Date of Submission to Coordination Unit:

A. GENERAL INFORMATION

1. Activity Name

Enhancing the Investment Climate in Egypt, through Equal Access and Simplified Environment for Investment (EASE) and Fostered Investment Policy, Legal and Institutional Framework

2. Requestor Information

Name: Ramy AfifiTitle: Assistant to Minister of Investment and International Cooperation

Organization and Address: Ministry of Investment and International Cooperation, Cairo, Egypt

Telephone: (202) 2391 2815 Email: rafifi@miic.gov.eg

3. Recipient Entity Name: Sahar Nasr Title: Minister of Investment and International Cooperation

Organization and Address: Ministry of Investment and International Cooperation, Cairo, Egypt

Telephone: + 202 240 55 408 Email: snasr@miic.gov.eg

Name: Mohsen Adel Title: Executive Director

Organization and Address: General Authority for Investment & Free Zones (GAFI), Cairo, Egypt

Telephone: Email: mohsen.adel@gafinet.org.eg

Name: Eng. Ismail Gaber Title: Chairman

Organization and Address: The Industrial Development Authority (IDA), Cairo, Egypt

Telephone: + 2 0100 685 2840 Email: gaber_2008@windowslive.com

Name: Tarek Hamza Title: Executive Director

Organization and Address: ERRADA, Cairo, Egypt

Telephone: + 2 0100 560 0099 Email: 'tarekhamza2005@yahoo.com'

4. ISA SC RepresentativeName: Samia Msadek Title: Director, MNAVP

Organization and Address: World Bank Group, 1818 H Street NW, Washington D.C., USA

Telephone: 1 202-458-1599 Email: Smsadek@worldbank.org

Name: Nicolas PINAUD Title: Head of the Sherpa Office

Organization and Address: OECD, 2 rue André Pascal – 75775 Paris Cedex 16

Telephone: +33 1 45 24 95 76 Email: Nicolas.Pinaud@oecd.org

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14 April, 2015 October 14, 2018 (AF)

5. Type of Execution (check the applicable box)√ Type Endorsements Justification

Country-Execution Attach written endorsement from designated ISA

√ Joint Country/ISA-Execution

Attach written endorsement from designated ISA

The World Bank supervised activities will be Country-executed. The OECD activities will be ISA-executed at the request of the Minister of Investment and International Cooperation of Egypt.

ISA-Execution for Country Attach written endorsement from designated ISA

6. Geographic Focusx Individual country (name of country): Arab Republic of Egypt

Regional or multiple countries (list countries): N/A

7. Amount Requested (USD) Total

Amount Requested for direct Project Activities:(of which Amount Requested for direct ISA-Executed Project Activities):

$6,484,000(of which $5,000,000 for WBG Country-Executed Activities)

(of which $1,484,000 for OECD ISA-Executed Project Activities)

Additional amount requested for direct Project Activities (of which Amount Requested for direct ISA-Executed Project Activities):

$2,214,500(of which $1,746,000 for WBG Country-Executed Activities)

(of which $468,500 for OECD ISA-Executed Project Activities)

Amount Requested for ISA Indirect Costs:1 $559,400(of which $459,400 for WBG ISA Indirect Costs)(of which $100,000 for OECD ISA Indirect Costs)

Additional amount requested for ISA Indirect Costs:

$263,100(of which $231,600 for WBG ISA Indirect Costs)(of which $31,500 for OECD ISA Indirect Costs)

Total additional amount requested: $2,477,600Total Amount (including additional financing):

$9,521,000

8. Expected Project Start, Closing and Final Disbursement Dates

Start Date: October 21, 2015

Closing Date: June 30, 2021

End Disbursement Date: December 30, 2021

9. Pillar(s) to which Activity Responds

1 ISA indirect costs are for grant preparation, administration, management (implementation support/supervision) including staff time, travel, consultant costs, etc.

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Pillar Primary(One only)

Secondary(All that apply)

Pillar Primary(One only)

Secondary(All that apply)

Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business environment (including for small and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private sector development strategies, access to finance, addressing urban congestion and energy intensity.

X

Enhancing Economic Governance. This could include areas such as transparency, anti-corruption and accountability policies, asset recovery, public financial management and oversight, public sector audit and evaluation, integrity, procurement reform, regulatory quality and administrative simplification, investor and consumer protection, access to economic data and information, management of environmental and social impacts, capacity building for local government and decentralization, support for the Open Government Partnership, creation of new and innovative government agencies related to new transitional reforms, reform of public service delivery in the social and infrastructure sectors, and sound banking systems.

X

Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labor market policies, increasing youth employability, enhancing female labor force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

X

Competitiveness and Integration. This could include such topics as logistics, behind-the-border regulatory convergence, trade strategy and negotiations, planning and facilitation of cross-border infrastructure, and promoting and facilitating infrastructure projects, particularly in the areas of urban infrastructure, transport, trade facilitation and private sector development.

X

STRATEGIC CONTEXT

10. Country and Sector Issues [Context at original proposal] A momentum for investment reformsEgypt, after having suffered from an uncertain and difficult economic situation, has announced its intention to embark on a wide number of economic and political reforms as well as in the launch of numerous investment projects to support the country’s growth and job creation. Restoring a favorable investment climate has been a key priority of the government over the last months. The announcements follow the significant fall of domestic and foreign direct investments (FDI) during the period 2010-2014. While FDI grew from less than USD 1 billion a year at the beginning of the 2000s to USD 11.6 by 2007, it started a declining path after the global financial and economic crisis and the 2011 revolution. After reaching disinvestment levels, FDI inflows have recovered halfway from their 2007 level, i.e. USD 6 billion in the fiscal year 2013-14. Gross capital formation (a measure of domestic investment) has been equally affected, shrinking from over 20% of GDP during 2007-2008 to 17.1% after the 2011 revolution and an even lower 14% in 2013.

As noted in the 2014 OECD publication on Business Climate Review of Egypt, Egypt has a national and international legal investment framework which protects basic investors’ rights. However, contradictions and overlaps are found in the legislative and regulatory instruments and implementation is lagging behind, with the de jure provisions and de facto practices not always aligned. Preliminary reforms were conducted with a short-term review of the Investment Law, but further efforts are needed to formulate a new investment policy to be translated into actionable legal terms – a unified investment law. A more predictable and transparent environment, efficient institutions, streamlined procedures, improved communication and a structured dialogue with government

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institutions and the private sector, are also elements that should accompany reforms. 

A difficult and deteriorating business environment. The business environment in Egypt suffers from multi-layer administrative compliance burdens, which represent a serious obstacle to doing businesses in Egypt, and significantly affects small businesses. In the Ease of Doing Business 2015 Report, Egypt ranks 112 out of 189 countries (as a comparison, Morocco ranks 71 and Tunisia 60). In the WEF Competitiveness Index 2014 Egypt ranks 118/148. Complexity and uncertainty in acquiring an industrial license exemplifies the problems faced by investors.

Uncertain times and the need for a private-led economic rebound. The revolutions that started in Egypt in January 2011 led to a tumultuous period marked by instability, stagnating growth and per capita incomes, rising unemployment and poverty, and setback in growth rates. Egypt went through two regime changes and presidential elections in just three years, with periods of unrest, uncertainty, insecurity, and violence that have left the population eager for stability and direction. With a new constitution adopted in January 2014, a new President elected in May 2014 and parliamentary elections expected in May/June 2015, the political landscape has evolved quickly while the economy is only just beginning to show signs of recovery. The Egyptian economy had achieved high growth rates during 2004-2008, however, the global financial crisis of 2008, followed by the unrest and uncertainty associated with the 2011 revolution, led to a slowdown in economic activity. Overall social conditions have been deteriorating, in tandem with the economic downturn since 2011. The unemployment rate reached 13.3% during the last quarter of FY14 (April-June 2014), marginally lower than the rates recorded since the beginning of FY14. Out of the 3.7 million currently unemployed, some 70% are between 15 and 29 years old, making youth unemployment a key challenge for economic inclusion and stability. The latest poverty data indicate that 26.3% of the population has been living below the national poverty line in FY13, with poverty rates reaching 50% in rural Upper Egypt. The loss of formal employment has been a key reason for households falling into poverty. This increases the vulnerability of women, youth and rural Egyptians, since they are the most likely to be unemployed.

