Reforms Win International Recognition
According to the latest report on Egypt's investment policies, presented at the signing ceremony in July, barriers to entry have been eased for both domestic and foreign investors, customs procedures streamlined and a dedicated ministry has been set up in 2004 to promote and manage investment.
The OECD's Investment Policy Review of Egypt 2007 says, "foreign direct investment inflows increased twelve-fold between 2001 and 2006, reaching US$ 9 billion in the first three quarters of its 2007 fiscal year, compared with US$ 6.1 billion for 2006 as a whole."
That review was soon seconded by another influential report. In September 2007, the World Bank's Doing Business 2008 report, which tracks the progress of 178 countries worldwide in terms of how easy it is to start, maintain and exit a business, named Egypt as the "top reformer of the year" with its overall ranking climbing up 35 spots to 126.
A month later, the United Nations Commission on Trade and Development's (UNCTAD) World Investment Report 2007 positioned Egypt at number 33 in a list of 141 countries on their EDI Index for pulling in a total of US$ 10 billion in FD1 between January and December 2006. The ranking makes Egypt the top recipient of foreign investments in Africa and the second highest country in the Middle East after Saudi Arabia.
According to the report, in 2006 Egypt succeeded in attracting 30% of FD1 directed to Africa and 43% of FD1 flows to the NorthAfrica region. UNCTAD praised Egypt's improved investment climate and the new opportunities that are now available in the country noting that the FDI structure in Egypt has changed drastically with non-oil investments now representing 70% of total investments coming into the country.
Egypt Named Top Reformer
Egypt now tops the World Bank's list of countries that have made the most progress in reforming their economies and facilitating the procedures required to do business. Egypt has improved in five of the 10 areas analyzed by the Doing Business team.
Egypt's impressive ranking as top reformer puts it ahead of countries such as Croatia, Saudi Arabia and China.
According to the World Bank: "Egypt, the top reformer in the region and worldwide, greatly improved its position in the global rankings on the ease of doing business. Its reforms went deep. Egypt cut the minimum capital required to start a business, from EGP 50,000 to just EGP 1,000 and halved the time and cost of starting-up operations. [In 2008, the minimum capital requirement to start a business was further reduced to EGP 200.]
"Property registration fees were reduced from 3% of the property value much more reasonable fixed amount," the report continued. “The government also eased the bureaucracy that builders face in getting construction permits and launched new one-stop shops for traders at Egyptian ports, cutting the time to import by seven days and the time to export by five. A new private credit bureau was recently established that will soon be making it easier for borrowers to get credit."
The report is considered very significant in its implications regarding investment. Countries such as Egypt that are "reforming" pose an attractive proposition for investors who want to capitalize on untapped potential. The opportunities that are now available in Egypt are expected to attract similar levels of interest, relative to its size, as India or China, both countries that once ranked poorly and have since reformed.
One of the most dramatic reforms that Egypt has undertaken is the opening of several One-Stop Shops throughout the country. As a joint venture between the General Authority for Investments and Free Zones (GAFI) and the International Finance Corporation (IFC), these One-Stop Shops were created for the sole purpose of speeding up the process of and cutting down the costs when opening up a business. Instead of several months, il is now possible to obtain licenses in two days and new business registration fees have been cut by 40%.
Today these shops are in the cities of Cairo, Alexandria, As-suit and Ismailia.
Beyond making business easy, Egypt was applauded for its efforts to reform taxation. The tax system has been streamlined, with the corporate income tax rates cut from 32-40% to a uniform 20%; the approximately 3,000 different types of exemptions have been eliminated.
Gaining International Respect
By cutting the red tape out of business, the government has created an environment that is friendly to the private sector — and that's now attracting attention from some of the leading investment watchdogs worldwide.
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