial services

exports) were even stronger, reflecting both

increasing quantities and rising prices. Merchandise

trade volume growth in 2017 may also have been

inflated somewhat by the weakness of trade over the

previous two years, which provided a lower base for

the current expansion.

Until recently, risks to the forecast appeared to be

more balanced than at any time since the financial

crisis. However, in light of recent trade policy

developments they must now be considered to be

tilted to the downside. Increased use of restrictive

trade policy measures and the uncertainty they bring

to businesses and consumers could produce cycles

of retaliation that would weigh heavily on global

trade and output. Faster monetary tightening by

central banks could trigger fluctuations in exchange

rates and capital flows that could be equally

disruptive to trade flows. Finally, worsening

geopolitical tensions could be counted on to reduce

trade flows, although the magnitude of their impact

is unpredictable. Technological change means that

conflicts could increasingly take the form of cyber-

attacks, which could impact services trade as much as

or more than goods trade.

On the other hand, there is some upside potential if

structural reforms and more expansionary fiscal

policy cause economic growth and trade to

accelerate in the short run. The fact that all regions

are experiencing upswings in trade and output at

the same time could also make recovery more

self-sustaining and increase the likelihood of

positive outcomes.

Growth in Trade Volume

The acceleration of world merchandise trade volume

growth to 4.7% in 2017 from 1.8% in 2016 was broad

based, driven by rising import demand across

regions but most notably in Asia. The largest gains

CHART 1

4

were recorded on the import side in developing

economies, where trade growth surged to 7.2% in

2017 from 1.9% in 2016. Import demand also picked

up in developed countries, albeit less dramatically,

as merchandise trade growth in volume terms

increased to 3.1% in 2017 from 2.0% in 2016.

Meanwhile, merchandise exports grew 3.5% in

developed countries and 5.7% in developing

countries last year, up from 1.1% and 2.3%

respectively in the previous year.

Africa, the Middle East and the Commonwealth of

Independent States, saw steady export growth of

2.3% in volume terms due to the fact that demand

for oil and other natural resources tends to be quite

stable in quantity terms. Meanwhile, imports of the

combined regions increased slightly by 0.9%, partly

as a result of higher primary commodity prices,

which raise export revenue in resource exporting

countries and allow more imports to be purchased.

Energy prices more than doubled since January

2016, but even at nearly US$70 per barrel oil

prices still remain below the US$100 level that

prevailed before the middle of 2014 (see chart

1).

5

INTERNATIONAL TRADE REPORT Q1 2018

business confidence and investment decisions, which

could compromise the current outlook.

GDP Growth

World real GDP at market exchange rates is projected

to grow 3.2% in 2018 (up from 2.8% last September)

and 3.1% in 2019. Brighter prospects reflect not only

investment and employment gains but also improved

business and consumer confidence as measured by

OECD business cycle indicators. The final figure of 3.0%

for world GDP growth in 2017 was also stronger than

the previous estimate (2.8% as of last September),

which partly explains the fact that actual merchandise

trade growth of 4.7% for the year exceeded even

optimistic assessments (e.g. 3.6% in September, with a

high-end estimate of 3.9%).

CHART 2

World fuel prices almost

double since January 2016

41%

Developing economies

had a 41% share in world

merchandise trade in

2017

Source: WTO, World Trade Statistical Review 2018 & IMF World Economic Outlook Apr. 2018

US$70 Forecast 2018-2019

World merchandise trade growth is expected to

remain strong in 2018 and 2019 after posting its

largest increase in six years in 2017, but continued

expansion depends on robust global economic

growth and governments pursuing appropriate

monetary, fiscal and especially trade policies, WTO

economists said.

The WTO anticipates merchandise trade volume

growth of 4.4% in 2018, as measured by the average

of exports and imports, roughly matching the 4.7%

increase recorded for 2017. Growth is expected to

moderate to 4.0% in 2019, below the average rate

of 4.8% since 1990 but still firmly above the post-

crisis average of 3.0%. However, there are signs that

escalating trade tensions may already be affecting

Ratio of world merchandise trade volume growth to world real GDP growth, 1981-2018

2. UK Export Performance &

Trade Confidence Index

• The number of UK businesses reporting improved export sales

increased in Q4 2017; manufacturing sector: + 43%, service sector +

27%.