A complex and unlevelled business environment that favors a few and limits competition. Throughout its fluctuating economic performance, the structure of the Egyptian economy remained broadly the same over the past decade. Formal business entry and growth is muted, and investments have been skewed towards small number of large, capital-intensive firms that do not create enough jobs, that coexist with a vast majority of micro firms – with limited development of a small or medium scale business sector. This lack of dynamism, particularly in the manufacturing sector is fostered by weak governance and a complex regulatory environment that fosters an unlevelled playing field as privileged (large) investors and incumbents have a competition edge as they often can influence bureaucratic outcomes, get things done more easily or have better access to (often subsidized) inputs like land, capital or energy. These factors have contributed to limited economic opportunities, an underdeveloped private sector, and have ultimately hindered job creation. According to the WBG Worldwide Governance Indicators, government effectiveness, regulatory quality, and rule of law rankings for Egypt have all declined in the past few years. Policy and institutional reforms to boost investment, and hence job creation have become one of Egypt’s priorities. Building on progress prior to 2011, the political will is to create a better business and investment climate with a view to enhance the development of the private sector, attract higher levels of FDI inflows and ultimately lead to the creation of more and better job opportunities. A sound and conducive business climate will also contribute to higher economic growth that can help Egypt to meet its potential for development.

[Key developments since the original proposal]

Political stability and the economic reform program. The political situation in Egypt showed signs of stability and recovery in 2014 with the endorsement of a new constitution, the presidential and parliamentary election in 2015. The government has since adopted a rigorous transformative and multifaceted reform agenda with the main objective of addressing structural economic imbalances and instigating robust, equitable and sustainable economic and social development. The main focus of the government is to stimulate economic growth by attracting national and foreign investments, promoting entrepreneurship and generating job opportunities. In 2015, Egypt signed two Development Policy Loan agreements (DPL) with World Bank (WB) and the African Development Bank (AfDB) by which both institutions provided a total of US$ 4.5 billion to support government initiatives towards the

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liberalization of the energy sector and streamlining business environment.

Economic growth rate has gradually picked-up driven by private and public consumption, oil production, recovery of the tourism sector, as well as investments. Real GDP increased from 3.4 percent in FY2014/2015 to 5.2 percent in FY2017/2018. This was a reflection of the government’s effort to fuel sustainable economic development, achieve inclusive growth, and achieve fiscal consolidation, in addition to the support of international development partners who supported the government in improving markets and achieving measurable benefits for Egypt’s macroeconomic environment.

The reform measures implemented by the government of Egypt have had positive impact on stabilizing the macroeconomic and business environment. However, all the positive projections for the coming years are dependent on maintaining and advancing the current growth within the market that requires a more proactive role to be assumed by the private sector.

Sector Issues

Promoting private sector-led economic growth is on top of Egypt’s strategic objectives . The government of Egypt is keen to continue the series of reforms that have tapped into the nation’s potential to become a premier destination for both local and international investors. In 2014, it had become necessary to create an environment more conducive to private sector. The Ministry of Investment and International Cooperation (MIIC) identified three main areas for improvement namely; (1) enabling regulatory framework, (2) modern and connective physical and technological infrastructure, in addition to (3) improved government business services and reduced bureaucracy. To that end, the Ministry sought the support of international development partners to introduce international successful practices in improving the business environment. The main areas for cooperation focused mainly on the role of government, legal and regulatory frameworks as well as institutional reforms. Since implementation, these transformational reforms have played an essential role in spurring private investments and encouraging sustainable and inclusive economic growth.

Egypt sought the support of development partners to expedite the reform process and implement the international best practices in developing a conducive business environment. To that end, Equal Access and Simplified Environment for Investment Project (EASE) was signed in 2015 with the World Bank Group and the OECD, with a total budget of US$ 7 million from the MENA Transition Fund. The project’s main objective was to “improve the regulatory environment for investors through simplified licensing and transparent industrial land allocation process”. The project included three components: (i) facilitating accessible and transparent investor services, (ii) supporting industrial sector regulatory reform, and (iii) capacity building for managing regulatory reforms. A number of positive results have already been achieved, including the enactment of laws and regulations such as new Investment Law, and enhancing the investor services.

The reform agenda, including the contributions of EASE project, led to measurable increases in private investments, net FDI flows as well as private companies’ establishment rates. Private investments increased by 29 percent amounting to EGP 270.8 billion during FY2016/2017 compared to EGP 210.6 billion in FY2015/2016, thus increasing private investments contribution to GDP to 9.2 percent during 2016/2017 as compared to 8.4 percent during 2015/2016. As for net FDIs, they amounted to around USD 7.9 billion in FY2016/2017 compared to about USD 6.9 billion in FY 2015/2016 with 14.5 percent increase. Also, the number of new companies established in FY 2016/2017 was 15,200 as compared to 12,084 in FY 2015/2016, with an increase of 25.7 percent. The latest reforms were welcomed by national and international investors who expressed their confidence in the Egyptian economy and market.

One of the main challenges for mainstreaming business procedures is the involvement of different stakeholders in the licensing and permits of business activities, and the lack of sustainable mechanism to support their regular

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communication and exchange of information which results in duplication, inaccuracy and mismatching of records. The additional financing aims to address this challenge through scaling up the achievements of EASE I, which succeeded in digitalizing business services within the ISC, through introducing digital solutions targeting the creation of a sustainable common system to facilitate interoperability and exchange of information among government entities. This will have direct effects on simplifying and expediting business registration, reducing bureaucracy and ultimately improving business services to investors.

Meanwhile, the digitalization process in GAFI succeeded in introducing new online services to investors and establishing a GAFI portal. This was a very important step to enhance transparency and reduce bureaucracy. More efforts are still needed to expand the gains of this process and ensure continuous development and sustainability. The additional financing will strengthen the information management system, expand online services to investors and connect affiliated entities to GAFI’s digital platform.

The Ministry also aims to address the incompatibility of institutional and human capacities within GAFI to the rate and scale of reform efforts through a comprehensive strategy targeting organizational and human advancement. The strategy will adopt international successful practices of change management emphasizing and promoting the values of integrity, efficiency and accountability.

To complement, facilitate and capitalize on the reform plan, the Ministry targets strengthening governance and investment management practices, including investment promotion, international investment statistics, and institutional as well as corporate governance. These measures support GAFI’s operation and contribute to a more favorable investment environment to fulfill the national strategic objectives and enhance transparency, and openness between GAFI and the business community.

This WBG-OECD joint project aims to enhancing the investment framework and addressing these regulatory, institutional, policy and governance issues.

11. Alignment with Transition Fund ObjectiveThe proposed project is aligned with the overarching goals of the Transition Fund of strengthening governance and public institutions, fostering sustainable and inclusive growth by developing, and advancing country-owned programs through supporting transformational reforms. Specifically, it encompasses the four themes, namely: (i) inclusive development and job creation, by expanding the outreach of services to lagging regions through the automation and enhanced connectivity of the General Authority for Investment’s (GAFI) One Stop Shops as stipulated in the new Investment Law and by supporting a new investment policy and a clear articulation with business strategies; (ii) investing in sustainable growth, which will be achieved by creating a more enabling and conducive business environment, through improving the legal, regulatory, and institutional, framework for industrial SMEs and investors, with the ultimate goal of spurring productive investment; and (iii) enhancing economic governance, which will be achieved by supporting regulatory reforms that reduce discretion and enhance transparency and predictability for the private sector by providing support to the Egyptian Regulatory Reform and Development Activity (ERRADA) and Industrial Development Authority (IDA), as well as supporting the government in formulating a new investment policy, enhancing the legal and institutional investment framework, improving legal coherence and coordination of business-related laws and jurisdictions of investment institutions, strengthening the international investment regime and enhancing investment dispute prevention and settlement; and (iv) competitiveness and integration, through capacity-building to negotiate international investment agreements (and the link with trade agreements), and the overall project’s objective to foster private sector development.

12. Alignment with Country’s National Strategy[Context at original proposal]

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New strategies for ambitious reforms. In its March 2015 Economic Development Conference in Sharm El-Sheikh, the Government of Egypt (GoE) announced its “Five-Year Macroeconomic Framework and Strategic Plan” to restore its macroeconomic imbalances, address its social inclusion priorities, and achieve high, well-diversified and sustainable economic growth. The government’s key objective is to create a productive, efficient and ultimately more dynamic economy and to ensure that future growth is high, sustainable and inclusive. While several elements of the reform agenda have already been put into effect, the government recognizes that much more must still be done in the coming years to fully restore the economy to health.

The GoE is reengineering the economy through coherent policies, programs and projects that together will serve as a catalyst to drive growth that is sustainable as well as robust enough to generate jobs and bring about material improvement in living conditions for Egyptian citizens. The government’s economic policy rests on three fundamental principles: a growth model based on a constructive partnership with the private sector, an approach that strikes the balance between fiscal consolidation and social justice objectives, and prudent macroeconomic programs that will be developed alongside long-term developmental projects with high-labor intensity and concrete efforts to improve the quality and accessibility of services offered to the public.

