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Fitch Egypt Education & Labour Report - 2022-07-06

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Fitch Egypt Education & Labour Report - 2022-07-06

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Jul 2022
www.fitchsolutions.com

Egypt
Educa
ducation
tion & Labour Mark
Market
et
Includes the Fitch Solutions Labour Market Risk
Index
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Contents
Key View............................................................................................................................................................................................ 4

SWOT .................................................................................................................................................................................................. 7
Education & Labour SWOT........................................................................................................................................................................................................ 7

Industry Forecast........................................................................................................................................................................... 8
Education Industry Forecast .................................................................................................................................................................................................... 8

Market Overview..........................................................................................................................................................................13
Basic Education ...........................................................................................................................................................................................................................13
Tertiary Education .....................................................................................................................................................................................................................17

Competitive Landscape.............................................................................................................................................................22
Education Trends........................................................................................................................................................................................................................22

Demographics And Household Characteristics ................................................................................................................25

Labour Market Risk .....................................................................................................................................................................29

Skills Analysis ...............................................................................................................................................................................................................................29
Availability Of Labour Analysis ..............................................................................................................................................................................................33
Labour Costs Analysis ..............................................................................................................................................................................................................43

Education & Labour Methodology .........................................................................................................................................48

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This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2022 Fitch
Solutions Group Limited.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Key View
Key View: Private educational providers will have opportunities in Egypt, owing to the gradual uptake in private education at all
levels. However, investors will be presented with headwinds in the form of generally low levels of disposable incomes, dampening
the demand for private education. Egypt has a large pool of labour relative to regional counterparts owing to its large population,
boosted by high growth potential and the absolute number of people completing various levels of education. However, various
salient factors such as the significant spatial and income disparities in access to quality education converge to restrict the variety of
recruitment options for businesses in Egypt over the medium term. While there is a high supply of labour, many students are
unprepared for additional education or the demands of the job market, such that businesses face a shortage of skilled workers,
necessitating extensive training and the costly import of foreign workers. Investors face additional challenges due to rigid labour
regulations in a highly unionised labour market.

Latest Education & Labour Updates

• Basic Education: In order to address the shortage of teachers in Egypt, and keep up with the demand for educational services
owing to a large and rapidly growing population, Egypt’s President Abdel Fattah el-Sisi stated in Q122 that Egypt will appoint a
total of 30,000 new teachers annually up until 2027. This will assist in combating the rising pupil-teacher ratio, which is
inconducive for a quality teaching environment and promote the profession. However, according to the Central Agency for
Public Mobilization and Statistics, The number of teachers in the public schooling system is 1.2mn and teaching staff had
declined by around 13,000 from 2020 to 2021 alone. Given this, we expect the role of private education providers to play a
bigger role in Egypt's education sector over the medium-to-long term in order to support the public sector.
• Tertiary Education: Egypt is currently building six new technological universities in the cities of sixth of October, New Assiut,
New Taiba in Luxor, East Port Said, Samanoud in Gharbia and Borg El Arab in Alexandria. Once completed, this will raise the
number of technological universities to nine in Egypt.
• Labour Market Risk: Reported by the Al-Quds Al-Arabi newspaper in June 2022, statistics from the Egyptian Medical Syndicate
revealed that as many as 110,000 doctors have left Egypt in the three prior, creating a shortage of skilled doctors in
Egypt. Germany, England, Canada, Australia, New Zealand and Singapore have become attractive destinations for these migrant
doctors due to inefficiencies in Egypt such as low salaries and wages, the weak capabilities and medical supplies within
government hospitals, and the search for better opportunities for scientific research. As such, the brain drain in the medical field
will hamper investment opportunities in Egypt, and may disrupt progress of the implementation of the universal health scheme.

Labour Market Risk Overview

Egypt scores 43.8 out of 100 for Labour Market Risk, its lowest score out of our four Operational Risk pillars, ranking in 14th place
out of 18 MENA markets and 134th out 201 markets globally. The main upside for the labour market is the sheer size of the working
age population in Egypt. However, despite having some of North Africa's most attractive tertiary education institutes, Egypt's labour
market faces deficiencies in education quality, limited digital skills and a lack of technical expertise, while literacy rates remain low by
regional and global standards. Furthermore, labour unions pose a significant challenge to businesses in terms of labour costs,
while low rates of urbanisation, low female labour participation rates, and a low life expectancy add to the unattractiveness of the
Egyptian labour market.

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Low Participation Rates And Rigid Labour Regulations Weigh On Appeal

Egypt & Regional Average - Labour Market Risk

Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Labour Market Risk Index

Availability Of Labour (35.8/100): Egypt's large working age population and high population growth rate are positive factors for
the size of the labour force. Despite these positives, the Egyptian labour market is weighed down by underlying structural
weaknesses, including the wide spatial and gender disparities in access to health services, transport and utilities, and the shortage of
formal sector jobs, underscored by high rates of unemployment and underemployment, particularly among Egyptian youth.
Businesses operating in the country also face restricted recruitment options due to low rates of urbanisation, low female labour
participation rates, low life expectancy and low migrant stock, particularly in terms of skilled labour. Finally, restrictions on foreign
labour recruitment and the impact of the prevailing regional security situation will make it difficult to import skilled foreign workers
over the medium term.

Labour Costs (43.2/100): Despite undergoing some incremental changes to improve labour relations, overall, labour market
regulations remain rigid for employers and unions are active in a broad range of sectors. Businesses face recurrent risks of strikes
and concomitant supply chain disruptions. Since the 2011 ouster of Hosni Mubarak, Egypt has witnessed the emergence of a
variety of new labour unions, posing a significant challenge to businesses and the political landscape. High labour-related taxes and
considerable severance pay requirements are key drawbacks for employers in labour-intensive industries. In light of regional
insecurity and the poor access to adequate social services, foreign skilled workers are likely to require additional compensation such
as hardship and danger pay in order to work.

Skills (51.8/100): Employers will benefit from having a comparatively large labour force with at least basic education; however, due
to deficiencies in education quality, limited digital skills and a lack of technical expertise, literacy rates remain low compared to
similarly-sized economies around the world by regional and global standards. Therefore, domestic recruitment options will remain
limited, and additional training costs will have to be incurred for businesses looking to fill technical positions. The Egyptian labour
market suffers from many structural problems that have accumulated over decades, reflected by the wide mismatch between the
skills acquired in public educational institutions and the needs of the private sector, particularly at the tertiary level.

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EGYPT - LABOUR MARKET RISK

Skills Availability of Labour Labour Costs Labour Market
Risk

Egypt score 52.3 35.8 43.2 43.8

MENA average 50.7 49.7 52.2 50.8

MENA position (out of 18) 10 17 15 14

Global average 48.5 49.9 51.2 49.9

Global position (out of 201) 95 179 155 134

Note: 100 = lowest risk; 0 = highest risk. Source: Fitch Solutions Labour Market Risk Index

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SWOT
Education & Labour SWOT
SWOT Analysis
Strengths • There is a large pool of low-skilled labour for investors to draw on, benefiting the manufacturing,
construction and agriculture sector in particular.
• Egypt has a regionally strong research and development sector, particularly in the fields of science,
technology and health.
• Gradually rising urbanisation allows for greater movement of labour.

Weaknesses • Strong unions have blocked reforms and tend to raise labour costs.
• Underemployment is high, especially among graduates.
• Limited technical skills among the working age population.

Opportunities • Improvements to educational infrastructure and legislation should increase labour force skills over the long
term.
• There is a sizeable and young labour pool for firms to draw upon.
• Egypt retains some of the best tertiary education levels in the North Africa region, with growing emphasis on
postgraduate qualifications for non-academic positions.

Threats • The threat of strikes, protests and widespread popular unrest remains elevated.
• Brain drain is a key threat for firms seeking special skills, as educated and wealthy workers leave Egypt,
particularly to Europe and the US.
• A shortage of teachers poses significant risks to the education sector as rapid population growth continues.

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Industry Forecast
Education Industry Forecast
Key View: We forecast robust growth in Egypt’s education industry over the medium term to 2026, registering an average annual
growth rate of 12.8% y-o-y in local currency terms. Free and compulsory education has also led to high primary school enrolment
rates, and fuels the demand for primary education. Despite this, Egypt's large informal economy and low working age means the
demand for secondary education reduces as young people seek employment as soon as possible. That said, there is a gradual
uptake of private education, although this is hindered by low income levels of households, and we forecast this sector as a share of
total enrolment to grow by 2.0% for the primary segment and 1.8% for the secondary school segment in 2022.

Latest Updates

• Egypt's total education industry value is forecast to reach EGP149bn by 2022, and trend upwards over the medium term
(2022-2026) to reach EGP234bn by 2026. This is largely due to high fertility rates driving the demand for education services in
Egypt.
• In June 2022, The Ministry of Education and Technical Education held a meeting with the JICA Mission (Tokyo) in which the
Japanese model of tokatsu activities will take place place in schools. Essentially, the tokatsu education system in Japanese
schools focuses on building learner's personalities and developing their skills. While the Egyptian curriculum contains weekly
tokatsu activities for all schools (45 minutes per week - three activities), these were not strictly enforced due to Covid-19. As
such, workshops will start to prepare and activate tokatsu activities in all public schools, and the first phase will start in July 2022.

High Population Growth Drives Demand For Educational Services

Egypt - Education Industry Value

e/f = Fitch Solutions estimate/forecast. Source: Fitch Solutions

Structural Trends

Education in Egypt is in high demand and requires further continuous investment and resources to support its growth - Egypt relies
on a highly subsidised public education system. The Egyptian population is young and growing quickly, which fuels the demand for
education at a basic and tertiary level since the youth and families know that higher education increases the chances of getting a
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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good job. Changes to the constitution in 2014 which made it compulsory for all Egyptian students until the end of secondary
school. Going forward, this may boost the level of those educated at a basic level as enrolment and completion rates in upper
secondary school increases.

Primary Education: Free public education coupled with compulsory schooling for children between the ages of six and 18 (or
until the end of secondary schooling) is primarily responsible for the high primary school net enrolment rate of 99.3%. Furthermore,
due to historical success in improving access to basic education and ensuring that it is universally free, 71.2% of the Egyptian
workforce has had a formal education. This provides employers with a large pool of potential workers with basic skills, though this is
low by regional standards as the market ranks in a weak 16th place out of 18 markets in MENA for this indicator. The improvements
in access have not been matched with improvements in quality, as evidenced by the low literacy rates in the country that currently
stand at 71.2% (the second lowest in the region, above only Yemen).

Primary school enrolment is forecast to reach 14.1mn in 2022, and trend upwards over the medium term (2022-2026) at an
average annual growth rate of 2.1% to reach 15.3 by 2026. Within this we expect private education to account for 9.6% of primary
enrolment in 2022, and 10.2% of primary enrolment by 2026.