• The British Chambers of Commerce Trade Confidence Index – a

measure of the volume of trade documentation issued nationally,

decreases by 2% in Q4 2017 compared to Q3 2017, but increases by

3.4% compared to Q4 2016.

• The volume of trade documentation issued for the Egyptian market

increases by 0.1% in Q4 2017 compared to Q3 2017, but drops by

11.8% compared to Q4 2016.

• The International Monetary Fund (IMF) reaches a staff-level

agreement on third review for Egypt’s extended fund facility; a

continued vote of confidence in Egypt’s economic reform

programme.

Chapter supported by the British Chambers of Commerce:

The British Chambers of Commerce (BCC) is a dynamic and

independent business network with accredited Chambers in

every nation and region of the UK, and in key markets around the

world. For more information, visit www.britishchambers.org.uk

UK EXPORT PERFORMANCE & TRADE CONFIDENCE INDEX

-40

-30

-20

-10

0

10

20

30

40

50

Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17 Q3 17

% B

ALA

NC

E

Service Sector Manufacturing Sector

-- Recession --

UK Export Performance

According to the British Chambers of Commerce

Quarterly International Trade Outlook for Q4 2017,

export sales in the manufacturing and services sector

are up in Q4 2017. 43% of exporting manufacturers and

27% of exporting service firms reported increased

export sales in Q4. 40% of exporting manufacturers and

24% of exporting service firms reported increased

export orders.

The Quarterly International Trade Outlook survey also

shows that both sectors are being severely hampered

by the prevalence of skills shortages. Across the board,

three-quarters of exporters that tried to recruit reported

difficulties in finding the right staff. In the

manufacturing sector, the greatest difficulty was in

finding skilled manual and technical labour (69%) and in

the services sector, it was professional and managerial

levels (52%).

*Balance figures are determined by subtracting the percentage of

companies reporting decreases in a factor from the percentage of

companies reporting increases.

+43%

The adjacent graph

shows the balance of

firms reporting an

increase in export sales

compared to those

reporting a decrease

going back to Q1 2008.

The balance of

manufacturers

reporting increased

export sales in Q4 2017

rose from the lowest

post-recession level in

Q4 2015.

+27%

7

Manufacturers report

improved export sales

Service firms

report improved

export sales

CHART 3

Source: British Chambers of Commerce Quarterly International Trade Outlook Q4 2017

124.03 The UK BCC Trade Confidence

Index currently stands at

124.03, where 2007 = 100

Down 2%

on Q3 2017

Up 3.4%

on Q4 2016

BCC Trade Confidence Index - Global

Many types of exports require supporting

commercial documentation. UK Chambers of

Commerce issue certified trade documentation

required for exports outside the EU and as a

result, the British Chambers of Commerce have

amassed a significant dataset around UK

merchandise exports. The Egyptian-British

Chamber of Commerce does the same but

solely for UK merchandise exports to Egypt. The

data collected from this process shows an index

of trade document certification.

The BCC Trade Confidence Index for Q4 2017 - a

measure of the volume of UK trade documentation

issued nationally - decreased by 2% on Q3 2017, but

was up by 3.4% on Q4 2016, the index now stands at

124.03.

After steady growth in export documentation

volumes in Q3 2017, several regions saw a slight

quarterly decline in Q4. The largest quarter-on-

quarter increases were in Northern Ireland (13.3%),

the East of England (9%) and the South West (5.6%)

INTERNATIONAL TRADE REPORT Q1 2018

57.87

The UK Trade Confidence Index

for Egypt currently stands at

57.87, where 2007 = 100

Up 0.1%

on Q3 2017

Down 11.8%

on Q4 2016

EBCC Trade Confidence Index - Egypt

Prior to 2016, the global downturn, and in

particular the unrest in the Middle East region,

caused a serious drop in volume of UK export

documents certified for the Egyptian market.

With stability returning to Egypt, we saw

significant growth in 2014 that carried on into

the beginning of 2015. Growth slowed in the

latter half of 2015 as foreign currency dwindled

due to a lack of tourism and FDI revenue

streams.

New export documentation decrees were

issued by the Egyptian government in

December 2015 and early 2016 – making it

mandatory for overseas exporting companies to

submit one-off registration documents when

shipping goods to Egypt – as a result the Chamber

saw a significant increase in UK export

documentation in the first two quarters of 2016.