During 2014, the GoE has made clear strides toward regaining confidence in the economy through serious and comprehensive reforms while moving steadily to improve the domestic environment for investment and to re-attract significant FDI inflows. Egypt’s Cabinet recently approved amendments to the Investment Law. It is an important step in the direction to improve the business climate and level the playing field for investors, but only a phase in reforming the investment climate over the next five years, as stated by the authorities. Egypt needs to formulate a new investment policy in line with its new economic policy recently announced. This new investment policy should serve Egypt’s long-term objectives of growth and inclusion, and would eventually enable the drafting of a unified investment law.

Effective implementation of the amended law will be essential, and the WBG is preparing this technical assistance project to support the Ministry of Investment and the General Authority for Investment (GAFI) to implement their mandates under the new law. GAFI aims to reducing stifling bureaucracy and room for discretion in the licensing and permitting process and land allocation for new investments. Most importantly, the law aims to empower GAFI to act as a one-stop-shop (OSS) for investors and to empower it to seek the necessary approvals from various agencies that investors need to obtain.

The need to focus on binding business environment constraints: industrial licensing, land and regulatory governance. The current government’s agenda aims at sending a strong signal to investors by engaging on an ambitious plan to address the deep-rooted problems of unequal treatment of businesses. Among these top priority areas are industrial licensing, access to land and construction permitting, which are among the most severe constraints to industrial growth. The agencies with the mandates for the relevant roles are all actively engaged on the reform agenda. GAFI is the principal governmental authority concerned with facilitating investment through its network of OSSs and aims at easing and decentralizing business entry, licensing and operations. The Industrial Development Authority (IDA) is the principal authority mandated to regulating the industrial sector and allocates land for industrial projects, while The Egyptian Regulatory Reform and Development Activity (ERRADA), which was revived with Prime Ministerial Decree No. 1038 of 2014 and is currently supervised by the Minister of Industry, Trade Small and Medium Enterprises (MITSME) is mandated to catalyze and support reform implementation. The Minister of MITSME assigned ERRADA to focus on industrial licensing, land allocation and construction permitting as priority focus areas for reform.

Furthermore, The WBG is preparing a Country Partnership Framework (CPF), for FY15-19 with Board presentation early next year. The first round of CPF consultations identified the improvement in the Business environment as one of four priority topics. The CPF focuses on two key drivers to increase shared prosperity and reduce extreme poverty: (i) supporting economic stability and improved governance; (ii) creating opportunities for sustained income generation by promoting private sector policies to level the playing field.

The findings of the recently completed Strategic Country Diagnostic (SCD) for Egypt also indicate that reforms such as phasing-out of energy subsidies and large-scale public investments in infrastructure will produce inclusive growth and jobs only if the complexity, discretion, and uncertainty that businesses face

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in complying with regulations and accessing services and factors of production are significantly reduced. This is consistent with the findings of the recently published “More Jobs, Better Jobs: A Priority for Egypt”2 which shows that the main constraint to private sector growth is a business environment characterized by complexity, uncertainty, and unequal treatment which have led investments to be skewed towards large, capital-intensive businesses that created few jobs. What fundamentally constrains the growth of a smaller-scale business sector is the complexity of the regulatory environment, the unequal access to regulatory services and (subsidized) inputs and factors, and the uncertainty this imposes on businesses. The myriad of regulatory barriers facing businesses provide an advantage to those who enjoy unproductive skills like political or bureaucratic connections to get around those barriers. This uncertainty and unpredictability in the interaction with government agencies and the unequal and arbitrary treatment to which businesses are subject, extends to areas like access to land, energy subsidies and even credit. These issues trickle down at the local level and in all areas of government-business interaction, and are not limited to favors to connected large investors. They are particularly harmful to small businesses that do not have connections and resources to shield them from this uncertainty and help them get around complex regulatory requirements. The disparity also has a spatial component, where businesses in non-metropolitan areas suffering from an even weaker business environment, despite some attempts to decentralize government functions and authority.

This project aims at addressing the issues identified in the SCD and other recent analytical work, starting with regulatory areas that are most constraining to businesses (land allocation and licensing): it aims to support reforms of the institutional set-up for the delivery of licensing through GAFI and improving the process of regulatory reform for more inclusivity and consultations via ERRADA . If not addressed, the same issues of uncertainty and discretion in the business environment that have muted or distorted the private sector response to previous waves of reforms may again limit the impact of current reforms and large public investment projects. The 2004-2006 wave of macroeconomic and microeconomic reforms, including in the tariff and tax areas, have been successful at increasing private investment rates, FDI and growth. But these investments mostly happened in large, capital intensive industries and were limited in the small scale manufacturing or services sectors. Few jobs were created and informality grew. For the same reasons, the ongoing reforms and investments may have the same disappointing impact in terms of formal job creation and SME growth if the core issues of uncertainty and arbitrariness in regulatory compliance and state-business interaction continue to prevail and to benefit a few. These same issues will also continue to limit the impact on job creation and business growth of other policies and interventions, including in the infrastructure, skills and financing areas. To reap the jobs benefits of the ongoing reforms and public investment projects, the priority for the Government of Egypt should be to profoundly and credibly reduce the complexity and uncertainty in business-government interaction, which is the focus of this project.

[Key developments since the original proposal]The project is in-line with Egypt’s national reform policy that was adopted in 2015 to promote sustainable private sector-led economic growth to create employment opportunities, improve income levels, enhance knowledge and technological transfers, improve national competitiveness, expand exports and foreign reserves, and increase growth rates.

It is also highly relevant to the Ministry of Investment and International Cooperation (MIIC) four-year investment strategy, from 2018 to 2022, that aims to foster a conducive investment climate by targeting six main objectives that are namely; supporting regulatory reforms, efficient institutional setup, improving investment indicators, promoting entrepreneurship, upgrading investment infrastructure and services in lagging regions, and utilizing official development assistance funds in realizing national objectives.

The project directly addresses regulatory reforms, institutional upgrading, extending government services to lagging regions, supporting technological and physical investment infrastructure across the country and endorsing international successful practices through the support of development cooperation to enhance sustainable development and promote private sector-led growth.

2 World Bank report issued in June 2014

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B. PROJECT DESCRIPTION

13. Project ObjectiveTo improve the regulatory environment for investors through simplified industrial licensing and transparent land allocation processes and to support the government of Egypt in designing a new investment policy and legal framework, and in strengthening its international investment regime.

14. Project ComponentsUnder the current Project objective, the proposal requests additional financing for scaling up and expanding the activities under the WBG supported Component 1: Facilitating accessible and transparent investor services and under the OECD supported Component 4: Support the government of Egypt in designing a new investment policy and legal framework and in strengthening its international investment regime.

The project is comprised of three components supported by the World Bank Group and one component supported by the OECD:

A. WORLD BANK GROUP SUPPORTED COMPONENTS:

Component 1: Facilitating accessible and transparent investor services (GAFI)

The Project aims to support GAFI become the national platform facilitating business entry, licensing, and access to investor information at the sub-national level through its One Stop Shops and GAFI Information Portal. This would entail addressing GAFI’s processes and interfaces with all the involved regulators, including primarily IDA, but also other line ministries and local authorities involved in licensing, developing an IT system to deliver business entry, licensing services, and investor information, and capacity building and technical assistance to enable and support GAFI in this enhanced client-facing role, particularly of its OSSs. This component will also include supporting GAFI in developing the necessary implementation instruments and action plan that would enable it to carry out its mandate in light of the new Investment Law. This component will also include project management activities to be undertaken by the Project Management and the Project Implementation Units.

Subcomponent 1.1: Develop and Implement Online System for Investor Servicing at GAFIGAFI currently provides one-stop services for business registration which covers business entry procedures but stops short of business licensing. GAFI has been developing and extending its OSS capabilities, and has documented the procedures for obtaining 479 different licenses and permits required from any of 78 different government agencies, depending on the nature of the business investment. The Project will support development of the following activities within GAFI:a) Mapping of the business entry procedures (major changes are not expected, as this process is already fairly

straightforward) and link this to the mapping of the industrial licensing procedures (which will be mapped and re-engineered under Component 2) in preparation for automation.

b) Procurement, configuration and deployment of a customer relationship management (CRM) system at GAFI HQ and its four OSSs. The CRM will provide online business entry services and act as a platform for hosting the licensing processes of other agencies, starting with IDA.

c) Develop and enhance the GAFI information portal to provide comprehensive investor information, including:

i. Information on the procedures and requirements for the 479 licenses and permits from 79 different agencies.

ii. Information on access to land through showcasing all land available for investment under the jurisdiction of the Industrial Development Authority (IDA), on GAFI’s website.

