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INCREASING THE COMPETITIVENESS IN THE AFRICAN MIDDLE INCOME COUNTRIES:

INCREASING THE COMPETITIVENESS IN THE AFRICAN MIDDLE INCOME COUNTRIES: STRENGTHENING THE INVESTMENT CLIMATE Sahar Nasr Senior Financial Economist World Bank Cairo, Egypt March 11, 2008. What is Competitiveness?.

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INCREASING THE COMPETITIVENESS IN THE AFRICAN MIDDLE INCOME COUNTRIES:

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  1. INCREASING THE COMPETITIVENESS IN THE AFRICAN MIDDLE INCOME COUNTRIES: STRENGTHENING THE INVESTMENT CLIMATE Sahar Nasr Senior Financial Economist World Bank Cairo, Egypt March 11, 2008

  2. What is Competitiveness? • Describes the overall performance of enterprises within a national business environment, particularly its level of productivity and its ability to export. • Productivity—magnitude and growth in value added (per unit input) of firms. • Ability of firms to operate efficiently in relation to others due to low cost or superior technology. • Function of quality not just cost • Depends on a host of factors that can be firm-specific; industry-specific or country-specific.

  3. Usually, sustained growth requires attaining manufacturing export competitiveness...

  4. …based on growing private investment.

  5. Macroeconomic environment Protection of property rights Trade policy Access to information Entry/Exit barriers Firm Investor Infrastructure Land markets Labor markets Capital markets What Affect Competitiveness? The Firm’s Business Environment Markets openness and liberalization Product markets Factor markets

  6. Policy-based Loans Grants and Trust Funds Technical Assistance In many ways, the World Bank Group supports business environment reform to enhance competitiveness • Creating policy and institutional foundationsfor effective markets (property rights, land registration, collateral systems, corporate governance, financial market infrastructure). • Promoting open and competitive markets—opening up entry, access to finance for promising firms, deeper bankruptcy financial markets, and exit for failing firms). • Initiate reform agendas, through sharing of cross-country experience—what works and what does not. • Ensure effective coordination with development partners. Diagnostics/ Formulation Implementation Policy Dialogue Strategy and Solution Design Doing Business Enterprise Surveys Investment Loans Investment Climate Assessments

  7. Policy-based Loans Technical Assistance Grants and Trust Funds In many ways, the World Bank Group supports business environment reform to enhance competitiveness Diagnostics/ Formulation Implementation Policy Dialogue Strategy and Solution Design Doing Business Enterprise Surveys Investment Loans Investment Climate Assessments

  8. World BankICA work allows us to learn from entrepreneurs their key costs and constraints.

  9. Similar survey data is collected and analyzed for African MIC’s World BankICA work allows us to learn from entrepreneurs their key costs and constraints.

  10. Percentage of firms currently with a loan from a financial institution 40 36 % 36 % 35 30 25 17.4 % 17.4 % 20 13 % 13 % 15 10 5 0 All Small and Micro Large One of the main constraints identified in the EgyptICA was Access to Finance . . . . especially MSMEs, receive little financing Size does Matter. . . • Only 17.4% of firms have access to bank credit • MSMEs have more difficulty accessing credit: only 13% of MSMEs have access compared to 36% of large corporations • Banks do not provide much financing to MSMEs (only 12% of MSME that have a bank account also borrow from banks) Source: Egypt ICA

  11. Can these countries compete on an equal footing without using all of their human resources?

  12. Doingbusiness Indicators • Measures of business regulations and their enforcement across 178 countries. • Doing Business is a guidefor evaluating regulations that directly impact economic growth,making cross-country comparisons, and identifying good practice reforms. • Regulations affecting 10 stages of a business’s life are measured: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

  13. 2006 2007 2008 2004 2005 • Business Licensing • Taxation • Trade Infrastructure • Transport • Customs • Standards • Updates of ‘04 and ‘05 • Regulation of Entry • Labor Regulations • Contract Enforcement • Credit Markets • Credit information • Bankruptcy • Corporate Governance • Property registration • Updates of ‘04 topics • Starting a business • Dealingwith licenses • Employingworkers • Protecting investors • Getting credit • Closing a business • Updates of ‘06 and ‘07 Doingbusiness Indicators Products: Report, academic papers, country summaries, website database www.doingbusiness.org

  14. What does Doing Business 2008 say about the business environment in Africa’s MIC countries ?

  15. Doing Business Sub-National • Measures the ways in which government regulations enhance business activity or restrain it at the sub national level. • Highlights good practices within the country that can be replicated easily in other cities. • Focuses on threeDoing Business topics: • Starting a business • Dealing with licenses • Registering property • Deals with three Governorates: • Alexandria • Assiut • Cairo • Provides information on other Governorates’ reform efforts, including getting credit, protecting investors, paying taxes, and trading across borders.

  16. Objectives Improve the soundness and efficiency of the financial sector through comprehensive structural and financial reform, to enhance financial intermediation. Main Components of the Program • Reforming the Banking Sector (consolidation, privatization, mergers) • Restructuring the Insurance Sector (mergers, restructuring, privatization) • Deepening the Capital Market • Developing a Well-functioning Mortgage Market • Strengthening the Regulatory and Supervisory Authorities • Improving the Institutional Infrastructure (credit bureau, payments system, etc.) Implementing Agencies Ministry of Investment and Central Bank of Egypt (CBE) EXAMPLEFinancial Sector Development Policy Loan WB and AfDB, along with other development partners supported theGovernment’s “Financial Sector Reform Program” (2004–2008)

  17. Financial Sector Development Policy Loan

  18. In what ways and areas, could WBG support your countries better? • Encourage Dialogue? • Technical Advise and Analytical Work? • Developing New Strategy? • Identifying Priority Areas of Reform? • Sharing of Cross-country Experience? • Providing New Products? • Other Delivery Mechanisms?

  19. Increasing the Competitiveness in the African Middle Income Countries: Strengthening the Investment Climate Thank you! World Bank Financial Products and Services for Improving the Investment Climate

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