This paper assesses Egypt’s service sector, its main service sector liberalization policies, and its commitments under the General Agreement on Trade in Services (GATS). The paper compares Egypt’s GATS commitments to those of other developing countries. It highlights the main developments of the liberalization and privatization policies in five main service sectors: telecommunications, banking and insurance, tourism, maritime services and air transport.
The paper argues that service liberalization in Egypt appears to be slowed down by two issues. The issues are:
- the dominance of government monopolies in many service sectors which creates the concern that eliminating barriers to allow private sector participation requires strong anti-trust laws and regulatory bodies
- the government’s emphasis on service liberalization only as an input to achieve other goals such as raising saving and investment levels, which excludes service sectors with higher growth potential and where risk of market power is limited
The paper then considers the policy options for service liberalization. It notes that if services are liberalized in the context of a multilateral agreement, it locks in liberalization policies, thus enhancing their credibility. Quantitative analysis and country experiences also suggest that it produces the strongest impact of any change in policy. The paper recommends that:
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the decision to liberalize services should not be open to compromise, but the issue of how to achieve this goal should be allowed to vary from sector to sector based on the initial conditions in each sector
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sequencing of liberalization should start with sectors that are initially private but lack dominant private players
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