Education Enrolment Driven By Population Growth

Egypt - Education Enrolment Rates

e/f = Fitch Solutions estimate/forecast. Source: Local sources, Fitch Solutions

Secondary Education: Secondary school net enrolment rates are moderate in Egypt, at 82.8%, ranking it in eighth place out of 18
MENA markets. This is also higher than the regional average secondary enrolment rate of 74.3%. On average, only 42.2% of the
labour force has a secondary education or higher, which means that businesses needing to fill highly or technically skilled positions
in the manufacturing, construction, and financial sectors may have to recruit foreigners to fill the skills gap. However, since Egypt's
economy is geared toward manufacturing, particularly textiles, many young Egyptians are able to enter this sector with relative ease.

Secondary school enrolment is forecast to reach 10.7mn in 2022, and trend downwards over the medium term (2022-2026) at an
average annual growth rate of 1.0% to reach 9.8 by 2026. This may be partly due to the learners leaving school in search of
employment, despite the compulsory mandate to complete secondary schooling. Within this we expect private education to
account for 8.8% of secondary enrolment in 2022, and 9.4% of enrolment for the same segment by 2026. Many of Egypt's
secondary schools, particularly in rural areas, are not sufficiently equipped to handle high enrolment rates or to offer a decent level
of education, leaving little in the way of prospects for expansion or improvement. Internet access in secondary schools is not
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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widespread, and in some rural areas is non-existent - which is a major risk to high-tech industries, as much of Egypt's labour pool will
be unable to fulfil the job specifications for businesses operating in this market. The low quality of secondary education has resulted
in a mushrooming market for private tutoring.

Decline In Enrolment Due To Job Searching

Egypt - Secondary Education Enrolment Rates

e/f = Fitch Solutions estimate/forecast. Source: Local sources, Fitch Solutions

Tertiary Education: Tertiary school enrolment is forecast to reach 3.1mn in 2022, and trend slowly upwards over the medium
term (2022-2026) at an average annual growth rate of 0.3% to reach 3.1mn (~40,000 higher than in 2022) by 2026. At present, the
Egyptian educational system does not provide its students adequate tools to develop the soft and technical skills required by the
labour market. The gross tertiary enrolment ratio stands at 39% which ranks Egypt marginally ahead of Jordan, in 13th place out of
18 markets regionally. Almost half of all university students specialise in the humanities and social sciences and only have
theoretical knowledge, which necessitates considerable investment in re-training of graduates aiming to join advanced sectors.

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EGYPT - EDUCATION INDUSTRY OUTLOOK

Indicators Average Annual Growth Forecast Drivers
(2022-2026)

Government -2.9% • Economic hardships in Egypt have required the government to

Expenditure On decrease funding for education in recent years.
Education (local • In 2022, government expenditure on education will be 3.4% of GDP,
currency units) and will decline to 3.1% of GDP by 2026.

Enrolment Rates Primary: 2.1% • The low working age and poor legal enforcement to attend school at
secondary level keep students from completing their general
Secondary: -1.2% education.
• Enrolment rates, particularly at the primary level, will be driven by the
Tertiary: 0.3% high fertility rates in Egypt.
• Egypt's population is mostly young, and this will remain the case
over the medium to long term - around 40.6% of the population is
aged 18 and under (2021 estimate), while 30.8% is aged from 20-39
years of age. These won't change substantially, meaning that there
will be a market for educational providers over the long term.

Education Industry Value 8.4% • Egypt's education sector remains heavily underfunded as most of
(local currency units) the government spending is being directed towards debt servicing
costs.
• However, significant population growth will contribute to the
demand for educational services, as well as the drop of the cap of
20% foreign ownership of private and international schools in Egypt
in H121.

Source: Fitch Solutions

Education Enrolment Outlook: The gross enrolment ratio (reflecting the proportion of students at this level of education in the
population of this age group) reached 100% for primary education (ie, primary education provided the entire population), but is at
approximately 90% for secondary education. The gross enrolment rate in higher education has increased significantly over the past
three decades, from 12% in 1990 to 39% in 2018. Although this is still significantly lower than regional leader Saudi Arabia (70.6%).

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Weak Enrolment Rates Will Deter Investors

Egypt - All Levels Education Enrolment Growth, % change y-o-y

e/f = Fitch Solutions estimate/forecast. Source: Local sources, Fitch Solutions

Education Expenditure: General education in Egypt is mainly funded by the government. At 3.9% of GDP, education spending is
ranked sixth out of 12 markets for which data is available in the region. However, this figure is shrinking and remains below the
mandated level set out in the constitution of 4.0% of GDP. Education provision in Egypt has improved substantially over the past two
decades as successive administrations saw it as a basis for economic growth. However, the turmoil since 2011 has meant education
has taken a backseat as political and security woes came to the fore. The Egyptian labour market's failure to compete with regional
peers in terms of educational attainment is likely to persist given limited investment in skills development and high population
growth.

EDUCATION FORECASTS (EGYPT 2017-2026)

Indicator 2017e 2018e 2019e 2020e 2021e 2022f 2023f 2024f 2025f 2026f

Education nominal GVA, USDbn 3.59 3.72 5.47 6.43 7.09 7.43 8.02 8.70 9.50 10.36

Education USD nominal growth, % y-o-y -28.7 3.6 47.0 17.5 10.3 4.8 8.0 8.5 9.2 9.0

Education spending, USD per capita 42.27 49.05 56.52 66.73 74.49 74.96 79.07 81.64 86.46 92.05

Education spending, USDbn 4.08 4.83 5.67 6.83 7.77 7.96 8.54 8.97 9.66 10.45

Education spending, % total 4.86 4.92 4.95 4.98 5.01 5.05 5.07 5.09 5.10 5.12
e/f = Fitch Solutions estimate/forecast. Source: Local sources, Fitch Solutions

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Market Overview
Basic Education
Egypt's education sector benefits from regionally strong enrolment rates, and the gradual increase in the prevalence of private
education offerings. Investment in the public sector is generally underfunded, which has resulted in a shortage of facilities and
teachers, leading to a system that is unable to meet the demand of the growing population. Furthermore, due to the government
budget being directed largely toward debt servicing costs, we expect this to remain the case over the medium term.

Latest Basic Education Updates

• In order to address the shortage of teachers in Egypt, and keep up with the demand for educational services owing to a large and
rapidly growing population, Egypt’s President Abdel Fattah al-Sisi stated in Q122 that Egypt will appoint a total of 30,000 new
teachers annually up until 2027. This will assist in combating the rising pupil-teacher ratio, which is inconducive for a quality
teaching environment and promote the profession. However, according to the Central Agency for Public Mobilization and
Statistics, The number of teachers in the public schooling system is 1.2mn and teaching staff had declined by around 13,000
from 2020 to 2021 alone. Given this, we expect the role of private education providers to play a bigger role in Egypt's education
sector over the medium to long term in order to support the public sector.

EGYPT - BASIC EDUCATION CHARACTERISTICS

Primary Level Secondary Level Basic Education

Net Enrolment Pupil-To-Teacher Net Enrolment Pupil-To-Teacher Mean Years Of

Rates (%) Ratio Rates (%) Ratio Schooling

Egypt 99.3 23.7 82.8 15.2 7.6

MENA average 93.0 19 74.3 13 8.1

Global average 90.9 24 69.5 17 8.6

Source: World, Bank, Local sources, Fitch Solutions

Market For Education

State-Funded Education: There are no formal admissions requirements at Egyptian public schools at the elementary education
stage. Even though education at public schools is technically free, these schools nevertheless charge small fees. Free education for
locals coupled with compulsory schooling for children between the ages of six and 14 is primarily responsible for the high primary
school net enrolment rates of 99.3%. Enrolment rates at secondary school remain relatively moderate in Egypt, registering a net
enrolment rate of 82.8%, which is above the regional average rate of 74.3%. However, many pupils do not complete the upper
secondary level, as education compulsory education is not strictly enforced and the legal working age in Egypt of 15 prompts some
students to seek employment. As a result, only 42.8% of the labour force have a secondary education or higher and this highlights
reduced demand for academic education services.

One of the main reasons behind the poor quality of education is the inability of the education system to serve the growing
population. Over the medium term, the population growth rate stands will hover around 1.8% annually, showing that Egypt will reap
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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a demographic dividend contingent on an easing in political instability and improvement in the investment environment. The gap
between the amount of students that enrol and the amount of students that the system can hold is increasing on an annual basis
given the discrepancy between the accelerating population growth rate and the much slower school capacity enhancement rates.
This has led to overcrowding in many classrooms, high pupil to teacher ratios, while increasing levels of poverty, particularly in rural
areas, means many children perform poorly or are obliged to drop out of school and become economically active to support their
families. Recent reports show that over USD2.5bn is spent on private tutoring in Egypt every year. The poor allocation of
government expenditure and endemic corruption continues to be a problem in Egypt's education administration.

Private Schooling Relatively Unpopular

MENA - Private School Enrolment Rates

Source: World Bank, Fitch Solutions

Private Education: When it comes to private school enrolment rates, Egypt ranks towards the bottom in the MENA region,
demonstrating a relatively weak demand for private education relative to regional peers. Private education accounts for 9.4% of
total primary enrolment and 8.4% of total secondary enrolment (2019 data). This is not surprising as most household do not have
high incomes in order to be able to afford private education, such as markets like the UAE or Qatar. However, there is a gradual
uptake in private education, especially as the public sector comes under pressure from a lack of capacity and funding. Furthermore,
January 2021 saw the Egyptian education ministry scrap the 20% cap on foreign ownership of schools, boosting opportunities for
foreign private investors in Egypt's education sector. in H121, the Ministry of Education and Technical Education reported that the
total number of private schools in Egypt is 9,169, and that they contain 76,768 classes.

Overview Of Basic Education System

Structure Of Basic Education

The language of instruction is generally Arabic, and subjects like Arabic, mathematics, science, as well as English and religious
education is taught at all stages of education. The compulsory primary education programme follows kindergarten at age four.
Primary school begins at age six, taking six years and preparatory school takes another three years to complete. During this
introductory phase pupils may enrol at state, religious or private schools by choice. After three years of preparatory schooling, a
basic education completion certificate is awarded. During this time a student's aptitude is examined in order to determine their best
secondary education route. There are three streams in secondary education, namely general (three years), technical (as long as five
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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years) and vocational. Technical secondary schools are organised around industrial, commercial or agricultural themes. Both
technical and general schooling are conduits to tertiary education. Egypt's Ministry of Education is undertaking reforms to improve
education, particularly in rural areas. These include efforts to decentralise the education system in order to strengthen local
institutional capacity, as well as establishing workforce development programmes that provide training and technical education.
Latest data from the Ministry of Education and Technical Education suggest that there are around 56,569 schools in Egypt, while
the number of students enrolled in pre-university education is 23,567,060 (2019/2020 academic year data).

Another system that runs in parallel with the public educational system is known as the Al-Azhar system which consists of six years
of primary stage, a three-year preparatory stage and three years of secondary stage (similar to the public system). In this system
there are separate schools for girls and boys, and the system is supervised by the Supreme Council of the Al-Azhar Institution. The
curriculum for Al-Azhar schools is generally the same as in secular public schools, but it places a greater emphasis on Islamic
studies.

