Document of The World Bank
Report No. ICR00001544
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-75280)
ON A LOAN
IN THE AMOUNT OF US$500 MILLION EQUIVALENT
TO THE
ARAB REPUBLIC OF EGYPT
FOR A
SECOND FINANCIAL SECTOR DEVELOPMENT POLICY LOAN
February 8, 2010
Social and Economic Development Group Egypt, Yemen and Djibouti Country Department Middle East and North Africa Region
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ARAB REPUBLIC OF EGYPT—GOVERNMENT FISCAL YEAR July 1st – June 30th
CURRENCY EQUIVALENTS (Exchange Rate Effective as of December 31, 2009)
Currency Unit Egyptian Pound US$1.00 LE 5.48
WEIGHTS AND MEASURES
Metric System
ABBREVIATIONS AND ACRONYMS
AfDB African Development Bank CAS Country Assistance Strategy CASE Cairo and Alexandria Stock Exchange CBE Central Bank of Egypt CFAA Country Financial Accountability Assessment CMA Capital Market Authority ECB European Central Bank EISA Egyptian Insurance Supervisory Authority EMRC Egypt Mortgage Refinancing Company EU European Union FIRST Financial Sector Strengthening Program FSAP Financial Sector Assessment Program FSRP Financial Sector Reform Program GDP Gross Domestic Product GOE Government of Egypt GSF Guarantee and Subsidy Fund IBRD International Bank for Reconstruction and Development IFC International Finance Corporation IHC Insurance Holding Company IMF International Monetary Fund MFA Mortgage Finance Authority MTPL Motor Third Party Liability NPL Non-performing Loan RTGS Real Time Gross Settlement SIF Social Insurance Fund SOE State-owned Enterprises
Vice President: Country Director:
Sector Director: Sector Manager:
Task Team Leader:
Shamshad Akhtar A. David Craig Ritva S. Reinikka Simon Bell Sahar Nasr
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ARAB REPUBLIC OF EGYPT SECOND FINANCIAL SECTOR DEVELOPMENT POLICY LOAN
Table of Contents
DATA SHEET A. Basic Information .................................................................................................................... i B. Key Dates................................................................................................................................ ii C. Ratings Summary.................................................................................................................... ii D. Sector and Theme Codes ........................................................................................................ ii E. Bank Staff ..............................................................................................................................iii F. Results Framework Analysis..................................................................................................iii G. Ratings of Program Performance in ISRs............................................................................iiiii H. Restructuring .......................................................................................................................iiiii 1. PROGRAM CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN............................................ 2 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES............................................. 4 3. ASSESSMENT OF OUTCOMES................................................................................................... 9 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME............................................................ 13 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE..................................................... 13 6. LESSONS LEARNED................................................................................................................ 16 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS...... 17 Annex 1: Bank Lending and Implementation Support/Supervision Processes ......................... 18 Annex 2: Summary of Borrower’s ICR and/or Comments on Draft ICR.................................. 20 Annex 3: Comments of Cofinanciers and Other Partners/Stakeholders.................................... 26 Annex 4: Operational Policy Matrix ......................................................................................... 26 Annex 5: Achievements of Project Development Objectives................................................ 32 Annex 6: List of Supporting Documents................................................................................... 39 Annex 7: Key Operational and Financial Performance Indicators............................................ 40
MAP .......................................................................................................................................... 42
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A. Basic Information
Country: Egypt, Arab Republic of
Program Name: Financial Sector Development Policy Loan II
Program ID: P094551 L/C/TF Number(s): IBRD-75280
ICR Date: 05/12/2010 ICR Type: Core ICR
Lending Instrument: DPL Borrower: ARAB REPUBLIC OF EGYPT
Original Total Commitment:
USD 500.0M Disbursed Amount: USD 500.0M
Revised Amount: USD 500.0M
Implementing Agencies: Central Bank of Egypt Ministry of Investment
Cofinanciers and Other External Partners: B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 09/10/2007 Effectiveness: 03/23/2009 03/23/2009
Appraisal: 03/24/2008 Restructuring(s):
Approval: 05/29/2008 Mid-term Review:
Closing: 12/31/2009 12/31/2009 C. Ratings Summary C.1 Performance Rating by ICR
Outcomes: Highly Satisfactory
Risk to Development Outcome: Substantial
Bank Performance: Highly Satisfactory
Borrower Performance: Highly Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings
Quality at Entry: Highly Satisfactory Government: Not Applicable
Quality of Supervision: Highly Satisfactory Implementing Agency/Agencies:
Not Applicable
Overall Bank Performance:
Highly Satisfactory Overall Borrower Performance:
Highly Satisfactory
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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation
Performance Indicators
QAG Assessments (if any)
Rating:
Potential Problem Program at any time (Yes/No):
Yes Quality at Entry (QEA):
None
Problem Program at any time (Yes/No):
No Quality of Supervision (QSA):
None
DO rating before Closing/Inactive status:
Satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Banking 42 42
Capital markets 25 25
Non-compulsory pensions, insurance and contractual savings
17 17
Payment systems, securities clearance and settlement 16 16
Theme Code (as % of total Bank financing)
Other financial and private sector development 17 17
Regulation and competition policy 33 33
Standards and financial reporting 17 17
State enterprise/bank restructuring and privatization 33 33 E. Bank Staff
Positions At ICR At Approval
Vice President: Shamshad Akhtar Shamshad Akhtar
Country Director: A. David Craig A. David Craig
Sector Manager: Simon C. Bell Simon C. Bell
Program Team Leader: Sahar Ahmed Nasr Sahar Ahmed Nasr
ICR Team Leader: Sahar Ahmed Nasr
ICR Primary Author: James A. Hanson
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F. Results Framework Analysis
Program Development Objectives (from Project Appraisal Document) The main objective of the operation is to support the Governmentâ s efforts to build up a sound, efficient, and diversified financial sector, capable of contributing to Egyptâ s growth performance and providing access to a broad segment of Egyptâ s population. By supporting the second phase of the reform program, the proposed operation contributes to the sustainability and irreversibility of the reforms and, therefore, to the fulfillment of its final objectives. Revised Program Development Objectives (if any, as approved by original approving authority) (a) PDO Indicator(s)
Indicator Baseline Value
Original Target Values (from
approval documents)
Formally Revised Target Values
Actual Value Achieved at
Completion or Target Years
Indicator 1 : Build a more resilient, competitive financial sector with sound banking system, capital market, and insurance industry to contribute better in the medium-term, to the provision of modern services
Value (quantitative or Qualitative)
A financial system that is not operating effeciently and is not playing an ative role in financial intermediation
A sound, and competitive financial system with an effecient banking system, capital market, and insurance industry contributing in the provision of modern & effective financials services
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
(b) Intermediate Outcome Indicator(s)
Indicator Baseline Value
Original Target Values (from
approval documents)
Formally Revised
Target Values
Actual Value Achieved at
Completion or Target Years
Indicator 1 : Reduction of Public Ownership and Control of Banks and Consolidation of the
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Banking Sector
Value (quantitative or Qualitative)
State-owned banks share in total banking system assets was 60% in June 2006
Less than 50% public ownership
Date achieved 06/30/2006 12/31/2009 Comments (incl. % achievement)
Indicator 2 : Financial and Operational Restructuring of Remaining Commercial State-Owned Banks and Specialized State-owned Banks
Value (quantitative or Qualitative)
Performance indicators of commercial and specialized state-owned banks, such as private sector credit-to-GDP, NPLs-to-total loans, return on assets, and return on equity.
State-owned banks in full regulatory compliance and competing with private banks on a level playing field.
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
Indicator 3 : Strengthening the Regulatory and Supervisory Framework of the Banking Sector
Value (quantitative or Qualitative)
The capacity building measures in banking regulation and supervision of the Central Bank of Egypt (CBE)--Phase I has been completed.
Completion of Phase II of the capacity building measures in banking regulation and supervision
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
Indicator 4 : Restructuring of State-owned Insurance Companies
Value (quantitative or Qualitative)
The due diligence of three state-owned insurance companies has been completed, pending implementation
The merged company is operating commercially with sound corporate governance
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
Indicator 5 : Strengthening the Regulatory and Supervisory Framework in Insurance and Pensions
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Value (quantitative or Qualitative)
Issuance and enactment of Motor Third Party Liability (MTPL)
State-owned insurers have established adequate MTPL claims provisions.
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
Indicator 6 : Improving the Efficiency of Capital Markets
Value (quantitative or Qualitative)
Enactment of Capital Market Law amedments, pending enforcement
Successful CMA actions to enforce compliance with new capital adequacy ratio and risk mangement requirements for financial intermediation
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
Indicator 7 : Strengthening the Financial Sector Institutional Infrastructure
Value (quantitative or Qualitative)
- Establishment of a private credit bureau. - Signing contract for RTGS - Draft Economic Court Law to Parliament.
- Development of an accurate and comprehensive database at the private credit bureau. - Operationalization of the RTGS system. - Operationalization of the Economic Courts.
Date achieved 06/29/2006 12/31/2009 Comments (incl. % achievement)
G. Ratings of Program Performance in ISRs
No. Date ISR Archived
DO IP Actual
Disbursements (USD millions)
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1 12/03/2008 Satisfactory Satisfactory 0.00 2 09/02/2009 Satisfactory Satisfactory 498.75 3 03/31/2010 Satisfactory Satisfactory 498.75
H. Restructuring (if any) Not Applicable
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1. Program Context, Development Objectives and Design
1.1. Context at Appraisal
Macroeconomic Framework
1. Over the last five years Egypt’s government has implemented significant structural reforms. These include liberalization of trade, a complete overhaul of the tax system, restructuring and improving regulations of the financial sector, and privatization of state-owned enterprises (SOEs). These reforms led to a friendlier investment climate which, in a favorable global economic environment, generated a strong private-sector supply response. Real Gross Domestic Product (GDP) growth increased from an average of 3.5 percent during FY01-04 to around 7 percent between FY06 and FY08 — a record compared to the previous twenty-five years. Egypt also accumulated significant net international assets in FY05-FY08, due to both internal and external factors.
2. Despite the progress made, Egypt faces many challenges in maintaining sustainable economic growth, and addressing economic, social and regional inequalities. The global economic slowdown that began in 2008 has adversely affected growth and employment in Egypt. In FY09, growth decreased to 4.7 percent and is expected to increase to only 5.5 percent in FY10 as the global economy recovers. Employment growth is expected to fall to 2.3 percent, and the unemployment rate is expected to increase to about 10 percent by FY10.1 To meet these challenges, Egypt needs to diversify the sources of economic and employment growth, and raise the efficiency of resource allocation without exerting undue pressure on the already strained environment.
Sector Background 3. The financial sector in Egypt has been, over the past decade and a half, the subject of reform efforts. These reforms aimed at financial liberalization to develop more effective financial instruments, strengthen the system infrastructure, and enhance competitiveness through increased private participation. The sector was subject to various legal and regulatory reforms. However, despite these positive steps, the financial system continued to face significant challenges prior to the 2004-2008 reform program given the low levels of competition, large non-performing loans (NPLs), relatively high intermediation costs, limited innovation, and dominance of state ownership. The non-bank segment was characterized by underdeveloped bond market, insurance, thin trading in equities, and underdeveloped mortgage markets. 4. The political and economic context at appraisal of this operation was conducive. The reformist cabinet that took office in July 2004 set a major agenda of macroeconomic and structural reforms. An integral component of this comprehensive reform program was the Financial Sector Reform Program that was endorsed by the President in September 2004 for implementation over 2005–2008. This endorsement set the stage for the Ministry of Investment and the Central Bank of Egypt (CBE) to embark on implementing this reform program aimed at addressing the identified vulnerabilities, and enhancing the performance of the banking sector, as well as developmental non-bank financial institutions, including the insurance sector, the capital market, and the mortgage industry. Underpinning the whole program was also a major effort at strengthening the regulatory capacity and supervisory framework. 5. In this regard, lending further credence to the authorities’ determination to see the reforms through, sweeping executive measures—uncharacteristic of the consensus-driven Egyptian establishment—were taken with the appointment of a new CBE Governor, and new management for the Egyptian Stock Exchange. The newly established Ministry of Investment was given oversight for all non-bank financial institutions. In parallel, new management was appointed for the state-owned banks and insurance companies.