Following the initial registration period, growth

slowed again in the second half of 2016 as

economic constraints persisted. Results for Q3 and

Q4 2017 demonstrate that even though Egypt’s

economy is improving, Egypt’s government is

actively working towards reducing import of non-

essential goods in order to reduce its trade deficit.

However, export documentation figures show some

signs of recovery in the beginning of 2018.

8

CHART 4

CHART 5

Source: British Chambers of Commerce Quarterly International Trade Outlook Q4 2017

UK EXPORT PERFORMANCE & TRADE CONFIDENCE INDEX

Trade Analysis & Forecast

The trade documentation recovery in 2014 and the

beginning of 2015 could mainly be attributed to a

return of political stability and increased confidence

in Egypt’s economic recovery post-Arab Spring.

However, reform momentum faded towards the end

of 2015 and continued to hinder trade growth in

2016. A lack of tourism and FDI revenue streams led

to a severe shortage of foreign currency in the

market. While some of the bans on outflow of foreign

currency were lifted earlier in 2016, foreign exchange

shortages still curbed production – and consequently

the export of Egyptian value-added merchandise -

throughout the year.

The Executive Board of the International Monetary

Fund (IMF) approved a three-year $12 billion loan to

Egypt in November 2016 to support Egypt’s

economic reform programme. In July 2017, the IMF

approved the first review of Egypt’s extended fund

facility which allows the disbursement of about $1.25

billion. The deal with the IMF involved a number of

crucial measures, including a cut to Egypt’s budget

deficit, a reduction of subsidies, and tax increases.

A vital part of Egypt’s economic reform programme,

as supported by the IMF, was the decision in

November 2016 to float the Egyptian pound.

Following this decision, the pound lost about half its

value with prices soaring at its fastest pace in almost

12 years in December 2016 – pushed higher by a rise

in fuel prices and a newly introduced value added tax.

The currency has stabilized considerably since, and is

now trading at close to EGP 18 to the dollar. As

predicted in our previous report, inflation has also

dropped from its high of 33% mid-2017 to around

13% currently. Over the medium-term, inflation is

expected to come down to single digits.

Despite some short-term volatility over the past year,

we now see strong signs of market recovery. Egypt is

a more affordable place to travel to and invest in; this

is reflected by a recovery in tourism, strong

remittances and increased inflows of foreign

investment.

The increased liquidity has a positive effect on trade;

and in particular Egyptian exports, as goods have now

become more competitive in the global market. In our

next chapter you will see that Egyptian exports to the

UK have increased by 28% in Q1 2018 compared to

the same period a year earlier, this follows a period of

subdued export growth. UK exports to Egypt however

still lag behind as Egypt’s government works to

narrow its budget deficit by reducing imports of non-

essential items from overseas. We estimate that

recovery will start to take hold on the back of a

stabilizing exchange rate and an improved investment

climate.

9

Highlights from IMF Press Release: Staff-level Agreement on Third Review for Egypt’s Extended Fund Facility

“Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 percent in the first half of the year from 4.2 percent in

2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances,

while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44

billion by end-April, equal to 7 months of imports.

“Annual headline inflation has declined from 33 percent in mid-2017 to around 13 percent in April, anchored by the well-calibrated

monetary policy of the Central Bank Egypt (CBE). The CBE remains committed to reducing inflation to single digits over the medium

term, with monetary policy underpinned by a flexible exchange rate regime that is critical for maintaining competitiveness and

adjusting to external shocks. Egypt’s banking sector remains liquid, profitable and well-capitalized.

“Egypt is on track to achieve a primary budget surplus excluding interest payments in 2017/18, with general government debt as a

share of GDP expected to decline for the first time in a decade. The budget for 2018/19 targets a primary surplus of 2 percent of GDP,

which would keep public debt on a firmly downward path. The government also remains committed to continuing energy subsidy

reforms to achieve cost-recovery prices for most fuel products by 2019. Together with raising revenues through tax policy reforms, this

will help create fiscal space for important infrastructure projects, targeted social protection measures and essential spending on health

and education.” IMF Communications Department (May 2018)

3. UK Trade with the MENA

Region & Egypt

• The value of UK trade with the Middle East and North Africa

(MENA) drops significantly in Q1 2018 after a rapid recovery in

2017.

• UK trade with Egypt performs comparatively better, with only a

marginal drop in value of UK exports to Egypt (-4.8%) and a

significant increase in value of Egyptian exports to the UK

(+28.3%)

Introduction

The value of UK trade with the Middle East and North Africa (MENA) shows considerable volatility in 2017,

and largely negative growth in the first quarter of 2018 (see chart 6).

