Egypt…Improving Investment Climate

Neveen EL ShafeiVice Chairman

General Authority For Investment and Free Zones

Business Registration Reform in Africa

Practitioners Workshop

Cape Town , March 30th 2009

Doing Business Report 2009 : Top Reformers

For the 2nd consecutive year, Egypt is among the top 10 reformers in the Doing Business Report, issued by the World Bank.

Doing Business Report 2009 : MENA Region- Aggregate Ranking

Despite of moving a head.. Egypt’s rank remains below average for MENA

COMESA Countries Ranking in Doing Business 2009

:COMESA Region- Aggregate Ranking

Doing Business Report 2009

South Africa-Rankings on the ease of doing business

57

87

69

33

9

67

53

76

9

61

134

85

68

47

87

29

45

65

43

74

26

45

91

147

102

48

7382

23

0

20

40

60

80

100

120

140

160

Sta

rting

abu

sine

ss

Lice

nsin

g

Em

ploy

ing

Wor

kers

Reg

iste

ring

Pro

perty

Get

ting

Cre

dit

Pro

tect

ing

Inve

stor

Pay

ing

Tax

Trad

ing

Acr

oss

Bor

ders

Enf

orci

ngC

ontra

cts

Clo

sing

aB

usin

ess

2007

2008

2009

Source: Doing business report, worldbank.

South Africa ranks second among southern Africa region in terms of ease of doing business

FDI Statistics: Inward FDI stock in African economies 1980-2006

UNCTAD, World Investment Directory 2008

40251

38925

29939

21779

11391

10993

10151

9018

6109

4775

4482

4155

3780

3755

3511

3467

3306

3133

2768

2497

2362

1802

1423

1164

1086

1057

958

906

900

794

771

748

686

640

594

504

442

433

416

384

347

343

297

230

211

120

118

101

98

16

87765

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

South Af r ica

Niger ia

Egypt

Mor occo

Tunisia

Sudan

Angola

Alger ia

Equator ial Guinea

Tanzania

Mozambique

Chad

Côte d’Ivoir e

Zambia

Libya

Camer oon

Congo

Liber ia

Ethiopia

Namibia

Ghana

Uganda

Maur itania

Zimbabwe

Kenya

DR Congo

Mali

Botswana

Seychelles

Maur itius

Gabon

Togo

Swaziland

Guinea

Malawi

Lesotho

Madagascar

Gambia

Cape Ver de

Senegal

Er itr ea

Benin

Sier r a Leone

Rwanda

Djibouti

Centr al Af r ican Republic

Niger

Somalia

Bur kina Faso

Guinea-Bissau

São Tomé and Pr incipe

Million Dollars

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 in terms of FDI Inflows

Doing Business Report 2009- Ease of DB in Egypt

126

106

147156

105

86

55

101

83

150

26

145

125

41

85 8470

165

124

146152

115

163

108

24

107

165

128151

144

0

20

40

60

80

100

120

140

160

180

2007 2008 2009

Rank

114 of 181

Doing Business Report 2009 - Starting a business

• Reduction of LLC minimum capital to EGP 200 (Jan 31st, 2008)

• Registering business at OSS has become easier after automation

• Automation of Commercial registry office at OSS-Cairo (Zero time for checking the company name)

• Automation of Tax card issuance process (1 day to get the card)

• Reduction of time to open the insurance file to 1 day.

• Reduction of the minimum capital requirement –(Drop in % GNI per capita from 12.9% to 2%)

Recent Reforms to Starting a business in Egypt

Doing Business Report 2009 - Starting a business

Starting a business indicator - recent progress

Starting a businessDB07DB08 DB09

Rank1265541

Procedures (number)1076

Duration1997

Cost (% GNI per capita)68.828.618.3

Pain in min. capital (% GNI per capita)694.712.92

126

55

41

0

20

40

60

80

100

120

140

DB07 DB08 DB09

Starting a Business in Egypt 2008

NoprocedureTime to complete:

1Obtain a certificate from an authorized bank

1 day

2Submit documents to the Department of Companies and obtain invoice

1 day

3Notarize company’s contract1 day

4Obtain the notification of incorporation

1 day

5Register for taxes 1-2 days

6Register employees with the National Authority of Social Insurance

2 days

905

1,380

1,929

0

500

1000

1500

2000

2500

2006 2007 2008

New business registration in EgyptNew business registration in Egypt

+ 113%

Doing Business Report 2009 - Starting a business

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

25/1/2006-24/1/2007 25/1/2007-24/1/2008 25/1/2008-24/1/2009

Total LLC

931

4656

7750

1513

6793

1918

19.99

19.5228.23

Starting a business indicator - recent progress

Doing Business Report 2009 - Starting a business

Doing Business Report 2009 - Starting a business

Procedures to start a business Time to start a business (days)