Investment In Basic Education

According to the director of the School Buildings Authority in Egypt, between 2014 and 2017, the Ministry of Education built 32,054
school facilities, including classrooms and expansions of already existing school buildings. Egypt had 45,279 public schools with
18,608,730 students, according to the ministry's statistics published in late July 2017. In 2018, the government also committed to
building 200,000 classrooms by 2028 at a cost of EGP100bn. In January 2022, the government stated that it will appoint 30,000
new teachers annually for a period of five years in order to address the shortage of staff, while a new incentive for teacher
development was also announced worth EGP3.1bn. Egypt’s recent macroeconomic and structural reforms stabilised the economy
and allowed the market to enter the global Covid-19 crisis with improving fiscal and external accounts. However, the adverse
repercussions of the pandemic have since undermined this recent progress, shedding light on longstanding challenges. These
include sluggish private sector activity and job-creation, especially in the formal sector, underperforming non-oil exports and foreign
investment, elevated government debt-to-GDP ratio, below-potential revenue mobilisation, and an unfavorable budget structure,
with limited allocations to key sectors, such as health and education.

EGYPT - EDUCATION FUNDING

Education Funding

State Funding

• Education expenditure: General education in Egypt is mainly funded by the government. However, a strained government budget has
resulted in underfunding for the education sector over recent years.

Private Funding/FDI

• The Egyptian government estimates that in 2022, investment in private schools will reach approximately EGP8.9bn, compared with
EGP6.5bn for public schools.
• Given the overall funding issues in the public school system, private institutions are of better quality and are becoming increasingly
popular.

Source: Local sources, Fitch Solutions

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EGYPT - BARRIERS TO ENTRY FOR BASIC EDUCATION SECTOR

Education Barrier Risk Level

Telecommunications • Moderate: Egypt faces moderate risks in relation to access to fast and reliable internet services.
and internet services • Pupils and institutions are constrained by relatively high fixed broadband costs, and fixed broadband tariffs are
the seventh highest per month on average out of 16 MENA markets for which data is available, which increases
costs overall.
• However, educational investors should note that according to Freedom House's 2021 Freedom on the net
report, internet freedom and the rights of internet users continued to deteriorate during 2021.

Digital skills of pupils

and teachers • Low: When compared to the MENA region, Egypt’s digital skills are above the average and fair well, ranking in
eighth position out of 18 markets in the region.
• However, the regionally low literacy rate will hamper Egypt’s potential to develop into more digitally supported
industries, such as IT, in the long term.
• On the upside, in order to improve the youths digital skills, the Cabinet Information and Decision Support
Center has said that the government allocated more than EGP1.1bn in H122 to meet the increasing demand
on learning digital skills.

Source: Fitch Solutions

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Tertiary Education
Egypt's tertiary education sector is relatively popular as it has some of the best universities in the North African region, and the
participation and establishment of private higher education institutions is on the rise. Furthermore, the regionally competitive
investment in research and development, the high number of research personnel and research partnership incentives boost the
attractiveness of Egypt’s R&D space, especially within the science and technology and health sectors. Key downside risks stem from
the low enrolment rates in tertiary institutions, largely due structural issues such as the low working age and low urbanisation rates.

Latest Tertiary Education Updates

• Egypt is currently building six new technological universities in the cities of sixth of October, New Assiut, New Taiba in Luxor, East
Port Said, Samanoud in Gharbia and Borg El Arab in Alexandria. Once completed, this will raise the number of technological
universities to nine in Egypt.
• The Minister of Planning and Economic Development stated in May 2022 that targeted investments for the 2022/2023
academic year involve expanding the digitalisation of exams at public universities, with the aim of providing EGP1bn to digitalise
154 test centers in all public universities. Investments are also targeted towards establishing 15 private universities, including in
Zagazig, Benha, Beni Suef, Mansoura, Assiut, Helwan, New Valley, Suez, Minya and Menoufia with a capacity of 150,000 students,
valued at EGP7.4bn.
• In February 2022, the Université Française d'Égypte announced that it will build a new EGP700mn campus, spread over an area
of approximately 34,000sq m in Shorouk city, East Cairo. The new campus will have a capacity of 3,000 students by 2028, and will
include faculties of arts, design, fashion, textile and by 2024, a department for medicine in partnership with an Egyptian
university.

Regionally Low Rates Add To Education Woes

MENA - Gross Tertiary Enrolment Ratio

Source: UNESCO, Fitch Solutions

Market For Tertiary Education

Egypt’s tertiary enrolment rate is the sixth lowest out of 18 markets in the MENA region at a rate of 35.2%, and this is far lower than
the primary (99.3%) and secondary enrolment rates (82.8%). There is a significant decline in enrolment rates compared with the
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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primary and secondary levels of education, and the market’s gross tertiary enrolment rates are below that of the regional average at
43.1%. This is comparable to rates in Lebanon (38.1%) and Jordan (33.6%). Regarding participation in tertiary education, females
enrolment is at 40%, while the gross enrolment ratio for males is 38%. The near-equal tertiary enrolment rates reflect the uptake
and participation in tertiary education by males and females. The low legal working age of 15 has also seen some learners leave
schools in search of employment opportunities, weighing on their ability to obtain a tertiary level of education.

Tertiary Education Overview

Structure Of Tertiary Education System

The Ministry of Higher Education and Scientific Research (MHESR) manages the implementation of education policy at the tertiary
level. According to the MHESR, there are 27 state universities, four national universities, 23 private universities, three technological
universities (with another six currently being built), four foreign university branches, 217 technology colleges and institutes and six
universities by international agreements. There are also 115 hospitals and medical centers in state universities. Most public
universities are large multi-faculty research institutions, and many of them have branch campuses across Egypt, while private
institutions tend to be much smaller. Arabic is the medium of instruction in humanities, social studies, education, law, commerce,
economics and political sciences, information, social service, tourism and hotels. English is widely used in the faculties of medicine,
pharmacology, dentistry science and engineering. Higher education is free for all Egyptians. As such, most students are enrolled in
public universities - according to the Central Agency for Public Mobilization and Statistics, 2.5mn students enrolled in public
universities and Al-Azhar institutions in 2020/2021, representing 71.8% of total students enrolled in higher education.

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EGYPT - TERTIARY EDUCATION CHARACTERISTICS

Tertiary Duration Tertiary Types/Characteristics

• Diploma: Two-to-three years Institution Types

• Bachelor's degree: Four years
• Master's degree: Two year • Colleges
• Doctoral degree: Two-to-five years • Institutes
• Universities
• Branches of foreign universities

Government Funded

• The government has established the majority of vocational and university institutions.
• Bachelor’s programs are four years long in most disciplines, but programmes in
engineering, pharmacy, dentistry and veterinary medicine last five years, while medical
programmes are six years in duration.
• Universities and higher educational institutions are overseen by the Ministry of Higher
Education and Scientific Research and is responsible for the educational activities in both
public and private Egyptian universities.

Privately Funded

• A number of private higher education institutions have been introduced recently in

Egypt, and this number is set to gradually grow over the long term, particularly in the New
Administrative Capital.

Source: Local sources, Fitch Solutions

Research And Development

For decades, science and technology in Egypt were highly centralised and dominated by the public sector. Research and
development (R&D) was carried out mostly by state-run universities and research centres supervised by the Ministry of Higher
Education and Scientific Research, which split into the Ministry of Higher Education and the Ministry of Scientific Research in 2014.
Egypt’s research centres that used to be scattered across different ministries are being reorganised under the umbrella of the
Supreme Council of Scientific Research Centres and Institutes in order to improve coordination. The Constitution adopted in 2014
mandates the state to allocate 1% of GDP to R&D and stipulates that the ‘state guarantees the freedom of scientific research and
encourages its institutions as a means towards achieving national sovereignty and building a knowledge economy that supports
researchers and inventors'. According to UNESCO data, just under 1% of GDP was spent on R&D in 2020, equivalent to USD8.3bn in
purchasing power parity terms. This has increased significantly since 2012 where R&D expenditure was at 0.5%. As a percentage of
GDP and in absolute value, this ranks Egypt fourth highest in the MENA region for both indicators out of 16 and 12 markets
respectively for which data is available. Additionally, Egypt has a relatively large headcount of R&D personnel (researchers) available
in its labour market - latest available indicate that there are 1,274 researchers per 1mn people, the third highest in the MENA region
out of 12 markets for which data is available. This puts Egypt marginally above Qatar (1,199) and Morocco (1,154), but well below
regional leader the UAE (4,160). However, Egypt's large overall population will mean that in absolute terms, there are far more
researchers than in small markets such as Qatar and the UAE.

Egypt’s academic publishing performance was highlighted by the release of data by SCImago, a platform hosting citation and
abstract databases of research output, which listed Egypt as the top producer of peer-reviewed journal publications in Africa, and
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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ranked in 26th position globally in 2021. With a 23% share of Africa’s publications in peer-reviewed journals, Egypt increased its
research output by 22% in 2021, as it produced 37,329 citable publications, compared to 30,536 publications in 2020, an increase
of 6,793 citable publications, according to SCImago’s datasets.

Research And Development Funding

Historically, the tendency in Egypt has been to focus solely on R&D development led by the state, without including the business
sector. The general trend recently, however, is to pursue policies to develop a knowledge economy as a way to provide employment
for a growing population while achieving sustainable development goals. As such, the business sector has played an increasing role
in R&D over recent years. In the 2022/2023 fiscal year, the government has earmarked EGP64bn for scientific research, which is
around 1% of GDP and up EGP4bn from the previous year’s budget, according to the Finance Ministry. However, Egypt's main
government agencies directly funding scientific research - the Science, Technology and Innovation Funding Authority, the Academy
of Scientific Research and Technology, and the Information Technology Industry Development Agency's Information Technology
Academia Collaboration Fund - will receive only just over EGP5bn. As such, more opportunities for businesses and universities to
fund R&D initiatives will increase over the long term.

EGYPT - PRIORITY R&D AREAS

Primary Skills Needed Research Opportunities And Supportive Conditions
Area Of
Focus

Science • Chemistry, • R&D cooperation between Egypt and the EU is governed by the EU-Egypt Science and Technology
and biology, Cooperation Agreement, signed in 2005. Cooperation areas include climate action (particularly water
technology physics management), food and agriculture, energy (particularly renewable energy and energy-water nexus),
• Engineering and health.
• IT • The US-Egypt Science and Technology Joint Fund was established, originally in 1995, to strengthen
scientific and technological capabilities between the two markets. The agreement was extended for five
years at a signing ceremony on August 31 2021.
• In 2007 the government launched a Science and Technology Development Fund, which has stimulated
the scientific society in Egypt by funding distinguished research papers and establishing scientific
partnerships with scientists from many advanced markets.
• The ScienceUP initiative aims to further interest in basic science and provide grants research in
mathematics and theoretical physics, while also building computing and big-data centres at Cairo
University, among others.

