Business Environment Benchmarking: Public Policy Tool to Attract FDI

1. Business Environment Benchmarking: Public Policy Tool to Attract FDI Consultative Preparatory Meeting for the Follow-up International Conference on Financing for Development Doha – Qatar 29-30 April 2008 Mona Aboul-Kheir Vice-Chairman Advisor GAFI

2. Contents • Enhanced Investment Climate • FDI Performance • Benchmarking Process • Recommendations

3. Enhanced Investment Climate Government Economic Reforms • Legislative Reform, • Monetary and Banking Reform • Tax Reform • Trade Policy Reform • Investment Policy Reform • Expanding Role of Private Sector

4. Enhanced Investment Climate Major changes to enhance the investment climate • 49% ceiling on foreign ownership in commercial banking and • insurance has been abolished. • Fewer activities are restricted to foreigners (e.g. Tourist guide • activities, Legal Services and Fishing). FDI Entry Establishment and Operation • Adopting the “The Procedure Simplification” program through GAFI • “One Stop Shop” (OSS) • Reduction of incorporation time for 3 days maximum. • Reduction of Minimum paid in capital for LLC (EGP200). • Reduction of incorporation and publication fees. • Tax card issuance in 48 hours. • Unification of bank certificate form to be issued in 1 day. • Checking Name Uniqueness within hours. • Opening social insurance files within 48 hours. • Sales Tax registration within 2 hours. • Replicating the OSS approach in GAFI offices outside Cairo in • Alexandria, Assiut and Ismailia.

5. Enhanced Investment Climate • Adopting a rigorous Asset Management Program in 2004. • Sale of assets and shareholdings in public enterprises. • Pubic sector companies have undergone a series of reforms, e.g. activating the role of general assemblies of holding companies and other public sector companies. Privatization • Greater emphasis on implementation of rules protecting IPR • Expansion of BIT networks (111 BIT) • Growing role of arbitration (local and international) and role of Cairo Centre for International Commercial Arbitration based on UNCITRAL rules. • Proposed draft law for Special Economic Courts. • Adoption of the Competition Law and establishment of the Egyptian Competition Authority (ECA). • Expanding role for Ministerial committee for Investment Disputes (GAFI). • Corporate Governance Code and establishment of the Institute of Directors • Growing emphasis on transparency of rules ( GAFI rulebook ). Protection & Treatment of FDI

6. Enhanced Investment Climate • Issuance of New Income Tax Law reducing income tax rates for businesses from 40 to 20 per cent. • New customs structure reducing the weighted average tariff rate from 14 to 9 per cent, as well as reduction in tariff bands from 27 to 6. • Banking Sector Consolidation and Financial Reform coupled with strengthening the Central Bank of Egypt. • Launching Mortgage, Securitization and Factoring while strengthening the Financial Leasing sector. • A new vision for Private Sector Participation leading to new Public Private Partnership schemes (PPP). A draft PPP law will be discussed in the next Parliamentary session. • Expanding the Egyptian market through various trade agreements with: Europe, GAFTA, COMESA, QIZ and Aghadir General Measures

7. Investment Indicators Private Investment as % of Total Investment Source: Ministry of Investment

8. Investment Indicators Contributions to Total Issued Capital By Nationality(%) Source: GAFI

9. Asset Management Progress of Privatization Program No of Transactions Source: Ministry of Investment

10. Foreign Direct Investment (US$ mn)(Net) 80% US$ Mn 54% 56% 2 Source: CBE

11. Foreign Direct Investment % of GDP Source: CBE

12. Foreign Direct Investment By Sector Source: CBE

13. Benchmarking Matters

14. Enhancing Egypt Ranking * Global Credit Ranking report is a semi-annual report, issued every six months.

15. What Gets Measured, Gets Done Publishing Comparable Data on Business Environment Inspires Governments to Act • Following Egypt’s ranking in 2006 Doing Business Report, Potential measures to accelerate the pace of reform and enhance Egypt’s competitiveness were questions that had to be considered. • The Ministry of Investment took note. Minister Mahmoud Mohieldin and GAFI’s (then) chairman Dr. Ziad Bahaa El-Din conferred the methodology with the Doing Business authors. • A task group was formed to discuss the 10 Doing Business indicators in detail, identify specific reforms and search for methods of implementing and monitoring them. • Undertaking a special in-depth subnational study based on the Doing Business methodology, but measuring business regulations in governorates other than Cairo. • GAFI convened a working group of approximately 50 professionals from all government agencies to periodically assess the regulatory environment. • Steadily, public officials started to see themselves as Facilitators rather than regulators. • The result was a reform focus that went beyond the topics measured by Doing Business to encompass the entire business environment.