The AF aims to strengthen GAFI’s role, in line with the new Investment Law, as the main business entry point for all sorts of companies and the “one window” for providing certain licensing and permits activities to investors. This requires the development of a comprehensive and functional digital system to mainstream business procedures, connect the central and subnational levels, facilitate easy access to the system in all geographical areas and adopt international successful practices in provision of government services. To that end, the AF will build on the work

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being implemented under the parent project and will promote the electronic coordination and synchronization among relevant line ministries, local authorities at different governorates, and public entities that are involved in granting business licensing and permits; and establish a quality control system to guarantee its efficiency and effectiveness. Specifically, it will undertake the following tasks:

a) Assessment of Technical Requirement for digitalized process among stakeholders: This task will provide a full readiness assessment to relevant national entities that are involved in the licensing and permits of business activities with the objective of evaluating their capacities and preparedness to move to a “one window” model as mandated by the new Investment Law and recommended by the outcomes of parent project.

b) b) Procurement and installation of needed IT Equipment: This task will support the preliminary step of deploying “digital integration units\kits” that can enable relevant ministries and government institutions to perform licensing transactions in a complete digital cycle using basic hardware, software, and digital signature solutions.

c) c) Creating Agents’ Network to Support Digital Transformation: This task will assist GAFI in creating a network of digitally enabled certified agents to support full deployment of GAFI online systems and mitigate the current deficiency and limitations in the community of users, allowing GAFI to reach a complete digital transformation scenario. In particular, this would facilitate the creation of certified lawyers and auditors’ network who are trained on the usage, features and benefits of the new system and are licensed to provide services to the investment community.

Subcomponent 1.2: GAFI Capacity Building and ICT UpgradingThis sub-component will cover IT system upgrading for GAFI and the OSSs and capacity building of staff, including:

a) Further e-integration of the OSS network, including e-archiving and electronic connectivity between OSS branches to enhance quality of service provided by OSS.

b) The Project will also support required upgrades to GAFI’s ICT infrastructure to support deployment and operation of the two systems

c) Training of GAFI staff in the use of the CRM system.

a) The AF aims to further enhance GAFI human and technological capabilities needed to efficiently manage investment data, expand investors’ online services and connect affiliate entities to the digital network, manage the change process, and strengthen technological competencies to manage the introduced IT automation solutions. Specifically, the work will develop a Unified Information Management System for Investment; introduce new features and business services through the Investment Map; institutionalize the change management functions; and improve standardized operations of the GAFI IT department.Specifically, it will undertake the following tasks:Developing a Unified Information Management System for Investment: this task aims to create an efficient information management system to facilitate the storage, organization and retrieval of investment information, which will allow for the flow of data across all departments and eliminates errors that occur due to manual processing. This will in turn unify data reporting mechanisms, avoid duplication and inconsistency of records and support policymakers develop informed decisions.

b) Expanding Investment Map Services: this task will introduce new features and business services through the investment map as follows: First; a “Customer 360” module, which is a Customer Relationship Management (CRM) best practice that targets strengthening the relationship with investors. Second; activating revenue-generating features on the map that include: detailed information and data elements to support the investors’ feasibility studies, notifications of new available investment opportunities as well as bidding procedures.

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c) Supporting the Change Management Process by Establishing a Change Management Unit which will support the management of the IT project and will ensure the sustainability of the project’s activities after their completion and creating a Digital Transformation Team dedicated for handling all inputs and outputs from the proposed new digital ecosystem, making sure the business needs from such systems are met, affecting process changes if needed, disseminating these changes to the rest of GAFI team.

d) Improving standardized operation in GAFI’s IT Department through technical training on ITIL systems to equip them with needed information technology service management skills to effectively and efficiently manage the digitalized systems that will be operational at GAFI.

Subcomponent 1.3: Project Management

This sub-component will cover the costs of the Project Implementation Unit including additional staff needed (to be hired as consultants on the project) and incremental operating costs. The complementary consulting staff to be hired is to be determined, but may include an M&E specialist and an additional procurement officer (to assist on the procurement packages).

The AF will continue supporting the project management functions to ensure the smooth and effective implementation of the project activities.

Component 2: Industrial Sector Regulatory Reform (IDA)

The Project aims to support IDA in focusing on its strategic roles of regulation and development and transform its approach to implement risk based regulation principles. This component will focus on the two primary functions of IDA, industrial licensing and industrial land allocation. The IDA is currently engaged in mapping its industrial licensing processes in collaboration with ERRADA and with World Bank Group support. The project will build on this work by supporting a fundamental restructuring of the IDA’s role in industrial licensing as well as the reengineering of underlying processes for administering the industrial license. The redesigned process will then be deployed in IDA branches and GAFI OSSs. On industrial land allocation the project will support developing a “wholesale” model of land development (through reforming the developer concession agreements) and developing and deploying an online industrial land allocation system. This component will also finance IDA staff training, workshops, and ICT upgrading needed to implement these activities.

Sub-component 2.1: Process re-engineering and automation of industrial licensing

IDA, in collaboration with the ERRADA program and with the support of the World Bank, is currently engaged in mapping out its industrial licensing procedures. This preparatory work will be completed as part of this project to re-engineer these processes and deploy the reformed processes through an automated system. The activities to be supported are:

1. TA to complete the assessment of the process, diagnose bottlenecks, and re-engineer the processes involved in producing an industrial license. This will include work eliminating technical evaluations and inspections as a precondition for industrial registration and perform inspections/evaluations on risk-assessment basis utilizing professional, accredited private practitioners,

2. TA to develop and establish the accreditation system of private sector entities to perform industrial technical evaluations on a risk-management basis which will be overseen by the IDA.

3. TA to IDA and other involved agencies to re-design the industrial register process to return it to its original policy objective as a data collection function, and delink import/export and other permits from the industrial register.

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Development of the software systems and equipment and installation of a new industrial licensing administration system (ILAS). The Industrial Licensing Administration System (ILAS) will be developed and deployed in the IDA headquarters, 22 branch offices as well as in GAFI’s headquarters and four regional offices. This system will be designed with the following capabilities

Sub-Component 2.2: Implementing a New Approach to Industrial Land Management and an Online Land Allocation System

One of IDA’s core functions is to help companies and private sector zone developers identify, purchase/lease, and develop land, and assist them in their dealings with local and national administrations. The project will support IDA in its effort to adopt primarily a transparent wholesale industrial land allocation process rather than the focus on the “retail” land allocation by setting and administering policies and procedures for industrial land allocation and introducing best practice contracting instruments with private developers. Furthermore, IDA has signed an MOU with the New Urban Communities Authority (NUCA) to transfer the role of land allocation for industrial use from NUCA to the IDA. To implement this MOU, the project will support IDA to work with land owners (primarily cities developed under New Urban Communities) to compile and maintain on-line information of land available for industrial development.

Accordingly, this sub-component will comprise the following activities:

1. TA to design the approach for wholesale land allocation and developer concession agreements and support implementation of reformed system.

2. Development of the software and information system for industrial land allocation , which would include ownership, location, offsite infrastructure, target industries and excluded industries, price, contact details, and any location-specific incentives that may be offered.

Sub-Component 2.3: IDA Capacity Building and ICT Upgrading

The project will support IDA’s technical and administrative capacity at the governorates’ level to enable decentralization of regulatory decision making and deployment of the ILAS to be deployed through existing OSSs. Accordingly, this component will include:

1. ICT Infrastructure Upgrading, including upgrade of existing LAN infrastructure in IDA HQ as well as dedicated internet connections to the branch offices through a government-owned internet service provider and purchase of computers and other equipment.

2. IDA staff training in the use of the ILAS and to support decentralization of decision-making.

Component 3: Capacity building for managing regulatory reforms (ERRADA)

The Project aims to strengthen the capacity of the GoE regulatory reform program (ERRADA). The project will focus on supporting ERRADA around a set of “horizontal” (cross-cutting) reforms that target constraints affecting firms in all sectors of the economy. It will in particular focus on reforms that promote transparency and predictability of the regulatory environment. It will also support “vertical” reforms in priority areas like industrial licensing and land allocation that complement components 1 and 2.

