business environment benchmarking: public policy tool to attract fdi mona aboul-kheir vice-chairman...
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Business Environment Benchmarking:Business Environment Benchmarking:Public Policy Tool to Attract FDIPublic Policy Tool to Attract FDI
Mona Aboul-KheirMona Aboul-KheirVice-Chairman AdvisorVice-Chairman Advisor
GAFIGAFI
Consultative Preparatory Meeting for the Follow-up Consultative Preparatory Meeting for the Follow-up International Conference on Financing for DevelopmentInternational Conference on Financing for Development
Doha – QatarDoha – Qatar
29-3029-30 April 2008April 2008
ContentsContents
• FDI Performance• FDI Performance
• Enhanced Investment Climate• Enhanced Investment Climate
• Benchmarking Process• Benchmarking Process
• Recommendations• Recommendations
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 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 ).
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 Indicators
Private Investment as % of Total Investment
66%
62%61%
51%
47%48%47%
51%48%48%
0%
10%
20%
30%
40%
50%
60%
70%
Source: Ministry of Investment
70.9
64.2
58
63.45
9.6
11.6
16
24.85
19.4
24.2
26
11.7
0 10 20 30 40 50 60 70 80
2003/2004
2004/2005
2005/2006
2006/2007
%
Egyptian Arab Foreign
Investment Indicators
Contributions to Total Issued Capital By Nationality(%)
Source: GAFI
Progress of Privatization Program14,500
381952 113 542
5642
14612 13607
2177
138
1910 7 13 28
65
53
150
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1995-2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 1ST
Half
0
20
40
60
80
100
120
140
160
Value Million EGP No. of Com
No of Transactions
Type of sale/ FY2004/20052005/2006 2006/20072007/20081ST half
ValueNo.ValueNo.ValueNo.ValueNo
Public Enterprise Shares &Assets
45791,00771,9198121.14
Joint Ventures4,819127,647181,55971,686.810
Sale of Other Public Sector Entities (e.g. Public Banks)
----5,122
)Telecom Egypt(
19,274
)Bank Of Alex(
100
Land & Unused assets 36778364085537368.71
TotalTotal5,6432814,6126613,607532,17715
Asset Management
Source: Ministry of Investment
Foreign Direct Investment ((US$ mn) (Net)
2
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/2007 2007/2008 Q2
509.4 428.2 700.62068
3901
6111
11053
7769.5
54%
56%
US$ Mn
80%
Source: CBE
Foreign Direct Investment % of GDP
6.4
8.5
2.69
1.010.510.55
4.22
0
1
2
3
4
5
6
7
8
9
2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007
Source: CBE
Foreign Direct Investment By Sector
23.7
10.7
0.5
65.1
54.8
14.8
0.4
30
47.3
25.1
0.3
27.3
44.5
17.5
0.4
37.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004/2005 2005/2006 2006/2007 2007/2008 Q2
GF. & Exp Sales of Assets Reals Estate Oil
Source: CBE
Benchmarking Matters
Enhancing Egypt Ranking
IndexRank 2008
Rank 2007
Rank 2006
Rank 2005
1 -Ease of Doing Business126152165---
2 -FDI Performance Index---336698
3 -The Global Competitiveness Index---776352
4 -The Business Competitiveness Index---707671
5 -Index of Globalization6464------
6 -Index of Economic Freedom85127128---
7 -Capital Access Index65829289
8 -Global Credit Ranking*March 73March 70
Sept 72
------
*Global Credit Ranking report is a semi-annual report, issued every six months.
What Gets Measured, Gets Done
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.
Publishing Comparable Data on Business Environment Inspires Governments to Act
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).
International Benchmarking: ESCWA Countries
Ease of Doing Business126408068N/A2313714149N/A85113N/A
1 -Starting Business55121133158N/A36169164107N/A132175N/A
2- Dealing with
Licenses 163857138N/A4786104130N/A11335N/A
3- Employing workers108394565N/A401266026N/A5363N/A
4- Registering property101721098N/A3894015N/A9244N/A
5- Getting Credit1156884115N/A4815813597N/A48158N/A
6- Protecting investors8319107107N/A5010710764N/A83122N/A
7- Paying Taxes1508194N/A798375N/A3384N/A
8- Trading Across
Borders
26995924N/A33127175104N/A83128N/A
9- Enforcing Contracts14599128144N/A136171150110N/A12141N/A
10- Closing a Business1256787139N/A797717859N/A11783N/A
Index Egypt Kuwait U.A.E Bahrain K.S.A Syria Iraq Oman Qatar Lebanon Yemen PalestineJordan
Doing Business Report: (Annual Report / World Bank) Benchmarking the Regulatory Cost of Doing Business in 178 Economies
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.
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.
Overall, doing business is easiest in Assiut, most difficult in Alexandria, withCairo in between.
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
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
Source: EIU, World Investment Prospects 2011
FDI Inflows into Emerging Markets 2004-2006
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