1 World Bank, Macro Policy Notes (2009).
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6. So far, the results of the Financial Sector Reform Program (2004-2008) seem to have prepared the financial system for weathering the global financial crisis, by improving its soundness and resiliency. The reform program forced a strengthening of bank’s capital, a clean-up of banks’ non-performing loans, and a consolidation of the banking system. Moreover, significant reforms have taken place in non-bank financial institutions—the insurance sector, capital markets, and mortgage finance. The financial sector institutional infrastructure has also significantly improved.
Rationale for Bank Involvement 7. There is evidence of a strong and causal relationship between the depth and efficiency of the financial system, and economic growth. Beyond its contribution to economic growth, there is also a growing understanding of the importance of access to financial services to the reduction of poverty and inequality. The Bank Group’s 2007 Strategy for the Financial Sector emphasizes the use of Bank policy-based lending in support of market reform and strengthening the expansion of access. 8. The operation was crucial for supporting the continuation and deepening of the financial sector reforms that were supported by DPL I. It is part of a comprehensive assistance which includes analytical work and technical assistance. The Egyptian government has repeatedly indicated its appreciation of the Bank’s integrated delivery of assistance, and has requested the operation as a means to improve program design and to enhance discipline in reform implementation. The perception that the Bank is prepared to remain engaged in the reform effort makes the institution a privileged partner. Moreover, the operation provides an effective vehicle for the Bank to continue playing a leading coordination role.
1.2. Original Program Development Objectives (PDO) and Key Indicators
9. The main objective of the operation is to support the Government’s efforts to build up a sound, efficient, and diversified financial sector, capable of contributing to Egypt’s growth performance and providing access to a broad segment of Egypt’s population. By supporting the second phase of the reform program, the proposed operation contributes to the sustainability and irreversibility of the reforms and, therefore, to the fulfillment of its final objectives. 10. To this effect, the World Bank operation sought to achieve: (i) reduction of public ownership and control of banks and consolidation of the banking sector; (ii) financial and operational restructuring of state-owned banks; (iii) strengthening the regulatory and supervisory framework of the banking sector; (iv) restructuring of state-owned insurance companies; (v) strengthening the regulatory and supervisory framework in insurance and pensions; (vi) improving the efficiency of capital markets; and (vii) strengthening the financial sector institutional infrastructure. 11. These outcomes were to be measured by key indicators: (i) completing the privatization of Bank of Alexandria; (ii) completion of divestiture of more than 95 percent of the portfolio of state-owned banks shares in joint-venture banks; (iii) completing the consolidation of the banking system; (iv) substantial progress in implementing the program of financial restructuring and recapitalization of state-owned banks; (v) further progress in implementing the institutional and operational restructuring of the remaining state-owned banks; (vi) addressing current problems and future role of the three state-owned specialized banks; (vii) continued capacity building for a strengthened regulatory and supervisory framework; (viii) completion of operational restructuring of the merged insurance company; (ix) significant improvement of the insurance regulatory and supervisory framework; (xi) building a solid institutional investor base; (xii) adequate enforcement of new regulations in investment funds; (xiii) establishment of a private credit bureau; (xiv) signing off of a contract for the implementation of an RTGS system; and (xv) issuance of Specialized Economic Courts Law.
1.3. Revised PDO (as approved by original approving authority) and Key Indicators
12. The PDO and the key indicators have remained the same during the life of the project.
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1.4. Original Policy Areas Supported by the Program
13. Phase II of the Financial Sector Reform Program is aimed at completing the implementation of the reform program. In the banking sector, it focuses on reducing state ownership through completing the privatization of the Bank of Alexandria, and further divesting the small and remaining state-owned banks’ shares in joint-venture banks. In addition the program aimed at implementing the institutional and operational restructuring of the remaining state-owned commercial banks, as well as financial restructuring mainly through completing the settlements of NPLs of SOEs in state-owned banks, and the workout arrangements for private NPLs. The program also initiate reforms of the specialized state-owned banks, through preparing the terms of reference for the financial due diligence of the state-owned specialized banks and initiating their restructuring programs. Moreover, the program was underpinned by the strengthening of the bank regulation and supervision, including further strengthening of off-site supervision, and improving banks’ risk management and governance.
14. On non-banks, the program includes a comprehensive program of restructuring of the insurance sector, strengthening the regulatory framework for insurance, developing the actuarial profession, addressing the under-funding problem of the existing defined-benefit pension schemes, removing the regulatory obstacles to the growth of investment funds, further deepening and improving the efficiency of capital markets by, inter-alia, strengthening accounting and auditing practices, improving capital adequacy standards of intermediaries, simplifying listing schedules, and establishing a stock exchange for small and medium firms. Finally, Phase II aims to improve the institutional framework through improvements in the financial sector institutional infrastructure including the credit information system, auditing, judicial procedures, and the payments system.
15. Accordingly, the DPL II was designed to support the authorities in the implementation of the policy reforms of Phase II of the Financial Sector Reform Program outlines above, focusing in the following areas: (i) reduction of public ownership and control of banks, and consolidation of the banking sector; (ii) financial and operational restructuring of state-owned banks;(iii) strengthening the regulatory and supervisory framework of the banking sector;(iv) restructuring of state-owned insurance companies; (v) strengthening the regulatory and supervisory framework in insurance and pensions; (vi) improving the efficiency of capital markets; and (vii) strengthening the financial sector institutional infrastructure.
1.5. Revised Policy Areas
16. The policy areas were not revised during the life of the project.
1.6. Other significant changes
17. There were no changes made to the project from the design stage to the completion of the operation.
2. Key Factors Affecting Implementation and Outcomes
2.1. Program Performance
Number of tranches
1
Tranche Amount Expected Release Date
Actual Release Date
Release
1 500,000,000 February 20, 2009 March 26, 2009 Regular
18. The delay in disbursing the loan was due to the fact that Egyptian constitution requires all projects to be ratified by the Parliament only after their approval by the Board of the Bank. In addition to the summer recess, elections and other parliamentary business (constitutional amendments and ratification of other laws concerning approval of economic reforms) lengthened the queue for Parliamentary approval. In addition, given the comprehensiveness of the financial
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sector reform agenda, Parliamentarians spent far more time than usual discussing the reforms supported under the DPL before finally approving the loan in March 2009, and the project became effective on March 23, 2009. The Loan Agreement was signed on October 30, 2008.
Tranche 1
List conditions from Legal Agreement/ Program Document Status A. The Borrower has maintained a sound macro-economic framework consistent
with the objectives of the Program Met
B. The Borrower has prepared for divestiture of remaining 20 percent of state-owned shares in Bank of Alexandria, including retention of a sales adviser
Met
C. The Borrower has implemented a divestiture of 94 percent of the portfolio of state-owned banks’ holdings in joint venture banks
Met
D. The Borrower has made substantial progress in financial restructuring of the state-owned commercial banks, including the settlement of at least 60 percent of the non-performing loans of state-owned enterprises held by state-owned banks outstanding as of June 2004
Met
E. The Borrower has adopted and put into effect a framework, satisfactory to the Bank, for institutional and operational restructuring of the National Bank of Egypt and Banque Misr
Met
F. The Borrower has adopted and put into effect a detailed program, satisfactory to the Bank, for capacity building in the areas of banking regulation and supervision
Met
G. The Borrower has implemented a comprehensive program of restructuring of the state-owned insurance sector, including the legal merger of three state-owned insurance companies
Met
H. The Government has submitted to Parliamentary amendments to Insurance Law (Law 10), including: (i) increase in minimum capital; (ii) corporatization of insurance brokers; (iii) independent funding for the Egyptian Insurance Supervisory Authority (EISA); and (iv) Separation of life and non-life insurance business
Met
I. The Borrower has adopted and started implementing International Financial Reporting Standards (IFRS) requirements for listed companies, and securities firms
Met
J. The Borrower has enacted amendments to the Executive Regulations of the Capital Market Law (CML) that enhance capital adequacy standards and risk management requirements, regulated by the Capital Market Authority (CMA)
Met
K. The Borrower has issued and enacted Executive Regulations to the amended CML with respect to investment funds that: (i) clarify their legal structure; (ii) improve the computation of net asset values; (iii) improve funds’ disclosure; and (iv) reduce minimum paid-up capital for fund managers to two percent of assets under management
Met
L. The Borrower has adopted the legal and institutional framework for the establishment of a private credit bureau, and a private credit bureau has been established
Met
M. The Borrower has signed a contract with a private vendor for the implementation of a Real Time Gross Settlement Payments System (RTGS), complying with international standards and best practices
Met
N. The Government has submitted draft Specialized Economic Courts Law to the Parliament
Met
O The Borrower has developed a strategy for micro lending through non-bank financial institutions (NBFIs) to increase access to finance
Met
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2.2. Major Factors Affecting Implementation
Adequacy of Government’s Commitment 19. Strong government commitment to the reform program was key to the success of the operation. The presence in the new cabinet of a core group of credible reformers, including the Minister of Investment and the Governor of the CBE, sent an unequivocal signal to investors and the donors’ community that Egypt is seriously committed to move towards a private-led economy. They designed a comprehensive program of reforms and moved swiftly to recruit highly qualified and experienced professionals in the market especially for the purpose of implementing the banking and nonbanking sector reforms. The successful implementation also benefited from an enhanced communications and consultation process through the new strategic partnership between the Egyptian authorities and the Bank during the formulation of the CAS. This involved a constructive dialogue with the authorities based on the principle of mutual commitment between the Egyptian authorities and the Bank, through a policy compact, whereby the Bank commits to support the reform process (not just specific ad hoc measures) in Egypt, and the government commits to continuing along an agreed upon reform path.
Soundness of Background Analysis 20. The design and implementation of the second phase of the Financial Sector Reform Program and this DPL were significantly enhanced by the analytical work carried out in 2002 in the context of the FSAP: the 2005 and 2006 Investment Climate Assessments, the 2007 report on Access to Finance, the 2007 FSAP Update, the fee-based Technical Assistance on Governance, Anti-corruption, and Regulatory Reforms; an SOE Corporate Governance Study, and an Accounting and Auditing Report on the Observance of Standards and Codes (ROSC) Update. The follow-on policy dialogue and the successive FIRST Initiatives which helped greatly clarify the capacity building needs. The experience that the World Bank has gathered in development policy lending in the financial sector was used by the authorities to guide the design and implementation of the program. USAID and the European Union (EU) have also supported analytical work on reforming and restructuring the financial sector.
Assessment of the Operation’s Design 21. The design of the operation was well thought out. The operation was a one-tranche operation to support the government in implementing phase II of the Financial Sector Reform Program. At the preparation stage of DPL I there was the option of having a programmatic operation amounting US$ 1 billion, or two operations amounting to US$ 500 million each, aimed at implementing the reform program. At the Operational Committee (OC) meeting for DPL I, a decision was made to proceed with two operations, aiming to support the government in implementing the two phases of the government program, which was consistent with the CAS which envisioned two financial sector operations (FY 2006 and FY 2008). Two separate operations were considered more underpinning to irreversible policy measures, as disbursement would occur upon the realizations of up front, specific actions under each phase. This would in turn ensure more stringent government commitment to the comprehensive implementation of the reform program. 22. Despite the complexity of the reform program and the number of organizations involved domestically, as well as outside donors, the policy areas were well identified and narrowly focused; and reforms were sliced into two stages according to their degrees of priority. The Egyptian government has repeatedly indicated its appreciation of the Bank’s integrated delivery of assistance, and has requested the operation as a means to improve program design and to enhance discipline in reform implementation. The perception that the Bank is prepared to remain engaged in the reform effort helped the dialogue and made the Bank a privileged partner. 23. Given the multifaceted nature of the financial sector reform effort, donors’ contributions were needed. In this context, the authorities sought assistance from other donors to complement that of the Bank to help them implement this comprehensive and substantive reform program.
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Given the World Bank’s experience, it chose to address banking sector reform while they worked on the supervision and regulatory framework. A large technical assistance program including intensive capacity building for banking supervision was put in place by the European Central Bank (ECB). USAID provided assistance to the financial sector reforms under a Memorandum of Understanding (MOU) with the Government of Egypt in mortgage finance and the insurance sector, and the IMF was concerned with exchange rate and monetary policy management. 24. The presence of many donors itself posed a challenge which led the Egyptian government to put in place an innovative approach to donors support by making it clear that it wanted the Bank to lead the coordination of donors’ support to financial sector reform to avoid overlap and address key issues on a timely and priority basis. To this end, a Financial Sector Donors Sub-group was formed to coordinate efforts related to both technical and financial support provided to the government. One outcome of this group is the joint World Bank-EU project for modernizing the payments system at the CBE. 25. Furthermore, the innovative approach followed by the Bank and other donors gave the authorities the flexibility needed to decide on how best to manage the privatization of the Bank of Alexandria and reduce state ownership in the joint venture banks without unduly imposing conditionality that could have undermined their bargaining power. The benchmarking approach helped implementation by focusing on results. In the end, the privatization of Bank of Alexandria transferred seven percent of the banking deposits while the divestiture of state-owned banks shares in joint venture banks, which is more than 95 percent complete, transferred about 20 percent of system deposits to private hands.
