Transcript Business Environment Benchmarking: Public Policy Tool to Attract FDI Consultative Preparatory Meeting for the Follow-up International Conference on Financing for Development Doha – Qatar 29-30

Business Environment Benchmarking:
Public Policy Tool to Attract FDI
Consultative Preparatory Meeting for the Follow-up
International Conference on Financing for Development
Doha – Qatar
29-30 April 2008
Mona Aboul-Kheir
Vice-Chairman Advisor
GAFI
Contents
• Enhanced Investment Climate
• FDI Performance
• Benchmarking Process
• Recommendations
Enhanced Investment Climate
Government Economic Reforms
Legislative Reform,
Monetary and Banking Reform
Tax Reform
Trade Policy Reform
Investment Policy Reform
Expanding Role of Private Sector
Enhanced Investment Climate
Major changes to enhance the investment climate
FDI Entry
Establishment
and Operation
49% ceiling on foreign ownership in commercial banking and
insurance has been abolished.
Fewer activities are restricted to foreigners (e.g. Tourist guide
activities, Legal Services and Fishing).
Adopting the “The Procedure Simplification” program through GAFI
“One Stop Shop” (OSS)
Reduction of incorporation time for 3 days maximum.
Reduction of Minimum paid in capital for LLC (EGP200).
Reduction of incorporation and publication fees.
Tax card issuance in 48 hours.
Unification of bank certificate form to be issued in 1 day.
Checking Name Uniqueness within hours.
Opening social insurance files within 48 hours.
Sales Tax registration within 2 hours.
Replicating the OSS approach in GAFI offices outside Cairo in
Alexandria, Assiut and Ismailia.
Enhanced Investment Climate
Adopting a rigorous Asset Management Program in 2004.
Privatization
Sale of assets and shareholdings in public enterprises.
Pubic sector companies have undergone a series of reforms, e.g.
activating the role of general assemblies of holding companies and other
public sector companies.
Greater emphasis on implementation of rules protecting IPR
Protection &
Treatment of FDI
Expansion of BIT networks (111 BIT)
Growing role of arbitration (local and international) and role of Cairo Centre
for International Commercial Arbitration based on UNCITRAL rules.
Proposed draft law for Special Economic Courts.
Adoption of the Competition Law and establishment of the Egyptian
Competition Authority (ECA).
Expanding role for Ministerial committee for Investment Disputes (GAFI).
Corporate Governance Code and establishment of the Institute of Directors
Growing emphasis on transparency of rules ( GAFI rulebook ).
Enhanced Investment Climate
General Measures
Issuance of New Income Tax Law reducing income tax rates for
businesses from 40 to 20 per cent.
New customs structure reducing the weighted average tariff rate from 14
to 9 per cent, as well as reduction in tariff bands from 27 to 6.
Banking Sector Consolidation and Financial Reform coupled with
strengthening the Central Bank of Egypt.
Launching Mortgage, Securitization and Factoring while strengthening
the Financial Leasing sector.
A new vision for Private Sector Participation leading to new Public
Private Partnership schemes (PPP). A draft PPP law will be discussed in
the next Parliamentary session.
Expanding the Egyptian market through various trade agreements with:
Europe, GAFTA, COMESA, QIZ and Aghadir
Investment Indicators
Private Investment as % of Total Investment
70%
66%
61%
62%
60%
50%
48%
48%
51%
51%
47%
48%
47%
40%
30%
20%
10%
Source: Ministry of Investment
20
07
/0
8(
e)
20
06
/0
7
20
05
/0
6
20
04
/0
5
20
03
/0
4
20
02
/0
3
20
01
/0
2
20
00
/0
1
19
99
/0
0
19
98
/9
9
0%
Investment Indicators
Contributions to Total Issued Capital By Nationality(%)
11.7
2006/2007
2 4 .8 5
6 3 .4 5
26
2005/2006
16
58
2 4 .2
2004/2005
11.6
6 4 .2
19 .4
2003/2004
9 .6
70 .9
0
10
Egyptian
Source: GAFI
20
30
40
Arab
50
60
Foreign
70
80
%
Asset Management
Progress of Privatization Program
16,000
14,500
14612
14,000
12,000
160
13607
140
138
120
10,000
100
8,000
80
65
5642
6,000
4,000
19
2,000
381
952
113
10
7
53
60
28
2000/2001
2001/2002
2002/2003
2003/2004
Value Million EGP
2004/2005
20
15
0
1995-2000
40
2177
542 13
2005/2006
2006/2007
0
2007/2008 1ST
Half
No. of Com
No of Transactions
Type of sale/ FY
Public Enterprise Shares
& Assets
Joint Ventures
Sale of Other Public Sector
Entities (e.g. Public Banks)
Land & Unused assets
Total
Source: Ministry of Investment
2004/2005
2005/2006
2007/2008
1ST half
2006/2007
Value
No.