Medical • Health • Most of the researchers in Egypt are found in medical and health sciences, an area of high importance
and health professionals to the Egyptian government.
related • Pharmacists, • Digital health is of importance in order to make the correct health assessments, particularly
sectors nurses, for hepatitis C virus and non-communicable diseases.
dentists

Source: Local Sources, Fitch Solutions

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EGYPT - BARRIERS TO ENTRY FOR TERTIARY EDUCATION SECTOR

Education Barrier Risk Level

Digital skills and • Low: When compared to the MENA region, Egypt’s digital skills are above the average and fair well, ranking in
literacy rate eighth position out of 18 markets in the region.
• However, the regionally low literacy rate will hamper Egypt’s potential to develop into more digitally supported
industries, such as IT and increasingly healthcare and science, in the long term.
• On the upside, in order to improve the youths digital skills, the Cabinet Information and Decision Support Center
has said that the government allocated more than EGP1.1bn in H122 to meet the increasing demand on learning
digital skills.

Telecommunications • Moderate: Egypt faces moderate risks in relation to access to fast and reliable internet services.
and internet services • Pupils and institutions are constrained by relatively high fixed broadband costs, and fixed broadband tariffs are
the seventh highest per month on average out of 16 MENA markets for which data is available, which increases
costs overall.
• Educational investors should also note that according to Freedom House's 2021 Freedom on the Net report,
internet freedom and the rights of internet users continued to deteriorate during 2021.

Source: Fitch Solutions

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Competitive Landscape
Education Trends

Trends In Education

Global Trends

Rising EdTech

The Covid-19 pandemic accelerated the uptake of technology in the education sector and is changing the manner in which
students and instructors interact with one another. The widespread adoption of online classes and technology-led instructions
offers a wealth of opportunities in flexible learning styles (such as live classes or recorded videos) and various forms of content
delivery. EdTech is expected to accelerate even more in the years to come. While the integration of mobile learning technology is
not new, learning platforms increased sharply over 2020-2021. Looking beyond 2022, we expect to see increased development of
new edtech-enabled learning techniques, including learning pods, increased use of AI in content delivery and virtual reality. The
increase in technological capabilities means that a range of media and support tools will become increasingly important in a
student’s journey to achieve high, quality education.

Shift Towards Facilitated Learning

Technological developments have also changed how teachers relate to their students and their classrooms. Students now have a
wealth of information at their fingertips and the tools they need to uncover a tremendous amount of facts and knowledge
independently. Against this backdrop, the top-down delivery method will lose value among students. Instead, teachers will take on a
more facilitative role, whereby they help students understand how to learn, uncover and understand the information they find.

Market Trends

Digitalisation And Blended Learning

According to Tracxn, there are 158 EdTech startups in Egypt. Egyptian EdTech start-up Orcas raised USD2.1mn in Q122 to expand
its operations in the MENA region. Similarly, Egypt-based edtech firm Sprints secured Series A investment of USD1.2mn as of April
2022. A report in Q421 from global market research company Report Linker suggests that education technology and smart
classroom market is estimated to grow to approximately EGP133bn (USD7.1bn) by 2027. This indicates that EdTech will be a
growing sector in the medium-to-long term in Egypt.

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Key Education Players

EGYPT - TOP RANKED UNIVERSITIES

University Ownership Size Characteristics Global
Ranking

Public: Government funded ~29,300 Aswan University first opened its doors as a branch of Assuit 401-500
Aswan University students University in 1976, and was was established as an
independent institution in its own right in 2012.

Kafrelsheikh Public: Government funded ~57,400 19 faculties, five are scientific, seven are health-related, and 501-600
University students six dedicated to the humanities.

Source: Local sources, Times Higher Education World University Rankings 2022, Fitch Solutions

EGYPT - TOP PROVIDERS OF BASIC EDUCATION

Institution Description Key Offerings Intake Ownership details Size

British International • Located in Beverly Hills, a GCSE (General Ages 3-18; co-ed non-profit; privately 1,050
School, Cairo compound within the sixth of Certificate of owned students
October City, there are 24 Secondary
languages spoken within the Education);
school community. International
• Most staff hold higher Baccalaureate
degrees or are members of (Diploma);
professional institutes, which National
enhances the quality of Curriculum for
schooling. England

Cairo American College • The school has learners from American High Ages 3-18; co-ed Independent; private 830
54 nationalities, although School and non-profit students
about 40% of pupils are Diploma
American. (College
• Out of the 110 faculty staff, Preparatory);
30 hold bachelors degrees, International
70 hold masters degrees and Baccalaureate
seven hold a Phd. (Diploma);
International
Baccalaureate-
PYP
(candidate)

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Institution Description Key Offerings Intake Ownership details Size

Maadi British • The school offers a National Ages 2-16; co-ed Independent; private 330
International School particularly strong IT Curriculum for and non-profit students
approach. England
• Teaching techniques are
regarded as child-friendly; for
example, Year four pupils
enjoy 'Lotions & Potions'
which is a unit of study based
on the Harry Potter books.
• The modern campus has
facilities such as a large, two
floor auditorium, an indoor,
heated swimming pool and
Astroturf playing field, well-
equipped rooms for Art,
Design Technology, Cookery
and a Science Laboratory.

Source: Local sources, Fitch Solutions

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Demographics And Household Characteristics

Key View: Egypt's population is mostly young, however the majority of households are low- to middle-income earners, which
indicates that few households may be able to afford private education. The population is also large and growing, with a large
working age population, which bodes well for education investors in the long term. High fertility rates will also boost the demand for
education The largest population group is the 0-18 years old bracket, making Egypt a prime target group for basic education
offerings. Meanwhile, despite a large population, the relatively low incomes in Egypt will mean opportunities may be more attractive
in wealthier markets in MENA region such as the UAE or Bahrain.

Population Size

Egypt’s population is forecasted to grow significantly by 54.5% over 2020-2050. We forecast the total population to reach 158.1mn
in 2050 up from 102.3mn in 2020 (estimate). The large population growth is attributed to high birth rates, and Egypt's large
population size means that education prospects will be abundant relative to other smaller markets in the MENA region such as
Bahrain or the UAE. Furthermore, the population is predominately young, which bodes well for the demand for education over the
medium-to-long term.

Largest Population In MENA Region And Growing

Egypt & Select MENA Markets - Total Population, mn

Note: Egypt forecast to 2049 only (158.1mn). e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

Population Breakdown By Education Status

Nursery (0-4 years): Babies and toddlers will make up 9.2% of the total population by 2049, down from 12.4% in 2020, although
the absolute number in this category will increase to 14.5mn in 2049 from 12.7mn in 2020.

Primary

• Lower Primary (5-9 years): The number of young children will also increase over 2020 -2049, from 12.3mn to 14,4mn.
However, as a portion of the population, this group will decrease from 12.1% to 9.1% over the same period. Overall, the demand
for lower primary education will rise over the long term.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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• Upper Primary (10-14 years): The demand for upper primary education will rise over the same period as the number of
children that fall into this category rises from 9.6mn in 2020 to 13.9mn in 2049. This is the highest absolute increase out of all
the young population groups. As a percentage of the population, over the same period, this will decrease by a relatively small
margin from 9.5% to 8.8%.

Secondary/College (15-19 years): This teenage group will increase in absolute terms, from 8.7mn in 2020 to 12.9mn in 2049,
and will provide the most opportunities for basic education services.

Trends In Basic Education

Egypt - Population Trends For Basic Education (2000-2049)

e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

Tertiary And Adult Education: The demographic breakdown of the population is a conducive market for providers of education
services. The second largest age group is the young adult category (20-39 years old), which accounts for 30.8% of the total
population (2021 estimate). This bodes well for providers of tertiary education and professional qualifications. The second largest
group is the 0-18 year old bracket, which makes up 40.6% of the total population. As such, this group will feed into the young adult
category over the long term, maintaining the demand for tertiary and adult education in Egypt.

POPULATION BY EDUCATION STATUS (EGYPT 2020-2049)

Indicator 2020e 2025f 2030f 2035f 2040f 2045f 2049f

Population, 1-4 yrs, % total 10.0 8.9 8.2 8.1 8.0 7.7 7.4

Population, 5-9 yrs, % total 12.1 11.3 10.3 9.5 9.4 9.3 9.1

Population, 10-14 yrs, % total 9.5 11.0 10.4 9.5 8.8 8.7 8.8

Population, 15-19 yrs, % total 8.50 8.64 10.16 9.67 8.81 8.24 8.17

Population, 20-39 yrs, % total 31.0 29.5 28.5 29.5 30.4 30.8 30.8

Population, 40-64 yrs, % total 21.3 22.5 23.9 24.7 25.1 24.9 24.8
e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

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Disposable Income

The World Bank classifies Egypt as a lower-middle income economy, the same as markets such as Morocco and Tunisia, highlighting
the relatively low incomes in Egypt. Comparatively, all Gulf Cooperation Council markets in the MENA region are classified as high-
income markets. The majority of households have low disposable incomes, which indicate the inability to pay for private education.
We estimate that only 1.2% of total households to have disposable income of USD15,000 and above, while 35% have incomes
above USD5,000. This means over very few households will have the financial means to pay for private education. Stable and strong
economic growth over the medium term will support a rise in earnings and spending power, which may boost the demand for
private education. However, businesses need to be aware that although education is compulsory at both the primary and
secondary level, education is also free under Egypt's constitution. Providers of education may find it difficult to attract students as
their parents have become accustomed to not paying for education services, and majority do not have high income levels.

Lack Of Wealthy Households Limits Private Education Market

Egypt - Household Income Trends (2019-2026)

e/f = Fitch Solutions estimate/forecast. Source: Egypt CAPMAS, World Bank, UN, Fitch Solutions

Population By Geography

Egypt does not have a large urban population, with only 42.7% of the population living in urban areas, the second lowest rate out of
18 MENA markets, only above Yemen. The market’s urbanisation rate is expected to reach 45.6% by 2032, a positive characteristic
for firms in the services sectors, including education. Egypt has the largest, most densely settled population among the Arab
markets. However, much of Egypt's land is desert and less than 10% of the total area of Egypt is inhabited. Most of the population
resides is located in the Nile Delta, located in the north of Egypt, and further along the banks of the Nile River. The population who
stay along the Nile River, an area termed the middle Nile valley stretch roughly the area from Cairo to Aswān. There are also small
communities spread throughout the desert regions of Egypt and are clustered around oases and historic trade and transportation
routes. The largest city in Egypt is the capital Cairo which is located in the northeast, and is home to approximately one-fifth of
Egypt's total population at about 20.9mn people (this include inhabitants in nearby surrounding areas). The second largest
city, Alexandria, has approximately 5.3mn inhabitants. There are also small communities spread throughout the desert regions of
Egypt and are clustered around oases and historic trade and transportation routes.

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Low Urbanisation Rate Dampens Education Market

Egypt - Urban & Rural Population, '000 (2020-2040)

e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

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Labour Market Risk

Skills Analysis
Key View: Employers will benefit from having a comparatively large labour force with at least basic education; however, due to
deficiencies in education quality, limited digital skills and a lack of technical expertise, literacy rates remain low compared to
similarly-sized economies around the world by regional and global standards. Therefore, domestic recruitment options will remain
limited, and additional training costs will have to be incurred for businesses looking to fill technical positions. The Egyptian labour
market suffers from many structural problems that have accumulated over decades, reflected by the wide mismatch between the
skills acquired in public educational institutions and the needs of the private sector, particularly at the tertiary level. Egypt scores
52.3 out of 100 overall for Skills, which puts it in 10th place out of 18 markets in the MENA region and 95th out of 201 markets
globally.