The value of UK exports to the MENA region and to Egypt largely follow the same trend in 2017, with a

spike in exports recorded for both categories in Q4 2017; this is as a result of the increased UK export of

chemical products, plastics and metals both to the MENA Region and to Egypt. In Q1 2018, there is a

sharp downward trend in UK exports to MENA and Egypt; this is largely due to the year-on-year drop in

value of UK export of machinery, mineral products and vegetable products.

Exports from the MENA region and Egypt to the UK also drop significantly in Q1 2018 compared to the

previous quarter after a volatile 2017. Year-on-year Egypt performs significantly better than the MENA

region; the value of Egypt’s exports to the UK increases by 28% compared to a drop of 11% for MENA

exports to the UK during the same period (see table 2); this is primarily as a result of the increased export

of machinery products from Egypt to the UK.

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18

UK TRADE WITH THE MENA REGION & EGYPT

-50

-40

-30

-20

-10

0

10

20

30

40

% Y

EAR

ON

YEA

R G

RO

WTH

PER

QU

AR

TER

UK trade growth with MENA & Egypt, 2015-2018

UK Exports to MENA UK Exports to Egypt

MENA Exports to UK Egyptian Exports to UK

Standard & Poor’s Upgrade Egypt’s Sovereign Credit Rating from B- to B on 11 May 2018:

• A more competitive exchange rate, rising domestic gas production, and increasing exports are helping to

improve Egypt’s current account deficit.

• Inflation is decelerating, which points to the increasing effectiveness of the monetary framework.

• We are therefore raising our long-term rating on Egypt to “B” from “B-“ and affirming the short-term rating at

“B”.

• The outlook is stable.

Source: Standard & Poor’s

CHART 6

B- to B Standard & Poor’s

Upgrades Egypt’s

Credit Rating

UK Exports to MENA % Share

Source: HM Revenue & Customs

UK Imports from MENA & Egypt

Q1 2018 Q1 2017 % Change

MENA £5,127bn £5,998bn -14.5

Egypt £245m £257m -4.8

% of MENA 4.8 4.3

Q1 2018 Q1 2017 % Change

MENA £3,169bn £3,559bn -11

Egypt £202m £157m +28.3

% of MENA 6.4 4.4

Egypt’s Share of MENA Trade with the UK

In the years prior to 2008, Egypt recorded a 7

percent share of MENA trade with the UK on

average. As a result of the Arab Spring - and

subsequent political and economic turmoil -

Egypt’s percentage share of MENA trade with

the UK dropped significantly.

In 2016, UK trade with MENA slowed whereas

trade with Egypt fared comparatively better;

the tables turned in 2017 but in particular

Egypt’s share of UK imports show a recovery in

the first quarter of 2018.

Egypt’s share of UK exports to MENA increases

marginally from 4.3% to 4.8% in Q1 2018,

compared to Q1 2017. Egypt’s share of UK

imports from MENA increases by an

impressive 2% from 4.4% in 2017 to 6.4% in

2018.

11

INTERNATIONAL TRADE REPORT Q1 2018

UK Exports

UK Imports

12

10%

10%

25%

21%

9%

6%

6%

4%

9%

Qatar Algeria

UAE Saudi Arabia

Israel Egypt

Morocco Libya

Others

35%

16%17%

6%

5%

3%

4%

7%

7%

UAE Saudi Arabia

Qatar Israel

Egypt Kuwait

Morocco Oman

Others

UK Exports to MENA

UK Imports from MENA

CHART 7

CHART 8

TABLE 1

TABLE 2

Source: HMRC Trade Statistics

Source: HMRC Trade Statistics

4. UK Trade with the MENA Region

& Egypt: Product Breakdown

• Egyptian exports to the UK significantly outperform UK exports to Egypt in

the first quarter of 2018.

• Products that contribute positively to the value of UK exports to Egypt in Q1

2018 include plastics, chemicals and transport equipment.

• Products that contribute positively to total Egyptian export figures in Q1

2017 are machinery, chemicals and plastics.

CHART 9

UK Exports to Egypt

Egypt is in the midst of a construction boom. In February

2016, the Egyptian government launched its Sustainable

Development Strategy – Egypt's Vision 2030, setting out

national goals for the next 15 years. The Ministry of Trade

& Industry aims at gradually reaching an industrial growth

rate of 8% by FY 2019/2020, and increasing the

contribution of the industrial sector to GDP from 18% to

21% by 2020.

