egypt improving investment climate twenty fourth session of the comcec istanbul, turkey october 23...
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Egypt
Improving Investment Climate
Twenty Fourth Session of the COMCECIstanbul, Turkey
October 23rd, 2008
Neveen EL ShafeiVice Chairman
General Authority For Investment and Free Zones
Government Economic Reforms
Legislative Reform,
Monetary and Banking Reform
Tax Reform
Trade Policy Reform
Investment Policy Reform
Expanding Role of Private Sector
Enhanced Investment Climate
Enhanced Investment Climate
Major changes to enhance the investment climate
FDI Entry49% 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).
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.
Establishment and Operation
Enhanced Investment Climate
Privatization
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.
Protection & Treatment of FDI
Greater emphasis on implementation of rules protecting Investors.
Expansion of BIT networks.
Growing role of arbitration (local and international) and role of Cairo Centre for International Commercial Arbitration based on UNCITRAL rules.
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.
General MeasuresIssuance 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
Enhanced Investment Climate
Investment Policy FrameworkInvestment Policy Framework
• Investment policy has been encouraged by
• Non- discriminatory investment policies• Pro-active strategy of investment promotion stressing the role of government as a service provider
rather than as a regulator• Sharp reduction of trade impediments to capital imports and streamlining of cumbersome and costly
customs procedures • Adoption of the competition law and establishment of the Egyptian Competition Authority (ECA)
• Towards a fully unified investment company regime
• Improving investment statistics in Egypt
• Transition from current transaction-based approach to a survey approach based on the standards of the IMF BOP5 and the OECD Benchmark Definition of FDI
• Advisory committee, headed by MOI, has been established and a business register has been developed to include all FDI enterprises, coded according to ISIC
• Active engagement in international investment negotiation being party to 67 ratified BITs
• Usage of several diagnostic and benchmark tools to assess investment climate obstacles (ICAs, OECD PFI)
Investment Policy FrameworkInvestment Policy Framework
Free Zones• Low Infrastructure cost
• Income Tax exemption
• 1% annual duty on the value added
• No sales tax
• No custom duties (Except for sales into Egypt)
Special Economic Zone
Upper Egypt Incentives
Investment Zones
•10% income taxation• 5% tax on wages•One administrative authority
• Private Sector can establish, manage
and promote investment zones which
will follow the same licensing
procedures as free zones; however, will
not be exempted from taxes
•Industrial land for free• Rebate for job creation
Liberalized legal framework guaranteed by Investment Law…
100% foreign ownership of companies
100% foreign representation of Board of Directors
Protection against expropriation
Protection against compulsory pricing
Full right of profit and dividend repatriation
Implementation of dispute resolution and settlement mechanisms
Robust Investment Regimes
Banking & Financial Reform
Strengthened supervisory role of Central
Banking sector consolidation and privatization
Anti-money laundering regulations in line with international standards
Further penetration of non-bank financial products: mortgage finance, financial leasing, fixed income products, factoring
Streamlined insurance activities
Source: the Central Bank of Egypt.
20 Oct:W.Ave. Interbank Rates 5.5861 US$ ’Market Rate: 5.5643 US $
Strengthened Capital Market Authority
Introduction of small cap stock exchange “Nilex”
Vibrant Capital Market
Source: Cairo & Alexandria Stock exchanges
Results of Reform & Incentives
Ensuring macroeconomic
stability as well as achieving
and sustaining average annual
real GDP growth that exceeds
7%
The average annual growth
rate of exports increased from
less than 1 % in 2001/02 to
20% in FY2006/07 and
increased by 33% in 2007/08
Results of reform & incentives
Exports Proceeds
GDP Growth
Rate
%
US$ Million
4.4 4.7
43.3
4.9 5.1
3.5 3.2 3.2
4.14.5
6.87.1 7.2 7.1
0
1
2
3
4
5
6
7
8
30/0
6/199
5
30/0
6/199
6
30/0
6/199
7
30/0
6/199
8
30/0
6/199
9
30/0
6/200
0
30/0
6/200
1
30/0
6/200
2
30/0
6/200
3
30/0
6/200
4
30/0
6/200
5
30/0
6/200
6
30/0
6/200
7
30/0
6/200
8
30/0
6/200
9
2001/02 2002/03 2003/04 2004/05 2005/06 2006/2007 2007/2008
7.1 8.2 10.5 13.8 18.5 22 29.4
20%34% 33%
*
* Expected
Results of reform & incentives
2.6 2.7 3.2
16.7
3.1
5.7
8.5 9.37.5 6.9
10.512.1
14.416.4
19.7
23.625.6
12.6 11.7
0
5
10
15
20
25
30
2000
/2001
2001
/2002
2002
/2003
2003
/2004
2004
/2005
2005
/2006
Feb-0
7
Apr-0
7
Aug-0
7
Sep-0
7
Oct-07
Dec. -
07
Jan-
08
Feb.-0
8
Mar.
