In developing countries, the construction industry plays a vital role in terms of its contribution to GDP, investment, employment and exports, and because of its strong linkages with other sectors in the economy. In Egypt, this industry has significant potential due to a combination of factors, namely, the accumulated expertise in this industry—being one of the oldest in the country, the availability of basic human and physical resources, as well as the high level of demand. However, evidence suggests that the role of the construction industry as an agent for promoting economic growth is rather modest, and that it produces limited developmental benefits. This study aims to test the above hypothesis and to explore the challenges that affect the development and competitiveness of the construction sector. It also assesses the impact of privatizing ten construction companies on their financial performance and discusses the benefits and costs of liberalizing the construction and related engineering services under GATS. To conclude, the study emphasizes the importance of addressing domestic challenges and reforming domestic regulations as crucial requirements for enhancing efficiency in the construction sector.