At the top of the government’s priorities list is a

comprehensive urban development plan that expands and

creates new cities across Egypt by developing 80,000

feddans (336 square kilometers) a year to contain the

rapidly growing population. Large government priority

projects, such as the New Administrative Capital, the

expansion of the Cairo metro line and water treatment

projects in Upper Egypt, continue to promote growth in the

sector.

That being said, Egypt is still very much recovering

economically from the effects of the Arab Spring and its

two revolutions. The government is promoting a

conservative approach to importing non-essential items

from overseas to reduce its trade deficit. The recent

21% Targeted industrial

sector contribution

to Egypt’s GDP by

2020

devaluation of the Egyptian pound has also made

sourcing goods from overseas a more expensive affair.

As a result, the UK still exports a significant number of

products to Egypt, but there is a marginal drop of 4.8%

in Q1 2018 compared to the same period last year.

Products that consistently perform well are chemical

products, transport equipment, and plastics (see chart

9).

UK exported value of base metals (iron & steel, export

value: £43 million) to Egypt has historically been more

volatile – partly because it is susceptible to volatility in

world market prices of metals. While world prices have

gone up however (see chart 1), UK export of metal

products has dropped by 12% in the first quarter of

2018.

14

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

IN £

MIL

LIO

N

Q1 Plastics Plastics

Q1 Transport & Equipment Transport Equipment

Q1 Chemicals Chemicals

Growth in value of main UK export products to

Egypt 2008-2018

6%

25%

18%17%

34%

Food & beverages

Raw materials, petroleum & petroleum products

Chemicals, pharmaceuticals & related products

Textiles & manufactured goods

Machinery & transport equipment

UK exports to Egypt by product group Q1 2018

CHART 10

UK TRADE WITH THE MENA REGION & EGYPT: PRODUCT BREAKDOWN

Source: Oxford Business Group & HMRC Trade Statistics

UK Exports to Egypt, Product Breakdown

Rank Commodity 2018 2017 % Change

1. Machinery & Mechanical Appliances (16), of which: 59,588,861 70,885,687 -15.9

Machinery & Mechanical Appliances 35,279,271 42,545,093 -17.1

Of which: Turbojets 2,238,958 2,905,991 -23

Electrical Machinery & Equipment 24,309,590 28,340,594 -14.2

2. Base Metals & Articles of Base Metal (15) 53,321,648 60,657,244 -12.1

3. Chemicals (6), of which: 44,247,509 34,978,828 26.5

Pharmaceutical Products 20,549,374 13,107,208 56.8

4. Transport & Equipment (17) 24,150,425 25,123,485 -3.9

5. Medical & Other Instruments and Parts (18) 14,142,107 13,463,258 0.1

6. Paper & Paperboard (10) 12,113,683 9,545,811 26.9

7. Plastics, Rubber and Articles Thereof (7) 11,153,612 9,744,069 14.5

8. Mineral Products (5) 6,550,712 11,214,971 -41.6

9. Live Animals & Animal Products (1) 5,007,613 2,232,112 124.3

10. Prepared Foodstuffs (4) 4,917,268 2,792,612 76.1

11. Vegetable Products (2), of which: 3,775,735 12,275,677 -69.2

Fruit & Vegetables 3,708,742 12,148,054 -69.5

12. Miscellaneous Manufactured Articles (20) 2,037,805 1,747,306 16.6

13. Textiles & Textile Articles (11) 1,987,375 1,727,952 15

14. Precious Stones, Metals & Jewellery (14) 1,346,457 225,104 498.1

15. Building Materials (13) 312,654 373,793 -16.4

16. Wood and Articles Thereof (9) 247,694 24,124 926.8

17. Fashion Accessories (12) 150,032 101,912 47.2

18. Leather, Hides & Skins (8) 40,704 137,550 -70.4

19. Art & Antiques (21) 27,115 5,008 441.4

20. Animal or Vegetable Fats & Oils (3) 13,326 50,215 -73.5

21. Arms & ammunitions (19) 0 83,147 -100

22. Other (22) 40,829 29,581 38

Total 245,173,164 257,419,446 -4.8

• All figures are in £ thousand

• Full product index on page 20

TABLE 3

15

INTERNATIONAL TRADE REPORT Q1 2018

Source: HMRC Trade Statistics

16 16

Egyptian Exports to the UK

Some of the main drivers of Egyptian export growth to

the UK in Q1 2018 are machinery and mechanical

appliances (+25.6%) chemicals (+75%) and plastics

(+12%).