Value
No.
Value
No.
Value
No
457
9
1,007
7
1,919
8
121.1
4
4,819
12
7,647
18
1,559
7
1,686.8
10
--
--
5,122
(Telecom
Egypt)
1
9,274
(Bank Of
Alex)
1
0
0
367
7
836
40
855
37
368.7
1
5,643
28
14,612
66
13,607
53
2,177
15
Foreign Direct Investment (US$ mn) (Net)
80%
US$ Mn
11053
54%
56%
6111
3901
509.4 428.2
700.6
7769.5
2068
2
2000/01
Source: CBE
2001/02
2002/03
2003/04
2004/05
2005/06
2006/2007
2007/2008 Q2
Foreign Direct Investment % of GDP
9
8.5
8
7
6.4
6
5
4.22
4
3
2.69
2
0.55
0.51
2000/2001
2001/2002
1
1.01
0
Source: CBE
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
Foreign Direct Investment By Sector
100%
90%
27.3
30
65.1
37.6
0.3
80%
0.4
0.4
70%
14.8
60%
25.1
17.5
50%
0.5
40%
30%
20%
10.7
54.8
47.3
44.5
23.7
10%
0%
2004/2005
GF. & Exp
Source: CBE
2005/2006
Sales of Assets
2006/2007
Reals Estate
2007/2008 Q2
Oil
Benchmarking Matters
Enhancing Egypt Ranking
Index
Rank
2008
Rank
2007
Rank
2006
Rank
2005
1- Ease of Doing Business
126
152
165
---
2- FDI Performance Index
---
33
66
98
3- The Global Competitiveness Index
---
77
63
52
4- The Business Competitiveness Index
---
70
76
71
5- Index of Globalization
64
64
---
---
6- Index of Economic Freedom
85
127
128
---
7- Capital Access Index
65
82
92
89
---
---
8- Global Credit Ranking*
March 73
March
Sept
70
72
* Global Credit Ranking report is a semi-annual report, issued every six months.
What Gets Measured, Gets Done
Publishing Comparable Data on Business Environment Inspires Governments to Act
Following Egypt’s ranking in 2006 Doing Business Report, Potential measures to
accelerate the pace of reform and enhance Egypt’s competitiveness were
questions that had to be considered.
The Ministry of Investment took note. Minister Mahmoud Mohieldin and GAFI’s
(then) chairman Dr. Ziad Bahaa El-Din conferred the methodology with the Doing
Business authors.
A task group was formed to discuss the 10 Doing Business indicators in detail,
identify specific reforms and search for methods of implementing and
monitoring them.
Undertaking a special in-depth subnational study based on the Doing Business
methodology, but measuring business regulations in governorates other than
Cairo.
GAFI convened a working group of approximately 50 professionals from all
government agencies to periodically assess the regulatory environment.
Steadily, public officials started to see themselves as Facilitators rather than
regulators.
The result was a reform focus that went beyond the topics measured by Doing
Business to encompass the entire business environment.
The Top 10 Reformers (Doing Business 2008)
Egypt : Top Reformer for 2006/07, improving in 5 of the 10 areas :Egypt’s reforms went deep.
Saudi Arabia : Runner Up Reformer in 2006/07 : eliminating the min cap requirement, speeding up the
company registration (# of days).
