Egypt requires reliable power, transport and telecommunications systems, as well as trustworthy legal frameworks. Over the past decade, Egypt’s reform programmes have brought about macro-economic stability, but progress, particularly in privatization will be closely observed.

“Egypt is perhaps a test case of Arab world liberalization and privatization,” said Roger Wise, Managing Director of Middle East investment banking at Robert Fleming.” What happens here is critical to the rest of the region. The success or failure of Egypt’s economic reform program will greatly affect not only the rest of the Middle East but also the international investment community’s perception of the region.”

Foreign investors have become increasingly nervous about Egypt’s mystifying foreign exchange rate policy, which has caused an intermittent dollar shortage this year. “It has

shaken investor confidence in the Egyptian economy, no matter how positive the macro-picture is,” Lyad Malas, the International Finance Corporation’s regional capital markets Manager told Reuters.

Officials have denied the existence of a dollar shortage and have given assurances that it is over. The government has refused to tackle the crisis, caused by dips in tourism and oil revenue, by adjusting the pound, raising interest rates or using Central Bank reserves to satisfy demand.

Egypt’s privatization program has been at a crossroads despite its widespread public acceptance since 1991. Tough decisions lie ahead on how to divest large chunks of the economy, including banks, insurance, firms and utilities, still in state ownership.

Selling big state banks and insurance firms would deprive the government of a handy tool in implementing economic policy, caused by the role of the state-owned financial institutions - the main buyers of government securities, tenders to public enterprises and financiers of state projects.

It is now important for Egypt to increase stock market liquidity through, for example, large flagship privatizations such as the long awaited sale of Telecom Egypt.