Greater Investment Needed To Reduce Skills Shortages

MENA - Skills Risk

Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Labour Market Risk Index

Latest Skills Analysis

• In June 2022, according to a report submitted by Dr. Muhammad Latif, the Secretary of the Supreme Council of
Universities, Egyptian universities succeeded in eliminating illiteracy in 157,000 people in Egypt in the three months prior to the
report. Among the top universities where illiteracy was eradicated were the Beni Suef University (26,110), Al-Azhar University
(25,406) and Sohag University (19,593). This comes after the Secretary of the Supreme Council of Universities announced
that Egyptian universities eradicated illiteracy of 310,286 citizens between October 2019 and April 2022. The drive forms part of
Egypt's wider social initiative called 'Haya Karima' which seeks to eradicate illiteracy in more rural communities and achieve the
goals of the sustainable development plan, Egypt Vision 2030. This bodes well for the overall skill level in Egypt as a higher
percentage of the population will be literate and may potentially seek employment in more urbanised areas.

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Basic Skills

The literacy rate is one of the lowest in the Middle East and North Africa (MENA) region, demonstrating the poor quality of the
education system despite high enrolment rates. In the long term, we note that initiatives to increase ubranisation and literacy rates
will serve investors well as more of the population becomes educated at a basic level and are able to perform low to mid skilled jobs.
While businesses will see an increasing availability of workers with basic skills because of the market's strong primary and secondary
school enrolment rates, with the greatest progress being witnessed in urban areas, skills risks are most acute in non-urban areas. In
the short-to-medium term, businesses operating in Egypt will face limited recruitment options particularly for semi-skilled to skilled
positions, necessitating high training costs and the import of foreign workers. Consequently, Egypt scores an uncompetitive 42.0
out of 100 for Basic Skills, which puts the market in 11th place out of 18 markets in MENA and 114th out of 201 markets globally.

Skills Risk Overview

Egypt has an extensive education system that outranks all others in North Africa in terms of access to education, such that even
tertiary education is state funded. Free education coupled with compulsory schooling for children between the ages of six and 18 is
primarily responsible for the high primary school net enrolment rates of 99.3%. Under the Egyptian constitution, compulsory
education is at all stages of schooling - elementary, secondary and high school. Prior to 2015, the constitution stated that
compulsory schooling is only for nine years running from the age of six to 15, which meant that there was a large dropout rate
following Grade nine, or its equivalent. Egypt's adult literacy rates are below regional and global standards, with 71.2% of the adult
population being literate, the second lowest out of 18 MENA markets, and well below the regional average of 88.5%. Latest available
data show that the pupil-to-teacher ratio at the primary school level in Egypt is 23.7, which is higher than the regional average of 19
pupils to one teacher. This somewhat hampers primary school learners in Egypt as personalised interaction with their teachers may
be limited.

Large And Growing Pool Of Learners Face Quality Constraints

MENA - Primary School Enrolment Rate & Literacy Rate

Source: UNESCO, Fitch Solutions

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Advanced Skills

Many of the challenges faced by Egypt's secondary education are amplified in the tertiary level. Significant gender disparities in
access to education hinder many females from entering the labour market with adequate skills, and this serves to restrict the pool
of skilled labour in the long run. That said, there are some positives to Egypt's tertiary education system which make the country
relatively attractive to investors, such as the high number of science and engineering graduates that enter the labour market
annually, though the quality of educational offering remains an area of concern. In light of this, for Advanced Skills, Egypt scores of
62.6, placing it in fourth place out of 18 markets regionally, and 60th out of 201 markets globally.

Egypt continues to offer some of the best universities in the region, such as the Aswan University, American University in Cairo, the
University of Cairo and Mansoura University. The mismatch between labour supply and demand among youth relates to the lack of
soft skills as well as technical and vocational skills where many students are enrolled in humanities and social sciences. Despite
increasing educational attainment, young people in Egypt are underutilised such that unemployment affects almost one-sixth of
the economically active youth population, and almost one-third (30.2%) of youth in Egypt are neither in education nor in
employment or training according to the World Bank. High unemployment rates among the youth reflect problems of insertion into
the labour market or rather a difficult transition from school to work. Universities in Egypt offer a minimum degree course of four
years and there tends to be a high ratio of students to staff, especially in humanities and social sciences which attract almost 70% of
Egyptian tertiary students. Just over half of Egypt’s 60 main universities (and higher education institutions) are public institutions but
these also account for approximately three-quarters of university enrolment. Technical colleges offer a two-year programme of
study in a number of specialisations, including manufacturing, agriculture, commerce and tourism. A few technical colleges provide
five-year courses leading to advanced diplomas but these technical diplomas lack the social status of university degrees. While 60%
of secondary school pupils are channelled towards technical and vocational secondary schools, almost 95% of enrolment in post-
secondary technical colleges comes from general secondary schools; this leaves many pupils from technical and vocational
secondary schools with no prospects for further education.

The proportion of students that graduate from science and maths degrees is relatively low, at around 3.6% of graduates annually.
The proportion is higher for engineering and manufacturing construction with 6.2% of total graduates. However, while these
proportions are below par when compared against many OECD countries, we believe there is still room for improvement in terms of
the quality of the educational offerings in the long run, especially given Egypt's large industrial sector. Majority of students graduate
from the fields of education (26.3%), social sciences (19.9%), and arts and humanities (15.8%). Furthermore, many of the market's
science graduates leave Egypt in search of opportunities abroad, because of decades of underfunding in science and technology
research, causing a brain drain in Egypt's labour market. For businesses, this means increased wage costs because competition for
the few science graduates is high and many companies opt to bring in foreign nationals where possible.

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Dominance Of Non-Scientific Disciplines Highlights Critical Skills Gap

Egypt - Tertiary Graduates By Discipline

Note: Total graduates stands at 428,630 for 2018. Source: UNESCO, Fitch Solutions

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Availability Of Labour Analysis

Key View: Egypt's large working age population and high population growth rate are positive factors for the size of the labour force.
Despite these positives, the Egyptian labour market is weighed down by underlying structural weaknesses, including the wide spatial
and gender disparities in access to health services, transport and utilities, and the shortage of formal sector jobs, underscored by
high rates of unemployment and underemployment, particularly among Egyptian youth. Businesses operating in the country also
face restricted recruitment options due to low rates of urbanisation, low female labour participation rates, low life expectancy and
low migrant stock, particularly in terms of skilled labour. Finally, restrictions on foreign labour recruitment and the impact of the
prevailing regional security situation will make it difficult to import skilled foreign workers over the medium term. Consequently, we
score the country 35.8 out of 100 for Availability of Labour, ranking it in a low 17th out of 18 markets in MENA and 179th out of 201
markets globally.

Largely Homogenous Labour Pool Limits Recruitment Options

MENA - Availability Of Labour

Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Labour Market Risk Index

Latest Availability Of Labour Analysis

• Reported by the Al-Quds Al-Arabi newspaper in June 2022, statistics from the Egyptian Medical Syndicate revealed that as many
as 110,000 doctors have left Egypt in the three prior, creating a shortage of skilled doctors in Egypt. Germany, England, Canada,
Australia, New Zealand and Singapore have become attractive destinations for these migrant doctors due to inefficiencies in
Egypt such as low salaries and wages, the weak capabilities and medical supplies within government hospitals, and the search for
better opportunities for scientific research. As such, the brain drain in the medical field will hamper investment opportunities in
Egypt, and may disrupt progress of the universal health scheme (see below).
• Egypt is currently implementing a new universal health insurance (UHI) scheme which aims to tackle high out-of-pocket (OOP)
costs and the fragmented nature of pooled funds. Most recently, in May 2022, Egypt’s prime minister Mostafa Madbouli held a
meeting with other Egyptian minsters to discuss the scheme further and address any challenges facing its implementation. The
UHI scheme will be progressively implemented across Egypt, with the aim of covering all Egyptian governorates by 2032 and
providing access to quality healthcare to 30mn people who could not previously afford it. The first phase was launched in Port
Said in July 2019. The UHI scheme will be funded by employee and employer contributions in addition to tax increases
supplementing budgetary allocations. In March 2020, Egypt received a USD400mn donation from the European Bank for
Reconstruction and Development and USD400mn from the World Bank in June 2020 to further support the rollout of the UHI
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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scheme. The project aims to support the government in rolling out phase one of the scheme in addition to offering temporary
financial protection to the most vulnerable population from high OOP health expenditures resulting from the Covid-19
pandemic.
• In Q221, Talaat Moustafa Group revealed plans for a new city east of Cairo with an investment cost of EGP500bn. It will include
140,000 housing units, and is expected to provide as many as 3.3mn regular and irregular jobs, the developer told a press
conference. The Noor City project, which is expected to accommodate 600,000 people, will provide a range of housing options
and boost urbanisation. Homes will be offered through payment plans over 15 years in cooperation with state banks that include
the National Bank of Egypt, Banque Misr and Banque du Caire. The project, which is located in front of the New
Administrative Capital, aims to meet the requirements of population and urban growth in the East Cairo axis, currently home to
about 4.5mn people, Asharq Business reported. Its population is expected to reach 10mn people by 2030. Furthermore, June
2022 saw the government provide approval for including the areas of lands of the New Administrative Capital and its extension
as part of Cairo.
• Relatedly, the owner and developer of New Administrative Capital in Egypt, the Administrative Capital Company for Urban
Development company, announced in June 2022 that the second phase of the New Administrative Capital project is in the
planning stage and will be done by means of a public-private-partnership model. The second phase will involve construction
worth EGP40bn in areas such as electricity, gas, water and sewage grids. Over the medium term, this will attract the attention of
large international investors and an increased number of labourers.
• Population growth stresses the capacity of the government to provide services and maintain social cohesion. Population
momentum will maintain Egypt's youth bulge over the next two decades, meaning that infrastructure and governance provision
will need to cater for the increasing demands of a growing population. Addressing the unmet need for voluntary reproductive
health measures must be a government priority in the face of increasing resource pressures.

Size Of Labour Force

Egypt is the most populous country in the Arab world and the third most populous in Africa, behind Nigeria and Ethiopia. Businesses
operating in Egypt benefit from the large working-age population that will continue to support the market's appeal to labour-
intensive businesses in the long run. Considerably high fertility rates will ensure that the labour pool will continue to increase;
however, labour mobility is hindered by the wide skills gap in the market, weak internal transport networks and bouts of social
instability and regional insecurity, which hinder the free movement of labour between sectors and areas. Furthermore, risks of high
staff turnover and absenteeism are underscored by the poor healthcare system, resulting in low life expectancy. Consequently,
Egypt ranks sixth out of 18 markets in the region and 42nd out of 201 markets globally for the Size of Labour, with a score of 59.0
out of 100.

