AlSayed GAFI Egypt2 - OECD

11

Presentation on Egypt’s Investment Challenges, Policies & Opportunities

OECD conference

11-12 February 2004

IstanbulPresented By

Diploma Eng. Ahmed El-SayedGAFI’s ; Chairman Consultant

& Head of promotion Affairs

22

Index

FDI Outlook (World wide, MENA countries & Egypt)Political stability at MENA region.Political & economic reformsInvestment policies

Legal & institutional framework reformLiberalization process

Privatization schemesPrivatization schemesCapital marketCapital market

Investment protectionInsurance schemesLiberalization of exchange marketDisputes settlement.Competition safe guardEntry & establishment facilitationIncentives issuesDevelopment of free zones & special economic zonesPromotion & Investment GenerationInternational perspectives (Regional & international Integration)Challenges & opportunitiesConclusion

33

FDI Inflow In The World 2002

Source : World Investment Report United Nation 2003

254

482

686

1079

824

652

0

200

400

600

800

1000

1200

1400

1991

-199

6

1997

1998

1999

2000

2001

2002

1392

41%

21%

In B

illio

n U

S $

FDI Outlook World ,MENA Countries & Egypt

Inward foreign direct investment (FDI) inflow have been consistently low for many years world wide , specially at MENA Countries .

44

FDI Inflow at MENA Countries in 2002

1065

428

681

821

218

37 567

257

41

326225

95

0

500

1000

1500

2000

2500

3000

Alg

eria

Egy

pt

Mor

occo

Sud

an

Tuni

sia

Bah

rain

Iran

Jord

an

Kuw

ait

Leba

non

Pal

esti

nian

Qat

ar

Syr

ian

Em

irat

es

Source : World Investment Report United Nation 2003

700

In M

illio

n U

S $


FDI in petroleum = US$ 2000 to be added

55

1.8

5.9

7.7

2.4 2.5

4.9

2.5

3.8

6.3

0

1

2

3

4

5

6

7

8

2000/2001 2001/2002 2002/ 2003

Expansion New Established Total

US

$ B

illio

n

Newly Established Companies + Expansion For Present Companies Under Law 8/97 ( 2000/2001 to 2002/ 2003 )


66

1.2

1.6

2.8

0.7

1.7

2.4

0.7

2

2.7

0.9

2.1

3

0

0.5

1

1.5

2

2.5

3

1999/2000 2000/2001 2001/2002 2002/2003

Other Sectors Petroleum Total

Total FDI ( Petroleum , Other Sectors , Total)Total FDI ( Petroleum , Other Sectors , Total)

In b

illi

on U

S$

Foreign Investment in Egypt(99/2000 to 2002/2003)

However the FDI inflow at Egypt showed a sustainable values


77

Political stability

Egypt’s agenda for this year is addressing

few challenges; Namely :

The Road map to peace

Gaining stability in Iraq

Both of them are vital for Egypt's growth, as

well as, for other countries in the region.

88

We believe that the two challenges could and

should be met.

People at the region need to be given hope for

better future.

More jobs, growing trade, increasing FDI,

improving productivity, better utilities and

infrastructure, more services and less

vulnerability for external shocks.

Political stability

99

Political & EconomicReform

However, Egypt showed a strong & firm political

commitment to reform, maintain, macro

stabilization, welcoming free trade, mobilizing

resources to improve competitiveness and

productivity, as well as, social stability which lead

to restore confidence at Egypt.

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Egypt’s InvestmentPolicies

1111

Legal & Institutional Framework Reforms

Egypt performed a diagnostic survey for the

investment climate, special attention paid to

deficiencies of enabling legal and institutional

framework, as well as, the effectiveness of

investment policies in attracting FDI.

All investment measures to legal & institutional

framework reforms have been undertaken.

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Following laws have been ratified for Following laws have been ratified for creating a suitable investment a suitable investment

environment :environment :--

Export encouragement law.

Money laundering law.

Intellectual property rights law.

commercial chamber law.

Labor law.

Special Economic zone law.

Mortgage law.

Banking law.

The companies department has been merged with GAFI, hence GAFI issues

the license for all companies.

Legal & Institutional Framework Reforms

Tax law.

Customs law.

The fourth chapter of

investment law (Facilitating

investment procedures ).

Other laws well be issued soon :

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Liberalization process

Starting, early 1990’s Egypt lunched programmes

aiming at reinforcing private sector development

and encouraging export oriented activities.

Policies measures have been taken to :

Privatization programme measures.

Capital market development measures.

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Privatization Schemes

Significant Progress has been made ,and will continue.Significant Progress has been made ,and will continue.

202 companies have been privatized out of (314) with total valu202 companies have been privatized out of (314) with total value e

of L.E 16.9 billion equivalent to (4.4 %) of GDP. of L.E 16.9 billion equivalent to (4.4 %) of GDP.

