Egypt
Improving Investment Climate
Twenty Fourth Session of the COMCEC
Istanbul, Turkey
October 23rd, 2008
Neveen EL Shafei
Vice Chairman
General Authority For Investment and Free Zones
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 Investors.
Protection &
Treatment of FDI
Expansion of BIT networks.
Growing role of arbitration (local and international) and role of Cairo Centre
for International Commercial Arbitration based on UNCITRAL rules.
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.
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 Policy Framework
•
Investment policy has been encouraged by
• Non- discriminatory investment policies
• Pro-active strategy of investment promotion stressing the role of government as a service provider
rather than as a regulator
• Sharp reduction of trade impediments to capital imports and streamlining of cumbersome and costly
customs procedures
• Adoption of the competition law and establishment of the Egyptian Competition Authority (ECA)
•
Towards a fully unified investment company regime
•
Improving investment statistics in Egypt
• Transition from current transaction-based approach to a survey approach based on the standards of
the IMF BOP5 and the OECD Benchmark Definition of FDI
• Advisory committee, headed by MOI, has been established and a business register has been
developed to include all FDI enterprises, coded according to ISIC
•
Active engagement in international investment negotiation being party to 67 ratified BITs
•
Usage of several diagnostic and benchmark tools to assess investment climate obstacles (ICAs, OECD PFI)
Investment Policy Framework
Free Zones
• Low Infrastructure cost
• No custom duties (Except for sales into Egypt)
• 1% annual duty on the value added
• Income Tax exemption
• No sales tax
Special Economic Zone
• 10% income taxation
• 5% tax on wages
• One administrative authority
Upper Egypt Incentives
• Industrial land for free
• Rebate for job creation
Investment Zones
• Private Sector can establish, manage
and promote investment zones which
will follow the same licensing
procedures as free zones; however, will
not be exempted from taxes
Robust Investment Regimes
Liberalized legal framework
guaranteed by Investment Law…
 100% foreign ownership of
companies
 100% foreign representation of
Board of Directors
 Protection against expropriation
 Protection against compulsory
pricing
 Full right of profit and dividend
repatriation
 Implementation of dispute
resolution and settlement
mechanisms
Banking & Financial Reform
 Strengthened supervisory role
of Central
 Banking sector consolidation
and privatization
 Anti-money laundering
regulations in line with
international standards
 Further penetration of nonbank financial products:
mortgage finance, financial
leasing, fixed income products,
factoring
 Streamlined insurance
activities
Source: the Central Bank of Egypt.
20 Oct:
W.Ave. Interbank Rates
5.5861 US$
’Market Rate: 5.5643 US $
Vibrant Capital Market
 Strengthened Capital Market
Authority
 Introduction of small cap stock
exchange “Nilex”
Source: Cairo & Alexandria Stock exchanges
Results of Reform & Incentives
Results of reform & incentives
 Ensuring macroeconomic
stability as well as achieving
and sustaining average annual
real GDP growth that exceeds
7%
GDP
Growth
Rate
%
8
6.8
7
6
5
4.9
4.7
4.4
7.2
7.1
*
5.1
4.1
4
3.3
4
7.1
3.5
3.2
4.5
3.2
3
2
1
 The average annual growth
rate of exports increased from
less than 1 % in 2001/02 to
20% in FY2006/07 and
increased by 33% in 2007/08
30
/0
6/
19
30
95
/0
6/
19
30
96
/0
6/
19
30
97
/0
6/
19
30
98
/0
6/
19
30
99
/0
6/