Relevance of Risks Identified 26. Risks identified at appraisal (such as political, social, fiscal, governance, and sustainability) were relevant and have been well managed as mitigating factors were embedded in the design of DPL II. To mitigate the risk that social, political and stakeholder opposition would weaken government resolve as had happened in the previous efforts to reform the financial sector, the government decided to communicate regularly and in a transparent way the objectives of the reform program, its expected outcomes, to show that consumers will gain from such reforms in the end. There was also much better communication of the government’s financial sector reform program to the various stakeholders—parliamentarians, media, and political parties. Contingency financing in terms of voluntary early retirement and compensation schemes were planned to alleviate the resulting social burden. In addition, the program included staff training and skills upgrading for employees whose current profile did not readily fit in the organization chart of the restructured financial institutions. 27. The risk to fiscal sustainability from the added burden of bank restructuring (fiscal cost of the settlement of NPLs, tax settlements, and the cost of compensation packages) on an already tight fiscal position was correctly identified and adequately managed. Indeed, the government was able to mobilize significant privatization proceeds of the sale of state-owned bank shares in joint venture banks, the sale of state owned enterprises (Law 203 companies) and other public entities, which were then used as planned to partially offset the cost and reduce its potential negative impact on the fiscal position. 28. The risks associated with governance were also correctly identified. To minimize the likelihood that state-owned banks may revert to the old lax management and lending practices that are at the root of their current problems, recapitalization by the government was made conditional on the state banks agreeing upon a plan of operational, institutional and financial restructuring which in turn was made contingent upon, and was to be implemented in step with, the progress of the capacity building program and restructuring plan designed to strengthen the banks governance and overhaul their lending and risk control practices, within a timeframe agreed with the Bank. Full implementation of the institutional and operational restructuring was to remain under close CBE supervision (acting on the owner’s behalf) throughout the restructuring period.
29. Regarding the risks associated with sustainability, the past five years have proven that the
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government is committed to the full implementation of the reform program, and in many cases to delivering more than was envisioned. The successful implementation of the reform program and the strong dialogue to date and requests for technical assistance to implement the reforms leave the Bank confident about the execution of Phase II. 30. Risks related to the implementation of the program of reforms were rightly judged low because of the strong dialogue and broad agreement on the substance and design of the operation, the continuous dialogue with official counterparts and thorough adequate supervision of the DPL, as well as the Bank’s recognition for the need to proceed diligently with the reform program. The financial sector dialogue conducted in Egypt between the 2002 FSAP, the 2007 FSAP Update, DPL I, and the preparation of this operation allowed for differences between the authorities and the World Bank to be narrowed down, and for a common view to emerge on a number of priority sector policy issues and orientations with clear objectives and a transition process to reach them. These were largely embodied in the government Financial Sector Reform Program. There has been a broad agreement on the substance and design of the operation components, the scope of World Bank assistance, and the need to proceed diligently with the reform program.
2.3. Monitoring and Evaluation (M&E) Design, Implementation and Utilization
(i) M&E design 31. A set of qualitative and quantitative intermediate outcome indicators were defined to monitor progress towards the achievement of the Program Development Objectives (PDO). The M&E framework was established during the design of DPL II for the clear purpose of monitoring progress against the agreed upon benchmarks as outlined in DPL II Operational Policy Matrix (see Annex 4). These indicators were selected in agreement with government counterparts, taking into account the availability of data, their relevance and feasibility.
32. Qualitative operational expected policy outcomes were selected to monitor progress in the execution of the Financial Sector Reform Program and the operation, such as: (i) reduction of public ownership and consolidation of the banking sector; (ii) implementation of the strengthening of the supervisory and regulatory authorities of banks and insurance industry; (iii) progress in the operational, institutional and financial restructuring of state-owned banks and insurers; and (iv) restructuring the insurance sector. Quantitative indicators were selected in areas where data was available, such as: (i) divestiture of 94 percent of the portfolio of state-owned banks holdings in joint venture banks by May 2008; (ii) reduction of share of state-owned banks to less than 50 percent of total banking sector assets by May 2008; and (iii) settlement of at least 60 percent of non-performing loans of state-owned enterprises held by state-owned commercial banks as of June 2004 by May 2008.
(ii) M&E Implementation 33. Data availability was adequate to follow up on the policy dialogue initiated during preparation of the operation. The program was jointly implemented by the Ministry of Investment and CBE. The Ministry had the overall responsibility for implementing the measures related to the non-bank financial sector, while CBE was the Executing Agency for the aspects of the program dealing with the banking sector. Within the CBE, a Bank Restructuring Unit (BRU) was set up as the focal point for implementation of banking reforms. The BRU, headed by a Sub-Governor, a former international banker, is staffed with highly qualified and experienced professionals, many of whom were specially recruited for the purpose of implementing the banking reform program. 34. The overall status of the government’s program was well monitored during the supervision missions to ensure that the reform program was on track, and highlight pending issues to the authorities throughout the process to ensure that all outcomes expected and agreed upon were met. In addition, the supervision missions also provided the Bank with the opportunity to inform the future phase of reforms and continue the policy dialogue with the institutions involved in the program implementation, and to ensure the deployment of staff and consultants able to advise the government in all of the policy and technical areas pertaining to the reforms.
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(iii) M&E Utilization 35. Armed with the information collected from the first ever independent financial due diligence of the state owned banks, the Bank in coordination with the BRU was able to follow up on the implementation of the plans to restructure the state-owned bank and enhance their governance structure. Specific indicators were designed and monitored through meetings with the state-owned banks’ management to monitor progress in cleaning up the balance sheets, upgrading their IT systems to prepare them for the new competitive and risk management environment. The Bank’s supervision mission’s discussions with the BRU and the state-owned banks also helped the Bank’s supervision mission staff monitor progress in implementing these restructuring plans and to pave the way to more reforms which are going to be implemented under the forthcoming DPL III. 36. Similarly, at the Ministry of Investment, sub-units were established to ensure the effective implementation of the various reforms related to the non-bank financial sector. A Steering Committee on Insurance Reform was already established under DPL I by Ministerial decree and included the Chairman of EISA, the resident Technical Advisor to EISA, and one senior executive each from the four public sector insurance companies. The Steering Committee, in turn, set up small restructuring units within each of the public sector insurance companies, whose mandate included ensuring proper communication of the envisaged reform measures to the companies’ staff in order to ensure their commitment and effective participation in the program implementation process. Measures related to the capital market and the mortgage sectors were implemented by the regulatory authorities, the CMA and the MFA respectively, under the overall supervision of the Ministry of Investment.
2.4. Expected Next Phase/Follow-up Operation (if any)
37. The government’s achievements under DPL II are sufficiently encouraging for the Bank to prepare another follow-up operation in response to the government’s request of December 7, 2009 (this was the date of the joint letter from Minister of Investment and CBE Governor to Vice President requesting DPL III). In this context, the third DPL of US$500 million would support the authorities’ implementation and partial funding of the costs of the second phase of the reform program. Reforms envisioned include further strengthening the domestic banking system by continuing the financial and operational restructuring of commercial and specialized state-owned banks, in addition to strengthening the regulatory and supervisory architecture of the banking sector. The follow up operation is expected to be presented to the Bank's Board by May 2010. 38. The second generation reforms of the program would also include a comprehensive agenda for the development of non-bank financial institutions and securities markets, with the objective of building a more diverse and balanced financial system, capable of providing a broader range of financial services to a wide range of clients while managing risks effectively. This would include the restructuring and privatization of the insurance industry, the restructuring of state-owned insurance companies, strengthening the regulatory and supervisory framework in the non-banking financial sector, and improving the efficiency of capital markets. More attention would be given to strengthening the financial sector institutional infrastructure; and improving financial intermediation.
3. Assessment of Outcomes
3.1. Relevance of Objectives, Design and Implementation
39. The objective of DPL II was to support the Government’s efforts to build up a sound, efficient, and diverse financial sector, capable of contributing to Egypt’s growth performance and providing access to a broad segment of Egypt’s population. This objective was adopted considering that the country had undertaken important measures to build a more resilient and competitive banking system, through consolidation and reduction of public ownership. Numerous foreign banks entered the market, which enhances competition. The merger of the three state-owned insurance companies led to the evolvement of a stronger and better performing company.
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40. The design of the DPL II was highly aligned with the country’s priorities and CAS. 41. They continue to be relevant at ICR preparation as:
� The 2005 CAS’s first strategic objective was to “strengthen the capacity of the financial system to facilitate private sector development”.
� DPL II fits well within the mandate given to the new cabinet to reduce poverty and improve living standards.
� Financial sector reforms are demonstrably linked to growth and poverty reduction. They are fundamental to reforms in other sectors, including private sector development, infrastructure, housing and social policies.
� Strengthening financial infrastructure acts as a steady promoter of growth and reduces the frequency and cost of financial crises.
� Prevention of financial crises is essential to poverty reduction.
� DPL II objectives remain those that will be pursued under the forthcoming DPL III; this was foreseen at the start of the design of DPL I in 2004, as building a competitive financial system is a medium term endeavor which needs years of reforms and implementation to fulfill the objectives fully.
42. Thus, the relevance of objectives, design and implementation is considered satisfactory, based on: (i) the consistency of the program with government and Bank priorities; (ii) quality of the design, with a clear focus in the resolution of the deleterious problem of NPLs and strengthening of the legal, regulatory and supervisory capacity of the banking, capital market and insurance sectors; and (iii) adequate implementation, that resulted in increased sustainability of supported reforms as evidenced by the continuation of the reform program which will be supported by another DPL; by increased private sector interest in Egypt (FDI increased from an average of 0.6 percent of GDP during FY01-FY04, to 8.6 percent in FY07) suggesting favorable market perceptions about Egypt’s overall macroeconomic and structural reform program, including the financial sector reform program.
3.2. Achievement of Program Development Objectives
Achievement of Development Program Objectives is considered satisfactory 43. Key achievements in the banking sector that are the direct result of the reforms implemented under DPL II included: (i) former joint ventures are majority privately owned; (ii) further consolidation of the banking system—the enforcement of stricter prudential rules resulted in the exit of small and weak banks through a series of mergers and acquisitions, and reduced the overall number of banks from 57 in 2004 to 39 in 2008; (iii) a competitive banking system led by strong private sector banks—the share of public sector commercial banks in both lending and deposits of the banking system has continued to decline in FY ending June 2008, and the banking system has so far been resistant to the financial crisis; (iv) over 60 percent of state-owned enterprises (SOE) NPL’s settled in cash; (v) Total settlement agreements from January 1, 2004 until November 30, 2009 exceeded 90 perecnt of NPLs (excluding public enterprises’ debt) with collections of 60 percent out of which cash collections represented 85 percent; (vi) doubling the banking sector’s net worth from LE 35 billion in 2004 to LE 70 billion in 2008; (vii)improvement evident in the operational restructuring of the state-owned commercial banks in three critical areas (human resource development, risk management, and information technology); (viii) completion of independent and comprehensive financial due diligence of the state-owned specialized banks; (ix) increasing the number of operative branches from 1795 in 2004 to 2345 in 2008; (x) continued capacity building measures in banking regulation and supervision— a two year technical assistance program provided by the Eurosystem to build a credible risk-based Banking Supervisory system was completed successfully in November 2007 and deemed satisfactory by the European evaluation process. A new program was signed in December 2008 to implement in a three year phase the standardized approach of Basel II framework.
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44. However, the initial public offering (IPO) transaction of Bank of Alexandria was not completed, due to the collapse of equity markets worldwide that made it undesirable to complete the IPO. However, the bank remains under private management and IFC has taken a 9.9 percent share of capital.
