Poverty grows in Egypt despite rapid growth-U.N.

CAIRO, Oct 17 (Reuters) - The proportion of Egyptians living in absolute poverty has risen despite relatively rapid economic growth this decade, the head of United Nations operations in Egypt said on Wednesday.

Between 2000 and 2005 the absolute poverty rate rose to 19.6 percent from 16.7 percent of the population, U.N. resident coordinator James Rawley told a news conference.

"One in every five Egyptians cannot meet their basic living needs," he added, quoting a survey completed in June.

A U.N. official said that "living in absolute poverty" and "unable to meet basic demands" were synonymous terms. "We're a bit surprised frankly that this is taking place. It's probably not just statistics. There are structural problems that have to be overcome before we see this resulting in reductions in the poverty rates," Rawley told Reuters later.

Over the five-year period, the Egyptian economy showed cumulative real growth of about 21 percent, and the rate of growth has since accelerated, to 7.1 percent in the financial year 2006/7, which ended in June.

Foreign direct investment in Egypt has also increased dramatically in the last two years and the World Bank said this month that Egypt was one of the countries which had made most progress in improving its business climate.

"We're seeing a lag there between these positive trends ... and declines in poverty. They are not showing up in the short run," Rawley said.

Rawley said Egypt was not the only country where poverty spread in the midst of economic growth. He said he was confident the government was committed to poverty reduction and that Egypt could meet the U.N. Millennium Development Goals.

Egypt's goal is to cut the proportion of people living on under $1 a day to 12.1 percent by 2015, from 20.2 percent now, a U.N. document said.

Rawley said poverty was disproportionately high in southern Egypt and in the countryside, with two thirds of the poorest people living in the south.

The government is offering companies incentives to invest in the south, which has suffered historically because it is remote from major markets and levels of education are lower.

Rawley was speaking at the launch of a campaign to publicise the Millennium Goals, which were adopted at the Millennium summit in New York in 2000 and which include poverty reduction.