Within the horizontal reforms, the project will support ERRADA in:a) completing a comprehensive inventory of business related formalities/administrative procedures;b) process mapping and re-engineering of the most relevant/frequent formalities/administrative procedures

with the objective of streamlining and simplifying them;c) establishing an informational portal of business related administrative procedures rendering all information

related to the requirements of these procedures accessible to the general public in a simple and comprehensive manner;

d) putting in place a public consultation and review mechanism to secure that all business related legislative proposals are properly reviewed and consulted with the stakeholders, including the private sector.

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B. OECD-SUPPORTED COMPONENT:

The component supported by the OECD responds to a request for technical assistance from the Minister of Investment in relation to the activities carried out by the Ministry to enhance the investment framework. All activities are inter-linked and contribute to a more favorable investment environment. Therefore, the provision of the sub-components will take place in parallel with a well-defined sequencing.

This component will be implemented in co-ordination with other international organizations and support institutions active in the area. In particular, the World Bank Group supported components will complement, support and build on the OECD-supported component. Regular coordination will ensure the articulation and complementarity of the activities (e.g. between component 3 of the World Bank Group (support to ERRADA) and sub-component 2 of the OECD (legal coherence of business-related laws)).

Through additional financing this component will build on the policy recommendations contained in the Investment Policy Review of Egypt (IPR), undertaken in the framework of the parent EASE project and is aimed at deepening further the needs assessment and the analysis provided in the IPR, as well as at implementing some of its key recommendations, through technical assistance and capacity-building.

Component 4: Support the government of Egypt in designing a new investment policy and legal framework and in strengthening its international investment regime

Sub-component 4.1: Investment policy and legal regime

Early 2015, Egypt conducted a short-term review on its 1997 Investment Guarantees and Incentives Law, which resulted in promulgating an amendment that will serve as a preliminary step in reforming the investment climate for the next five years. However, Egypt is in a dire need to formulate a new investment policy that is consistent with the new national economic policy, which was announced in the March 2015 Economic Development Conference. This new investment policy would serve Egypt’s long-term economic policy and would eventually enable the drafting of a unified Investment Law, which will translate the policy into actionable legal terms. The new investment policy will need to be supported by research and analysis to identify the types of investment most needed for the economy, the optimum mechanisms for attracting the identified investments and the accompanying tools to improve spillover effects and impact of investments on inclusion (support to job creation, territorial development, MSMEs…), while ensuring a right balance between rights and obligations of investors.

The OECD, in consultation with the GoE, will conduct analytical work, comparative studies and field research to generate data that will support a clear and precise investment policy. Based on this policy, the OECD will assist the GoE in unifying and streamlining the legal framework for investment through a completely new, modern, and state-of-the-art investment law. Already in 2014, the GoE has committed to work toward “a unified law on investment that includes all provisions regulating different investment systems and coordinating between them, including local investment, free, private, investment, and industrial zones, and other legal frameworks accumulated over the years”.3 The OECD Business Climate Review (BCR) also suggests that Egypt proceeds with an informed revision of its investment legal regime to improve transparency, predictability and openness, streamline investment-related legislations, enhance implementation of the legal framework to ensure that de jure provisions and de facto practice are better aligned, and simplify the rules and regulations administering Free Zones, Special Economic Zones and Industrial Zones. The BCR has also noted that Egypt should improve clarity on its restrictions to foreign investment.

Specific activities include:

1. FDI statistics and compliance with international recommendations: improve data collection on investment, in particular on FDI statistics through implementation of international guidelines for compiling FDI, including the OECD Benchmark Definition of FDI. A statistics review will be conducted with a view to assess compatibility of FDI statistics with international recommendations, data sources and evaluation methods, and feasibility of compiling additional resources. The review will contain

3 Egypt, Minister of International Cooperation, Report: Egypt’s Economy in Six Months – 8 January 2014.

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recommendations to be implemented. Implementation will comprise capacity-building for officials in implementing international norms and compiling FDI statistics. Reliable investment data will inform the investment policy.

The AF will be used to support further the Investment Intelligence Center (IIC) in GAFI in advancing its methodology in compiling FDI statistics to be compatible with the OECD Balance of Payments (BPM6) and Benchmark Definition (BMD4). This will improve the FDI measurement in the balance of payments, and will provide guidelines for producing more meaningful measures of FDI for policymaking through the adoption of BMD4. The subcomponent will build on the recommendations provided by the OECD Review on the Compilation of FDI Statistics in Egypt, prepared under EASE I. Activities will include: Supporting IIC statisticians’ participation in the Working Group on International Investment Statistics (WGIIS) biannual meetings to learn about international successful practices on uses of FDI statistics, and organizing workshops on relevant topics especially with relation to linking FDI financial statistics with relevant data on companies’ operations.

2. Stocktaking and preliminary analysis of the investment policy: Review Egypt’s current investment policy, obstacles, restrictions, as well as the legal framework (including the amended 1997 Investment Guarantees and Incentives Law, other investment-related legislations and international commitments). This activity will be followed by a workshop with the Egyptian authorities with a view to prepare the investment policy.

This additional work will build on the policy recommendations provided by the forthcoming OECD Investment Policy Review of Egypt, prepared under the parent project and the outcomes of the OECD Mapping of Investment Promotion Agencies (IPAs), to which GAFI took part. It will support GAFI in enhancing its investment promotion strategy and activities. OECD activities will help GAFI improve policies and practices to attract foreign investment in order to create job opportunities, enhance local development, and foster economic diversification. The OECD will also support the GAFI in developing a sound institutional framework and institutional good governance practices. Activities will include: support peer learning with other IPAs on other areas of relevance for investment promotion strategies, identify areas for improvement with the objective of increasing GAFI’s effectiveness.

3. Assistance in the drafting of the investment policy and road map for reforms: draft a policy paper with key recommendations for the new investment policy and a road map sequencing the reforms, including the improvement of the investment legal regime. A validation workshop with the authorities will be organized with a view to support the government in the formulation and adoption of the new investment policy and the prioritization of the implementing reforms.

4. Comparative assessment of the Egyptian legal investment regime against good practices and with other countries in the region and countries which situation can be relevant to Egypt. Findings of the assessment will be discussed with the authorities, as well as with the wider business community to identify and validate the needed improvements.

5. Technical assistance in the drafting of the new law: Based on the investment policy and recommendations, the GoE will draft a revised Investment Law. The OECD will assist the GoE in this task by monitoring the process and giving recommendations upon request, with a focus on protection and guarantees, and supporting the Parliamentary process. This work will be carried out in conjunction with on-going activities undertaken by the GoE (i.e. Ministry of Investment, GAFI and the new Centre for investment development and promotion) or other support institutions (e.g. cost-benefit analysis of incentives, evaluation of the investment promotion institutional framework…). This activity will include the update and revision of the list of restrictions published in 2007 under the OECD National Treatment Instrument, with possible streamlining and improvements, and subsequent revision of Egypt’s ranking in the OECD FDI Restrictiveness Index comparing 60 countries.

6. Public-private dialogues: throughout the process, organize dialogues with key stakeholders, the private sector and civil society (constitution of a public-private platform/task force, 2 consultations, and surveys) with a view to build awareness on the reform process and benefit from exchange of ideas and practical views. As beneficiaries of the actions, the private sector will be encouraged to contribute to and validate

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the proposed improvements.

7. Consultations, awareness-building and communication: the GoE will ensure that all relevant governmental bodies are duly consulted during the revision process. The OECD will assist in supporting the organization of consultations with key public authorities (to ensure institutional co-ordination) and briefings to parliamentarians (to ensure adoption of the new law) (2 events). Once the law is enacted, the GoE will adopt a communication strategy to ensure that adequate information is made available to all stakeholders (public-private). This can take the form of an implementation manual for public entities, brochures and investor’s guide for the private sector, and web tools. Promotional tools will be available in several languages. The OECD will assist the GoE in developing communication tools by providing guidance and comments.

Additional Financing will be allocated to support MIIC and GAFI in the implementation of responsible business conduct (RBC) standards by building the capacity of businesses on RBC and improving the policy coherence on RBC through supporting the establishment of the national contact point. Specific activities will include: Capacity building with businesses on due diligence, one training with businesses on the basis of the new due diligence guidance, focusing on technical aspects of conducting supply-chain due diligence and another one Toward policy coherence for achieving the SDGs – role of RBC. Also, OECD will provide tailored guidance to the GoE on key aspects of establishing a NCP, including advice on specific issues, and pairing the new NCP with other NCPs for peer learning purposes.

