Economic and Social Reform A New Chapter in Egypt’s History A Popular Leader with an Entrepreneurial Vision A Technocrat Prime Minister to Execute the Vision
Egypt, pre & post ‐ revolution … then what’s next! P OVERTY I NFLATION U NEMPLOYMENT R EAL GDP G ROWTH FY20 FY20 FY20 FY20 below 6% FY09 FY09 8% FY09 FY09 9% 20% 16.5% 9.2% 21.6% 4.7% FY14 FY14 FY14 FY14 2.1% 10.7% 24% 13.3% I MPLEMENTED I NVS . ( EGP BN ) FDI ( USD BN ) F ISCAL D EFICIT /GDP N EWLY E STABLISHED C O . PS SHARE (%) FY20 FY20 FY20 FY20 Xxx Below FY09 FY09 FY09 Xxxx 14 ‐ 15 FY09 75% 10% 197 6292 8.1 6.4% 58% FY14 FY14 FY14 FY14 265 8246 4.1 12.2% 62% 2
Aggressive targets, yet achievable with Egypt’s new formula… S OLID “N EW E GYPT ” Growing investor Confidence F UNDAMENTALS C ATALYST Moves towards Location stability Structural Inherit sizable Rising Investment adjustment demand Investment High youth Stimulus plan contribution Diversified Legislative reform economy STRONG & Clear Governance SUSTAINABLE GROWTH 3
… especially as Egypt already kicked ‐ off with its checklist � Commitment to Political Roadmap � Constitution referendum � Presidential election � Parliamentary election kicking ‐ off March 2015 � Consensus building, moves toward stability and improved security � Structural Adjustment � Taxation reform � Phasing out oil subsidies � Investment stimulus plan � Legislative reform � New regulations and amendments � settling investors disputes � Payment of dues to oil companies � Full coverage of FX backlog � Social welfare program 4
� Commitment to political timeline with a more inclusive scene ‐ a conductive investment climate • With recent announcement of running parliamentary election Commitment to political roadmap by March 2015, commitment to political roadmap is confirmed ensuring a full ‐ fledged political system by 1Q15. Long ‐ standing cabinet • With President ‐ elect Abdel Fatah El ‐ Sisi gaining 97% of votes Parliamentary election Cabinet reshuffle with a considerably high turnout ratio of 47.1% suggests President Elect El Sisi took office consensus building, a key factor in achieving stability – already Presidential election evident in the reduced number of strikes. PM Mehleb appointment Constitution Referendum • A recent poll, conducted by Baseera, assessing President El ‐ Sisi 100 ‐ day performance shows that 82% approves his Feb ‐ 14 May ‐ 14 Jun ‐ 14 Jun ‐ 14 Jul ‐ 14 Mar ‐ 15 May ‐ 15 Apr ‐ 15 performance which further confirms public consensus. Source: Official sources and Ministry of Investment database High turn out ratio confirms consensus building… …which reduced strikes, helping reinstate stability 1000 70.0% 900 58.7% 60.0% 51.9% 800 47.1% 46.4% 50.0% 700 41.2% 38.9% 40.0% 600 32.9% 30.0% 500 400 20.0% 300 10.0% 200 0.0% Parliamentary Elec ‐ 1st round Presidential round 2012 Constitution Constitution Presidential 100 Ref Mar ‐ 11 Elec 2014 Presidential Elec ‐ 2nd Ref 2012 Ref 2014 Elec 2011 0 2012 Jan ‐ 13 Feb ‐ 13 Mar ‐ 13 Apr ‐ 13 May ‐ 13 Jun ‐ 13 Jul ‐ 13 Aug ‐ 13 Sep ‐ 13 Oct ‐ 13 Nov ‐ 13 Dec ‐ 13 Jan ‐ 14 Feb ‐ 14 Mar ‐ 14 Apr ‐ 14 May ‐ 14 Source: Supreme committee for elections Source: ECESR 5
� Adoption of long ‐ standing policies to restore confidence… P HASING OUT OIL SUBSIDIES New oil prices � The massive increase in energy prices in July 2014 – a 73% increase in transport cost; a 26% hike in electricity prices; New tariff Gasoline Old tariff (EGP/Liter) % increase (EGP/Liter) and a 59% rise in petroleum products extended to the industrial sector ‐ confirms the government commitment Octane 95 5.85 6.25 6.84% to reform. Octane 92 1.85 2.60 40.54% Octane 80 0.90 1.60 77.78% � A move that show serious steps towards fundamental Diesel 1.1 1.8 64% budget restructuring; which is reflected in the targeted NG for Vehicles 0.4 1.1 175% EGP30.1bn slash in oil subsidies in FY15 budget, bringing Av. gasoline Price increase, 41.7% down the fiscal deficit to 10% of GDP. Source: Official sources � It is worth highlighting that the drop in international oil prices should reflect favorably on the state budget. …and a narrowed fiscal deficit Targets a reduced oil subsidies bill… Oil subsidies Oil subsidies/expenditure Fiscal deficit Fiscal Deficit % GDP EGP bn EGP bn 140 25% 300 16% 14% 120 13.7% 250 20.4% 20.3% 20% 12.8% 12% 18.2% 100 17.9% 17.8% 16.8% 10.8% 200 15.9% 10.0% 10% 9.8% 15% 80 150 8.1% 8% 60 10% 6.4% 6% 100 40 4% 5% 50 20 2% 0 0% 0 0% FY09 FY10 FY11 FY12 FY13 FY14 FY15B FY09 FY10 FY11 FY12 FY13 FY14 FY15B Source: Ministry of Finance Source: Ministry of Finance 6