The fruit & vegetables sector also performs well; in

2016, the sector contributed a record £120 million to

overall Egyptian exports to the UK, and Q1 2018 shows

a further increase of 3% compared to Q1 2017.

Representative of Egypt’s gradual move up the value

chain, chemicals and plastics will be some of the

largest contributors to export growth in the long-term.

The exported value of chemicals to the UK increased

quite considerably in Q1 2018, and already shows a

significant increase at the start of Q2 2018. The value

of chemicals exports is likely to increase this year,

compared to 2017.

Mineral Products & Metals

In 2017 the primary cause for the drop in value of

Egyptian exports to the UK was the decrease in exported

value of mineral products from Egypt to the UK, in

particular the drop in value of crude oil.

The mineral product figures (incl. crude oil) are not

available for Q1 2018, however we can conclude from

table 4 that the two suppressed product groups (Metals

& Mineral Products) add almost £19 million to the actual

totals for Egyptian exports to the UK. This suggests a

moderate recovery in export of mineral products from

Egypt to the UK in the first quarter of 2018.

In Q1 2017 there was a significant slowdown in export of

turbojets, but export of this product but t during the

quarter, as well as a considerable export slowdown in Q1

2017 of turbojets in the machinery sector.

If we take out fuel and turbojet exports, we see an

increase of 5.3 % in the value of Egyptian exports to the

UK; from £143 million in Q1 2016 to £151 million in Q1

2017.

17%

10%

8%

27%

38%

Agricultural products, food & beverages

Raw materials, petroleum & petroleum products

Chemicals, pharmaceuticals & related products

Textiles & other manufactured goods

Machinery & transport equipment

Egyptian exports to the UK by product group Q1 2018

Growth in value of main Egyptian export products

to the UK 2008-2018

CHART 12

CHART 13

UK TRADE WITH THE MENA REGION & EGYPT: PRODUCT BREAKDOWN

Source: HMRC Trade Statistics

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

IN £

MIL

LIO

N

Machinery Q1 Machinery

Chemicals Q1 Chemicals

Plastics & Rubber Q1 Plastics & Rubber

16

Egyptian Exports to the UK, Product Breakdown

Rank Commodity 2018 2017 % Change

1. Machinery & Mechanical Appliances (16) 71,708,443 53,352,117 25.6

Machinery & Mechanical Appliances 15,162,959 6,960,454 54

Of which: Turbojets 12,209,045 5,857,774 52

Electrical Machinery & Equipment 56,545,484 46,391,663 18

Of which: Insulated Wire, Cable and

Other Insulated Electric Conductors

52,888,140 42,863,717 19

2. Vegetable Products (2), of which: 31,869,902 31,062,099 2.5

Fruit & Vegetables 31,278,840 30,138,790 3.6

3. Textiles & Textile Articles (11) 26,445,588 27,021,192 -2.1

4. Chemicals (6) 14,549,877 3,641,833 75

5. Plastics, Rubber and Articles Thereof (7) 11,382,740 10,026,115 12

6. Building Materials (13) 8,355,222 7,001,925 16.1

7. Paper & Paperboard (10) 7,689,914 5,613,013 27

8. Transport & Equipment (17) 3,985,058 7,750,249 -48.5

9. Medical & Other Instruments and Parts (18) 3,448,782 3,399,152 1.4

10. Miscellaneous Manufactured Items (20) 1,282,376 96,993 92.4

11. Prepared foodstuffs (4) 804,628 489,904 39

12. Art & Antiques (21) 578,978 27,971 95

13. Animal or Vegetable Fats & Oils (3) 365,034 207,205 43

14. Precious Stones, Metals & Jewellery (14) 328,739 4,596,969 -92.8

15. Wood and Articles Thereof (9) 54,404 29,830 45

16. Leather, Hides & Skins (8) 11,469 0 100

17. Fashion Accessories (12) 2,408 6,489 -62.8

18. Live Animals & Animal Products (1) 0 50,284 -100

19. Base Metals (15)* * 2,476,881 N/A

20. Mineral Products (5)* * 172,454 N/A

21. Other (22) 249,006 390,879 -36

Total 183,112,568

Actual: 201,981,148

157,413,554

28.3

• All figures are in £ thousand

• Full product index on page 20

* Supressed products (still count towards total values)

TABLE 4

INTERNATIONAL TRADE REPORT Q1 2018

WTO TRADE POLICY REVIEW: EGYPT

17

The fourth Trade Policy Review of Egypt, which has taken place 13

years after the previous one, has provided the opportunity to

deepen our understanding of its trade and investment policies and

practices, and to collectively appreciate the challenges it has faced

in recent years.