Sub-component 4.2: Business-related laws, jurisdictions of investment institutions and legal coherence

While the GoE identifies the need to revise a number of business and investment-related laws in addition to the investment legal regime (amendment to the Companies Law n°159 of 1981, Public Procurement Law n°98 of 1989, Mortgage Law n°148 of 2001, Real Estate Law n°114 of 1946, PPP Law n°67 of 2010 and drafting of new laws for Insolvency and for Secured Transactions), it is essential to ensure coherence and harmonization of all legislations from a broader perspective. The business legal framework should also be reviewed and assessed against international standards and best practices. Once the laws are harmonized and enacted, the GoE should also ensure efficient implementation of the revised legal framework for businesses.

In addition, proper implementation of the legal framework also implies efficient institutional co-ordination with roles of each institution clearly identified. A key finding of the OECD Business Climate Development Strategy (BCDS) was the “high degree of institutional overlap. […] There is evidence of governmental institutions competing with each other in the same area, as well as insufficient coordination between them”. 4 In this context, the GoE identified the need “to conduct a comprehensive review of the competences and authorities granted to different public authorities supervising economic activities in order to rid them of overlapping and conflicts, and to facilitate procedures taken by those involved in various economic activities and investors before these authorities.”5

Improving institutional co-ordination and efficiency will contribute to a more streamlined and conducive business environment through facilitated procedures for the private sector and improved dialogue. This will also contribute to reduction of red tape and corruption and revitalize sense of duty and responsibility in governmental agencies. The project proposes to review the jurisdictions of the institutions in charge of investment-related issues to avoid overlaps in their mandates.

Specific activities include:

1. Interactions assessment and legal harmonization: Verify the interactions between the investment law and business-related laws, as well as between the national investment framework and international obligations to ensure coherence. A report assessing the interactions will be drafted and discussed with the relevant authorities (one workshop).

4 OECD (2010), Business Climate Development Strategy.5 Egypt, Minister of International Cooperation, Report: Egypt’s Economy in Six Months – 8 January 2014.

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2. Technical assistance for the revision of business-related laws: the GoE will revise the laws taking into account the possible interactions identified in the report. Upon request, the OECD will provide technical assistance on specific issues in relation to the interactions with the Investment Law.

3. Revision of jurisdiction of investment-related institutions: review the mandate and jurisdiction of the various institutions dealing with investment-related issues, focusing on overlaps and complementarities. Define clear flow chart, task assignments, delegation of authorities in co-operation with the GoE. A workshop with the relevant institutions will be organized to discuss and agree on mandates and division of tasks.

The GoE will be responsible for implementing the reforms. It will proceed with the necessary reorganization including through by-laws and reallocation of resources and staff, develop management and co-ordination tools and develop tools to help navigate the institutional framework for businesses, such as guides and websites.

Sub-component 4.3: International investment agreements

Egypt has signed more than 100 bilateral investment treaties (BITs) – 30% not ratified, some of them being inconsistent with each other and some may be incompatible with the new Egypt’s investment policy. In collaboration with the Ministry of Investment (MoI), the OECD will assess the existing network of international investment agreements signed by Egypt and their interactions (including with trade agreements), identify the recent international best practices in the field of international investment treaty drafting, and will make recommendations on policy options, in particular with a view to reduce the negative impact of international arbitration. The main objectives of this collaboration will be to identify the priority of the real economic interests in concluding BITs, attaining consistency between Egyptian BITs, achieving balance between the investor’s and state’s interests, asserting the role of BITs in attaining sustainable development for Egypt and its partners, reinforcing the links between trade and investment provisions in international agreements, and reducing the number of treaty-based disputes.

Specific activities include:

1. Review and assessment: the OECD will conduct an assessment of the commitments made by Egypt under international investment treaties, with a particular focus on investment protection and recourse to international arbitration. The assessment will look at the legal interactions between the BITs themselves and the BIT network and the national framework. Attention will be brought to the 2013 amended Investment Agreement of the Arab League which recently entered into force with the ratification of five members, and in particular to the Arab Investment Court which status have also been revised in 2013 and which could become a more effective and used investment arbitration mechanism in the region.

2. Recommendations: the OECD will provide an analytical report reflecting latest trends and best practices in international investment law, giving recommendations on how to reduce legal inconsistency, and discussing policy options for the possible revision of the Egyptian model BIT.

3. Capacity-building on international investment agreements: based on the recommendations, the OECD will provide capacity-building to the Egyptian civil servants dealing with BITs and other investment-related agreements (2 workshops).

Sub-component 4.4: Investment dispute settlement

Following the 2011 events, Egypt is confronted with an increased number of disputes between the State and economic actors, including foreign investors – 12 cases of investor-State disputes have been filed under the auspices of the International Centre for Settlement of Investment Disputes (ICSID) since 2011. In addition to the costs involved for the government, the existence of these disputes sends a negative signal to the business community and involves a timely settlement.

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The GoE is tasked to “propose a comprehensive program for settling economic disputes between the state and investors so as to realize economic stability and confidence, yet without waiving the state’s general rights or its right fight corruption, in addition to developing the operation system of the existing investment dispute settlement committees.”6 The GoE has created several mechanisms and bodies in the past to deal with the issue and more recently, in the amendments to the 1997 Law, a Contract Committee for “reconciliation” cases involving public funds and a Governmental Group for the Settlement of Investment Disputes. The 2015 amendment to the Investment Law also contains provisions to enhance predictability for foreign investors in relation to contract’s challenging by third parties. However the role of the various bodies and the access procedures are unclear and they do not operate as expected. The BCR Egypt also recommends clarifying the respective roles of the Committees and operationalizing their work in a timely, consistent and transparent manner involving MoI/GAFI in a leading role; ensuring due process of law; and setting clear framework for procedures with timelines to deal with disputes involving foreign investors and the State and State agencies.

Specific activities will focus on dispute prevention, settlement and management and will include:

1. Assessment: assess the role and the effectiveness of the existing and new bodies dealing with investment disputes, as well as the procedures, and draw lessons from experiences of previous cases. Examine existing dispute prevention means, the use of alternative dispute resolution mechanisms, in particular mediation, available to investors and the GoE, as well as arbitration procedures in light of good practices.

2. Consultations: organize a consultation with relevant ministries and agencies interacting with foreign investors, as well as with foreign companies themselves and other private sector representatives, to discuss investment disputes avoidance and settlement.

3. Manual of procedures: draft a manual or handbook on procedures for dispute prevention, mediation and management for government officials of various levels of government, addressing existing mechanisms, institutional co-ordination, communication, awareness and capacity-building for government officials in charge of prevention, settlement and management of disputes.

4. Communication: based on the assessment and the consultation, the government should set up an internal electronic information platform to ensure proper information and communication flows between public agencies at both the central and governorate levels, as well as an early-alert system to bring investors’ problems to the immediate attention of the responsible agency. The government should ensure awareness-raising among investors. The OECD will support this initiative by showcasing examples from other countries.

5. Capacity-building: organize capacity-building activities for the officials in charge of preventing and settling disputes, and managing arbitration processes (including through mock cases). These activities will also sensitize government agencies, governorates and free-zone authorities to commitments made towards foreign investors, ways to respond to grievances, alternative dispute resolution (ADR) mechanisms and tools to handle disputes (2 workshops).

Capacity building activity will further be scaled up to build GAFI capacity on issues pertaining to the prevention, mediation, and settlement of investor-state disputes. This activity will serve GAFI’s efforts to improve the broader investment climate in Egypt through the adoption of good governance practices in this area. It will develop relevant knowledge and skills in a capacity-building workshop and through the participation of GAFI legal experts in the meetings of the OECD Freedom of Investment roundtable, which brings together some 54 governments from around the world to exchange information and experiences on investment policies, and develop guidance for open, transparent and non-discriminatory investment policies

15. Key Indicators Linked to Objectives Progress towards achieving the Project’s development objectives will be measured by the following indicators:

6 Egypt, Minister of International Cooperation, Report: Egypt’s Economy in Six Months – 8 January 2014.

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World Bank Group supported components:

Average Duration of Licensing Process Number of land allocation requests processed through the reformed land allocation system Number of government institutions that are digitally connected to GAFI through integration units

OECD-supported component:

An efficient national investment framework: A new investment policy and a unified investment law, a more coherent business legal regime, better articulation of investment-related institutions,

An effective international investment regime: Assessed network of bilateral investment treaties, enhanced capacities to (re)negotiate agreements and to prevent and manage investment disputes.

GAFI’s effective Investment Promotion Policy is in place. Investment promotion and retention policies and measures are improved.

This Project corresponds overall with the Transition Fund Cross Pillar 5 Development Objective and Outcome Indicator 5.1 “Improved enabling environment and government capacity.” Section E (Results Framework and Monitoring) identifies the Project’s key indicators and progress measures of intermediate results.