45. Main achievements in the non-banking sector that are the direct result of the reforms implemented under DPL II include: (i) completion of operational restructuring of the merged insurance company. All legal requirements have been fulfilled, and branches merged. Also, the new entity has been assigned for the highest rating between merged entities, and a new chairman has been appointed; (ii) substantial progress in the implementation of the National Insurance Company’s business plan; (iii) state-owned insurers have established adequate MTPL claims provisions; (iv) effective insurance legislation in place to support the planned reforms and encourage a more efficient insurance sector—key amendments to Law 10 have been passed; (v) submission to Parliament of Ministers of draft law overhauling the regulatory framework of the private pension system—the draft law was submitted to State of Council to be reviewed; (vi) at least five selected graduates from Egypt receiving international actuarial professional training—an actuarial development program is in place; (vii) adoption of International Standards of Auditing (ISA)—and Egyptian translation of ISA issued in June 2008; (viii) enactment of amendment to Capital Market Law (CML) in June 2008; and (ix) initial listing of several small and medium enterprises (SMEs) on NILEX—three SMEs listed but IPOs delayed due to poor market conditions. 46. On strengthening the Fiduciary Framework for Public Financial Management and Corporate Financial Reporting, achievements directly related to DPL II, include: (i) development of a reliable and comprehensive database at the private credit bureau—in the nine months since its commercial launch, iScore has issued over one million credit reports and signed up 55 subscribers; (ii) signing off of a contract for the implementation of an RTGS system, complying with international standards and best practices on March 15, 2009; (iii) issuance of Specialized Economic Courts Law—in May 2008 Specialized Economic Courts Law 120 of 2008 has been enacted; and (iv) creation of a legal framework for regulation of micro-lending NBFIs and promulgation of regulated regulations and supervisory framework—in March 2009 the Single NBFI Regulator Law 10 of 2009 was enacted. 47. Finally, while in some cases the impact of the actions taken might take time to be felt, in others it is clear that actions supported by DPL II resulted in appreciable improvements as shown by the medium term outcome indicators.
� State control of the banking sector was reduced as indicated by the share of the banking system deposit under state control or influence which declined from 65 percent in 2004 to 51 percent in June 2007. This was due to the privatization of Bank of Alexandria, the fourth largest state-owned commercial bank, and the divestiture of the state-owned banks’ shares in 13 of the joint venture banks.
� The stock of NPLs by state-owned enterprises at the state-owned commercial banks was curtailed by two thirds, falling from LE 26 billion to LE 10 billion. The stock of private sector NPLs was also significantly reduced through the work out unit created at the banks. (Total settlement agreements from January 2004 until November 2009 exceeded 90 percent of NPLs (excluding public enterprises’ debt) with collections of 60 pecent, out of which cash collections represented 85 percent).
� Provisioning of state-owned banks was improved as shown in the ratio of provisions to NPLs which increased for National Bank of Egypt, Bank Misr and Banque du Caire from 66.5 percent in June 2008 to 74.8 in June 2009.
� The increase in capital requirements and stricter compliance enforcement rules have led to a vast consolidation in the banking sector which led to a fall in the number of banks operating in the sector from 57 in June 2004 to 39 in October 2008.
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3.4. Justification of Overall Outcome Rating
Rating: Satisfactory 48. The overall outcome rating for DPL II is “satisfactory”. Planned reforms were implemented, some (such as the privatization of Bank of Alexandria) ahead of time and are achieving their key objectives of restoring soundness in the banking and insurance sector. Significant institutional strengthening has been carried out in the financial sector. While the government is pursuing its reform agenda, the impact of the measures taken under DPL II is perceptible: (i) state control in the banking sector has been appreciably reduced through privatization and divestiture; (ii) the supervisory and regulatory framework is more robust than it was before the reforms were launched; (iii) new laws have been introduced and others amended to remove significant constraints on the development of the insurance sector; (iii) the large stock of NPLs has been significantly reduced and provisioning boosted, resulting in sounder state banks’ balance sheets; and (iv) state-owned banks have undergone a comprehensive restructuring—completed on June 30, 2008 which enhanced their operations and profitability, will enable them to operate as pure commercial entities, and will reduce drastically the likelihood of future claims on the government budget.
3.5. Overarching Themes, Other Outcomes and Impacts
(a) Poverty Impacts and Social Development
49. Though DPL II did not have explicit social development outcomes as objectives, clearly the shift from a public to a more market-oriented financial system is expected to have a direct and positive impact on growth, employment, and crisis prevention, while also increasing access of various social groups, including the poor, to financial services. The privatized Bank of Alexandria has already increased its outreach in rural areas through mobile banking services outputs, increased ATMs, and is moving into the SME finance market. 50. Restoring the soundness of the state-owned insurance companies and increased competition in the sector will enable the industry to provide better quality products at a more reasonable cost. This combined with the sharp reduction in stamp duty levied on insurance premia will lower the cost of insurance for Egyptians and ease access to insurance in a country where penetration is very low. The measures aimed at addressing the soundness of the private pension funds and strengthening of the supervisory function of the pension system will ensure that the interest of retirees are protected in the future and that their savings are well managed.
(b) Institutional Change/Strengthening
51. DPL II had, and will continue to have, a substantial institutional development impact in the financial sector even though it was a single-tranche project. The policies supported by the program are fast transforming the Egyptian financial sector. Substantial capacity building provided to CBE, and EISA are modernizing these institutions while introducing state of the art risk management tools and IT systems and will lead to the emergence of a robust supervisory and regulatory capacity in the country. 52. The comprehensive operational and institutional restructuring of the two largest state-owned commercial banks is modernizing these banks and enhancing their operating environment thereby contributing to enhancing their capacity to increase intermediation and improve savings mobilization. Substantial staff training sector wide, in and outside Egypt, will have a long lasting impact and will develop a pool of financial skills hitherto not abundant in Egypt, thereby contributing to the sustainability of the reforms.
(c) Other Unintended Outcomes and Impacts (positive or negative, if any)
Not applicable
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3.6. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops
Not applicable
4. Assessment of Risk to Development Outcome
Rating: Low to Negligible 53. The risks to development outcomes which were well identified at appraisal remain low to negligible. Three sources of risks were identified at that point: (i) political feasibility and macroeconomic framework; (ii) building credible and independent regulators; and (iii) state banks reverting to old lax management practices after recapitalization. After closing the operation, the risk to the Development Outcome is considered Negligible to Low since the mitigating measures envisaged in the Program Document are still in place.
(i) Political feasibility and macroeconomic framework: Nearly two years after appraisal, commitment of the government towards the reform program continues to be strong and focused on implementation as evidenced by their request for a second operation to support the second phase of reforms. In addition, despite some criticism of the privatization of Bank of Alexandria by the media, most agree that the privatization was a success and brought in more revenues than expected, with the privatized bank leading change in modernizing access to financial services. The labor layoffs were also well managed with many leaving voluntarily through the various voluntary early retirement programs. (ii) Building credible and independent regulatory authorities. The credibility and independence of the regulator is the base upon which a resilient financial system may emerge and prosper. This risk relates to the authorities’ ability, within the program timeframe, to build the capacity of and implement the strengthened regulatory and supervisory framework. These risks are being adequately managed through the strong donor driven capacity building initiatives discussed earlier and the Central Bank of Egypt's commitment to continuing to benefit from ECB’s existing technical assistance. The protocol agreement for a two year technical assistance program ended in December 2007. A second 3-year protocol was signed in November 2008 between ECB, and the CBE for the implementation of Basel II. (iii) Recapitalization without privatization is considered a serious risk of fiscal waste at best; such unconditional financial support may provide bank management with the wrong signal to pursue their past and costly lending practices. To reduce such a risk, the Government is still committed to proceed with the recapitalization of these banks only upon the satisfactory implementation of their operational and restructuring plan. Full compliance is being closely monitored by CBE (acting on the owner’s behalf) and the Bank.
5. Assessment of Bank and Borrower Performance
5.1. Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Highly Satisfactory 54. Bank performance is rated as highly satisfactory. The project team paid particular attention to ensuring high quality at entry for this operation. The Loan identification and design were consistent with the CAS, and the recommendations put forward by the 2002 FSAP, and 2007 FSAP Update.
� The Bank was instrumental in taking full advantage of a window of opportunity presented by the reformist government that led to this major progress on financial sector reforms outcomes.
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� Sound preparatory work, strong policy dialogue, good working relationships with government counterparts, high level of consultation with market participants, and Bank expertise led to the design of an operation which took into account the need to build regulatory capacity, and manage the key risks (political, social, fiscal, and governance) that could derail implementation.
� Close coordination with the USAID, the EU, AfDB and the IMF to help the government build the necessary capacity to implement the Program.
� The Bank set a clear results-based framework which included reaching an irreversibility step in the privatization process of the Bank of Alexandria, and agreeing to subjecting recapitalization of restructured state owned banks to implementation of the financial, institutional, and operational plans before taking the operation to the Board.
55. In addition, the Bank rightly identified the principal risks to which the financial sector was exposed and ensured that the FS DPL Program would address those risks which were related to the most vulnerable areas of the financial, banking and insurance sectors.
(b) Quality of Supervision
Rating: Satisfactory 56. Bank supervisory performance is rated as satisfactory. The Bank conducted two supervisions. The policy dialogue continued with official counterparts on both the implementation of the reforms under DPL and on new areas of reforms which the government sought advice on. Periodic monitoring of the implementation of the reform program and the operation was done regularly from the field by the task manager, in addition to the periodic supervision missions. These missions provided sound technical advice to the authorities. The missions followed up on progress on the agreed monitoring indicators and discussed results with the Ministry of Investment and CBE as well as other counterparts in the sector. The supervision provided therefore a crucial channel through which the World Bank team was able to continue to support and advise the government on the next steps of reforms. These supervision missions had their terms of reference extended to the preparation of the follow up operation DPL III
(c) Justification of Rating for Overall Bank Performance
Rating: Satisfactory 57. The rating of satisfactory is based on the following considerations: (i) the project was very well designed, its PDO was in line with the Country’s and the Bank’s priorities, the intermediate indicators were relevant, helped focus the supervision, and helped inform the design of the second stage of reforms; (ii) the Bank was aware of the challenges involved in seeking the reduction of the state’s ownership of financial sector assets and addressing the restructuring of major financial institutions so it adopted a flexible results based framework and a risk mitigating strategy, in consultation with the authorities, who remained committed to the implementing the reforms despite their high political risks; (iii) from identification to closing, the team was extensively involved in a policy dialogue with the authorities and independent counterparts, collaborating to ensure that the ultimate goal of this operation - to assist Egypt in strengthening the enabling environment for financial intermediation, resource mobilization and risk management, and increasing private sector role and participation in the provision of financial services- would be achieved; and; (iv) the project team and the country office developed an optimal level of cooperation that played a key role in the success of the operation.
58. The combination of clear and focused policy actions supported in DPL with sustained dialogue before and after the loan was approved and disbursed, during supervision and preparation of other operations, resulted in a constructive interaction with counterparts, strengthening sustainability of the policies supported by DPL in the process.
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5.2. Borrower Performance
(a) Government Performance
Rating: Highly Satisfactory 59. From the design to implementation stage, the government was in the “driver seat” seeking advice from the Bank where needed to implement its strategic reform agenda. The authorities remained focused on the success of the Development Objective as they saw its importance in fulfilling ultimately through the financing of a private sector let investment strategy, their growth and improvement of Egyptians living standards. In this context, the Government took the initiative to seek support from other donors according to their respective comparative advantage, and was keen on ensuring good coordination between the various partners. The decision to request the Bank to play a lead role succeeded in getting the best out of each donor’s support and avoided waste that comes from unclear donors mandate and overlap. The donors coordinating committee, chaired by the Bank, also helped the Government address key financial sector issues on a timely and priority basis.
(b) Implementing Agency or Agencies Performance
Rating: Satisfactory
Implementing agencies Ministry of Investment (MOI) Satisfactory Central Bank of Egypt (CBE) Satisfactory 60. The Ministry of Investment and CBE are the two agencies responsible for the design and overall implementation of the operation. The Minister of Investment and his staff and the staff of the BRU and the Banking Supervision Department at CBE in charge of the implementation of the reforms, including at its head the Governor of CBE and his two deputies, were instrumental to the success of this operation. They were systematic in the way they went about the design of the blueprint for the reforms, and seeking advice from the Bank and other donors, at judicial junctures to keep the implementation moving and get support and advice when they encountered major challenges. The reporting and coordination of actions between the concerned agencies was efficient and timely throughout the life of the project resulting in a successful operation that went far beyond compliance with identified intermediate outcomes as one can see during the follow on operation that is under preparation. Their availability and knowledge of all the program benchmarks allowed for a timely presentation to the Board of the operation and for an effective implementation of the DPL II reform agenda before project closing.