Egypt's working age population is the largest in the MENA region at an estimated 64.4mn, with around 700,000 new workers
entering the market each year. A rebound in the population growth rate, combined with the echo boom from the last population
bulge, resulted in a second youth bulge nearly 50% larger than the first. This will increase pressures on the labour market,
infrastructure, social services and the environment, making it even more urgent for Egypt to undertake wide-ranging structural and
policy reforms if it is to attract investors. A risk to businesses in Egypt is the weak provision of affordable healthcare services and the
low life expectancy of Egyptian workers, which at 72.2 years is the fourth lowest in MENA, above only Iraq and Yemen. The relatively
low life expectancy in Egypt is partially a result of low government expenditure on healthcare (USD68.5 per capita) which raises risk
of chronic illness within the labour force, resulting in reduced productivity. Overall, healthcare expenditure is the fourth lowest out of
18 markets in the MENA region at USD220 per capita. The existence of low government expenditure on healthcare means workers
(and employers) will have to cover the shortfall privately. This leaves those from low-income households (the majority of the
working-age population) particularly vulnerable to health risks. Approximately 90% of the public hospitals in Egypt are ill-equipped
for several interconnected reasons such as low budgets, the misallocation of hospital funds, lack of evaluation systems for doctors'
performance and drug shortages. These factors contribute to additional costs for businesses since employees are more likely to
take sick leave, retire early and seek private healthcare insurance as part of their compensation package. In addition, it is important
to note that climate change will likely exacerbate water scarcity in vulnerable areas and negatively affect food security, raising health
risks among the low-income groups in the population.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Large Pool Of Labour Readily Available

Egypt - Active & Pensionable Populations; Active/Pensionable Population Ratio

f = Fitch Solutions forecast. Source: UN, Fitch Solutions

With regard to the wider workforce that is employed, in 2019 around 20.6% were employed in agriculture (which suggests the high
prevalence of low productivity work) and we expect this to decline gradually. The market is also a large producer of products such as
crude and refined petroleum as well as metals, nitrogenous fertilisers and gold, and consequently there will be a large number of
workers trained with skills to match these industries. Employment in the manufacturing sector stood at an estimated 12.5% of the
workforce in 2019. In addition, more workers are joining the services sector, which employs 52.4% of the workforce, where we
expect the number of employed people in the services of the business sector to gradually rise over the long term. There are
approximately 5.6mn civil servants in Egypt's public sector. Overall, the government bureaucracy and public sector enterprises are
substantially over-staffed compared to the private sector.

Egypt's population is growing at a high rate, with a regionally high average fertility rate of 3.2 births per female contributing to the
population increase of over 41% since the early 1990s and we expect the population to reach 102.3mn in 2020. However, the
provision of basic sanitation and potable water has not improved with the population growth. According to the Egyptian
Organisation for human rights, roughly 38mn people in Egypt drink polluted water. The Nile River is the traditional receptor of
industrial waste and drainage waters generated by different activities, and it is estimated that more than 400 factories continue to
discharge more than 2.5mn cubic metres per day of untreated effluent into Egypt's waters. This raises the risk of chronic conditions
such as kidney failure and cancer, as well as water-borne diseases. Employers face the added cost of having to provide safe drinking
water for staff and factoring in hardship pay for expatriate workers.

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Oversupply Of Unskilled Workers

Egypt - Demographic Breakdown By Age (2021)

Source: Local sources, Fitch Solutions

Although Egypt's economy grew strongly during the 2000s and the country attracted substantial foreign direct investment (FDI),
the rate of unemployment and poverty remains high, and this is compounded by rapid population growth and urbanisation.
According to our forecasts, Egypt's population will rise to 113.5mn by 2026. Meanwhile, the country has a large youth population -
in 2020, around 40% of Egyptians are aged 19 or younger - and although this is forecast to decline gradually, it will remain very high
for the next decade. At the same time, Egypt's urbanisation rate is expected to increase marginally to 44.8% by 2030, meaning a
greater demand for urban jobs, housing and infrastructure and social services. These dynamics mean that future Egyptian
governments will need to provide more (or at least enable the private sector to provide more) to its citizens. A failure to achieve this
would keep unemployment high and leave many trapped in poverty, while raising political risks. Such an outcome would mean that
the country would remain vulnerable to political instability.

The Egyptian economy is still suffering from the ramifications of two major events: bouts of political instability following the 2011
revolution, and the impact of the Covid-19 pandemic which hurt the market's tourism and retail sectors the hardest. A third event,
namely the war in Ukraine, threatens price stability in Egypt in the short term. Labour force growth is exceeding employment
growth, and this is likely to exacerbate the ongoing domestic political crisis in the years ahead - a key risk for investors. According to
the World Bank, even before the pandemic, the unemployment rate of young females is more than five times that of young males,
and almost half of unemployed young people have completed university-level education or above (44.5% of the unemployed),
highlighting the significant skills mismatch in the labour market. The youth unemployment rate increases with each additional level
of educational attainment; tertiary-level graduates have the highest rate at 34.0%, compared to only 2.4% among youth with less
than primary-level education. Only 39% of the working-age population was in employment, while female labour participation rates
were at a low 21.9% before the pandemic struck, and this has decreased to 15.4% in 2021.

An upside risk to the reforms being applied to the health insurance system is the potentially increasing role of the private sector in
providing Egypt's healthcare services. Greater private sector engagement will expand healthcare coverage, alleviate some of the
financial burden placed on the government and support the development of public health facilities in the process. Egypt's public
health services have previously suffered from medicine shortages and a lack of special units. We believe that over the long term,
Egypt's private sector will play a crucial role in healthcare delivery for the population, reducing risk of illness over the medium-to-
long term if reforms are implemented appropriately. Egypt is also currently implementing a new UHI scheme which aims to tackle
high OOP costs and the fragmented nature of pooled funds. The UHI scheme will be progressively implemented across Egypt, with
the aim of covering all Egyptian governorates by 2032 and providing access to quality healthcare to 30mn people who could not
previously afford it. The first phase was launched in Port Said in July 2019. The UHI scheme will be funded by employee and
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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employer contributions in addition to tax increases supplementing budgetary allocations.

Composition Of Labour Force

Egypt's large labour pool is poorly diversified and presents firms seeking skilled professionals with restricted recruitment options.
Furthermore, the low availability of skilled local workers will require businesses to import labour at further costs. The low
urbanisation rate limits the recruitment scope of urban-based businesses and low female labour participation rates dent hiring
prospects for gender specific tasks. Furthermore, very low levels of gender balance in the workforce and a proportionally low stock
of migrant workers serves as deterrents. Additionally, approximately 95% of the population lives within 20km of the Nile River and its
delta, while vast areas of the country remain sparsely populated or uninhabited. Taking these factors into consideration, Egypt
scores a low 12.7 for the Composition of its Labour Force, which ranks it in 17th place out of 18 markets in MENA, and third last out
of 201 global markets.

The limited availability of female workers negatively affects businesses in Egypt by reducing the size of the labour force and limiting
the skills available. This is evident in the low female labour force participation rate of 15.4%, a figure which shows that there has
been minimal progress on this front in the last decade, and which has even deteriorated in recent years, down from 21.6% in 2017.
Despite significant strides in reducing the gender gap in education in Egypt, young women are much more likely to be unemployed
or trapped in vulnerable employment, leading to significant skills erosion in the market. A majority of young workers are employed
in agricultural activities and the informal market, which indicates a lack of vocational skills in the labour market that is likely to persist
in the medium-to-long term. The consequence of the prevalence of underemployment among the youth is that young workers
performing a job below their level of educational qualification are likely to lose their productive potential.

Despite growing at an impressive rate, Egypt's urbanisation is still the second lowest in the MENA region at 42.7%, above only
Yemen at 37.3%. On the upside, a fertility rate of 3.2 live births per female combined with rural to urban migration has caused many
of the cities in Egypt to increase by around 4% annually in terms of population size. Most of the land mass is desert, so about 95% of
the population is concentrated in a narrow strip of fertile land along the Nile River, which represents only about 5% of Egypt's land
area. Egypt's rapid population growth - a significant 78.8% between 1990 and 2019 - stresses limited natural resources, jobs,
housing, sanitation, education and healthcare. It is estimated that over the period 2005-2020, 14mn people would have moved
from rural to urban bases - a beneficial factor to urban-based businesses which will have access to a much larger workforce than is
currently available. Major urban centres in Egypt include Cairo (with a population of 20.9mn) and Alexandria (5.3mn). Cairo, the
capital city, is the largest city in all of Africa and the entire Arab world, which partially offsets the low urbanisation rate. Roughly 25%
of the labour force is concentrated in the Cairo and Alexandria governorates. Cairo has one of the most populous metropolitan and
urban areas globally, and has a population density of about 44,500 people per square mile. The most commonly spoken language in
Cairo is Arabic; however, a good proportion of the educated population can speak English, French or Italian. The city's economy is
predominantly based on textiles, cotton and food processing, so investors in these sectors will benefit the most. Tourism is also a
large source of employment; however, prevailing security risks have resulted in a subdued tourism sector outlook over the medium
term, which will likely lead to significant job losses.

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Low Urbanisation Levels Will Dampen Recruitment Options

Egypt – Urban & Rural Population, % (2022)

Source: UN, Fitch Solutions

Migration Trends

Population pressure, poverty, high unemployment, and the fragmentation of inherited land holdings have historically motivated
Egyptians, primarily young men, to migrate internally from rural and smaller urban areas in the Nile Delta region and the poorer rural
south, to Cairo, Alexandria, and other urban centres in the north, while a much smaller number migrated to the Red Sea and Sinai
areas. Waves of forced internal migration also resulted from the 1967 Arab-Israeli War and the floods caused by the completion of
the Aswan High Dam in 1970. Limited numbers of students and professionals emigrated temporarily prior to the early 1970s, when
economic problems and high unemployment pushed the Egyptian government to lift restrictions on labour migration.

The limited availability of migrant workers in Egypt drives up costs for investors because of the need to import workers at business
expense. Migrant workers currently make up just 0.5% of the population in comparison to markets such as Qatar where they make
up as much as 78.7% of the population. The largest number of workers come from markets in MENA region in 2019, such as the
West Bank & Gaza (26.6%), Syria (24.7%), Sudan (11.8%) and (Iraq (3.9%). Of the top five, only Somalia (4.0%) falls outside the MENA
region. Historically, immigrants from the top five largest sources increased gradually, barring immigrants from Syria which increased
significantly due to the Syrian war - between 2010 and 2015, Syrian immigrants increased by over 1,100% in Egypt. While many of
immigrants from other markets are also likely to be refugees seeking asylum or work in Egypt, migrants from more developed
markets are likely to be skilled professionals seeking employment in Egypt's oil and gas industry such as Saudi Arabia (1.6%),
Germany (1.5%) and Russia (1.5%).