Privatization is extended to banks ,insurance companies, and Privatization is extended to banks ,insurance companies, and

Infrastructure projects.Infrastructure projects.

A database for the privatization has been setup.A database for the privatization has been setup.

New systems for privatization has been lunchedNew systems for privatization has been lunched

Increase company's capital .Increase company's capital .

Selling public sector's share to anchor investor.Selling public sector's share to anchor investor.


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Capital Market

Cairo stock market (CSM) has been a major Arab

stock market over the last years.

CSM have reached advanced stage of development.

Assurance are provided and securities to investors

and lenders.


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Projects can be owned 100% by foreigners.Guarantees against nationalization & expropriation.No price control.Exemption from any rules on workers participation in management.

Projects shall not be nationalized or confiscatedProjects shall not be nationalized or confiscated

Projects Funds shall not be retained or seized in protective Projects Funds shall not be retained or seized in protective custody or blockedcustody or blocked

No expropriation for real estate or property.No expropriation for real estate or property.

Lawsuits can not be instituted against investment projects priorLawsuits can not be instituted against investment projects priorconsultation with GAFI.consultation with GAFI.Repatriating of capital & profits.

Investment ProtectionInvestment law 8/1977 includes the following articles :-

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Insurance schemes

Investment protection is available at both the

national & international levels against non-

commercial risks.

Multi investment grantee agency (MIGA) of the

World Bank have signed an agreement with

Egypt to cover Insurance schemes for companies

investing at Egypt . Several companies investing

at Egypt are already enjoying such insurance.

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For the economy at large , peace have been rewarding, For the economy at large , peace have been rewarding, Egypt were able to introduce safely the first phase of fiscal, Egypt were able to introduce safely the first phase of fiscal, as well as, monetary reform.as well as, monetary reform.

Liberalization inLiberalization in--full of the exchange market have been full of the exchange market have been achieved Jan. 2003 . achieved Jan. 2003 .

All economic indicators for the year 2003 support market All economic indicators for the year 2003 support market stability. stability.

Egypt had surplus in both the balance of payment as well Egypt had surplus in both the balance of payment as well as the current account. as the current account.

Exports are increasing in quantity and value. Exports are increasing in quantity and value.

Products proved to be competitive . Products proved to be competitive .

Tourism arrivals are the highest since ten years.Tourism arrivals are the highest since ten years.

Liberalization Of Exchange Market

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Disputes settlements are solved through court channels accordingto international law.

A minor permanent committee to solve Taxes & Custom problems; ministerial committee take the lead for unsolved cases.

A permanent ministerial committee for investment affairs has been formed, presided by the deputy Prime Minister, so as to solve investment disputes amicably outside court channels.

Out of (274) case discussed during (15 ministerial meetings), (217) have been solves and (14 ) decree became as general rule.

Disputes between private party are solved through judicial system.

International arbitration are possible through relevant legal documents.

Disputes Settlements

2020

Competition safeguard

Government of Egypt is in process of issuing new

competition law, to insure proper functioning of

the markets, particularly the monitoring of firm

restrictive business practices, such as mergers,

acquisitions and take over, as well as, monopolies.

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Entry & establishment Facilitating

A new chapter to investment law will be added A new chapter to investment law will be added

under the title under the title ““facilitating investment facilitating investment

proceduresprocedures”” that aims at facilitating investment that aims at facilitating investment

& achieving transparency in addition to the & achieving transparency in addition to the

actual implementation of actual implementation of ““One Stop ShopOne Stop Shop””..

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Encompasses delegates from different governmental agencies dealing with investors.

Comprises Following Divisions.A) The Advisory Unit

Focuses on investor facilitation, business support service.Respond to investor’s inquiries.Optimize and streamline incorporation procedures.Investment Facilitation Services offered to investor before, during & after incorporation, such as :

Providing needed data and information to investors.Providing Utilities & Land prices.Assist investors to select proper Locations for their projects.

Supply investors with Investment opportunities.

One Stop Shop


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B) The Current awareness unit:

Receiving documents related to the legal incorporations of

companies.

Act on behalf of investors to obtain company license .

Electronic registration of companies.

Registration approvals & licensing of companies.

Issue & Renew of Work Permits for foreigners.

Airport entry permits for company representatives.

One Stop Shop


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Directional incentives to meet specific development objectives, such as :

Location development ( Industrial zones, New communities , Special economic zones and new valley)

Transfer of intangible assets , technologies , Know how.Transfer of intangible assets , technologies , Know how.

