Ministry of Investment Egypt: EEDC… Targets.. Results..Next Reform delivers… …..Investment for growth April 2015
Egypt: Reforms …..on the top • Political road map.. Close to end by parliament elections very soon.. • New Economic and Fiscal Reforms..remarkable achievements during 2014-2015.. Reform engine has been working to tackle down all economic constraints.. • Many legal reforms have been achieved… • Launching Egypt’s train of the balanced economic development ..the take off was in the EEDC held in Sharm El-Sheikh 13-15/3/2015..that aimed at: • Telling the story of Egypt …after 2 revolutions.. • Addressing the Egyptian-tailored sustainable economic development plan. Where we are going.. • Regulatory reforms.. Achieved and what still in the pipeline. • Presenting investment projects in various sectors with a different approach. • Restoring the confidence locally, regionally and Internationally. • Putting Egypt on the world investment map again..
Egypt: briefs on …. Egypt’s economic plan targets.. 3
Egypt: ..fiscal consolidation.. economic stimulus.. Proposed plans in Jun 2014 1 Fiscal consolidation plan* 2 Economic Stimulus Develop a fiscal consolidation plan of $58 Develop a growth stimulating investment plan billion that addresses current funding gaps by that compensates for fiscal consolidation and 2018 addresses citizen pain points • Size of expenditure cuts USD50 Bn investment $29 Bn $60 Bn • USD 26 Bn in subsidy reforms opportunities • • USD3 Bn from wage freeze) USD10 Bn infrastructure projects to be launched in the next 4 years • Size of revenue increasing measures Regulatory, institutional and 73 $29 Bn • USD 19 Bn VAT implementation infrastructure initiatives that initiatives • USD 4 Bn Income & Wealth tax enable sector development reform • USD 4 Bn mining law one off asset sales • USD 2 Bn others + USD 17-20 Bn External Financial Support needed in 2015-2016 due to the gradual implementation of the plan Economic recovery plan 4
Egypt: Signs of an upturn in economic indicators are more visible GDP growth in H1 -2015 estimated at 5.6 % • Real GDP grew by 5.6% in 1H2014/15 with investment being the main driver of such accelerated growth. The government’s fiscal stimulus whether through the central budget or through state authorities including the Suez Canal project and the expansion of the national road network supported the pick-up in investments. Non-oil manufacturing is the biggest contributor to the rebound in growth GDP growth will target 6% in 2018/2019 5 Source: Ministry of planning
……Signs of an upturn in economic indicators are more visible • FDI inflows recorded USD2.7bn in the first half of FY14/15 up from USD2bn a year earlier. The net inflows were driven by a net inflow for Greenfield investments by USD1.4bn and USD1.2bn inflows in the oil sector. • Number of established companies reached 6,364 companies in 8M14/15 up from 5,331 a year earlier (19%+). • Evident recovery in corporate activity as Loans saw an accelerated growth of 17%YoY in Jan-15, the highest in 4 years. Foreign Direct Investments Loans growth Newly established companies USD bn Companies YoY 13.2 14 1200 18% 12 11.1 16% 1000 10 14% 8.1 800 12% 8 6.8 10% 600 6 8% 4.1 3.8 4 2.7 6% 400 2.2 2.1 2 4% 200 2% 0 0% 1H14/15 FY06/07 FY07/08 FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 FY13/14 0 Jul-11 Sep-11 Nov-11 Jan-12 Jul-12 Sep-12 Nov-12 Jan-13 Jul-13 Sep-13 Nov-13 Jan-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-12 May-12 Mar-13 May-13 Mar-14 May-14 Sep-12 Jul-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Source: GAFI & Central Bank of Egypt 6
Egypt: overview of Egypt’s economy..(2011/2012 till 2018/2019) 7 Source: Ministry of Finance projections
Egypt: Reform delivers Reform offers strong upside to the investment environment… As the political scene resets, Egypt commenced its reform program by tackling structural imbalances to restore macroeconomic stability and drive growth. The medium-term strategy focus on adopting pro-investment policies and implementing key legal, regulatory and institutional reforms to expand private sector investments. ..with a development strategy that places Egypt’s growth potential on a more sustainable grounds The government’s key objective is to create a productive, efficient and ultimately more dynamic economy and to ensure that future growth is high, sustainable and inclusive. Hereby, priority is given to launching economically viable projects that are labour intensive to help alleviate unemployment. Restored investors’ confidence, regional support and investment pledges should help achieve set targets The Egypt Economic Development Conference marked a strong vote of confidence in the country’s economic policies with a unified message that highly emphasized the continued regional support and investors interest. 8