Egypt's trade policy objectives are set out in the Industrial Development

Strategy (IDS) for 2016-2020, in accordance with Egypt's SDS "Egypt

Vision 2030". The aim is to help Egypt become a leading industrial

economy in the Middle East and North Africa region and a main export

hub for medium-technology manufactured products by 2025. Egypt's

export base has become more diversified during the review period: the

share of exports of fuel products declined from 43% of total exports in

2005 to 14.3% in 2016. Despite this, fuel remains Egypt's single most

important export product, followed by vegetables, 12.5% precious

stones and metals (11.8%), chemicals (11.3%), and textiles (11.2%).

Egypt's merchandise exports declined in US dollar terms between 2011

and 2016, to US$22.5 billion. In 2016, the European Union was Egypt's

main export destination, followed by the United Arab Emirates, Saudi

Arabia and Turkey. Merchandise imports amounted to US$58.1 billion in

2016. Machinery and electrical equipment is the single most important

import group, accounting for 16.1% of total merchandise imports in

2016, followed by mineral fuels (14.2%) and base metals (11.4%). In

2016, 32.4% of Egypt's merchandise imports came from the European

Union; China and other Asian countries were the source of 27.3% of

Egyptian imports. The customs administration was made more efficient

and transparent, by reducing the number of documents required for

import and export processes and allowing their presentation

electronically. In addition to tariffs, imports are now subject to a value-

added tax of 14% which also applies to domestically produced goods;

exported goods are exempted and services are zero-rated. Egypt also

applies excise taxes on some products in addition to the general VAT

rate.

In 2014, the Government began to implement a reform programme

aimed at stimulating economic growth and improving the business

environment. The first wave of reforms focused on rebalancing the

macroeconomic situation: introduction of the value-added tax (VAT) at a

rate of 14%, a shift in the exchange rate regime from a peg to the US

dollar to a full float of the Egyptian pound in November 2016;

broadening of the tax base; reduction of energy subsidies; and

containment of public sector salary increases. Egypt's economic

programme has been supported by the IMF with a $12 billion loan. Also,

in May 2017, a new Investment Law No. 72/2017 entered into force.

WTO Review

This WTO Review on Egypt is an

update from the previous review

that took place in 2005

Investment incentives under the new law include

deductions on taxable profits and preferential

import duty rates and aim at updating Egypt's

investment regime to attract more investment.

Egypt's FDI inflows averaged some US$6 billion per

year during 2013-16, below the US$9 billion annual

average in 2005-07. The European Union is the

main foreign investor in Egypt, followed by the

United States and some Arab countries.

New regulations for the establishment of free zones

are contained in Law No. 72/2017. There are two

types of free zones: public and private. Public free

zones are established for several projects, whereas

private free zones are confined to one specific

project or company. Enterprises in free zones

benefit from complete exemption from import

tariffs, income taxes and the VAT. They are charged,

however, a fee of 1% or 2% in lieu of taxes. There

are also regional programmes in place to support

MSMEs. Reforms were also made Egypt's

competition policy underwent far-reaching changes

and it sets out prohibitions in respect of the abuse

of dominant position. It also prohibits vertical

agreements or contracts between a person and its

supplier or clients if they are intended to restrict

competition.

As Egypt is not a party to the GPA the two main

procedures for public procurement of goods and

services are public tender and public reverse

auction. Both procurement methods may be open

to both Egyptian and foreign suppliers. Additionally,

MSMEs must be given an extra 10% preference in

any tender. Also, Egypt's Constitution was amended

to provide for the separation of powers between

the executive, the legislature and the judiciary, and

reformed the legislative branch by making it

unicameral.

