Egypt

Improving Investment Climate

Twenty Fourth Session of the COMCECIstanbul, Turkey

October 23rd, 2008

Neveen EL ShafeiVice Chairman

General Authority For Investment and Free Zones

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

Enhanced Investment Climate

Major changes to enhance the investment climate

FDI Entry49% 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.

Establishment and Operation

Enhanced Investment Climate

Privatization

Adopting a rigorous Asset Management Program in 2004.

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.

Protection & Treatment of FDI

Greater emphasis on implementation of rules protecting Investors.

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.

General MeasuresIssuance 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

Enhanced Investment Climate

Investment Policy FrameworkInvestment 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 FrameworkInvestment Policy Framework

Free Zones• Low Infrastructure cost

• Income Tax exemption

• 1% annual duty on the value added

• No sales tax

• No custom duties (Except for sales into Egypt)

Special Economic Zone

Upper Egypt Incentives

Investment Zones

•10% income taxation• 5% tax on wages•One administrative authority

• 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

•Industrial land for free• Rebate for job creation

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

Robust Investment Regimes

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 non-bank 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 $

Strengthened Capital Market Authority

Introduction of small cap stock exchange “Nilex”

Vibrant Capital Market

Source: Cairo & Alexandria Stock exchanges

Results of Reform & Incentives

Ensuring macroeconomic

stability as well as achieving

and sustaining average annual

real GDP growth that exceeds

7%

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

Results of reform & incentives

Exports Proceeds

GDP Growth

Rate

%

US$ Million

4.4 4.7

43.3

4.9 5.1

3.5 3.2 3.2

4.14.5

6.87.1 7.2 7.1

0

1

2

3

4

5

6

7

8

30/0

6/199

5

30/0

6/199

6

30/0

6/199

7

30/0

6/199

8

30/0

6/199

9

30/0

6/200

0

30/0

6/200

1

30/0

6/200

2

30/0

6/200

3

30/0

6/200

4

30/0

6/200

5

30/0

6/200

6

30/0

6/200

7

30/0

6/200

8

30/0

6/200

9

2001/02 2002/03 2003/04 2004/05 2005/06 2006/2007 2007/2008

7.1 8.2 10.5 13.8 18.5 22 29.4

20%34% 33%

*

* Expected

Results of reform & incentives

2.6 2.7 3.2

16.7

3.1

5.7

8.5 9.37.5 6.9

10.512.1

14.416.4

19.7

23.625.6

12.6 11.7

0

5

10

15

20

25

30

2000

/2001

2001

/2002

2002

/2003

2003

/2004

2004

/2005

2005

/2006

Feb-0

7

Apr-0

7

Aug-0

7

Sep-0

7

Oct-07

Dec. -

07

Jan-

08

Feb.-0

8

Mar.

-08

Apr.-0

8

May

.08

July-

08

Agu -

08

Year

0%

0.50%

1.70%

0%0%

1% 1%

2%1.60%

3.20%

5%

2%

1%

-3%

-1%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

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

35.234.834.130.92

14.215.1

18.1

20.318.5

14.1 14.8 14.8

19.5822.931

26.2228.03

29.66

0

5

10

15

20

25

30

35

40

Year

Net International Reserves

Inflation

Current Account as a percent of GDP

Public and Private investment % of GDPPublic and Private investment % of GDP

8.3%

7.3%

8.8%8.7%8.5%9.4%

8.7%

9.9%10.9%

13.7%

11.4%

9.1%

7.6%7.9%8.4%

9.0%9.1%9.9%

61

4547

423536

31

3434

101

71

49

373332

32

3130

0%

2%

4%

6%

8%

10%

12%

14%

16%

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

0

20

40

60

80

100

120

EGP Billion

share of public investment share of private investment total public investment total private investment

FDI Performance

Net FDI flows

FDI has Reached $13.2 bn as of FY2007/08 and represented 8.5% as a percentage of GDP.

The recent increase in FDI has been accompanied by a change in the sectoral distribution towards the non-oil sectors.

6.4

8.5

2.69

1.010.510.55

4.22

0

2

4

6

8

10

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/2007 2007/2008

509 428 7002068

39016111

11053

1320054%

56%

80%

US$ bn

19%

23.710.70.5

65.1

54.8

14.80.4

30

47.3

36

0.3

27.3

48.5

17.43

31.1

0%

20%

40%

60%

80%

100%

2004/2005 2005/2006 2006/2007 2007/2008

GF. & Exp Sales of Assets Reals Estate Oil

International Ranking / Perception

Doing Business Report 2009

• Egypt Among the Top 10 Best reformers over the last two years

126

106

147156

105

86

55

101

83

150

26

145

125

41

85 8470

165

124

146152

115

163

108

24

107

165

128

151144

0

20

40

60

80

100

120

140

160

180

2007

2008

2009

D.B. 2009 Rank 114 out of 181

Source: D.B report 08.

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

68

81

44

18

92

13

44

3341

55

24

63

19

55

20

42

78

34

51

21

6

105108 112

0

20

40

60

80

100

120

Egypt S. Africa Tunisia Morocco UAE Saudi Arabia Sudan Jordan

2005 2006 2007

• Egypt ranks The First among North African countries and the Second among Africa and in terms of FDI Inflows

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