gafi - towards an effective vehicle for policy advocacygafi - towards an effective vehicle for...

GAFI - Towards an Effective

Vehicle for Policy Advocacy

MENA-OECD INVESTMENT PROGRAMME

Designing Effective Strategies for Investment Promotion and Reform Communication

Neveen EL Shafei

Vice Chairman

June 25-26 2007

Manama, Bahrain

Contents

• Key Success Factors

• Policy Advocacy- Why?

•Performance Indicators

• Applied Cases in Policy Advocacy

• Government Reforms

• Future Challenges

• Monetary Policy Stability

• Fiscal Transparency

• Investment and Trade Promotion

• Financial Sector Reforms

• Government Efficiency

• Enhanced Investment Climate

Highlights of Egypt’s Economic

Reform Agenda

Enhanced Investment Climate

Major changes to enhance the investment climate

Institutional

Development

Investment

Procedures

New Investment

Fields

The establishment of the Ministry of Investment and the

change in GAFI’s role and approach.

Adoption of “The Procedure Simplification” program

which has significantly cut the money, effort, and time for

procedures, through GAFI One-Stop-Shop

Opening new investment fields such as: real

estate, shipping, finance, logistics and others

Tax Reform

Customs Reform

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.

Enhanced Investment Climate

Trade Agreements

Expanding the Egyptian market through various trade

agreements with: Europe, Arab world, and COMESA; as

well as the QIZ.

Banking Reform Banking sector consolidation and financial reform coupled

with strengthening the Central Bank of Egypt.

Private Sector

Participation

A new vision for private sector participation leading to

new public private partnership schemes( PPP)

Privatization Revitalization of the Privatization Program.

Financial Sector

ReformLaunching mortgage, securitization and Factoring

Macro Performance Indicators

2001/02 2002/03 2003/04 2004/05 2005/06

7.1 8.2 10.5 13.818.5

160%

Exports Proceeds

1.9

2.5

3.9

4.7

5.0

5.3

4.1

5.4

5.9

3.4

3.2

3.0

4.3

5.1

6.8

7.1

1991/9

2

1992/9

3

1993/9

4

1994/9

5

1995/9

6

1996/9

7

1997/9

8

1998/9

9

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

2004/0

5

2005/0

6

2006/0

7

Q1

US$ bn

GDP Growth

Rate


Current Account as a percent of GDP

Net International Reserves

0%

1.20%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 1Q

28.0326.22

22.931

19.58

14.814.814.1

18.520.3

18.115.1

14.2

0

5

10

15

20

25

30

1995/ 1996 1996/ 1997 1997/ 1998 1998/ 1999 1999/ 2000 2001/ 2002 2002/ 2003 2003/ 2004 2004/ 2005 2005/ 2006 Feb-07 May-07

Year

US

D B

illion

Highest Level

Reached


Source: Ministry of foreign trade and industry and the Central Bank of Egypt.

Market Capitalization

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

100

200

300

400

500

600

Series1

Series2

Progress of Privatization Program

5642

12556

15051

952381 542113

14500

21713

28

59

1019

138

0

2000

4000

6000

8000

10000

12000

14000

16000

1995-2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/Mar.2007

0

20

40

60

80

100

120

140

160

Value Million EGP No. of Com


2006/2007 Jul.-Mar.2005/2006 2004/2005Type of sale/ FY

No.Value

EGP MillionNo.

Value

EGP MillionNo.

Value

EGP Million

41716810889457Public Enterprise Shares & Assets

51254167646124819Joint Ventures

1

9274

(Bank Of

Alex)

1

5122

(Telecom

Egypt)

----Sale of Other Public Sector Entities

113123411957367Land & Unused assets

21125565915051285643Total

POLICY ADVOCACY - WHY?

• Sustainable FDI Performance

• High level of un -mobilized domestic & regional surplus liquidity

• High unemployment rate coupled with a mismatch between labor

market needs & qualifications

• Need for review of some existing Legislations

• Lack of clear sectoral investment strategies

• Absence of sector-specific incentives

• Need for coordination between governmental entities.