(c) Justification of Rating for Overall Borrower Performance
Rating: Satisfactory The rating of satisfactory is justified by the following:
� The GOE demonstrated a clear ownership of the project. The respective responsibilities of the MOI and the CBE where clearly defined reducing to a minimum the opportunities for overlapping or misunderstanding.
� The reform program reflected a clear and complete vision of needs of the financial sector. It was complete, comprehensive, articulated around the most important issues and sequenced according to priorities.
� The GOE was very instrumental in keeping the momentum of the financial reform agenda and the operation alive. This was no small task given the comprehensiveness of the reform and the scope of the project.
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6. Lessons Learned
(i) Trusting reformers who demonstrate commitment to reform and giving them the necessary flexibility to implement these reforms is key to success of reforms
61. When dealing with credible reformers, one important lesson is to trust their judgment (since they are in the driver seat and have themselves initiated the reforms rather than being forced to reform). A more appropriate approach should, therefore, be based around the principle of mutual commitment between the Egyptian authorities and the Bank, a policy compact whereby the Bank commits to support the reform process in Egypt and the GOE commits to continuing along the reform path rather than micromanaging the reform process and imposing conditionality that undermines the credibility of the reformers with their domestic constituency. (ii) Prior Analytical work (FSAP), and Strong back up from development partners through policy dialogue and technical assistance, Synergies between donors, and flexibility in implementation of the reforms, are critical to success
62. The 2002 FSAP, and the 2007 FSAP Update, helped lay a credible blueprint for the design of the DPL II which in turn made easier the coordination of donors’ assistance around the realization of this blueprint. Given the multifaceted nature of the financial reform effort, the contribution of many donors was needed. Since most components of the reform are inter-connected, the coordination of these efforts becomes critical. The Bank team made an excellent decision, given its experience, to focus its dialogue and assistance to addressing the restructuring of the banking and insurance sectors, the EU and ECB to work on the supervision and regulatory framework, the USAID to provide assistance in mortgage finance and the regulatory environment for the insurance sector, the IMF to focus on exchange rate and monetary policy management, and the AfDB to join the overall effort through co-financing. Strong communications between the World Bank team, the Government, and these donors helped cement a solid partnership based on comparative advantage. 63. This best practice partnership framework is among the key success factors of this operation. Indeed, the respective responsibilities were clearly defined, including giving the authorities the flexibility needed to implement the reforms. Since the Egyptian government had a clear vision of what needed to be accomplished, cooperation and coordination of support were the best approach rather than constant “hand holding” and double guessing of the authorities’ intent. The success of the operation required the right balance between flexibility in the implementation and pro-activity in providing technical assistance and guidance where needed. In this respect, the approach followed under this DPL II can be considered best practice and one that may benefit other operations outside Egypt.
(iii) Consultation with the stakeholders can mitigate opposition to the reforms 64. Reforms have been undertaken after a process of close and continuous consultation with all stakeholders. This participative process with wider involvement not only encouraged a more informed evaluation of underlying content of policies but also enhanced the credibility of policies and generated expectations that the reform process will be sustained. One of the reasons advanced for the inability to fully implement the financial sector reform measures in the past was the lack of public support for the measures.
(iv) The design of the policy matrix is key to the sustainability of the reforms 65. A well defined policy matrix owned by the government and endorsed by the Bank and partners is an essential implementation roadmap for the authorities to move the agenda forward.
(v) Outside expertise must accompany the reforms for a longer time to ensure sustainability and a training plan over the short and medium terms must be formalized as an integral part of the program.66. The country is in the midst of a vast program of reforms involving significant laws to be
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passed or amended, institutions to be created or reorganized. The pool of financial skills is limited and public institutions do not always have adequate resources to fund outside expertise or extensive training needs for their staff to ensure sustainability of the reforms.
(vi) The single tranche DPL II proved to be a suitable instrument for the Borrower and the Bank 67. It responded effectively to the needs of the authorities by providing them timely support based on clearly established prior actions. It provides quicker feedback and momentum to the reforms that enables follow up and making early adjustments if necessary. It allows continuity in the dialogue with the authorities. Single tranche operations define benchmarks based on information available at the time of implementation and not on some future developments which might not materialize.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
(a) Borrower/Implementing agencies 68. The Egyptian government praised the Bank’s operation in supporting the government in implementing its ambitious Financial Sector Reform Program, which entails strengthening the institutional framework and the overall environment for better financial intermediation; resource mobilization and risk management; and increasing the role of the private sector. Regarding borrower’s performance, the operation witnessed a series of reform measures that aimed at developing a sound financial sector, such as, the reduction in NPLs, the upgrade of the banking supervision department at CBE, the consolidation of the banking sector, and the divestiture of public shares in joint venture banks. The government also acclaimed the team’s remarkable deal of diligence and technical support throughout the operation, in addition to the close coordination and dialogue (see Annex 2).
(b) Donors and Co-financiers 69. Donors that are actively involved in the financial sector work, include, USAID, EC, and AfDB have commended the World Bank’s financial sector work, and especially DPL II. Various donors and international institutions have been providing support for the implementation of the government’s Financial Sector Reform Program through the provision of technical assistance, and analytical work on reforming and restructuring the financial sector. Technical assistance provided by Eurosystem was deemed satisfactory by an European HQ evaluation mission. This required effective coordination, which the Bank took leadership in. A Financial Sector Donors Subgroup, chaired by the World Bank was formed in mid 2005, to coordinate efforts related to both technical and financial support provided to the government and to ensure that borrowed funds are used in the most effective manner. This cooperation led to mutual design and agreement of conditionality issues that all donors agreed were essential for financial sector reform. In addition, donors were able to do a much better job of leveraging resources, both loan and technical assistance, when coordination is effective. Views and feedback of donors were obtained through various consultations via the Financial Sector Donors Subgroup led by the World Bank.
(c) Other partners and stakeholders 70. Stakeholders commended the operation and its positive impact on enhancing competition and shaping a more sound financial sector in Egypt. Private banks indicated that the Bank’s operation ensured timely and adequate implementation of the Financial Sector Reform Program. Both local and foreign banks greatly appreciated the consultations that were conducted during the design of the operation. State-owned banks and state-owned insurers in particular praised the Bank for providing draft Terms of References for the undertaking of Comprehensive Independent Audit of State-owned Commercial Bank; Institutional and Operational Strengthening of State-owned Commercial Bank; and Restructuring and Privatization of State-owned Insurers. These Terms of References helped in guiding financial institutions in the implementation of the restructuring programs.
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Annex 1: Bank Lending and Implementation Support/Supervision Processes
a) Task Team members Names Title Unit Responsibility/Specialty
Lending
Sahar Nasr Lead Financial Economist MNSEDTTL
Samia Msadek Manager MNAFMFinancial management
Rodney Lester Sr. Adviser FPDSN Insurance restructuring and Supervision
Roberto R. Rocha Sr. Adviser Banking restructuring
William Mako Lead Private Sector Development Specialist MNSFP Capital market
Xavier Reille Lead Microfinance Specialist CGAP Microfinance
Didier Debals Senior Financial Specialist MNSFP Banking supervision
Gustavo Demarco Senior Economist MNSSP Pension reforms
Hyacinth Brown Senior Finance Officer CTRFC Disbursement
David Freese Senior Finance Officer CTRFC Disbursement
Olasupo Olusi Young Professional MNSEDBanking
Ghada Youness Sr. Counsel LEGEM Legal
Anarkan Akerova Counsel LEGEM Legal
Steve W. Wan Yan Lun Operations Analyst MNSEDOperation
Amira Zaky Program Assistant MNC03 Operation
James Hanson Consultant MNSEDBanking restructuring
Tanis Maclaren Consultant MNSEDCapital market
Supervision
Sahar Ahmed Nasr Lead Financial Economist MNSED TTL
Rodney Lester Sr. Adviser FPDSN Insurance sector
Roberto Rocha Sr. Adviser FPDFS Banking restructuring
William Mako Lead Private Sector Development SpecialistMNSFP Capital market
Didier Debals Senior Financial Specialist MNSFP Banking supervision
Gustavo Demarco Senior Economist MNSSP Pensions sector
James Hanson Consultant MNSED Banking restructuring
Amira Zaky Program Assistant MNC03 Operation
Laila Abdel Kader Consultant MNSED Financial Sector
Yasmine Wissa Consultant MNSED Financial Sector
Mohamed El Sherif Consultant MNSED Financial Sector
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(b) Staff Time and Cost
Staff Time and Cost (Bank Budget Only) Stage
No. of staff weeks USD Thousands (including travel and consultant costs)
Lending FY05 26 127.28 FY06 63 294.13
Total: 89 421.41 Supervision/ICR
FY07 19 107.25 FY08 4.93
Total: 19 112.18
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Annex 2: Summary of Borrower’s ICR
A. Introduction Since its appointment in July 2004, the Egyptian Government has embarked on a comprehensive program of macroeconomic and structural reforms. A key pillar of this comprehensive effort was the "Financial Sector Reform Program (2005-2008)". This program aimed at creating a sound and diversified financial sector, capable of contributing to Egypt’s growth performance and providing access to financial services to a much broader segment of the Egyptian population. The main components of this program included the empowerment of the private sector in the provision of financial services, the development of effective bank and non-bank institutions providing a wide range of financial services, and the strengthening of financial infrastructure and the regulatory and supervisory framework. This entailed strengthening the institutional framework and the overall environment for financial intermediation, resource mobilization and risk management. The World Bank's Financial Sector Policy Loan (II) was affected to evidence the continuing support to the Egyptian Government's economic reform efforts. B. Assessment of the operation’s objectives, design, implementation, and operational
experience: The operation's objective aimed to support the government in the implementation of the second phase of its ambitious financial reform program. The program pillars called for (i) reforming the banking sector; (ii) restructuring the insurance sector; (iii) deepening the capital market; (iv) developing a well-functioning mortgage market; and (v) activating other financial services. The operation's design and implementation was agreed to be as a single disbursement of the full amount of the loan in the amount of US$500 million. This came into effect in view of a series of reform efforts that have been concluded, including:
� Reduction of public ownership and control of banks to less than 50 percent of total banking sector assets, through: completion of privatization of Bank of Alexandria, divestiture of 94 percent of the portfolio of the state-owned banks’ shareholding in joint-venture banks, as well as further consolidation of the banking system to 40 banks through mergers and acquisitions.
� Financial and operational restructuring of the commercial state-owned banks—adoption of a viable, time-bound, operational scheme for the settlement of SOEs’ NPLs whereby outstanding NPLs as of June 2004 will drop by at least 60 percent by May 2008,
Arab Republic of Egypt
Ministry of Investment Central Bank of Egypt
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progress in provisioning for NPLs of state-owned commercial banks; substantial progress in the implementation of the operational and institutional restructuring of the state-owned commercial banks; and finalizing the TORs of the financial due diligence of the three state-owned specialized banks.
� Strengthening the legal, regulatory and supervisory framework of the banking system via satisfactory implementation of the program for capacity building in banking regulation and supervision, including new on-site inspection reports and associated training program, preparation for CAMEL based off-site reporting and operational macro prudential and regulations unit.
� Restructuring the state-owned insurance companies. Completion of the legal merger of the three state-owned insurance companies into Misr Insurance Company; appointment of an investment bank to advise on the operational restructuring of the newly merged state-owned insurance company.
� Strengthening legal regulatory and supervisory framework in insurance and pensions. Adoption of new organizational structure of EISA consistent with an appropriate risk based supervisory model. Enactment of new MTPL Law and Executive Regulations, beginning to raise premiums to actuarially required levels; and update MTPL claims provision, as well as submission to Parliament of key amendments to Insurance Law 10, including: (i) increase in minimum capital; (ii) corporatization of insurance brokers; (iii) independent funding for EISA; and (iv) Separation of life and non-life insurance business. In addition to the completion of a draft law overhauling the regulatory framework for private pension funds.
� Improving the ability of capital markets to provide financing and capital market/corporate governance discipline through the adoption and implementation of IFRS requirements for listed companies and securities firms; establishment of a registry for auditors at the CMA; enhanced capital adequacy regulations and risk management for financial intermediaries; and establishment of listing requirements and regulatory framework for the new SME stock exchange (NILEX), as well as better disclosure, legal and pricing clarifications, and reduced capital burdens for the sponsors of investment funds.
