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The Egyptian market has held a rather unique position during the past year of financial turmoil with a number of trends not being seen elsewhere. The economy has not suffered as badly thanks to reduced exposure to the worst hit sectors, as one partner explains: "Egypt is a cash economy so the problems that happened in Europe and the US did not occur here....

The Egyptian market has held a rather unique position during the past year of financial turmoil with a number of trends not being seen elsewhere. The economy has not suffered as badly thanks to reduced exposure to the worst hit sectors, as one partner explains: "Egypt is a cash economy so the problems that happened in Europe and the US did not occur here." Another adds: "We do not have a big mortgage business so that didn't cause a disturbance in the market."

However this is not to say that no impact was felt. "There was a tendency to say that Egypt was insulated from the global crisis but we're being affected," says one lawyer. "Things are not as insular as we thought."

One of the most interesting features of the market has been the problems of financing deals. Unlike other jurisdictions where liquidity is the main stumbling block, Egyptian banks have been described as too liquid. This situation creates a different set of problems. "Due to central bank restrictions Egyptian banks were over-liquid," explains one partner. "The banks have the money to lend but do not want to take on risky ventures." However another lawyer has a different view: "The market was moving towards the future, but over the last two months we're seeing the start of the recession. It is not the banks but the clients dragging their legs over the transactions."

A potential source of new work may be from investors in the gulf. "When Dubai went bust all the investors looked at Egypt," says one lawyer. This trend could also lead to a rise in shariah-compliant transactions, "What we see coming in is Islamic finance because a number of Middle East companies from the gulf area are doing business," says a partner.

In the M&A sector the Egyptian market has experienced a downturn. "M&A is not something that's really coming," says one partner, adding: "Acquisitions are really slowing down, there's a complete standstill." One reason for this is an absence of distressed transactions. "The market is on the level so there has not been the desire for acquisitions," says one partner.

There is also little work on the restructuring side again due to the relative health of most Egyptian companies. "We haven't seen much of the restructuring because the global crisis hasn't impacted much, so you haven't seen general restructurings," says one partner.

In the project finance market, the launch of the Egyptian public-private partnership (PPP) programme in 2008 has sparked off interest and investment. "PPP is going to be promoted," says one partner. "Older financing schemes required the government to use foreign currency which wasn't popular. The new project financing is based on local currency." The sector has in some ways been boosted by the downturn, with the government keen to maintain projects and jobs but not willing to invest large amounts of money.