• Overlapping roles

Key Success Factors

• Credibility

• Coordination with government related entities.

• Optimum Usage of Donor TA programs

• Capacity Building

• Focused TA for Selected sectors

• Benchmarking

• GAFI new BOD & Board of Trustees

• Sectoral Public-Private Partnerships

• Staff Training programs

• A comprehensive database for investor problems

Investment FunctionsDevelopment Agencies

SupportMonitoringFacilitation PromotionStrategy

Investment Promotion

GAFI

Local Investment Promotion

Industrial Development Program

Egypt Competitiveness Council

SME's Support

Local Investment Promotion

Social Fund for Development

FDI & exports promotion

Ministries

Direct Responsibility

Input

Mandates of Development Agencies

& Investment Functions

GAFI Role in Strategy / Policy

Formulation and Implementation

Prime Minister- the Cabinet

Minister of

Investment

GAFI

Strategy/ Policy

Implementation

Policy Advocacy

&

Co. Performance

Free Zones &

Regulation

Administration

Investment

Promotion

• Setting regulations that aim at facilitation and that reflect the proper

role of the regulator

• Apply policy approaches consistent with comparative best practice

in advanced and emerging economies

• Improve transparency and effectiveness of govt. operations

• Explore untapped potential sectors where procedures & legislation

are the main reasons for slow growth & where incentives are

needed

• Local governorate problems

Policy Advocacy Methodology

2003/042004/05

2005/06

80.30%

65.10%

30%

19.70%34.90%

70%

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 1Half

509.4 428.2 700.6

2107.2

3901.6

6111.47200

Performance Indicators-FDI Flows

Source: General Authority for Investment and Free Zones

54%

56%

US$ bn

Net FDI flows

FDI Inflows (petroleum and non-petroleum)

Net Foreign Direct Investment

Net Foreign Direct Investment as a percent of GDP

USD Billion


6.1

7.2

9.04

3.9

2.1

0.70.43

0.51

0

1

2

3

4

5

6

7

8

9

10

2000/ 2001 2001/ 2002 2002/ 2003 2003/ 2004 2004/ 2005 2005/ 2006 Dec-07 Mar-07

6.4

4.22

0.55 0.51 1.01

2.69

0

1

2

3

4

5

6

7

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006


584

43

555

159

229

4554

2040 1682

363

814

29612940

214

2890

0

400

800

1200

1600

2000

2400

2800

3200

3600

4000

4400

4800

2001/02 2002/03 2003/04 2004/05 2005/06 Q1+Q2

2006/07

$US

Mili

on

USA EU Arab Countries

Performance Indicators Company Establishment

1434

3274

6421

3876

5427

3800

11087

17742

11612

33688

0

5000

10000

15000

20000

25000

30000

35000

40000

2002/2003 2003/2004 2004/2005 2005/2006 2006/May

2007Year

Mill

ion

EG

P

New companies established Issued Capital

Company Establishment …(cont.)

3274

6421

3876

5427

13463120 139

17742

11612

33688

11087

633143822439 3252

0

1000

2000

3000

4000

5000

6000

7000

2003/ 2004 2004/ 2005 2005/ 2006 2006/ May 2007

0

5000

10000

15000

20000

25000

30000

35000

40000

New com est - Tot al New com est - Free Zones

Iss. Cap. - Tot al Iss. Cap. - Free Zones

0

10

20

30

40

50

2003/2004 2004/2005 2005/2006 2006/2007

% Industry

Teleco & IT

Constr.

