Transcript Slide 1

Egypt Open for Business
By
Dr. Hany Barakat
Ministry of Trade & Industry
Egypt
2008
•Introduction
• Principles
• Values
•Key Reform Objectives
Sustainable economic growth
 Deregulation as a driver for success
 Public-private partnership as a vehicle
for growth
Investor-friendly business environment
Stable political conditions
Reliable and transparent operating legal
environment
Macro-economic Fundamentals
Real Economy
 GDP growth rate increased to 6 % and expected to reach over 7% in 2007
 GOE introduced significant changes in the past 36 months increasing the
ability of the economy to withstand exogenous shocks
 Inflation down by approx. 13 percentage points between 2003/2004 and
2005/2006
 Stable exchange rate
External position
 C/A posted its fourth surplus in a row reaching $2.9Bn in 2005/2006
 Key current inflows: hydrocarbons, Suez Canal, tourism, Exports ,
private remittances and FDI
 C/A balance reached 3% of GDP in 2005/2006
 Current Account Surpluses & capital inflows (2006) led to a significant
rise in CBE reserves.
FDI Surge
 Non-oil FDI tripled to USD 1.3 Bn bringing total FDI in June 2006
to USD 6 B.
 In 2005/2006, newly established companies reached 6236 with an
issued capital amounting to EGP 19.3 B, representing a leap from
1434 established in 2002/2003 with only EGP 3.8 B in issued capital
 Issued capital from foreign sources doubled in 2005
 Issued capital from Egyptian sources was twice as much as capital
from foreign sources
 68% of total issued capital was in the industrial and finance and
services sectors in 2006
• Privatization
 Reform of the public sector has been the hallmark of the
new Govt.
 Cumulative Privatization proceeds over the period July
2005 - 2006 reached LE 20 B representing 55 deals
 This value is approximately equivalent to the total
privatization proceeds between the years 1995-2000
Banking Sector Reform
 A plan has been initiated to restructure the six main
Public Banks in Egypt .
 Privatizing State owned Banks and Divesting Public
Shares in Joint Venture Banks
Bank of Alexandria was totally acquired by Sao Paolo
 10 major transactions over a period of 12 months
Stock Market
Market cap rose to 83% of GDP in April 2006 up from 50%
in January 2005.
Reshaping of the organizational structure of the CMA and
introduction of corporate governance department
Issuance of the executive regulation of the securitization law.
Stock Market
Strong Earnings Reports

Attractive valuations in absolute terms

Attractive valuations in comparison with other emerging markets
 Average price earnings ratio of most of the actively traded
securities is 14-16 times 2005 earnings.

Strong fundamental economic backdrop
 Strong earnings reports
 Active Mergers and Acquisitions Market

Attractive dividend yields
 Many companies offer yields in excess of 10%
Mergers & Acquisitions
A 4-fold increase in M&A transactions between
2004 and 2006
15 M&A Major transactions in the financial
sector in 2006
22 M&A Major transactions in the Industrial
sector in 2006
Acquisitions in 2006
Acquiring Party
Date
Italcementi Group
March 2005
IPO
May 2005
Consortium led by Citadel
Capital
July 2005
NSGB
August 2005
IPO
December 2005
Calyon
January 2006
 The privatization
program has regained
momentum under the
current government
SIDPEC
 The pace is likely to
pick up in 2007 with
additional targets in
industries including
banking, oil and gas,
cement and insurance
Source: CBE and EFG-Hermes
Measures to Improve Business Climate
Legal and Structural Reforms

New Customs Law

New Tax Law

Mortgage Law

Securitization Law

An amendment on the Corporate Law to allow the
adoption of Employee Stock Option (ESP) Plans