C. IMPLEMENTATION

16. Partnership Arrangements (if applicable) The main beneficiaries of the Project are the governmental institutions in charge of investment issues, the Ministry of Investment and International Cooperation, the General Authority for Investment and Free Zones (GAFI), the Industrial Development Authority (IDA) and the ERRADA programme. The Ministry of Investment and International Cooperation will support the overall coordination of the Project from the government side. Indirect beneficiaries and relevant institutions for the implementation of the project comprise the Ministry of Industry, Trade and Small and Medium Enterprises, the Ministry of Supply and Internal Trade, the Ministry of Justice (including the Egyptian Law Suit Authority), the Ministry of Finances and the Central Bank as they will be key partner institutions which shall be participating in applying the enhanced digitalized process.

Business associations, such as the Federation of Chambers of Commerce (FEDCOC), Federations of Industries, bilateral chambers, will be consulted among others, as well as potential and established, local and international entrepreneurs and investors.

As implementing agencies, the WBG and OECD will be in charge of the management and implementation of the Project. Transfer of best international practices, training of governmental staff, consultations and communication (portals, manuals…) will ensure project sustainability.

17. Coordination with Country-led Mechanism/Donor Implemented Activities The project is fully aligned with the economic development strategies of the government, in particular the “Five-Year Macroeconomic Framework and Strategic Plan”. It will contribute directly to the existing efforts of the authorities to enhance the regulatory, legal and institutional framework for investments and businesses.

The Project team has been coordinating with several donors and international organizations (European Commission, United States, Germany and GIZ, France and AfD, the Austrian Fund, the UAE Egypt Task Force, AfDB, EBRD…) to ensure complementarity and coordination and to avoid overlapping of scope or duplication of activities. In particular, the Austrian Fund has earmarked funds for supporting the drafting of the implementing regulations for the new Investment Law, which sets among other areas, the framework for GAFI’s OSS mandate. The Project thus continues to support government efforts, builds on the achievements of the WB-OECD supported EASE project

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and benefits from the major reform initiatives that took place on the ground.

Given the scope and objectives of the Project, the World Bank Group and the OECD are carrying out joint implementation with a clear division of tasks under the four components, based on respective expertise and on-going and past activities in the country. The complementarities of the components will be well articulated to maximize the impact of the Project at the benefit of the Egyptian authorities. The Project will also benefit from successful experiences that the OECD and the World Bank Group have in jointly implementing Transition Fund projects on investment-related issues especially the Equal Access and Simplified Environment for Investment (EASE) that was implemented with GAFI and MIIC in Egypt, as well as (the Jordan Competitiveness and Investment project and the Tunisian Investment Authority project).

18. Institutional and Implementation ArrangementsFor the Country-Execution components supported by the World Bank Group:

MIIC and GAFI are the principal government bodies regulating and facilitating investment in Egypt. GAFI is also a lead agency in the facilitation of business registration, licensing and investment policy formulation. A Project Implementation Unit (PIU) will be implemented under MIIC. MIIC and GAFI currently have a strong professional cadre at the senior management and officer levels that in turn has a good track record with the World Bank.

MITSME and IDA are the principal bodies concerned by regulating industry in Egypt. IDA’s mandate includes regulatory functions with respect to both establishment and operations of industrial activities and industrial land. IDA has not previously implemented projects with the World Bank. GAFI would execute the IDA component on behalf of IDA along with the procurement of the IT systems, which will be undertaken by GAFI for the entire project. A second Project Implementation Unit (PIU) will be established to implement this component.

ERRADA’s mandate is the support the government’s efforts in building a regulatory management system, based on a dialogue between public and private institutions, aiming at increasing efficiency, competitiveness and creating more job opportunities. Prime Ministerial Decree No. 1038 of 2014 assigned the Minister of Industry, Trade & Small and Medium Enterprises the supervisory role over the ERRADA program. This component is a catalyst to the rest of the project, and is secondary to the project main components related to GAFI and IDA. Most of the activities under this component are related to capacity building.

The management of the Egypt EASE components will be governed by two management levels:

A World Bank Project Steering Committee (PSC) will be established by MIIC and GAFI. Its principal role will be to review and advise on project performance at the levels of output and outcome and issues related to inter-governmental, public-private dialogue and donor coordination issues;

Project Implementation Units (PIU) team under the supervision of the PSC will act as the execution arm for the Project components. The PIU comprises Project Officer in addition to technical implementation team in procurement, finance and accounting and M&E. The PIU’s function would be to i) execute purchase requests, ii) perform the accounting and finance functions for the Project and issue periodical reports to the PSC, and iii) periodically measure results according to the Project Results Framework and report to PSC. The principal role of the PIU will be on technical performance at input, output and outcome levels and related budget management and strategic communications issues pertaining to the project; MIIC and GAFI will assign technical staff to support the PIUs on implementation activities.

An Operational Manual will be prepared and agreed upon with Project partners defining roles and responsibilities of the PIU team, principles and procedures related to procurement, finance and accounting functions of the Project and relevant fiduciary requirements.

For the ISA-Execution component supported by the OECD:

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The Ministry of Investment and International Cooperation (MIIC), the main counterpart for the OECD-supported component, is articulating and implementing the investment strategies and policies of the country. It has endorsed recently the new Investment Law of 2017 which enhanced were enacted. It was a first step in reforming the regulatory framework for conducive investment environment in Egypt along with climate. The objective is now to reformulate a new investment policy that would eventually enable the amendments of the Companies Law, Movable Assets Law, Bankruptcy Law and Factoring Law. The MIIC drafting of a unified investment law. The MIIC also has a major role in the negotiation of international investment agreements and in dealing with existing and potential investor-State disputes. Indirect beneficiaries will be GAFI, as well as other governmental entities in charge of investment-related issues (e.g. the Egyptian Law Suit Authority at the Ministry of Justice).

An OECD Project Advisory Committee (PAC) will be established. It will be composed of the OECD, the WB, government representatives to be nominated by MIIC in consultation with relevant ministries and institutions, as well as representatives of private sector. The OECD Project Steering Committee will meet regularly and will provide advice and recommendations on overall guidance to the Project.

An OECD Project Implementation Unit (PIU) (composed of senior and technical OECD staff) will work in consultation with senior and technical MIIC staff. The PIU will ensure the implementation of the Project and will regularly inform the PSC. It is also envisaged that a secondee detached from the MIIC will work on the outputs of the components and ensure co-ordination between the MIIC and the OECD while benefitting from capacity-building (subject to the signature of a separate agreement between the MIIC and the OECD).

The World Bank and OECD Project Steering and Advisory Committees will organize regular joint meetings (at least once a year) to ensure efficient coordination of the activities and overall guidance to the project.

19. Monitoring and Evaluation of ResultsRegular and in-depth monitoring of progress and evaluation of results and outcomes is essential for the success of the project. The ISAs will be responsible for the overall monitoring and evaluation of the Project with the support of the technical experts and the Project Steering and Advisory Committees. The M&E system will be consistent with the reporting requirements of the MENA Transition Fund.

Both the WBG and the OECD will coordinate efforts in conducting a Mid-Term Review (MTR) 12 months after the date of approval of release of the funds in accordance with the terms of reference agreed upon with the government. The PIUs will prepare the mid-term report detailing implementation progress under all components and identifying implementation issues. This report will be submitted to all parties not later than two months prior to the mid-term review. During the mid-term review, implementation progress and solutions to identified implementation issues will be discussed and agreed on and, if required, Project redesign will be undertaken.

D. PROJECT BUDGETING AND FINANCING

20. Project Financing (including ISA Direct Costs7)

Cost by Component Transition Fund

(USD) - original

Transition Fund (USD) – Additional

Financing

Country Co-

Financing (USD)

Other Co-Financing

(USD)

Total(USD)

A. B. WBG Supported Components

Component 1: Facilitating accessible and transparent investor services (GAFI)

$2,250,000 $1,746,000 $3,996,000

7 ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project. Also see Paragraph 47 of the Operations Manual.