UK TRADE WITH THE MENA REGION & EGYPT: PRODUCT BREAKDOWN

18

Source: World Trade Organization

In their interventions, WTO Members commended Egypt for its sustained economic growth since its

previous Review in 2005, which has averaged 4.5% annually in the last twelve years. Although GDP growth

slowed down in 2011, in recent years economic activity has accelerated on the basis of an expansionary fiscal policy.

Members remarked that, since 2014, Egypt has undertaken notable reforms, including floating the Egyptian pound,

tax reform, fuel subsidy reform, and further privatization steps. Nonetheless, it was noted that Egypt faces important

challenges, notably reducing its relatively high unemployment rate and poverty alleviation. In this regard, Members

took note that Egypt is implementing an ambitious economic reform programme that stems from its National

Development Strategy (Egypt Vision 2030), that seeks to promote the participation of the private sector in the

economy so as to foster GDP growth, and further address its external and fiscal imbalances. Additionally, the

Industrial Development Strategy 2016-20 aims at making Egypt a leading industrial economy in the Middle East and

North Africa region and a main export hub for medium-technology manufactured products by 2025, thus paving

the way for Egypt to further diversify its trade.

Egypt was commended by Members for being a strong advocate of the multilateral trading system, as

witnessed by its active participation in the WTO. In particular, Members recognized Egypt's participation in

the Information Technology Agreement (ITA) and its ratification of the Protocol Amending the TRIPS

Agreement.

Members recognized Egypt's important efforts to improve its business climate and further liberalize foreign

investment restrictions, including the introduction of a new Investment Law and its regulations in 2017, as well as

reforms in customs administration, making it more efficient and transparent. It was noted, however, that more needs

to be done to improve the business environment, including further simplifying customs procedures, improving the

risk assessment system, reducing red tape and increasing transparency.

Several Members raised questions regarding Egypt's extensive use of import licensing and invited Egypt to notify its

regime to the WTO. Egypt was also encouraged to review import registration and other regulatory requirements,

which some Members considered an obstacle to trade.

Members welcomed the changes implemented with respect to government procurement, namely the steps adopted

to encourage private sector participation in the procurement process and the introduction of new procurement

methods. They noted, however, that the 15% preference granted to domestic suppliers and products remained in

place and enquired about plans to eliminate this preference.

GDP by Economic Activity, 2015/16

Source: World Trade Organization

19

CHART 13

Full Product Index

1. Live animals; animal products

2. Vegetable products

3. Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes

4. Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes

5. Mineral products

6. Products of the chemical or allied industries

7. Plastics and articles thereof; rubber and articles thereof

8. Raw hides and skins, leather, furskins and articles thereof; saddlery and harness; travel goods, handbags and similar

containers; articles of animal gut (other than silkworm gut)

9. Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting

materials; basket-ware and wickerwork

10. Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard; paper and

paperboard and articles thereof

11. Textiles and textile articles

12. Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof; prepared

feathers and articles made therewith; artificial flowers; articles of human hair

13. Articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware

14. Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles

thereof; imitation jewellery; coins

15. Base metals and articles of base metal

16. Machinery and mechanical appliances; electrical equipment; parts thereof, sound recorders and reproducers, television

image and sound recorders and reproducers, and parts and accessories of such articles

17. Vehicles, aircraft, vessels and associated transport equipment

18. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus;

clocks and watches; musical instruments; parts and accessories thereof

19. Arms and ammunition; parts and accessories thereof

20. Miscellaneous manufactured articles

21. Works of art, collectors' pieces and antiques

22. Others

Long-Term Outlook

The Chamber is encouraged by the progress

made in 2017 on Egypt’s economic reform

programme. It is progress that continues in 2018,

with growth expected to return to a healthier

5.2% in FY 2017/18 up from 4.2% in 2016/17.

With foreign exchange now more readily available

after the Central Bank of Egypt (CBE) liberalised

the exchange rate in November 2016 - and eased

restrictions on the outflow of foreign currency

mid-2017 - the outlook for 2018 is more

optimistic. Assuming reforms continue to be

implemented, growth should pick up slightly

because of positive developments in the gas,

manufacturing and real estate sectors, alongside

recovery in the tourism sector from recent

security-related issues.

However, managing to contain the large fiscal and

current account deficits in an environment of high

inflation will be a challenge in the remainder of

2018 and beyond.

But research shows that, while facing short- and

medium-term challenges – Egypt’s long-term

economic and trade outlook is largely positive.

20

INTERNATIONAL TRADE REPORT Q1 2017

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