Adopting pro-investment policies complements reform Pro-investment policies are key to restore investors’ confidence where several measures were already taken to remove impediments to investments; • Addressing current investor disputes marks an entry point for potential foreign inflow. 43% of investor’s disputes were resolved under the mechanism of contract reconciliation and 60% of presented cases were solved under the dispute settlement committee . • Settling dues with foreign oil and gas companies marks another priority to boost investors’ confidence – particularly as the sector accounts for +60% of FDI inflows. • Easing repatriation issues marks another boost; improved foreign currency inflows with a pick-up in FDIs and continued Gulf support should ease capital controls. • The Central Bank of Egypt swift move to a sustainable policy mix with a cut in policy rates accompanied by a depreciation in the cut-off FX auction rate will help limit the currency overhang and revive lending activities. Such pro- investment stance will help setting the stage for a series of sovereign rating upgrades during 2015 which should bode well for equities. Contracts reconciliation committee Ministerial dispute settlement committee Contracts No of disputes solved 25 Authority Number 23 20 268 Governorates and affiliates 15 141 10 Ministry of Finance and affiliates 9 10 79 4 3 3 3 3 3 New Urban Communities Authority 5 2 1 1 1 0 0 0 27 0 Ministries Real-estate & const Tourism Agriculture Petrochemcials logistics Mining & Fert others Total Oil, Gas & 8 Tourism Development Authority 6 Others Total Settlement 529 Source: Ministry of Investment As of March 2015 9
Creating a welcoming climate for investors The government is determined to remove constraints and inappropriate legal provisions to create a healthier business climate. Thus, several amendments to a number of laws were recently passed, in addition to few that are expected to be released in the coming period. Status Measures taken ▪ Create a one-stop-shop at GAFI that will reduce for investors the time needed Passed for issuing investment licenses, procuring land and obtaining utilities. ▪ Establish the National Center for Developing & Promoting Investments at GAFI that will be in addition the sole liable for preparing an investment map for Egypt. Investment ▪ Set a legal framework for dispute resolution as well as standard procedures for Law solving investors’ disputes that may arise in the future. ▪ Emphasizing and adding some investor rights to the existing ones. ▪ Income Tax: Reduce the maximum for corporate income tax from 25% percent Passed to 22.5%. Taxes Law ▪ Wealth Tax: Cancel the 5% tax imposed on individuals and corporations with annual income above EGP 1,000,000. ▪ Guarantees citizens’ rights to civil jobs based on merit hence eliminating Passed favoritism & discrimination. Civil Service Law ▪ Address government bureaucracy and establish a strong governance system. 10
Creating a welcoming climate for investors cont.. Status Measures taken ▪ Implement a more effective tax & royalty structure that ensures a swift Passed allocation of mineral concessions to domestic & foreign firms. Mining Law ▪ Organize appeal procedures and prohibit any third party interference in Third Party Passed Contract contracts between the state and the investor. (to protect the investor rights in Appeal their contracts with the government.) ▪ Restrict the state’s role in the electricity sector to regulation and supervision. Passed (more liberalization of the sector) Electricity ▪ Separate the production, transmission and distribution functions in order to foster the private sector’s role and bring out greater competitiveness. ▪ Unveil "feed-in- tariff” and legal provision for the development of the country’s Passed Renewable wind and solar potential. (PPA, Sovereign guarantee, feed-in-tariff were Energy introduced to facilitate more investments) ▪ Ensure competitive practices in markets by allowing the Competition Authority Passed Competition to independently file lawsuits and settle cases against violators. Law ▪ Allow licensed entities to offer microfinance loans up to EGP 100,000 to Passed individuals or small companies Microfinance Law ▪ Grant the Egyptian Financial Supervisory Authority (EFSA) the power to supervise the microfinance entities to ensure their financial transparency . 11
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