Comparing Egypt to the best practice and MENA Region

Doing Business Report 2009 - Starting a business

Cost to start a business (% of income per capita) Minimum capital to start a business (% of income per capita)

Comparing Egypt to the best practice and MENA Region

Ease of Starting a Business - the Top 10 and Egypt

Ranking Procedures Days Cost Minimum capital

1 New Zealand 1 1 0.4 0

2 Canada 1 5 0.5 0

3 Australia 2 2 0.8 0

4 Georgia 3 3 4.0 0

5 Ireland 4 13 0.3 0

6 United States 6 6 0.7 0

7 Mauritius 6 13 0.8 0

8 United Kingdom 6 13 0,8 0

9 Puerto Rico 7 7 0.8 0

10 Singapore 4 4 0.7 0

41 Egypt 6 7 18.3 2.0

Doing Business Report 2009 - Starting a business

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

How Egypt compares with other countries

No of procedures

No of days Cost (%GNI per capita)

Minimum capital requirement (% GNI per capita)

Overall ranking

Egypt 2006 2007 2008

10 7 6

19 9 7

68.8 28.6 18.3

694.7 12.9 2.0

Best performer 2006 2007 2008

2 2 1

3 2 1

0.9 0.8 0.4

0 0 0

1 1 1

Egypt’s ranking

2006 2007 2008

91= 43= 32=

36= 16= 15=

125 102 94

167 94 86

126/175 55/178 41/181

Doing Business Report 2009 - Starting a business

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

In March 2007 a visit to GAFI OSS made by COMESA Advisor and 12 RIA representatives.

• The Sudanese IPA visited GAFI OSS in May 2007 and Feb. 2008

• As Kenya seeks to establish OSS for SMEs, 4 visits were made to GAFI OSS by Trade Minister of Kenya (Feb. 2007), Investment Committee of Kenya (July, 2007), Investment Authority (April,2008) and 15 governmental representatives (May,2008)

• Investment Promotion Agency of Libya was expected to visit Egyptian OSS in Oct. 2008 (Postponed)

• Tunisian UN expert specialized in Investment treaties visited Cairo OSS in Oct. 2008.

• A delegation from the republic of Mali, visited Cairo and Alexandria OSS, this visit organized upon request of IFC within the framework of the technical assistance provided to Mali Ministry of Trade and Industry.

GAFI One Stop Shop-Shared Experience with African Institutions

Proposed Recommendations

• Reduce fees A need for a substantial overall reduction in order to significantly impact the Doing Business rankings.

• Abolish minimum capital The number of countries which do not require minimum capital has now risen to 79 such as Saudi Arabia and Yemen.

• Abolish the requirement for notarising company contracts A need to consider the experience of Portugal, Estonia and Georgia. This would further improve the country’s Doing Business ratings with a reduction of one procedure and one day.

• Move towards online systems The whole registration process could be conducted online

• Introduction of a standard classification system for business activities

GAFI, Cairo – Registration of a company (1)

GA

FI

Oth

er

bo

die

sA

pp

lica

nt Investor’s

representative (normally a

lawyer) applies to GAFI for name

approval

GAFI lawyer checks legal

validity of name and returns

annotated form to applicant

Applicant applies to Commercial

Registry for name check

Commercial Registry performs check for duplicate names and returns

annotated form

Applicant assembles

information and documents for

registration

Applicant applies to GAFI for registration

GAFI lawyer performs initial

check for completeness and permits applicant

to take queue number

When queue number is displayed,

applicant attends at relevant window

Establishment lawyer enters data and prints contract

Applicant attends at Establishment

Follow-up window

Follow-up clerk prints invoice and advises on next

steps

Applicant pays capital into bank

account

Bank issues certificate

confirming capital payment

2

ST

AR

T

Data transferred via workflow system1

1 Currently, a paper file is also transferred.

Registration procedures

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

Registration procedures

GAFI, Cairo – Registration of a company (2)

Oth

er

bo

die

sG

AF

IA

pp

lica

nt

Applicant pays invoice at bank

Bank credits single payment to relevant accounts

and issues confirmation of

payments

1

Follow-up Department deals with:- Lawyers’ Syndicate (if required)2

- Capital Markets Authority (Joint Stock Companies)

Lawyers’ Syndicate

Applicant delivers bank confirmation slips to Follow-up

Department

3

Capital Markets Authority

Notary Public reviews file and enters data into NP system, then calls applicant to

authenticate

Applicant signs NP register

Follow-up Department

passes file to Notary Public3

Follow-up Department

retrieves file and passes to

Establishment lawyer

2 A Lawyers’ Syndicate endorsement is required where the capital is more than EGP 5,000. The applicant has the option of using the Syndicate based at the One-Stop Shop or an external Syndicate.