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Largely Homogeneous Migrant Population Signals Limited Skills Diversity

Egypt - Top Five Immigrant Source Markets (2000-2019)

Source: UN, Fitch Solutions

At the same time, high oil revenues enabled Saudi Arabia, Iraq and other Gulf markets, as well as Libya and Jordan, to fund
development projects, creating a demand for unskilled labour (mainly in construction), which attracted tens of thousands of young
Egyptian men. Consequently, even after the 2011 Arab Spring, emigration levels remain high and in 2019 the market had a net
migration rate of 0.5 migrants per 1,000 of the population. Employers in Egypt are encouraged to give jobs to locals rather than
employing foreigners, which can impact work permits. Egypt also has a quota system, so limits on work permits could impact firms'
workers. For example, non-Egyptian workers in any company should not exceed 10% of the total staff of semi-skilled or unskilled
workers. The limit for skilled workers is 25%. The total compensation of foreign employees must not exceed 20% of the total payroll.

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EGYPT - LOCALISATION REQUIREMENTS

Requirement Business Impact

Foreign labour rules • Moderate: The Egyptian government encourages investment in sectors that create employment,
generate foreign exchange, and create forward and backward links with rural areas. Labour regulations
continue to restrict the employment of foreign nationals, particularly in low-skilled sectors.
• Labour rules prevent companies from hiring more than 10% non-Egyptians (25% in free zones), and
foreigners are not allowed to operate sole proprietorships or simple partnerships.
• Work permits are required for all foreign nationals intending to work in Egypt.

Visa process and exemptions • Moderate: In June 2017, Egypt introduced liberalisations concerning the visa acquisition process
applicable to individuals with a Gulf residency in India, Pakistan, Indonesia, Philippines, Sri Lanka and
Maghreb region (consisting of Mauritania, Morocco, Tunisia, Algeria and Libya).
• Specifically, individuals that have a minimum of six months residency in the denoted list are no longer
required to apply for pre-approved visas issued by Egyptian consulates abroad, prior to entering the
Egyptian jurisdiction. Instead, they can now acquire visas directly at the ports and airports connected
to Egypt, which is a boost to labour mobility and costs.
• Citizens of the following markets can enter into Egypt visa free (up to three months): Bahrain, Hong
Kong (China), Israel (special conditions apply), Kuwait, Lebanon (special conditions apply), Macao,
Oman, Saudi Arabia, the UAE, and Malaysia (only up to 15 days).
• Subject to the stratification of specific criteria, the New Investment Law states that foreign employees
are only allowed to make up a maximum of 20% of the investors' employee base/the investment
projects' personnel.

Source: Fitch Solutions

The limited availability of migrant workers in Egypt drives up costs for investors because of the need to import workers at business
expense. Migrant workers currently make up just 0.5% of the population in comparison to markets such as Qatar where they make
up as much as 78.7% of the population. The largest number of workers come from markets in MENA region in 2019, such as the
West Bank & Gaza (26.6%), Syria (24.7%), Sudan (11.8%) and (Iraq (3.9%). Of the top five, only Somalia (4.0%) falls outside the MENA
region. While many of these are likely to be refugees seeking asylum or work in Egypt, migrants from more developed markets are
likely to be skilled professionals seeking employment in Egypt's oil and gas industry such as Saudi Arabia (1.6%), Germany (1.5%)
and Russia (1.5%).

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Skilled Emigrants Flock To Gulf Peers And Developed Markets

Egypt - Top Five Destinations For Emigrants (2000-2019)

Source: UN, Fitch Solutions

Moreover, there were also roughly 31,500 migrants from developed markets in 2019, down from 35,300 in 2015. Migrants from
developed markets include citizens of Australia, Austria, Belgium, Canada, Denmark, France, Germany, Gibraltar, Italy, Monaco, the
Netherlands, Norway, the UK and the US. These workers tend to be well educated and equipped with a reasonable level of skill. We
also highlight that recruitment options relative to firms seeking skilled and educated workers will be limited, as Egypt is experiencing
a severe brain drain of local talent. Reported by the Al-Quds Al-Arabi newspaper in June 2022, statistics from the Egyptian Medical
Syndicate revealed that as many as 110,000 doctors have left Egypt in the three prior. Germany, England, Canada, Australia, New
Zealand and Singapore have become attractive destinations for these migrant doctors due to low salaries and wages, the weak
capabilities and medical supplies within government hospitals and the search for better opportunities for scientific research. Many
Egyptians also leave for developed markets in the wider European region, the US, as well as the UAE and Saudi Arabia, in search of
better economic opportunities.

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EGYPT - BARRIERS TO ACCESSING FOREIGN LABOUR

Barrier Sectors/ Impact On Labour Market
Countries
Affected

Visa/travel All • Moderate: A foreign national must obtain a work permit to be able to stay and work in Egypt.
restrictions • In 2011, Egyptian authorities enacted regulations designed to restrict access for foreigners to
Egyptian worker visas, though application of these provisions has been inconsistent. Visas for
unskilled workers will be phased out. For most other jobs, employers may hire foreign workers
on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job
during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills
will remain open to foreign workers.
• The procedures are easier for managers than employees. A joint stock company or a limited
liability company operating under the umbrella of the Investment Law can appoint a number of
managers commensurate to the value of its capital. It usually takes around two months from
application to obtain a residency visa, and it costs around EGP3,000.

Language/cultural All • Low: Though foreign language skills, especially in English, are widespread, language barriers
barriers may be a problem for foreign workers, especially those working in rural areas.

Migrant labour All • Moderate: Regulations on employment conditions and the access to basic social services -
regulations such as healthcare, education and justice - are somewhat discriminative towards regular
migrant workers and they are basically non-existent for undocumented migrant workers.
• These problems are strongly connected to the fragmented system regulating different
residence status for third-country nationals, especially when it comes to labour rights and
guarantees.

Source: Fitch Solutions

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Labour Costs Analysis

Key View: Despite undergoing some incremental changes to improve labour relations, overall, labour market regulations remain
rigid for employers and unions are active in a broad range of sectors. Businesses face recurrent risks of strikes and concomitant
supply chain disruptions. Since the 2011 ouster of Hosni Mubarak, Egypt has witnessed the emergence of a variety of new labour
unions, posing a significant challenge to businesses and the political landscape. High labour-related taxes and considerable
severance pay requirements are key drawbacks for employers in labour-intensive industries. In light of regional insecurity and the
poor access to adequate social services, foreign skilled workers are likely to require additional compensation such as hardship and
danger pay in order to work. Egypt scores 43.2 out of 100 for Labour Costs, which ranks it 15th out of 18 markets in MENA and a low
155th place out of 201 markets globally.

High Costs And Rigid Labour Practices Inhibit Growth

MENA - Labour Costs

Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Labour Market Risk Index

Latest Labour Costs Analysis

• In January 2022, President Abdel Fattah el-Sisi announced in a statement that the minimum monthly wage would be raised to
EGP2,700 (equivalent to around USD171.50), an increase of 12.5% from EGP2,400 (USD152.50). Civil servants' salaries are also
expected to increase by about 13%, highlighting the impact of rising inflationary pressures. The Egyptian government decided to
apply the increase in minimum wages set for fiscal year 2022/2023 as of April 1 2022, instead of the originally stipulated date of
July 1 2022. Moreover, the government decided to upgrade the tax exemption limit to EGP15,000, from EGP9,000, to include
individuals receiving an annual wage of EGP30,000, instead of the current limit of EGP24,000. President el-Sisi has also approved
a 13% increase in pensions, effective as of April 1 2022. The government also decided to add 450,000 new families to the Takaful
and Karama’s pensions programme, with an additional annual cost of EGP2.4bn.
• The annual core inflation rate in Egypt accelerated to 13.3% in May 2022, up from 11.9% in April 2022. This was the highest
figure since June 2019, mainly due to rises in prices of food and beverages - cereals and bread; oils and fats; fish and seafood;
fruits; and dairy, cheese and eggs. These increases offset the sharp drop in vegetable prices and the favourable base year impact.
On a monthly basis, consumer prices rose by 1.1% in May 2022, this is down from 3.3% and 2.2% recorded in April 2022 and
March 2022 respectively. Our Country Risk team expect double-digit inflation to weigh on household income, public investment
and a full recovery in tourism sector. In its latest meeting on June 23 2022, Egypt’s central bank opted to keep the interest rate
unchanged following a large 200 basis point increase in May 2022. The central bank believes that Egypt's target of inflation of
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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5-9% for Q422 is still viable.

• While Egypt's labour laws are broadly considered to be quite rigid to navigate for employers, there are some avenues of relief.
Apart from limited reductions for disciplinary reasons, employers cannot unilaterally reduce salaries. There are two limited
exceptions to this rule in the Egyptian Labour Law. The first is where there is a compelling event or circumstance, outside an
employer's control, which prevents employees from working. In such cases, employers may reduce the salaries by up 50% of an
employee's salary for the duration of the event or circumstance. A second exception is in cases where the employer has the right
to terminate the employment contract for economic reasons. Employers may instead decide to decrease employees' wages, as
long as they do not go below the statutory minimum wage. However, employers must first obtain approval from a governmental
committee assembled for this purpose. We note however that this is a lengthy and bureaucratic process as the committee does
not convene regularly. In any event, if this course of action is pursued, employees have the right to terminate employment
contracts and are entitled to an end-of-service compensation. This compensation is equivalent to the gross salary of one month
for each of the first five years of employment, and the gross salary of one and a half months for each year exceeding that. The
ramifications of the Covid-19 pandemic could fulfil both of these exceptions, and elevated inflation will support this; however, this
must be determined on a case-by-case basis, taking into consideration the economic impact of the pandemic and elevated
inflation on an employer's business.

Cost And Flexibility Of Labour

Employers in Egypt benefit from low minimum wage requirements in the labour market when compared to regional peers, and high
levels of productivity-wage ratios; however, given the prevailing economic headwinds, wages are likely to rise as elevated inflation
persists across 2022. This, in conjunction with high labour taxes, drives up overall employment costs significantly. In light of these
considerations, Egypt scores 40.3 out of 100 for Cost of Employment, placing it 15th out of 18 markets in the MENA region, and
147th out of 201 markets globally.

Labour policies are key obstacles to doing business in Egypt, particularly in the labour-intensive industries. There are significant
restrictions on the hiring and firing of workers, the latter proving especially difficult and costly, as evidenced by high severance pay
requirements. Large labour unions also presents short- to medium-term operational risks for businesses, as prolonged strikes can
compromise supply chains and productivity. Egypt, therefore, scores 46.2 out of 100 for Flexibility of Labour, ranking 12th out of 18
markets in the MENA region, and 124th out of 201 markets globally.

Direct Labour Costs

The flotation of the Egyptian pound, the scrapping of several subsidies on regulated goods and the introduction of VAT have
raised cost pressure on households, underpinning our expectations for rising labour costs in the near term. Egypt's minimum wage
is set by the government, often in response to political pressure. In January 2022, President Abdel Fattah el-Sisi announced in a
statement that the minimum monthly wage would be raised to EGP2,700 (equivalent to around USD171.50), an increase of 12.5%
from the current EGP2,400 (USD152.50). This is the third time President el-Sisi has raised the minimum wage since taking office in
2014. January 2022 also marked the first time that the minimum wage was applicable for the private sector, increasing overall
labour costs - Minister of Planning and Economic Development Hala al-Saeed estimated the number of workers who will benefit
from this decision is about about 20mn. Civil servants' salaries are also expected to increase by about 13%, highlighting the impact
of rising inflationary pressures in the country. A rise in public sector wages will also put further pressure on private sector wages to
trend upwards in the short term. Egyptian Labour Law states that all persons governed by the Labour Law are entitled to a
minimum annual raise of 7% of their basic salary. The basic salary referred to here is not the employee's actual basic salary, but
rather the salary upon which social insurance contributions are calculated.