Established the Investor Protection Fund (IPF) against
non-commercial risk

Issuance of Codes of Ethics and Conduct for the
Brokerage and Fund Management Activities
Preferential Trade Agreements
Bilateral Agreements
with Libya, Tunisia,
Morocco, Lebanon,
Jordan and Syria
Greater Arab Free
Trade Area
Common Market for
Eastern and Southern
Africa (COMESA)
EGYPT
Free trade zone
Agreement with Israel
Trade and Investment
Framework Agreement
(TIFA)
(with the US)
Europe-Mediterranean
Partnership
World Trade
Organization
Immediate access to over 1 billion customers
Incentive Schemes
Inland
• Low infrastructure cost
• Project contracts exempted from stamp duties and fees
for five years from the date of registry in the commercial
register (Bank loan agreements, Mortgages)
• Free land in Upper (South) Egypt
• 20% Tax rate on industrial projects
• 0- 5% customs duties on imported machinery
Free Zones
•
•
•
•
•
Corporate income tax exemption
Low infrastructure cost
No customs duty (except for sales into Egypt)
No Sales tax
Mere 1%annual duty on the value added of the project
Incentive Schemes
 Qualified Industrial Zones (QIZ) Agreement with the
United States and Israel in December 2004 & other FT
agreements
 Special Economic Zones (SEZ)
– The tax rate on all activities within these zones is 10%
– First Zone Created under the new law: The North West Suez Special
Economic Zone.
The Red Sea port of Ain Sokhna
East Port Said located on the Mediterranean Sea.
Simplification Procedures
Establishing a ‘One-Stop-Shop’ at the General Authority for
Investment Promotion (GAFI)

The one Stop Shop started operating in Cairo head
office in 2004,
Opened in Alexandria in 2005
Three other governorates (Assiut, Giza and Ismailia).

Reduction of some administrative start up and
operational barriers
Investor Protection & Transparency
• Implementation of the executive regulations of Intellectual Property
Rights Law passed in 2002
• Issuance of Antitrust Law (August 2005)
• Set up Competition Council to ensure the prohibition of anticompetition practices
• Institute of Directors (IOD) was established with the aim of
strengthening corporate governance practices
• Issuance of the Corporate Governance Best Practice Code in Aug 2005
Investor Protection & Transparency
• Restructure of the Ministerial Committee for Dispute
Settlement
• Specialized Economic Courts (in Progress)
•A new budget classification system compliant with IMF has
been adopted to improve transparency on budget reporting
Egypt
Fortune Global 500 (2006)
Egypt
And the list goes on…..
Industrial profile

Strategic Vision &Targets
Ministry of Trade and Industry
Trade & Industry Growth Plans
• Industrial Growth
Real Growth of the Industrial Sec.
7
6
6
5.2
5
4
3
2.7
2
1
1.6
0
2002/2003
2003/2004
2004/2005
2005 / 2006
Factories Built and Operated
( 2005 – 2006 )
–Number : Large ( <15 M )
: 610
: 110
Medium ( 5 – 15 M ) : 140
Small ( > 5 M )
: 360
–Total Investments : 10 B
–Employment : 100 Thousand
Direct Jobs
Factories Under Construction
–Number of Factories Under Construction : 1227
– Land Allocated for new factories ( 2005 – 2006 )
: 4.8 M Sq meter for 496 factories
Total Number of Factories Under Construction : 1723
Ministry of Trade and Industry
Trade & Industry Growth Plans
New Industrial Parks (Under Construction)
#
City
Project
Total
Area
(Acers)
Total
Investments
(LEM)
1
Robaiky / Badr
City
Leather Tanning
and Manufacturing
110
500
2
Al Safa /
Kalioubeia
Foundries
142
596
3
Borg El Arab
Textile & Ready
Made Garments
60
420
4
Damietta
Furniture & Wood
Products
150
378
5
Al Mahalla Al
Kobra
Textile
35
249
6
Assiut
Furniture City
20
120
Ministry of Trade and Industry
Trade & Industry Growth Plans
• Exports Performance
10000
8826
M$
9000
8000
7000
6000
6201
5000
4735
4000
3000
3396
3675
2000
1000
0
01/02
02/03
03/04
04/05
05/06
• Exports Performance
Total Exports (M$) : 2004/2005 : 6201
2005/2006 : 8826
Growth : 42%
Sectorial Distribution
05/06 Exports Sectorial Distribution
Million $
Sector
05/06 Exports
Building Materials
2425
Finished Garments
620
Home Wear
394
Spinning and Textiles
294
TEX
**Total TEX
1308
Chemicals
1420
Engineering
1179
Agriculture
1665
Food Industry
519
Pharma
109
Furniture
102
Leather
Tannery
82
Leather Products
17
**Total Leather
99
TOTAL
8826
 Strategic Thrusts
–Industrial Zones
–Human Resource Development
–Industrial Modernization
–Technology Transfer Centers
–Exports Promotion
–Development of Local Market
Egypt Open for Business