20
30
00
/0
6/
20
30
01
/0
6/
20
30
02
/0
6/
20
30
03
/0
6/
20
30
04
/0
6/
20
30
05
/0
6/
20
30
06
/0
6/
20
30
07
/0
6/
20
30
08
/0
6/
20
09
0
* Expected
Exports Proceeds
US$
Million
7.1
2001/02
8.2
2002/03
10.5
2003/04
13.8
2004/05
33%
20%
34%
18.5
2005/06
22
2006/2007
29.4
2007/2008
Results of reform & incentives
Current Account as a percent of GDP
5%
6%
5%
Inflation
3.20%
4%
2%
3%
2%
2% 1%
30
1%
25.6
23.6
25
1%
1%
0%
0%
19.7
16.7
16.4
15
12.6 11.7
14.4
0.50%
-1%
1993/1994 1994/1995 1995/1996 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008
-2%
-3%
-3%
-4%
12.1
10
8.5
5.7
5
2.6 2.7 3.2
10.5
9.3
7.5 6.9
3.1
20
00
/2
00
20
1
01
/2
00
20
2
02
/2
0
0
20
03 3
/2
00
20
4
04
/2
00
20
5
05
/2
00
6
Fe
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A
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7
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ug
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ec
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ar
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ay
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0
Year
1.70%
0%
0%
-1%
20
1.60%
Net International Reserves
Public and Private investment % of GDP
EGP Billion
16%
120
13.7%
14%
101
12%
100
11.4%
10.9%
9.9%
10%
9.9%
9.1%
9.0%
9.4%
8.7%
9.1%
8.8%
8.7%
8.5%
8.4%
7.9%
7.6%
80
71
8.3%
61
7.3%
8%
60
49
6%
34
4%
32
34
30
45
40
47
37
33
32
31
31
42
35
36
20
2%
0%
0
1998/99
1999/00
share of public investment
2000/01
2001/02
2002/03
share of private investment
2003/04
2004/05
total public investment
2005/06
2006/07
total private investment
FDI Performance
10
8.5
8
6.4
6
 FDI has Reached $13.2 bn as of
FY2007/08 and represented 8.5%
as a percentage of GDP.
4
4.22
2.69
2
0.55
0.51
1.01
0
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
19%
80%
 The recent increase in FDI has
been accompanied by a change
in the sectoral distribution
towards the non-oil sectors.
54%
US$ bn
13200
56%
11053
6111
3901
509
2000/01
428
2001/02
700
2002/03
2068
2003/04
2004/05
2005/06
2006/2007
2007/2008
65.1
100%
30
0.4
14.8
80%
60%
0.5
10.7
23.7
40%
Net FDI
flows
20%
31.1
27.3
0.3
3
17.4
36
54.8
47.3
48.5
0%
2004/2005
GF. & Exp
2005/2006
Sales of Assets
2006/2007
2007/2008
Reals Estate
Oil
2006/2007
International Ranking / Perception
Doing Business Report 2009
•
Egypt Among the Top 10 Best reformers
over the last two years
165
163
165
180
160
140
147
126
108
106 107
120
152
150
144
156
115
101
100
85
84
151
146
145
128
124125
105
2007
86
83
2008
70
80
2009
55
60
41
40
26
24
20
Source: D.B report 08.
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D.B. 2009 Rank
114 out of 181
FDI Performance
Top Reformers in 2007/2008
For the second consecutive year, Egypt is among the top 10 reformers in the Doing
Business Report, issued by the World Bank.
Source: DB 2009, World Bank
World Investment Report 2008
•
120
108 112
105
Egypt ranks The First among North African countries and
the Second among Africa and in terms of FDI Inflows
100
92
81
80
78
68
63
55
60
41 42
40
55
51
44
44
34
33
24
20
19 21
18
20
13
6
0
Egypt
S. Africa
T unisia
2005
Morocco
UAE
2006
Saudi Arabia
2007
Sudan
Jordan
FDI Performance
Improved Ranking in OECD FDI Regulatory Restrictiveness Index (2000 and 2006)
41st
33rd
* In July 2007, Egypt became the first Arab and African country to adhere to the OECD Investment
Declaration, on International Investment and Multinational Enterprises.
* Over the period 2000-2006, Egypt’s rank in FDI Regulatory Restrictiveness Index has improved by 43%,
Preceding that of many countries such as Canada, South Africa, & India.
Source: IPR 2007, OECD