Inflation in Egypt has remained high in recent quarters and is set to remain elevated across 2022, and is a controversial issue, with
significant disparities between government's inflation estimates and those experienced on the ground. Most private and public
companies use the official inflation rate as the basis for salary negotiations, often resulting in real wage declines. This, in turn, lowers
employee morale and increases the risk of strikes.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Egypt Education & Labour Market | Jul 2022

Businesses seeking skilled foreign labour will face increased operational costs as a result of additional compensation requirements
in the form of hardship and danger pay. In light of regional security risks and weak access to social services, according to the US
state department, current hardship and danger pay requirements run as high as 20% and 15% on top of basic compensation
respectively. Furthermore, many foreign workers may command higher salaries or salaries in hard currency. Labour tax and social
insurance contributions are among the highest in the region at 26% on basic salary and 24% on variable salary (each reduced by
3% for medical scheme). Both are payable jointly by the employer. We highlight that the employee paid contribution stands at 14%
on basic salary and 11% on variable salary (each reduced by 1% for medical scheme).

Flexibility Of Labour Regulations

An employee is entitled to 60 days notice of dismissal if his or her period of service does not exceed 10 years, and 90 days if that
period exceeds 10 years. If the firm does not wish to keep the employee on for this period, they are obliged to pay the equivalent
salary. Even the privatisation programme in some cases requires a company's new owner to keep all the old workers on their books.
The average severance package for redundancy dismissal is 21.7 weeks, which is tied for the highest in the MENA region with Iran,
Yemen, and West Bank and Gaza. Further increasing the costs for investors is the fact that the average worker is entitled to 24 days
paid leave per annum, compared to a low 15 days in Lebanon and 18.7 days in Jordan.

EGYPT - LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE

Contracts

Fixed-term contracts prohibited for permanent tasks? No

Maximum length of a single fixed contract (months) No limit

Working Week And Absences

Maximum working days per week 6

Premium for overtime work (% of hourly pay) 35 (70 for night-time)

Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 24

Paid or unpaid maternity leave mandated by law? Yes

Minimum length of maternity leave (calendar days) 90

Redundancy

Dismissal due to redundancy allowed by law? Yes

Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in salary weeks) 10.1

Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in salary weeks) 21.7

Source: Local Sources, Fitch Solutions

The government bureaucracy and public sector enterprises are substantially over-staffed compared to the private sector and other
international norms. Businesses highlight a mismatch between labour skills and market demand, despite high numbers of university
graduates in a variety of fields. Official statistics put the unemployment rate at 7.2% in Q122; however, more realistic estimates are
that unemployment is likely higher, but this is difficult to determine given Egypt’s large informal economy (accounting for
approximately half of the labour force and nearly a third of GDP). The unemployment rate is significantly higher for women. Limited
employment opportunities for youth remain a serious challenge to Egypt’s social cohesion. While Egypt attracts some migrant
workers, primarily seasonal agricultural workers from neighbouring countries and some domestic labourers from South East Asia, it
remains a net exporter of labour with millions of Egyptians continuing to seek employment abroad.

Foreign companies frequently pay internationally competitive salaries to attract workers with valuable skills. The labour law allows
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Egypt Education & Labour Market | Jul 2022

ministers to set the maximum percentage of foreign workers that may work in companies in a given sector. There are no such
sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits
or procedures regarding the proportion of foreign and local employees. Egypt has regulations restricting access for foreigners to
Egyptian worker visas, though application of these provisions has been inconsistent. The government plans to phase out visas for
unskilled workers, but as yet has not. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but
must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire
the requisite skills will remain open to foreign workers. Application of these regulations is inconsistent.

Egyptian labour laws allow employers to close or downsize for economic reasons. The government, however, has taken steps to halt
downsizing in specific cases. The unemployment insurance law, also known as the Emergency Subsidy Fund Law, sets a fund to
compensate employees whose wages are suspended because of partial or complete closure of their firm or due to its downsizing.
The fund allocates financial resources that will come from a 1% deduction from the base salaries of public and private sector
employees. These aspects of Egypt's labour laws and policies are significant business impediments, particularly the difficulty of
dismissing employees.

Egypt’s new labour law includes 267 articles, providing each profession an official framework and entity. The law aims to balance the
relation between employers and their employees, so that neither party violates the rights of the other. The employer has to provide
a safe environment for workers, as well as health and social care. These are the main rights secured by the Egyptian Constitution to
achieve job security and stability within the society. The law also stipulates that employees will be entitled to annual leave (not
including official holidays, feasts and weekends), up to 15 days in the first year, 21 days in the second year, 30 days for employees of
10 years or more and 45 days for those aged 50 years old or older or people with special needs.

Labour Unrest Risks

In March 2011, the Minister of Manpower and Migration issued a decree recognising complete freedom of association and,
subsequently, the minstry registered well over 1,600 independent trade unions without interference. Egypt's government has
completed the amendment of the new labour law including the Laws of Labour and Trade Union Oganizations, in a way consistent
with the current economic conditions of the market and its social reflections on all workers sectors. Employees have the right to
strike in accordance with the labour law, as well as rules and guidelines governing collective bargaining between employees and
employers. In spite of these measures, strikes are usually more common in Egypt than in the Middle East, which raises risk of supply
chain disruption and lost productivity. Workers have the right to strike peacefully, provided the trade union organises the strike in
defence of vocational, economic and social interests and announces it at least 10 days in advance. A trade union or workers'
committee may be formed if 50 employees in an entity demand it. Strikers must also notify the employer and administrative officials
of the reasons for, and time frame of, the strike.

The Egyptian government has approved amendments to the law that regulates trade unions and adheres to international labour
standards. The new amendments allow all workers to form labour committees with no less than 50 members. They also allow
workers in organisations with less than 50 staff members to form a labour committee. They will be allowed to join forces with
workers in other professions or crafts. The amendments also allow for the formation of a general trade union with at least 10
committees, each with at least 15,000 members. The new legislation aims at handling and making the best effective remedies to
the negative aspects of the current law - the 2003 Law No.12. One of the key points in the new regulation encourages youth to be
engaged in the private sector, through developing fixed guarantees for the termination of the employment relationship.

Workers in Egypt have the right to strike peacefully, but strikers are legally obliged to notify the employer and concerned
administrative officials of the reasons and time frame of the strike 10 days in advance. The law prohibits strikes in strategic or vital
establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens. In
practice, however, workers strike often, in all sectors, without following these procedures, but at risk of prosecution by the
government. Strikes, especially in labour-intensive industries such as the textile sector, are typically organised and led by workers
independently of the Trade Union Federation. For example, over 750 worker-led labour actions in textile mills in the Nile Delta were
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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recorded in 2016. Amid rising economic hardship in Egypt and a wave of labour strikes in the private and public sector, as well as
military-owned industries, the government has been known to use a series of disciplinary measures and criminal sanctions to crack
down on workers and trade unionists. Egypt saw almost 250 protests take place around the country from May 2016 to April 2017,
where workers were calling for increased wages and access to financial dues. Workers' strikes resulted in 186 arrests and the
suspension of 2,691 workers.

According to latest reports in Q122, at least two sit-ins were staged in 2021, including one by more than 2,500 workers in
September 2021, to protest the delay in overdue salary payments to workers. The protests subsided only after the Ministry of
Manpower stepped in and brokered a mutually agreed schedule between the workers and company management for the payment
of salaries. Protest actions have been staged by workers in previous years, with one such workers’ strike resulting in the manpower
industry agreeing to pay half the value of the workers’ salaries from its own treasuries for a six-month period. An Egyptian non-
governmental organisation, the Centre for Trade Unions and Workers Services, recorded 8,041 violations of workers’ rights in 2021,
with delayed payments of salaries accounting for 36% of all violations, the highest among the various kinds of workers’ rights
violations recorded in 2021.

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Education & Labour Methodology

Labour Market Risk Index Methodology

Our Operational Risk Index quantitatively compares the challenges of operating in 201 markets worldwide. The index scores each
market on a scale of 0-100, with 100 being the lowest risk. The entire index consists of 24 sub-index scores and 90 individual
surveys and datasets, which all contribute to the headline score.

Each market has a headline Labour Market Risk Index score, which is made up of three categories of analysis, further broken down
into sub-categories. Each category and sub-category is scored out of 100, with 100 the lowest risk.

The overall Labour Market Risk score is calculated from the average of the Skills, Availability Of Labour and Labour Cost sub-
component scores.

Skills: The skill sub-component covers all levels of schooling from primary to tertiary. Scores are based on enrolment rates at each
level of education and take-up of technical degree courses such as science, ICT, manufacturing, construction and engineering. This
gives an indication of the talent pool available, and emphasises higher value technical skills.

Availability Of Labour: The availability of labour score takes into account the size of the workforce, the quality, age and health of
the labour pool and its composition with regard to the nationality, gender and occupational status of workers.

Labour Cost: This sub-component assesses the flexibility of labour laws and the cost of hiring in a particular market. It includes
factors such as the minimum wage, severance pay and regulations surrounding hiring and firing practices. The scores are calculated
to reward the markets with the lowest hiring costs and most flexible legislation.

WEIGHTING OF INDICATORS (%)

Weighting

Skills 33 of which

Basic Skills 50

Advanced Skills 50

Availability Of Labour 33 of which

Size Of Labour Force 50

Composition Of Labour 50

Labour Cost 33 of which

Costs Of Employment 50

Flexibility Of Workforce 50

Source: Fitch Solutions

Education Industry Methodology

Our industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric
modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard
practice, by the prevailing features of the industry data being examined.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a variable using more than
the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil
consumption, supply and capacity.

When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most
desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile
form of univariate models: the autoregressive moving average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historical data or data quality is poor. In such cases,
we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.

We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, we use a
'general-to-specific' method. We mainly use a linear model, but simple non-linear models, such as the log-linear model, are used
when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy
variables are used to determine the level of impact.

Effective forecasting depends on appropriately selected regression models. We select the best model according to various different
criteria and tests, including but not exclusive to:

• R2 tests explanatory power; adjusted R2 takes degree of freedom into account

• Testing the directional movement and magnitude of coefficients
• Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
• All results are assessed to alleviate issues related to autocorrelation and multicollinearity

We use the selected best model to perform forecasting.

Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience, expertise and knowledge of
industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a
purely mechanical forecasting process would not.

Sources

Sources used in the reports include local education ministries, official and publicly available company figures, established think
tanks and institutes and donor agencies such as the World Bank and UNESCO.

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Fit
Fitch
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ondon. E14 5GN, UK
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Web: www.fitchsolutions.com

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