16. The Top 10 Reformers (Doing Business 2008) Egypt : Top Reformer for 2006/07, improving in 5 of the 10 areas :Egypt’s reforms went deep. Saudi Arabia : Runner Up Reformer in 2006/07: eliminating the min cap requirement, speeding up the company registration (# of days).

17. International Benchmarking: ESCWA Countries Doing Business Report: (Annual Report / World Bank) Benchmarking the Regulatory Cost of Doing Business in 178 Economies Index Egypt Kuwait Jordan U.A.E Bahrain K.S.A Syria Iraq Oman Qatar Lebanon Yemen Palestine

18. Case Study: Subnational Doing Business -Egypt 2008 • Doing Business in Egypt 2008 is the first subnational Doing Business report in the Middle East and North Africa. • The report was done upon a request from the Egyptian Ministry of Investment to FIAS, a multi-donor investment climate advisory service of the World Bank Group. • It covers three cities and governorates – Cairo, Alexandria, and Assiut – that are compared with each other, and with 178 countries around the world based on the indicators in Doing Business 2008. • The report aims to provide a tool for Egyptian cities to become globally competitive. By identifying good practices and bottlenecks, it fosters peer-learning and competition to reform across governorates. • It measures the ways in which government regulations enhance business activity or restrain it at the subnational level. This was done by studying three main topics: starting a business, dealing with licenses, and registering property. • The indicators hence are used to analyze the economic outcomes of the regulations and to identify what reforms have worked, where and why. It also provides information on reform efforts undertaken by the Egyptian government in recent years that affect other Doing Business topics–getting credit, protecting investors, paying taxes and trading across borders.

19. Case Study: Doing Business in Egypt 2008 Best practices in Egypt compared internationally Global Ranking (178 countries) Egypt’s turnaround was the result of strong resolve and hard work. Through the special in-depth sub-national study Egypt could promote competition to reform across governorates, pinpoint Best practices and identify major obstacles. Overall, doing business is easiest in Assiut, most difficult in Alexandria, with Cairo in between.

20. UNCTAD: IPR Follow up Report 2005 • The Investment Policy Review (IPR) of Egypt 1999 was one of the earliest IPRs to be conducted. The review introduced some recommendations necessary to improve the investment framework, promotion effort and strategy to attract and benefit from foreign direct investment (FDI) in selected business activities. • In 2005, the Ministry of Investment invited UNCTAD to assess the undertaken measures. A mission to Egypt was conducted where its main findings were as follows: • 1.Implementation of recommendations on the investment framework, the Government's track record compared against the recommendations in the IPR is impressive: • Business start-up has improved in ways recommended by the IPR. GAFI is now responsible for performing and facilitating the establishment and registration procedures through opening a full fledge one-stop shop and it’s branches in other governorates. • Work and residence permits for non-citizen employment has improved, Labor regulation was overhauled through the introduction of a unified Labor Law in 2003. • 2. Implementation of recommendations on investment promotion: • The creation of a Ministry of Investment in 2004, The Ministry has set performance targets on planned reforms and tracks their pace of implementation. • Restructuring GAFI ( mandate, strategy, structure, and internal operations) • The promotion and facilitation structure, procedures, systems are designed by the Multilateral Investment Guarantee Agency (MIGA) • 3. Implementation of recommendations on the investment framework: • The Central Bank of Egypt has adopted the international guidelines for FDI data collection and it has revised the balance of payments statistics series “A striking feature of the present Government is its accessibility and its willingness to listen to and act upon concerns raised by investors” IPR follow-up report, 2005

21. RECOMMENDATIONS FDI Inflows into Emerging Markets 2004-2006 Source: EIU, World Investment Prospects 2011

22. Thank You