� Strengthening the financial sector institutional infrastructure, through improving the quality and credibility of the credit-information system, developing the public credit registry and operationalizing the new private credit bureau; continuing the modernization of the payments system at CBE; and setting the legal framework for specialized economic courts to address problems of bankruptcy, foreclosure, and cumbersome judicial system, as well as regulatory framework for microfinance.
C. Assessment of the outcome of the operation against the agreed objectives:
The loan objectives were satisfactorily met as reflected by the strengthening of the institutional framework, the overall improvement of financial intermediation, resource mobilization and risk management, and the increasing private sector role and participation in the provision of financial services to support real economic growth. Due to early reforms conducted during the period 2004-2008, prudential regulations, and strong supervision, the Egyptian banking sector remained immune to the effects of the collapse of global financial markets. Key characteristics have undoubtedly helped the banking sector continue to function normally amid the global financial turmoil, such as:
� Very limited exposure to the failed and stressed global financial institutions.
� Marginal exposure to risky and impaired assets
� High levels of balance sheet liquidity, as domestic retail deposits correspond to more than two thirds of the banking system’s liabilities.
� The overall loans-to-deposit ratio is around 55 percent and a high proportion of assets are short term and liquid.
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� Egyptian companies obtain most of their finances domestically i.e. highly sheltered from the freeze in international money markets and the higher costs of funds.
� The domestic money and foreign exchange markets have been operating in an orderly manner and remain very liquid.
The following summarizes the landmark developments accomplished during this Phase of the Financial Sector Reform Program:
� Divesture of state owned banks’ shares in joint venture banks eliminating conflict of
interest, and indirect state ownership and intervention. This reform pillar succeeded in attracting foreign and regional strategic investments and inviting banking know-how by means of drawing regional and international strategic investors.
� State control of the banking sector was reduced as indicated by the direct and indirect share of state owned banks of banking system deposits which declined from over 70 percent in 2004 to 45.5 percent in December 2009. This was due to the privatization of Bank of Alexandria, and the divestiture of the state-owned banks shares in the joint venture banks.
� The privatization of Bank of Alexandria was acknowledged as one of the most successful privatization transaction in the MENA region in recent years.
� Dealing with weak banks by means of consolidations with larger banking institutions, which was instrumental in securing depositors’ funds, protecting the financial system and ensuring its safety amidst the financial crisis.
� Consolidations were encouraged to create robust entities with strong management, efficient processes and proper financial coverage, whereby (i) the number of banks has declined from 57 banks in December 2004 to a current number of 39 banks; (ii) doubling the Banking Sector’s Net worth from EGP 35 billion in 2004 to EGP 70 billion in 2008 and (iii) increasing the number of operative branches from 1795 in 2004 to 2424 in September 2009.
� Implementation of a complete operational and financial reform for state owned commercial banks, whereby (i) recapitalization measures of state owned commercial banks were taken based on results of an independent audit, due diligence and IFRS conversions from EAS and (ii) operational and structural reform was implemented for National Bank of Egypt and Banque Misr covering 3 backbone areas, namely HR, Risk Management, IT & MIS.
� Setting a national policy for dealing with NPL’s to improve economic performance and enhance growth which lead to (i) the stock of NPLs by state-owned enterprises at the state-owned commercial banks was curtailed by two thirds falling from LE 26 billion to LE 10 billion; (ii) the stock of private sector NPLs was also significantly reduced through the work out units created at the banks. Total settlement agreements from 1/1/2004 through 30/11/2009 exceeded 90% of NPLs (excluding public enterprises’ debt) with collections of 60% out of which cash collections represented 85%; and (iii) provisioning of state-owned banks was improved as shown in the ratio of provisions to NPLs which increased for National Bank of Egypt, Bank Misr and Banque du Caire from 66.5 percent in June 2008 to 74.8 in June 2009.
� Completing Phase I of Upgrading the Banking Supervision Unit in line with international standards by implementing a risk based approach.
� Completing operational restructuring of the newly merged insurance company (Misr Insurance Company). All legal requirements have been fulfilled, and branches merged. Also, the new entity has been assigned for the highest rating between merged entities, and a new chairman has been appointed.
� Strengthening the legal regulatory and supervisory framework in insurance and pensions through (i) adopting a new organizational structure for Egyptian Insurance Supervisory Authority consistent with an appropriate risk based supervisory model; (ii) enacting amendments to insurance Law 10 including increase in minimum capital, corporatization
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of insurance brokers, independent funding for EISA and Separation of life and non-life insurance business; (iii) enacting a new Motor Third Party Liability (MTPL) Law and Executive Regulations. The strong action already taken on the MTPL front has encouraged 12 private insurers to seek authority to enter this sector; (iv) submission to the cabinet draft law overhauling the regulatory framework of the private pension system by inter alia creating new collective private pension funds and pension companies providing professional training; and (v) Continued progress in actuarial assessment of private pension funds under EISA guidelines.
� Improving the ability of capital markets to provide financing and capital market/corporate governance discipline through (i) the adoption of International Standards of Auditing (ISA) and setting stronger CMA rules for certification of external auditors; (ii) enactment of amendment to the Executive Regulations of the Capital Market Law (CML), enhancing capital adequacy requirements and risk management requirements for financial intermediaries regulated by the CMA and successful CMA actions to enforce compliance with new capital adequacy ratio and risk management requirements for financial intermediaries; (iii) enactment of amendments to CML simplifying four listing schedules at the EGX; (iv) establishment of a new SME stock exchange (NILEX) and initial listing of several SMEs on NILEX; (v) better disclosure, legal and pricing clarifications, and reduced capital burdens for the sponsors of investment funds; and (vi) bettering supervision and market surveillance by CMA.
� Issuance of Specialized Economic Courts Law.
� Creation of micro lending NBFIs and promulgation of related regulations and supervisory framework.
� The stock market showed positive trends during this period. Turnover in the Egyptian exchange has expanded to EGP 280 billion in FY 2008/09, which is a considerable leap since its valuation of EGP 72.8 billion in FY 2004/05; while the monthly average value of trade increased from EGP 6,069 million in FY 2004/05 to EGP 23,335 million in FY 2008/09. The volume of trading in the Egyptian exchange has reached EGP 25.9 billion in FY 2008/09 up from EGP 3 billion in FY 2004/05. The number of investors registered in the Egyptian exchange has increased from 875,000 investors in FY 2004/05 to 1.6 million investors in FY 2008/09.
� The housing finance market witnessed significant progress on various fronts relating to registration fees, efficiency of procedures for land registration, property valuation, and access to long-term credit and cost of funding. Eleven mortgage finance companies and Egypt Mortgage Refinancing Company with nineteen banks are now operating in the market with around EGP 4.3 billion extended as mortgage finance loans as of December 2009
Sustaining the reform program on all fronts has fundamentally solidified the business and economic environments and provided substantial institutional depth and vigor to execute the next phase of the reform program.
D. Evaluation of the borrower’s own performance during the preparation and implementation of the operation, with special emphasis on lessons learned that may be helpful in the future: The operation witnessed a series of reform measures that focused on developing a sound financial sector. The majority of the concluded reforms were thoroughly discussed with the World Bank on various occasions. Moreover, they mostly converge with the FSAP 2002, and 2007 FSAP Update recommendations.
Building on the achievements of the 2004-2008 financial sector Reform Program and core objectives focusing on (i) deepening the Egyptian banking sector, enhancing its efficiency, competitiveness, transparency and risk management practices to ensure that it will effectively conduct its role in financial intermediation to sustain domestic economic growth and development, (ii) restructuring the Insurance Sector, (iii) deepening the Capital Market, (iv)
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developing the Mortgage Finance Market, and (v) enhancing other Financial Services, a new phase of the Financial Sector Reform Program (2009-2012) was launched in January 2009. The strategic pillars of the financial sector reform program focus on:
� Supervising and monitoring the launch of a complete operational and financial
restructuring plan for the three state owned specialized banks (PBDAK, EALB, and ID&WB).
� Following up on the operational and institutional restructuring of NBE, BM and BDC to ensure sustainability of phase I restructuring achievements, and finalizing the requirements necessary to improve their efficiency in financial intermediation and risk management.
� Implementing Basel II framework in the Egyptian banking sector.
� Reviewing and enforcing the implementation of Corporate Governance rules in the banking sector and the Central Bank of Egypt.
� Adopting an initiative promoting the development and growth of banking activities/services catering for various sectors especially the SME sector.
� Improving access to finance, especially for SMEs through introducing a new legislation regulating the micro finance activities, reinforcing the operations of the Nile Stock Exchange (NILEX) for SMEs, improving medium and long-term financing through developing the bonds market; as well as enhancing and developing the secondary market for bonds via promoting the establishment of collective investment vehicles.
� Expanding the activities of the financial institutions in remote areas to provide credit and other financial services for SMEs.
� Strengthening the regulatory and supervisory Framework in the Non-Banking Financial Sector via the establishment of the Egyptian Financial Supervisory Authority (EFSA) consolidating the regulatory bodies of non-bank financial services, markets, institutions, and developing the regulatory framework for the NBFS to ensure the stability of the financial sector, by moving from a rule-based to a risk-based regulatory framework.
� Enhancing markets’ efficiency and fostering financial innovation in the Non Bank Financial Sector (NBFS).
� Expanding the reach of the NBFS to remote and under developed areas in Egypt.
� Enhancing regional expansion by Non Bank Financial Institutions.
� Developing the financial culture and raising public awareness of investment and financial services, and associated risks and returns associated with their investments.
E. Evaluation of the performance of the Bank, any co-financiers, or of other partners
during the preparation and implementation of the operation, including the effectiveness of their relationships, with special emphasis on lessons learned: The World Bank's performance during the operation was overall highly satisfactory. The operation witnessed close coordination and communication with the relevant bank officials, and special acknowledgment should be given to the efforts of the field team, especially the Task Team Leader during the preparation and supervision. The team showed a remarkable deal of diligence and technical support for the responsible authorities throughout the operation. The presence of the TTL on the ground during supervision provided effective communication and ensured all required and expected intermediate outcomes where duly met. The World Bank also conducted close coordination efforts with other donors who are actively involved in the financial sector reform including the EU, USAID and African Development Bank (AfDB).
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F. Description of the proposed arrangements for future operation of the project:
As a result of the successful cooperation with the World Bank in the preparation for and disbursement of DPL II, the Egyptian Government is keen on further cooperation with the World Bank on the second phase reforms of its Financial Sector Reform Program, through a third DPL.
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Annex 3: Comments of Cofinanciers and Other Partners/Stakeholders
Donors that are actively involved in the financial sector work, include, USAID, EC, and AfDB have commended the World Bank’s financial sector work, and especially the DPL. Various donors and international institutions have been providing support for the implementation of the government’s Financial Sector Reform Program through the provision of technical assistance, and analytical work on reforming and restructuring the financial sector. This required effective coordination, which the Bank took leadership in. A Financial Sector Donors Subgroup, chaired by the World Bank was formed in mid 2005, to coordinate efforts related to both technical and financial support provided to the government and to ensure that borrowed funds are used in the most effective manner. This cooperation led to mutual design and agreement of conditionality issues that all donors agreed were essential for financial sector reform. In addition, donors were able to do a much better job of leveraging resources, both loan and technical assistance, when coordination is effective. Donors have benefited from the analytical work that was undertaken by the Bank, especially the 2002 joint IFM-World Bank FSAP. Most of the recommendations put forward by the FSAP were used in drafting the Memorandum of Understanding (MOU) between the government of Egypt and USAID. All major elements required for financial sector reform as identified by the FSAP were used in drafted the conditionality that appears in the MOU. Moreover, technical assistance to support the financial sector reforms was jointly discussed, designed and deployed, with USAID and EC, with an understanding that the different donors would support various activities, but attempting to promote complimentarily. For example, the audit TOR for public sector banks was drafted by the WB where USAID is providing funding for audits. The European Central Bank and the EC funded projects provided technical assistance to CBE banking supervision, restructuring assistance for NBE and Bank Misr, whereas USAID provided technical assistance to the CBE in areas such as information technology, human resources, foreign exchange unit, monetary policy unit, and the banking reform unit, as well as to the insurance sector. From the USAID perspective, the strong relationship with the Bank was unique in that it was mutually reinforcing. USAID acknowledges such close cooperation that helped them in designing assistance strategies to effectively respond to the needs of Egypt. They appreciated the sharing of information and the close contact to advance in addressing major constraints. This close working relationship helped to ensure that activities of respective organizations did not conflict with each other. Both parties had a common objective to support the government of Egypt’s efforts to implement financial sector reforms. It is much easier for USAID to provide long-term technical assistance rather than long-term finance, whereas the World Bank is well positioned to address financing issues, a key component to help the authorities implement their financial sector reforms. Supporting common objectives helped the government in advancing with its reform agenda. This was really a three-win situation for the World Bank, USAID and most importantly for the government of Egypt. AfDB provided parallel financing to the Financial Sector Reform Program, of an equivalent amount of US$500 million. The AfDB appreciates the Bank’s efforts in processing such a large operation. Their project document was largely based on the Bank’s analytical work and the preparation work that was done. The World Bank and AfDB have conducted joint appraisal mission, in which the Bank took a leading role in the policy dialogue, and in the identification of triggers on banking and insurance sector. Overall, donors have commended the Bank’s efforts in moving forward with the implementation of the Financial Sector Reform Program, and in ensuring synergy in the policy measures supported by the various donors, and effective use of resources.