Financial

Services

Agri

Tourism

Company Establishment -Distribution of issued Capital By Sector

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Industry Teleco & IT Constr. Financial Services Agri Tourism

2003/2004 GF 2003/2004 Expan

0

2000

4000

6000

8000

10000

12000

14000

16000

Indust ry Teleco & IT Const r. Financial Services Agri Tourism

2004/2005 GF 2004/2005 Exp

0

2000

4000

6000

8000

10000

12000

14000

16000


2005/2006 GF 2005/2006 Exp

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000


2006/2007 GF 2006/2007 Exp

Company Establishment & Expansions

Distribution of issued Capital

2006/2007

64

23

13

Egyptian Arab Foreign

EGP70bn2005/2006

55

17

28


EGP42bn

2004/2005

6610

24


EGP35bn2003/2004

70

10

20


EGP21bn

Company Establishment & Expansions

Contributions to Total Issued Capital By

Nationality(%)

Effective Policy AdvocacyActions undertaken -2006/2007

ReformsIndicator

•Reduction of incorporation time for 3 days maximum.

•Reduction of Minimum paid in capital for LLC. (EGP1000).

•Reduction of incorporation fees.

•Reduction of Publication fees.

•Tax card is issuance in 48 hours.

•Unification of bank certificate form to be issued in 1 day.

•Acquiring the legal accountability for all corporations after

registering in the commercial registry.

•Direct check on non/similarity of companies name after

automation.

•Opening social insurance files within 48 hours.

•Sales Tax registration within 2 hours.

Starting a

business

•Reduction of registration fees of real estate and automation of

registration as both affect licensing procedures and cost.

•The right to establish investment zones authorized to give licenses

(2007 amendments to Investment Law 8/1997) which reduces

procedures, no. of respective entities involved, time and cost.

Dealing with

Licenses

(building

licenses)

•Reduction of registration fees of real estate (EGP 2000

maximum)

•Automation to save time and reduce procedures.

•Relaxation of rules governing foreign ownership

Registering

Property

•The first Credit Bureau was established in Sept. 2005 and will start

working in July 2007.

Getting

Credit

Actions ….(Cont.)

Actions ….(Cont.)

• New resolutions were issued by GAFI and CMA to maximize

the effect of laws including provisions for protecting investors

(ie. Inspection rules/new listing rules & takeover regulations)

• Application of corporate governance rules and issuance of CG

Code/ establishment of IOD for CG certification

Protecting Investors

• Abolish stamp tax on checks

• Reduction of taxes on advertisements.

• Reduction of corporate taxes by 50% (from 40% to 20%).

• Payment of any type of tax at any tax office (reduces the no. of

payments).

• Establishment of Large Tax Payers Center.

Paying Taxes

•Reduction of time and procedures by automation of ports and

the General Organization for Import and Export Control

(GOIEC).

Trading across

borders

•Draft law for Special Economic Courts.Enforcing Contracts

•GAFI resolution concerning voluntary liquidation.

• On-going project for reforming bankruptcy rules in the Law of

Commerce.

•Training courses for judges working in bankruptcy issues.

Closing a business

• Opening of IDA outlet at Alex. OSS. (operating licenses & land

allocation).

• Agreement between ABA and IFC to construct a DB Index.

• Reduction of fees of dispute settlement run by GAFI.

• Co-operation agreement between GAFI and IFC to streamline

business regulatory start-up process at Alex OSS (land assignment/

project approval/ industrial registration/operating license)

• Appointment of Mackenzie to assist in promotion strategy develop.

• Twinning scheme with the German Investment Promotion Agency

•Anti-Trust Law passed

•Consumer Protection Authority established following the CP Law

Others

Actions ….(Cont.)

Sector Issues and Actions

-Assistance and coordination between local

governorates to resolve outstanding issues.

Solid Waste Management

Policy Paper Issued and recommendation

concerning gas pricing – encouraging value added

products, coordination between ministries,

upgrading of railway and most importantly a

formulation of National Mining and gas strategy.

A Supreme Council for energy & mining Strategy

was formulated recently

Fertilizer Sector

Policy Paper issued and recommendations on

reforms

Cooperation with USAID ( ongoing )

Revision of Leasing law/ Collateral Registry

Leasing Sector

Assisted in the establishment of First CDM project

and company in Egypt Carbon Austria, which started

in Alex - Abu Qir.

Unification of incentives for CDM projects

CDM

• Mandate and Authority.

• Governance and Organization.

• Manpower and Capabilities.

• Performance Management.

Effective Policy Advocacy Function-

Future Challenges

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