3 For a joint stock company, this process takes place in parallel to registration with the Capital Markets Authority

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

GAFI, Cairo – Registration of a company (3)

Oth

er

bo

die

sG

AF

IA

pp

lica

nt

2

Applicant returns to Commercial

Registry the next day

Commercial Registry enters in

register and provides

manuscript copy of entry

Applicant applies for registration in

Commercial Registry

(Companies Law cases only)

Commercial Registry enters details in CR

database

Commercial Registry provides computer-printed

copy of entry

Lawyer prepares Decree

(Investment Law) or Certificate

(Companies Law)

Secretary allocates

serial number

Manager signs

Follow-up Department liaises with Commercial Registry

(Investment Law cases only)

Commercial Registry registers

company

Follow-up Department arranges Chamber of Commerce registration and passes

documents to applicant (Companies Law cases only)

4

Representative of Federation of Chambers of Commerce

registers new member

Documents returned to applicant

Registration procedures

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

GAFI, Cairo – Registration of a company (4)

Oth

er

bo

die

sG

AF

IA

pp

lica

nt

3

Applicant attends at Tax Office at OSS

Tax representative completes form with

data from documents and passes to Tax headquarters

Applicant attends at Tax Office again the

following day

Tax Office representative

provides tax card

Applicant applies to Social Security desk

Registration for Social Security

EN

D

Registration procedures

Source: IFC Benchmarking Report On Registration Procedures-GAFI OSS Cairo,2008-D. Walke

•Thank you

Doing Business Report 2009 - Starting a business

931

141

435

937

37

208

684

989

0

200

400

600

800

1000

1200

200 201-1000 1001-49999 50000 and more

25/1/2006-24/1/2007 25/1/2007-24/1/2008 25/1/2008-24/1/2009

There were no LLC’s Under EGP1000

This year witnessed a remarkable impact of reduction to EGP 200

Starting a business indicator - recent progress

Investment Climate: Starting a Business in COMESA

FewestMost

Mauritius5Uganda18

Madagascar 5Eritrea13

Egypt6Djibouti 13

Zambia6Swaziland

13

Ethiopia7Kenya12

FewestMost

Mauritius 6Djibouti155

Egypt7Zimbabwe96

Madagascar 7Eritrea84

Rwanda14Swaziland61

Ethiopia16Burundi43

FewestMost

Mauritius 5D.R. Congo435.4

Seychelles8.3Zimbabwe432.7

Madagascar11Burundi215

Egypt 18.3Djibouti200.2

Zambia28.6Comoros188.6

Who regulates business start-up the least –and who the most?

Procedures (Numbers) Time (days)

Cost (% of income per capita) Paid-in minimum capital (% of income per

capita) FewestMost

Mauritius0Ethiopia 693.6

Kenya0Djibouti514

Seychelles0Eritrea396.7

Uganda0Madagascar289.8

Malawi0Comoros280.8

• COMESA countries are changing their laws and procedures in order to facilitate the flow of investment

Investment Climate: Reform Sectors in COMESA by Country (2009)

Investment Climate: Net Number of Reforms Improving a Set of Doing Business Indicators

Egypt (114)

• Egypt continued its reform by keeping a position among the top 10 reformers for 3 consequent years by

achieving great in the following:• starting a business: decreasing procedures (7 to 6), no .of days (9 to 7) and paid in min. capital (% of GNI per capita) from 12.9 to 2

• registering property: decreasing no of days from 193 to 72 and cost (% of property value) from 1 to 0.9

• Getting credit: by improving credit information, private and public registry coverage (% adults) because of establishing the first

credit bureau which started its activity in Jan 2008.

• Protecting investor: by improving disclosure and protecting minority shareholders

• Laws have been issued to improve dealing with construction licenses and enforcing contracts.

55

163

108104 102

84

151

21

152

128

41

165

107

85 84

70

144

24

151

128

0

20

40

60

80

100

120

140

160

180

Starting aBusiness

Dealing w ithConstruction

Permits

EmployingWorkers

RegisteringProperty

GettingCredit

ProtectingInvestors

PayingTaxes

TradingAcrossBorders

EnforcingContracts

Closing aBusiness

2008 2009