� …more of long ‐ standing policies to restore confidence E XPANDING THE POOL OF REVENUES New tax reform � With Egypt’s budget revenues/GDP 22.9% falling far New tax Tax Rate Details below its regional peers average of 39%, expanding the country’s taxation pool (averaging 67% of total budget Capital gain & 10% *10% capital gain tax on realized profit at the Dividends taxation end of each year; while losses will be carried revenues over the past five years) remains key to over for 3 years. reduce the high fiscal deficit. * Investors with a minimum of 25% stake will � Imposing cash dividend and capital gain tax (CGT); the be charged 5%. * Cash dividend tax of 10%; while those real estate tax law; and an additional 5% temporary tax investors below EGP15k are exempted. on wealthy individuals with annual income above * Foreign investors are charged 10% for the transaction with 6% to be taxed instantly. EGP1mn are vivid examples – which are expected to * CGT will be calculated based on the add EGP13.5bn to revenues. difference between exit price and the higher of either; historic buying price or price at time of law implementation. * Bonus shares are tax ‐ exempt. Low tax revenue/GDP Additional Income tax Increment of 5% ‐ for 3 *30% on individuals with annual income years exceeding EGP1mn. Tax revenues Tax revenues/GDP EGPbn *25% for corporate income below EGP10mn. *30% for corporate income at EGP10mn and 400 16% above. 15.1% 350 15% Real Estate 10% * Residential units with market value up to 14.3% 300 14% 14.0% 13.9% EGP2mn will be exempted; while tax will be 13.4% applicable above this threshold. 250 13.0% 13% * Non ‐ residential units will be tax ‐ exempt if net 200 12% annual rental value is below EGP1.2k, after deducting 32% maintenance expense. 150 11% 100 10% FY10 FY11 FY12 FY13 FY14 FY15B Source: Official Sources Source: Ministry of Finance 7
� …more of long ‐ standing policies to restore confidence � Legislative reform involves Investment Law; Bankruptcy Chapter 11; Labor Law; Title Registration; Industrial Law; Commercial Law; and removing red tape. It is worth noting that a law has been issued that prohibits a third party to file an appeal to contracts between the government and investors, as it restricts it to the parties involved only. � Settling investor’s disputes; which increased 22% since last committee meeting – reaching 411 resolution. � With the Egyptian Tax Authority’s (ETA) independent appeals committee ruling in favor of OCI N.V.’s subsidiary — Orascom Construction Industries (OCI S.A.E.) — in the tax dispute dating back to 2012 (EGP7.1bn paid on installments until 2017), this confirms the government positive stance to support investments. It is worth highlighting that following that statement, Sawiris announced a commitment to maintain the company's presence in Egypt through construction services and large ‐ scale investments in infrastructure. � Settling dues to international oil and gas companies to boost investors’ confidence – as already Egypt settled USD2.1bn (40% of its dues to oil companies). Likewise, settling dues with contractors. � CBE covered the backlog of FX owed to foreign investors seeking to repatriate funds through the repatriation scheme which started in March 2013. Contracts reconciliation committee Ministerial dispute settlement committee Contracts Authority Resolution No of disputes solved 25 23 Governorates and affiliates 198 20 15 Ministry of Finance and affiliates 126 10 9 10 New Urban Communities Authority 56 4 3 3 3 3 3 5 2 General Authority for Reconstruction Projects and Agricultural 1 1 1 17 0 0 0 Development 0 Real ‐ estate & const Tourism Agriculture Petrochemcials logistics Mining & Fert others Total Tourism Development Authority 8 Oil, Gas & Others 6 Total Settlement 411 Source: Ministry of Investment Source: Ministry of Investment 8
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