New Chapter has been added to the investment law including :

““ The cabinet may approve extra incentives for foreign companies The cabinet may approve extra incentives for foreign companies that that are internationally renowned, which aims at using Egypt as a basare internationally renowned, which aims at using Egypt as a base e for production and export to neighboring markets, as well as, thfor production and export to neighboring markets, as well as, the e companies working in hicompanies working in hi--tech. industries and the international tech. industries and the international companies specialized in developing international trade, and zoncompanies specialized in developing international trade, and zoneses””

A Ministerial committee headed by the prime minister has been A Ministerial committee headed by the prime minister has been formed in order to increase exports competitiveness and facilitaformed in order to increase exports competitiveness and facilitate te the export procedures. the export procedures.

Incentive issues

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Development of Free zones and special economic zone

Expanding the establishment of administrative Expanding the establishment of administrative offices, world class storage buildings , preoffices, world class storage buildings , pre--fabricated, factory buildings.fabricated, factory buildings.

Inviting international companies to participate in Inviting international companies to participate in developing work, management , marketing and developing work, management , marketing and establishing of infrastructure.establishing of infrastructure.

New free zones : GAFI is currently undertaking studies to establish 2 public free zones .

Development of current free zones:

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Promotion & Investment generation

Performing assessment studies; SWOT analysis, Bench Performing assessment studies; SWOT analysis, Bench

Marking, competitiveness for sectors and regions targeted Marking, competitiveness for sectors and regions targeted

for development, in order to issue vision, strategies& policies.for development, in order to issue vision, strategies& policies.

Prioritizing potential sectors for development.Prioritizing potential sectors for development.

Defining EgyptDefining Egypt’’s sector competitive location.s sector competitive location.

Analyses potential markets, trade flow and FDI flow Analyses potential markets, trade flow and FDI flow

affecting such sectors. affecting such sectors.

Compile the output of such studies in a proactive promotion Compile the output of such studies in a proactive promotion

plan.plan.

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Regional & international Integration

Egypt ensures its integration in the region aiming at closer regional integration.

International perspectives

Coordinating with the Arab Economic UnityUnityCouncil to: to:

Establish a Geographic Information System (GIS) Establish a Geographic Information System (GIS) for the potential projects utilizing the available for the potential projects utilizing the available resources in the Arab World.resources in the Arab World.

Identify and develop strategies and policies.Identify and develop strategies and policies.

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COMESACOMESA..Egypt agreed to host the Regional Investment Promotion Agency (RIA) Establishing of database of relevant information, furthering regional projects, and providing relevant services. Increasing regional trade, movement of labor and attract FDI.

Regional & international Integration

International perspectives

Mediterranean & EUMediterranean & EU front, cooperating with its front, cooperating with its neighbors and EU, in several programs such as neighbors and EU, in several programs such as MEDA, ANIMA, establishment a common portal.MEDA, ANIMA, establishment a common portal.

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Challenges & Opportunities

Our challenges here are thought to beThe first challengeTo maintain stabilization accompanied by higher rate of growth.The second challengeThe continuation of Egypt privatization program. Including a longelist of public companies, as well as, joint venture banks.The third challengeIs the implementation of the free Trade Agreement signed with Europe. It was agreed to lift immediately all qualitative restrictions and reduce tariffs to European levels over the next 12 years.

3030

Challenges & Opportunities

The fourth challenge

Upgrading and modernize our ports facilities, as well as, our port management.

The fifth challenge

Is to implement the modernization program set for the agricultural and industrial sector. Both programs are jointly financed by EU. They are getting popular. Participants are increasing and the target is 3000 factories in five years.

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OECD support can be most useful to:I.I. Render Render sectoralsectoral and regional assessment for potential and regional assessment for potential

fields, to foster those most essential for improving overall fields, to foster those most essential for improving overall competitiveness, and those which are core elements for competitiveness, and those which are core elements for development strategies.development strategies.

II.II. To identify best practices from other investment agencies To identify best practices from other investment agencies for GAFI namely:for GAFI namely:

1.1. Promotional strategies.Promotional strategies.2.2. Programs for facilitating dealings with investors.Programs for facilitating dealings with investors.3.3. After care programs.After care programs.4.4. Economic Intelligence.Economic Intelligence.5.5. Assisting in establishment of offices abroad.Assisting in establishment of offices abroad.6.6. Investor Relationship Management.Investor Relationship Management.

III. Partnership programs.IV. Establish a federation of IPAs of MENA countries. This

will strengthen relations with OECD countries.

Conclusion

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Finally I invite the OECD & MENA Finally I invite the OECD & MENA countries to have next meeting at countries to have next meeting at

Egypt to discuss Future Egypt to discuss Future cooperation, integration and means cooperation, integration and means

of increasing FDI and trade.of increasing FDI and trade.

Thank YouThank You

Documents

AlSayed GAFI Egypt2 - OECD