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(a) Sub-component 1.1: Develop and Implement Online System for Investor Servicing

(b) Sub-component 1.2: GAFI Capacity Building and ICT Upgrading

(c) Implementation Support

1,500,000

650,000

100,000

1,050,000

540,000

156,000Component 2: Supporting industrial sector transformational reforms (IDA)(a) Sub-component 2.1: Process re-

engineering and automation of industrial licensing

(b) Sub-component 2.2: Implementing a new approach to industrial Land Management and an Online Land Allocation System

(c) Sub-component 2.3: IDA capacity building and ICT upgrading

(d) Implementation Support

$2,250,000

1,000,000

550,000

600,000

100,000

$2,250,000

Component 3: Capacity building for managing regulatory reform (ERRADA)

$500,000 $500,000

Total Cost for WBG Supported Components

$5,000,000 $1,746,000 $6,746,000

Cost by Component Transition Fund

(USD) – original

Transition Fund (USD) – Additional

Financing

Country Co-

Financing (USD)

Other Co-Financing

(USD)

Total(USD)

B. OECD Supported Component 4: Support the government of Egypt in designing a new investment policy and legal framework and in strengthening its international investment regime

Sub-component 4.1: Investment policy and legal regime:

1. Data Collection, FDI statistics and compliance with international recommendations

2. Stocktaking and preliminary analysis of the investment policy

3. Assistance to the drafting of the investment policy and road map

4. Comparative assessment of the Investment Law

5. Technical assistance in the drafting of the new law

6. Public-private dialogues7. Consultation/awareness-building

communication

$579,000

154,000

84,000

49,000

58,000

61,000

78,00095,000

$440,390

93,700

281,100

65,590

$1,019,390

Sub-component 4.2: Business-related laws, jurisdictions of investment

$232,000 $232,000

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institutions and legal coherence:

1. Interaction assessment and legal harmonization

2. Technical assistance for the revision of the business-related laws

3. Revision of jurisdiction of investment-related institutions

100,000

54,000

78,000

Sub-component 4.3: International investment agreements

1. Review and assessment and 2. Recommendations

3. Capacity-building on international investment agreements

$202,000

93,000

109,000

$202,000

Sub-component 4.4: Dispute settlement

1. Assessment2. Consultations3. Manual of procedures and 4.

Communication5. Capacity-building

$231,000

49,00047,00039,000

96,000

$28,100

$28,110

$259,100

Secondee from the Ministry of Investment

Implementation support, coordination and M&E

$109,000

$131,000

Total Cost for Component 4 $1,484,000 $468,500 $1,952,500

Total Cost for WBG + OECD Joint Components

$6,484,000 $2,214,500 $8,698,500

21. Budget Breakdown of Indirect Costs Requested (USD) Description Amount (USD)

For grant preparation, administration and implementation support (WBG): $691,000WBG preparation budget $50,000WBG supervision budget $350,000

WBG grant administration budget $59,400Additional WBG preparation budget $40,000Additional WBG supervision budget $170,000

Additional WBG grant administration budget $21,600 For grant preparation, administration and implementation support (OECD): $131,500

Additional for OECD $31,500Total Indirect Costs $822,500

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(e) Results Framework and Monitoring

PDO: To improve the regulatory environment for investors through simplified licensing and transparent industrial land allocation processes and to support the government of Egypt in designing a new investment policy and legal framework and in strengthening its international investment regime.

MENA Transition Fund Cross Pillar 5 Indicators

Unit of Measure Baseline

Cumulative Target ValuesFrequency Data Source/

MethodologyData Collection Responsibility Description

YR18 YR2 YR39 YR4 YR5 Target

Output 5.1.1: Documents Produced and Endorsed # 0 111 267 501 600 Annually Progress Report PIU

Number of roadmaps, frameworks, procedures, licensing requirements, regulatory reform documents produced or endorsed designed to enhance the business enabling environment

Output 5.1.2: Decrees Issued or Structures Established # 0 2 12 24 24 Annually Progress Report PIU

Number of laws, policies, or regulations endorsed and number of units and systems established through capacity building or TA activities to enhance the business enabling environment

Output 5.1.3: Staff Trained # 0 25 95 145 200 Annually Progress Report PIU

Number of public sector staff receiving training in the client agencies to improve capacity for enhanced service delivery to investors

PDO Indicators Unit of Measure Baseline

Cumulative Target ValuesFrequency Data Source/

MethodologyData Collection Responsibility Description

YR1 YR2 YR3 YR4 YR5 Target

Av. Duration of Licensing Process Day 320 250 180 75 60 Annually Progress Report PIU

Corresponds with Transition Fund Outcome Indicator 5.1 “Improved enabling environment and government capacity”

Number of land allocation requests processed through the reformed land allocation system

# 0 0 750 2000 2000 Annually Progress Report PIU

Corresponds with Transition Fund Outcome Indicator 5.1 “Improved enabling environment and government capacity”

8 Corresponds to the WBG fiscal year form July 1 to June 30.9 Figures in columns YR1, YR2, and YR3 are actual results

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Intermediate Results IndicatorsComponent 1 (WB) - Facilitating Accessible and Transparent Investment Services (GAFI)

Mapping/Simplification of Entry procedures completed Y/N no Y - - Y Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.1 “Documents produced and endorsed”; (Yes is equivalent to 1 roadmap)

CRM Platform Operational in OSSs # 0 0 2 5 5 Annually Progress Report PIUCorresponds with Transition Fund Output 5.1.2 “Structures established”

Sectors licensing requirements consolidate/published on GAFI Portal # 0 100 250 479 479 Annually Progress Report PIU

Corresponds with Output 5.1.1 “Documents produced and endorsed”

Capacity Building workshops for GAFI OSS staff completed # 0 2 5 10 20 Annually Progress Report PIU

Number of Online Business Registrations # 0 0 0 0 100 Annually Progress Report PIU

Number of GAFI OSS staff trained in workshops10 # 0 10 35 50 80 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.3 “Staff trained”

Component 2 (WB) – Industrial Sector Regulatory Reform (IDA)

Mapping/Simplification of Licensing sub-processes completed # 0 4 4 4 4 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.1 “Documents produced and endorsed”

Risk based approach for industrial technical evaluation applied Y/N - Y - - Y Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.1 “Documents produced and endorsed”; (Yes is equivalent to 1 Risk based framework endorsed)

Industrial Licensing System (ILAS) Deployed in IDA Branches # 0 2 5 10 10 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.2 “Structures established”

Online industrial land allocation Y/N - - Y - Y Annually Progress Report PIU Corresponds with Transition

10 The WB results framework of this project does not include this indicators, However it is monitored to enable aggregation at the TF’s higher level indicator of number of staff trained

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system designed/deployedFund Output 5.1.2 “Structures established” (Yes is equivalent to 1 system established)

Industrial Developer land allocation framework designed and deployed Y/N - - Y - Y Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.1 “Documents produced and endorsed”; (Yes is equivalent to 1 land allocation framework deployed)

Capacity building workshops for IDA branches staff completed # 0 2 5 10 10 Annually Progress Report PIU

Number of IDA staff trained in workshops # 0 10 35 50 50 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.3 “Staff trained”

Component 3 (WB) – Capacity Building for Managing Regulatory Reform (ERRADA)

Regulatory reforms proposed # 0 5 10 15 15 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.1 “Documents produced and endorsed”

Private Sector consultation on regulatory reform mechanism applied # 0 5 10 15 15 Annually Progress Report PIU

Capacity building workshops for ERRADA staff completed # 0 2 5 10 10 Annually Progress Report PIU

Number of ERRADA staff trained in workshops # 0 5 10 15 15 Annually Progress Report PIU

Corresponds with Transition Fund Output 5.1.3 “Staff trained”

Component 4 (OECD) – Support to the government in designing a new investment policy and legal framework and in strengthening its international investment regime

Reliable FDI statistics, compliant with international recommendations Y/N - no yes yes Y Annually Progress Report PMU

Adoption by the government of a new investment policy and a revised investment law

Y/N no no no yes Y Annually Progress Report PMUCorresponds with Transition Fund Output 5.1.2 “Decrees issued”; (Yes is equivalent to 1 law/policy adopted)

FDI restrictions revised and improved ranking in the OECD FDI Restrictiveness Index

Y/N no no no yes Y Annually Progress Report PMUCorresponds with Transition Fund Pillar 4 “improved competitiveness and integration”

Business-related laws harmonized with Investment Law, jurisdiction of # 7 0 4 3 7 Annually Progress Report PMU Corresponds with Transition

Fund Output 5.1.2 “Decrees

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investment-related institutions approved issued”;

Number of workshops/consultations # 7 3 3 1 9 Annually Progress Report PMU

BIT network and dispute settlement bodies and procedures assessed Y/N - no yes yes N/A Annually Progress Report PMU

Number of Egyptian officials trained in negotiating BITs and in preventing and managing investment disputes in workshops

# 30 0 15 15 30 Annually Progress Report PMU Corresponds with Transition Fund Output 5.1.3 “Staff trained”

Number of investor-State dispute settlement cases reduced # # no no yes N/A Annually Progress Report PMU

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