The Macrotheme Review
The Open Door Policy (1970-1990)
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3.2 The Open Door Policy (1970-1990)
Presence of Open Door was the first step to return to private enterprise activities and opening the doors to foreign goods and investment and deeper political ties with other countries (Amin, 2011).
The driving force of this change was to boost the private sector, encourage foreign investment and leverage Egypt’s natural resources and human capital base. Thus, Egypt tried to pitch itself as a safer investment climate and undertook reforms to make investments attractive (McDermott, 1988).
A series of financial sector reforms started to be implemented from 1974 onwards. These included: i) Law 43/1974 that reduced Egyptian ownership to 51%, allowing foreign ownership of the remaining 49%, ii) Law 120/ 1975 that gave the Central Bank of Egypt supervisory and regulatory power over the banking sector, while also making it an independent legal authority, iii) Law no. 43/1974 that liberalized the foreign exchange market and some import commodities, while also providing incentives/subsidies for domestic and foreign private companies and iv) Law 32/1977 that provided further tax exemptions and benefits for private firms (Mohieldin, 2000). Foreign and joint venture banks started to be set up to benefit from these incentives and reforms.
Over this period, economic growth showed a positive trend. In fact, over the 1973 to 1981 period, the positive growth in real GDP reflected the impact of externally- facing sources of GDP including oil earnings, worker remittances, tourism and Suez Canal tolls. While economic growth was strong from the 1970’s, by the late 1980’s, then, after the death of Alsadat, the downward trend was triggered by lower oil prices from 1985 onwards, but its full extent was postponed by
5 Muhammad Anwar El Sadat (25 December 1918 – 6 October 1981) was the third President of Egypt, serving from 15 October 1970 until his assassination by fundamentalist army officers on 6 October 1981.
Marwa A. Elsherif, The Macrotheme Review 4(3), Spring 2015
74 heavy foreign borrowing that overshadowed this decline in external revenues (Soliman, 1999).
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