-08
Apr.-0
8
May
.08
July-
08
Agu -
08
Year
0%
0.50%
1.70%
0%0%
1% 1%
2%1.60%
3.20%
5%
2%
1%
-3%
-1%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
1993/1994 1994/1995 1995/1996 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008
35.234.834.130.92
14.215.1
18.1
20.318.5
14.1 14.8 14.8
19.5822.931
26.2228.03
29.66
0
5
10
15
20
25
30
35
40
Year
Net International Reserves
Inflation
Current Account as a percent of GDP
Public and Private investment % of GDPPublic and Private investment % of GDP
8.3%
7.3%
8.8%8.7%8.5%9.4%
8.7%
9.9%10.9%
13.7%
11.4%
9.1%
7.6%7.9%8.4%
9.0%9.1%9.9%
61
4547
423536
31
3434
101
71
49
373332
32
3130
0%
2%
4%
6%
8%
10%
12%
14%
16%
1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
0
20
40
60
80
100
120
EGP Billion
share of public investment share of private investment total public investment total private investment
FDI Performance
Net FDI flows
FDI has Reached $13.2 bn as of FY2007/08 and represented 8.5% as a percentage of GDP.
The recent increase in FDI has been accompanied by a change in the sectoral distribution towards the non-oil sectors.
6.4
8.5
2.69
1.010.510.55
4.22
0
2
4
6
8
10
2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/2007 2007/2008
509 428 7002068
39016111
11053
1320054%
56%
80%
US$ bn
19%
23.710.70.5
65.1
54.8
14.80.4
30
47.3
36
0.3
27.3
48.5
17.43
31.1
0%
20%
40%
60%
80%
100%
2004/2005 2005/2006 2006/2007 2007/2008
GF. & Exp Sales of Assets Reals Estate Oil
International Ranking / Perception
Doing Business Report 2009
• Egypt Among the Top 10 Best reformers over the last two years
126
106
147156
105
86
55
101
83
150
26
145
125
41
85 8470
165
124
146152
115
163
108
24
107
165
128
151144
0
20
40
60
80
100
120
140
160
180
2007
2008
2009
D.B. 2009 Rank 114 out of 181
Source: D.B report 08.
FDI Performance
Top Reformers in 2007/2008
For the second consecutive year, Egypt is among the top 10 reformers in the Doing Business Report, issued by the World Bank.
Source: DB 2009, World Bank
World Investment Report 2008
68
81
44
18
92
13
44
3341
55
24
63
19
55
20
42
78
34
51
21
6
105108 112
0
20
40
60
80
100
120
Egypt S. Africa Tunisia Morocco UAE Saudi Arabia Sudan Jordan
2005 2006 2007
• Egypt ranks The First among North African countries and the Second among Africa and in terms of FDI Inflows
FDI Performance
Improved Ranking in OECD FDI Regulatory Restrictiveness Index (2000 and 2006)
41st
33rd
* In July 2007, Egypt became the first Arab and African country to adhere to the OECD Investment Declaration, on International Investment and Multinational Enterprises.
* Over the period 2000-2006, Egypt’s rank in FDI Regulatory Restrictiveness Index has improved by 43%, Preceding that of many countries such as Canada, South Africa, & India.
Source: IPR 2007, OECD