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Annex 4: Operational Policy Matr ix
Egypt—Second Financial Sector Development Policy Loan
PRIOR POLICY ACTIONS
FOR BOARD APPROVAL ON MAY 2008PHASE I I OF GOVERNMENT’SPROGRAM
EXPECTED INTERMEDIATE PROGRAM OUTCOMES
BY DECEMBER 2009 CLOSING DATE
LONG-RUN INDICATIVE POLICY MEASURES
I. Reduction of Public Ownership and Control of Banks and Consolidation of the Banking Sector
Preparation for divestiture, including retention of a salesadvisor, of the remaining 20% of state-owned shares inBank of Alexandria (20% of which 5 percent will go toemployees)
Completion of initial public offering (IPO) transaction forBank of Alexandria
Bank of Alexandria operating fully under privateownership
Divestiture of 94 percent of the portfolio of state-ownedbanks holdings in joint venture banks
Former joint venturebanks are majority privately owned Former joint venturebanks operating at a level playing fieldwith other privatebanks
Consolidation of the banking system from 57 banks as of June2004 to 40 banks, through mergers and acquisitions
Further consolidation of thebanking system A sound and sustainablebanking system
Reduction of share of state-owned banks to less than 50percent of total banking sector assets
A competitive banking system led by strong privatesectorbanks
A competitive banking system led by strong privatesectorbanks
* The indicative policy measures for the proposed FS DPL II are indicated in Phase II of the ‘Financial Sector Reform Program’, as stated in the Government’s Development Policy Letter, and outlined inthe Operational Policy Matrix of FS DPL I.
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PRIOR POLICY ACTIONS
FOR BOARD APPROVAL ON MAY 2008PHASE I I OF GOVERNMENT’SPROGRAM
EXPECTED INTERMEDIATE PROGRAM OUTCOMES
BY DECEMBER 2009 CLOSING DATE
LONG-RUN INDICATIVE POLICY MEASURES
II. Financial and Operational Restructuring of Remaining Commercial State-Owned Banks and Specialized State-owned Banks
Substantial progress in implementing program of financialrestructuring and recapitalization of state-owned commercialbanks, including:
�� Settlement of at least 60 percent of non-performing loans (NPLs) of state-ownedenterprises (SOEs) held by state-ownedcommercial banks as of June 2004
�� Progress in provisioning theNPLs of state-ownedcommercial banks
Full settlement of theNPLs of SOEs held by state-ownedcommercial banks
State-owned commercial banks’ financial statements fullyreflect bank net asset values and economic position
State-owned commercial banks in full regulatory complianceand competing with private banks on a level playing basis
State-owned commercial banks’ financial statements fullyreflect bank net asset values and economic position in linewith International Financial Reporting Standards (IFRS)
Substantial implementation of program of institutionaland operational restructur ing of the National Bank ofEgypt and Bank Misr with par ticipation of reputableinternational firms, and as per agreed framework
National Bank of Egypt and Bank Misr show improvement in:(i) human resources; (ii) risk management, and (iii) ITsystems.
Satisfactory completion of restructuring of National Bank ofEgypt and Bank Misr so that they operate on commerciallysound basis within adequate governance, incentive and riskmanagement structures
Completion of financial and operational reviews by KPMGand Rabo Bank in the Principal Bank for Development andAgricultural CreditCompletion of TORs of independent and comprehensivefinancial due diligence of the three state-owned specializedbanks (Principal Bank for Development and AgriculturalCredit, Arab Land Bank, and Industrial Development Bank)
Completion of independent and comprehensive financial duediligence of the three state-owned specialized banks
Adoption of a program of institutional and operationalrestructuring for the state-owned specialized banks
Specialized state-owned banks operating as viable commercialbanks
I I I . Strengthening theRegulatory and Supervisory Framework of the Banking Sector
Implementation of capacity building measures in bankingregulation and supervision ison track as per agreed ECBprogram, including new on-site inspection reports andassociated training program, preparation for CAMELbased offsite repor ting, and operational Macro PrudentialUnit.
Continued capacity building measures in banking regulationand supervision, including new internal guidelines andprocedures, new IT scheme and training program
Egypt has built a credible, risk-based banking supervisorysystem
IV. Restructur ing of State-owned Insurance Companies
Completion of the legal merger of three state-ownedinsurance companies into Misr Insurance Company
Completion of operational restructuring of the mergedinsurance company
The merged company is operating commercially with soundcorporate governance
Adoption of a viable business plan for the state-ownedNational Insurance Company
Substantial progress in the implementation of the NationalInsurance Company’s business plan
National Insurance Company operating on a soundcommercial basis
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PRIOR POLICY ACTIONS
FOR BOARD APPROVAL ON MAY 2008PHASE I I OF GOVERNMENT’SPROGRAM
EXPECTED INTERMEDIATE PROGRAM OUTCOMES
BY DECEMBER 2009 CLOSING DATE
LONG-RUN INDICATIVE POLICY MEASURES
V. Strengthening the Regulatory and Supervisory Framework in Insurance and Pensions
Substantial improvements to the legal and regulatoryframework for Motor Third Party Liability (MTPL) Insurance,including:
• Enactment of new MTPL Law and Executive Regulations
• Enactment of thenew interim price list of MTPL
• Updateof MTPL claims provisions
Sufficiently adequateMTPL premium rates to encourage awider range of non life insurers to enter the businessState owned insurers have established adequateMTPL claimsprovisions
A viable privately managed MPTL system is in place
Submission to Parliament of critical amendments toInsurance Law 10, including:• Increase in minimum capital• Corporatization of insurance brokers• Independent funding for Egyptian Supervisory
Insurance Authority (EISA)• Separation of life and non-life insurance business
Effective insurance legislation in placeto support the plannedreforms and encouragea moreefficient insurancesector
A legal and regulatory regimeconsistent with internationalstandards
Adoption by EISA of new organizational structureappropriateto a risk based supervisory model and implementationsubstantially underway
Substantial progress in implementing risk-based regulation andsupervision in the insurancesector.
A strong, credible, risk-based insurancesupervisory system,conforming to international standards and codes
Completion of draft law overhauling the regulatory frameworkfor privatepension funds, including the introduction of newvoluntary collectivepension funds and pension companiesproviding professional training
Submission to Parliament of Ministers of draft law overhaulingtheregulatory framework of theprivate pension system byinter alia creating new collectiveprivatepension funds andpension companies providing professional training
A sound and well-regulated privatepension system
Completion of plan creating special class of certified pensionactuaries
At least five selected graduates from Egypt receivinginternational actuarial professional training
Sufficient actuarial capacity to serve theprivatepensionindustry
Actuarial assessment of private pension funds under EISAguidelines, representing at least 50 percent of assets of existingprivatepension funds
Continued progress in assessing private pension funds underEISA guidelines
Full actuarial assessment of all privatepension fundsandelimination of all actuarial imbalances
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PRIOR POLICY ACTIONS
FOR BOARD APPROVAL ON MAY 2008PHASE I I OF GOVERNMENT’SPROGRAM
EXPECTED INTERMEDIATE PROGRAM OUTCOMES
BY DECEMBER 2009 CLOSING DATE
LONG-RUN INDICATIVE POLICY MEASURES
VI. Improving the Efficiency of Capital Markets
Adoption and implementation of IFRS requirements forlisted companies and securities firms, and preparation oftheir 2007 financial statements based on IFRSEstablishment of Auditors Registry at Capital Market Authority(CMA)
Adoption of International Standards of Auditing (ISA)Stronger CMA rules for certification of external auditors
Oversight body for accounting/auditing fully operationalEnhanced transparency and reliability of financial reportingfor listed companies, public companies, and securities firms
Enactment of amendment to the Executive Regulations ofthe Capital Market Law (CML), enhancing capitaladequacy requirements and risk management requirementsfor financial intermediaries regulated by the CMA
Successful CMA actions to enforcecompliance with newcapital adequacy ratio and risk management requirements forfinancial intermediaries
Sound basis for safe operations by financial intermediaries
Enactment of a decreeadding a chapter to theCML ExecutiveRegulations on takeovers and public tenders
Continued mergers and acquisitions of listed companies,including by foreign investors
Transparent and fair treatment of minority publicshareholders in merger and acquisition transactions
Cabinet approval of draft amendment to CML to simplify fourlisting schedules at the Cairo and Alexandria Stock Exchange(CASE)
Enactment of amendment to CML and simplification of fourlisting schedules at CASE
Increased daily trading of companies listed on CASE’s mainboard
Establishment of the regulatory framework for SMEs market“NILEX”, governing listing, disclosure, nominated advisorsand trading
Initial listing of several SMEs on NILEX Improved SME access to capital
I mproved regulation of investment funds, throughenactment of CML amendment and issuance of executiveregulations to:• Clarify investment funds’ legal form• Improve net asset value computation• Improve funds’ disclosure• Reduce minimum paid-up capital for fund general
partner to two percent of assets under managementEstablishment of CASE regulations for exchange-traded funds(ETFs)
AdequateCMA enforcement of new regulation on investmentfunds
At least oneETF trading on CASE
Increase in the number and variety of investment funds and infund assets/GDP, indicating greater choiceanddiversification, at reduced costs, for retail investors
Establishment of supervisory department at CMA with staffhired and trainedNew chapter to Executive Regulations of the CML issuedregarding pricemanipulation and insider trading
Improved supervision and market surveillanceby CMA CMA is operating a credible risk based supervision systemconforming to IOSCO principles.
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Pr ior Policy Actionsfor Board Approval on May 2008
Phase II of Government’s Program
Expected Intermediate Program Outcomesby DECEMBER 2009 Closing Date
Long-run Indicative Policy Measures
VII. Strengthening the Financial Sector Institutional Infrastructure
Legal establishment of a private credit bureau Development of a reliableand comprehensivedatabaseat theprivatecredit bureau
Enhancing access to finance through improved availability ofcreditworthiness information
Signing of contract with private vendors for theimplementation of a real time gross settlement (RTGS)payments system complying with international standardsand best practicesDeveloping the regulations of the Automatic Clearing House(ACH) to reducetotal processing time of checks
Operationalizing the RTGS system, complying withinternational standards and best practices
Reduceprocessing time of government checks and collectionsfrom 25 to 2-3 days
Fully operational RTGS system
Submitting draft Specialized Economic Courts Law to theParliament
Issuance of Specialized Economic Courts Law Specialized Economic Courts operational
Development of astrategy for microlending through non-bankfinancial institutions (NBFIs) to increaseaccess to finance
Creation of microlending NBFIs and promulgation of relatedregulationsand supervisory framework
Vibrant microlending NBFI sector providing microcredit topoor and vulnerable population
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Annex 5: Achievements of Project Development Objectives
Expected Intermediate Program Outcomes by December 2009 Closing Date
Status of Implementation
I. Reduction of Public Ownership and Control of Banks and Consolidation of the Banking Sector
Completion of initial public offering (IPO) transaction for Bank of Alexandria
The collapse of equity markets worldwide has made it undesirable to complete the privatization of Bank of Alexandria with an IPO. However, the bank remains fully under private management and the IFC has taken a 9.9% share of its capital.
Former joint venture banks are majority privately owned
Completed for practical purposes
Further consolidation of the banking system On track
Largely completed in commercial banks; the consolidation has helped the system become more resilient to the international financial crisis. Consolidation has also occurred in state-owned specialized banks.