International Benchmarking: ESCWA Countries
Doing Business Report: (Annual Report / World Bank) Benchmarking the Regulatory Cost of Doing Business in 178 Economies
Egypt
Kuwait
Jordan
U.A.E
Bahrain
K.S.A
Syria
126
40
80
68
N/A
23
137
141
49
55
121
133
158
N/A
36
169
164
2- Dealing with
Licenses
163
85
71
38
N/A
47
86
3- Employing workers
108
39
45
65
N/A
40
4- Registering property
101
72
109
8
N/A
5- Getting Credit
115
68
84
115
6- Protecting investors
83
19
107
150
8
26
9- Enforcing Contracts
10- Closing a Business
Index
Ease of Doing Business
1- Starting Business
7- Paying Taxes
8- Trading Across
Borders
Iraq
Oman
Qatar
Lebanon
Yemen
Palestine
N/A
85
113
N/A
107
N/A
132
175
N/A
104
130
N/A
113
35
N/A
126
60
26
N/A
53
63
N/A
3
89
40
15
N/A
92
44
N/A
N/A
48
158
135
97
N/A
48
158
N/A
107
N/A
50
107
107
64
N/A
83
122
N/A
19
4
N/A
7
98
37
5
N/A
33
84
N/A
99
59
24
N/A
33
127
175
104
N/A
83
128
N/A
145
99
128
144
N/A
136
171
150
110
N/A
121
41
N/A
125
67
87
139
N/A
79
77
178
59
N/A
117
83
N/A
Case Study: Subnational Doing Business -Egypt 2008
Doing Business in Egypt 2008 is the first subnational Doing Business report in the
Middle East and North Africa.
The report was done upon a request from the Egyptian Ministry of Investment to
FIAS, a multi-donor investment climate advisory service of the World Bank Group.
It covers three cities and governorates – Cairo, Alexandria, and Assiut – that are
compared with each other, and with 178 countries around the world based on the
indicators in Doing Business 2008.
The report aims to provide a tool for Egyptian cities to become globally competitive.
By identifying good practices and bottlenecks, it fosters peer-learning and
competition to reform across governorates.
It measures the ways in which government regulations enhance business activity or
restrain it at the subnational level. This was done by studying three main topics:
starting a business, dealing with licenses, and registering property.
The indicators hence are used to analyze the economic outcomes of the regulations
and to identify what reforms have worked, where and why. It also provides information
on reform efforts undertaken by the Egyptian government in recent years that affect
other Doing Business topics–getting credit, protecting investors, paying taxes and
trading across borders.
Case Study: Doing Business in Egypt 2008
Best practices in Egypt compared internationally
Global Ranking
(178 countries)
Overall, doing business is easiest in
Assiut, most difficult in Alexandria, with
Cairo in between.
Egypt’s turnaround was the result of strong resolve
and hard work. Through the special in-depth subnational study Egypt could promote competition to
reform across governorates, pinpoint Best practices
and identify major obstacles.
UNCTAD: IPR Follow up Report 2005
The Investment Policy Review (IPR) of Egypt 1999 was one of the earliest IPRs to
be conducted. The review introduced some recommendations necessary to
improve the investment framework, promotion effort and strategy to attract and
benefit from foreign direct investment (FDI) in selected business activities.
In 2005, the Ministry of Investment invited UNCTAD to assess the undertaken
measures. A mission to Egypt was conducted where its main findings were as
follows:
1.Implementation of recommendations on the investment framework, the
Government's track record compared against the recommendations in the IPR is
impressive:
• Business start-up has improved in ways recommended by the IPR. GAFI is now
responsible for performing and facilitating the establishment and registration
procedures through opening a full fledge one-stop shop and it’s branches in other
governorates.
• Work and residence permits for non-citizen employment has improved, Labor
regulation was overhauled through the introduction of a unified Labor Law in 2003.
2. Implementation of recommendations on investment promotion:
• The creation of a Ministry of Investment in 2004, The Ministry has set performance
targets on planned reforms and tracks their pace of implementation.
• Restructuring GAFI ( mandate, strategy, structure, and internal operations)
The promotion and facilitation structure, procedures, systems are designed by the
Multilateral Investment Guarantee Agency (MIGA)
•3. Implementation of recommendations on the investment framework:
The Central Bank of Egypt has adopted the international guidelines for FDI data
collection and it has revised the balance of payments statistics series
“A striking
feature of the
present
Government is
its accessibility
and its
willingness to
listen to and act
upon concerns
raised by
investors”
IPR follow-up
report, 2005
RECOMMENDATIONS
FDI Inflows into Emerging Markets 2004-2006
Source: EIU, World Investment Prospects 2011
Thank You