A competitive banking system led by strong private sector banks
On track
System has grown and share of private banks has increased as a result of competition and restructuring of state-owned commercial banks.
The banking system has been largely resilient to the effects of the international financial crisis.
II. Financial and Operational Restructuring of Remaining Commercial State-Owned Banks and Specialized State-owned Banks
Full settlement of the NPLs of SOEs held by state-owned commercial banks
On track The government has reduced the SOE’s outstanding loans and the corresponding NPLs due to the state-owned commercial banks by 60%. It is committed to settle the remaining loans and the corresponding NPLs. An agreement was signed between the Holding companies and NBE and BM in September 2009 to settle the remaining outstanding NPLs within a year in kind (land). To date, around LE 3 million were settled.
State-owned commercial banks’ financial statements fully reflect bank net asset values and economic position
On track The banks’ financial statements are now available more promptly and the statements reflect much more accurately the economic position and the net asset values as a result of the pay-down of SOEs’ borrowings, the settlement and collection of private NPLs and substantial increases in provisioning and subordinated loans from the shareholder.
National Bank of Egypt and Bank Misr show improvement in: (i) human resources; (ii) risk management, and (iii) IT systems.
On track The new management team at NBE has increased the pace of reforms in these 3 areas substantially. In particular, risk management has improved dramatically, major changes have been made in training and in the remuneration of staff, and IT connectivity has already improved and a contract for a new core banking system has been signed. Bank Misr has been improving itself for some time in these areas. In particular, it continues its
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Expected Intermediate Program Outcomes by December 2009 Closing Date
Status of Implementation
training program, has appointed a risk management team and given it a major say in lending decisions, and has incorporated a well-functioning IT system.
Completion of independent and comprehensive financial due diligence of the three state-owned specialized banks
On track - PBDAC, the largest state-owned specialized
bank has contracted KPMG to conduct an independent, comprehensive, due-diligence report.
- Egyptian Arab Land Bank has contracted Deloitte Touche Tohmatsu to conduct an independent, comprehensive, due-diligence report
Adoption of a program of institutional and operational restructuring for the state-owned specialized banks
On track New law submitted to change the organizational structure of PBDAC; the non-banking activities of PBDAC have been almost completely eliminated; and it is implementing an operational restructuring program designed in conjunction with Rabo Bank. The Industrial Bank has absorbed the Workers bank and is undertaking a corresponding institutional and operational restructuring.
III. Strengthening the Regulatory and Supervisory Framework of the Banking Sector Continued capacity building measures in banking regulation and supervision, including new internal guidelines and procedures, new IT scheme and training program
On track Phase II of the Banking Supervision reform was successfully finalized. First protocol with ECB successfully finalized in Dec 2007.
IV. Restructuring of State-owned Insurance Companies Completion of operational restructuring of the merged insurance company
- All legal requirements have been fulfilled. - Operational restructuring has been completed. - Regions and branches have been fully merged. - All departments (technical and supporting) have
been fully merged and working according to unified roles and guidelines.
- The new entity has been assigned for the highest rating between the merged entities (A-) by AM Best rating agency. New chairman has been appointed.
Substantial progress in the implementation of the National Insurance Company’s business plan
On track – National will become a specialist life and benefits insurer. - Portfolio of classified group life business
related to the state has been transferred to National Insurance Company (NICE) with adequate reserves approved by the regulator.
- The deficit of life business has been halved. - The MTPL reserves have been strengthened
with L.E. 200mn and to be adequately reserved in the current FY 2008/09.
- A New Chairman has been appointed and a strategic business plan is being implemented in place
- The company has been assigned for B++ very good from AM Best for Public Information and
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Expected Intermediate Program Outcomes by December 2009 Closing Date
Status of Implementation
to be confirmed after completion of the rating process.
V. Strengthening the Regulatory and Supervisory Framework in Insurance and Pensions
Sufficiently adequate MTPL premium rates to encourage a wider range of non life insurers to enter the business State owned insurers have established adequate MTPL claims provisions
- New law No. 72/2007 and its executive regulation enacted in order to cap the exposure of insurance companies to LE 40,000 for death or total disablement and 10,000 for property, and MTPL premiums will be raised initially to provide that the business is no longer loss-making and eventually to full market-based pricing.
The current price list resulted in the loss ratio reducing from 500% to 200% in 07/08. A new price list is being prepared to increase the prices with 50% and to be implemented by July. 09; these prices are expected to bring down the loss ratio to around 125%.
MTPL Reserves of Misr Insurance Co. are adequate after strengthening by L.E. 850mn in June 2008, National has strengthened its reserves for MTPL by L.E. 200mn to be fully reserved in the current FY 08/09
Effective insurance legislation in place to support the planned reforms and encourage a more efficient insurance sector
Key amendments to Law 10 have been passed and will be implemented by the end of the 2008/ 2009 FY. A full review of Law 10 to support the introduction of RBS is needed and will form part of the next round of FS reforms.
Substantial progress in implementing risk-based regulation and supervision in the insurance sector.
EISA has restructured to support a RBS approach, but further detailed TA is needed at the implementation level – particularly on site supervision.
Submission to Parliament of Ministers of draft law overhauling the regulatory framework of the private pension system by inter alia creating new collective private pension funds and pension companies providing professional training
The draft law was submitted to State of Council to be reviewed and it's expected to be submitted to Cabinet of Ministers before June 2009.
At least five selected graduates from Egypt receiving international actuarial professional training
An actuarial development program is in place, the number of certified actuaries ultimately produced is largely dependent on the number of suitable graduates emerging from the Cairo University and American University undergraduate programs.
Continued progress in assessing private pension funds under EISA guidelines
On track EISA produced an actuarial assessment of the largest 25 private pension fund in 2008, representing 52% of the funds under management. An update is in progress. For this purpose, effective January 2009 all plans are required to produce actuarial valuations following a standard format provided by EISA after discussion with the registered actuaries. Under the current regulations, actuarial assessment report are required every five years, but the new law proposed by EISA will reduce the maximum period to report to three years. Were the financial
36
Expected Intermediate Program Outcomes by December 2009 Closing Date
Status of Implementation
statements are required every year.
VI. Improving the Efficiency of Capital Markets Adoption of International Standards of Auditing (ISA) Stronger CMA rules for certification of external auditors
Egyptian translation of ISA issued June 2008 and in effect for 2009. Regarding external auditors, Audit Oversight Board (AOB) established July 2008; first meeting December 2008; working now to begin auditor inspections by end-2009. External auditors already-listed at CMA will have 2 years to achieve compliance with AOB standards; newly-listed auditors must comply immediately.
Successful CMA actions to enforce compliance with new capital adequacy ratio and risk management requirements for financial intermediaries
CMA conducts weekly monitoring of capital adequacy and has conducted 140 on-site inspections of financial intermediaries, resulting in 14 orders for corrective action and 2 referrals to public prosecutor.
Continued mergers and acquisitions of listed companies, including by foreign investors
Same number of M&A transactions (28) in 2008 as in 2007. Slight decrease in total value, from LE 142 billion to LE 105 billion, a likely reflection of global financial crisis. Acquirers included investors from Western Europe and GCC economies.
Enactment of amendment to CML and simplification of four listing schedules at CASE
CML amended June 2008. CASE (EGX) listing schedules consolidated in fall 2008 into two schedules – one for domestic companies, one for foreign.
Initial listing of several SMEs on NILEX 3 SMEs listed, but IPOs delayed due to Global financial crisis. Additional SMEs have applied for NILEX listing.
Adequate CMA enforcement of new regulation on investment funds At least one ETF trading on CASE
Regular CMA review of investment fund prospectuses and major corporate actions. Some CMA inspections of investment funds and required corrective actions. Expected by end-2009. A securities firm has been competitively selected to issue/manage EGX30 ETF and has designated 1 market maker and 1 authorized participant market maker. IT systems implemented between designated issuer and MCDR. Activation awaiting final approvals from CMA and MCDR.
Improved supervision and market surveillance by CMA
In addition to regular monitoring and on-site inspections of financial intermediaries and auditors, CMA is moving to acquire/upgrade computerized surveillance systems.
VII. Strengthening the Financial Sector Institutional Infrastructure Development of a reliable and comprehensive database at the private credit bureau
On Track In nine months since its commercial launch, iScore has issued over one million credit reports, signed up 55 subscribers. On the depth of Credit Information Index, Egypt's score increased from 2 of 6 in 2007, to 5 of 6 in 2009, and 6 of 6 in 2010
Operationalizing the RTGS system, complying with international standards and best practices
On track The RTGS became fully operational on March 15, 2009.
Reduce processing time of government checks Acheived
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Expected Intermediate Program Outcomes by December 2009 Closing Date
Status of Implementation
and collections from 25 to 2-3 days Issuance of Specialized Economic Courts Law On Track
In May 2008, the Specialized Economic Courts Law no. 120 of 2008 has been enacted.
Creation of micro lending NBFIs and promulgation of related regulations and supervisory framework
On Track In March 2009, Single NBFI Regulator Law no. 10 of 2009 has been enacted.
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Annex 6. List of Supporting Documents
Program Document, dated April 24, 2008 (Report No. 43362-EG) Aide-Memoires, Implementation Status Results and Reports Supplemental Letter ref. Actions under the Program CBE Annual Report FY2007-2008 and Monthly Bulletins 2008
40
Annex 7: Key Operational and Financial Performance Indicators 2004-2009 (Percent)
Banking Sector 2004/2005 2005/2006 2006/2007 2007/2008
Balance Sheet Structure SOEs loan growth 5.2 6.0 -15.6 -19.9 Private sector credit-to-GDP 46.2 46.4 42.3 40.0 Portfolio Quality NPL / Gross loans 26.5 18.2 19.3 14.8 Provisions / NPL 51.0 76.2 74.6 92.1 Profitability Return-on-average assets (ROAA) 0.5 0.8 0.8 0.8 Return-on-average equity (ROAE) 7.7 13.2 13.3 13.5 Net interest margin (spread) = (interest income-interest expense)-to-average earning assets
1.5 1.7 1.7 1.8
Efficiency Cost to income ratio (operating expenses-to-gross operating income)
43.3 39.6 38.5 37.2
Net income-to-personal expenses 182.0 275.3 279.7 344.9 Capital and Capital adequacy Equity-to-total assets 6.1 6.3 5.5 6.1
(Percent)
Insurance Sector 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009
Penetration Gross premium-to-GDP 0.8 0.7 0.8 0.9 0.83% Asset Growth Real percentage growth in insurance assets
8.2 10.8 12.3 33.4 -1%
Investments
16.8
18.7
21.2
29
34.5
policy holders’ rights
12.7
14.3
16.5
20.7
28.1
shareholders’ equity
3.8
4.1
4.6
8.5
7.3
Total Assets
20.1
22.3
25
33.4
40.5
Direct Premiums
4289
4591
5687
7449
7439
Direct Paid Claims 2389
3439
3667
4216
4538
Net Profits
591
701
896
1085
613
Profitability Efficiency Combined ratio (net loss ratio plus net claims ratio)
90.4 115.1 94.9 83.5 85.5%
Capital and capital adequacy Solvency ratio (equity-to-statutory minimum solvency)
449 484 499 527 516%
Operating risks (risk retention)
(Percent)
Capital Markets 2004/2005 2005/2006 2006/2007 2007/2008
Market Performance
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New issues 51,509
78,543
101,114
126,455
Volume of trading 72,831
241,443
261,639
547,064
Return (%) 235% -1.16% 63% 26%
Value of Trading (EGP mn)
72,831
241,443
261,639
547,064
Volume of Trading (Securities mn)
2,273
5,834
9,423
19,607
Investor Base Retail investors 983,006 1,451,589 1,510,495 1,602,300
Retail Foreign Investors
3,509 4,538 4,909 5,339
Retail Arab Investors
9,254 15,401 16,510 17,639
Institutional Investors 16,097 16,859 17,302 17,867
Institutional Foreign Investors
6,184 6,755 7,405 8,283
Institutional Arab Investors
992 1,353 1,484 1,665
Foreign Investors 9,693 11,293 12,314 13,622
Number of Total Arab Investors 10,246 16,754 17,994 19,304
Financial Products Mutual funds 24 29 39 44
Public Placement (EGP mn)
882 2,864 114 1,449
Private Placement (EGP mn)
907 4,459 412 6,349
Initial public offerings 1,789 7,324 526 7,798
Secondary public offerings 568 3,932 5,997 7,900
Annex 8: Map
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