Reform delivers… …..Investment for growth

Egypt: EEDC… Targets.. Results..Next

April 2015

Ministry of Investment

Egypt: Reforms …..on the top

• Political road map.. Close to end by parliament elections very soon..

• New Economic and Fiscal Reforms..remarkable achievements during 2014-2015.. Reform engine has been working to tackle down all economic constraints..

• Many legal reforms have been achieved…

• Launching Egypt’s train of the balanced economic development ..the take off was in the EEDC held in Sharm El-Sheikh 13-15/3/2015..that aimed at:

• Telling the story of Egypt …after 2 revolutions..

• Addressing the Egyptian-tailored sustainable economic development plan. Where we are going..

• Regulatory reforms.. Achieved and what still in the pipeline.

• Presenting investment projects in various sectors with a different approach.

• Restoring the confidence locally, regionally and Internationally.

• Putting Egypt on the world investment map again..

Egypt: briefs on ….Egypt’s economic plan targets..

3

4

Fiscal consolidation plan* Economic Stimulus

Economic recovery plan

Develop a fiscal consolidation plan of $58 billion that addresses current funding gaps by 2018

Develop a growth stimulating investment plan that compensates for fiscal consolidation and addresses citizen pain points

$29 Bn

$29 Bn

$60 Bn

73 initiatives

Size of expenditure cuts • USD 26 Bn in subsidy reforms • USD3 Bn from wage freeze)

• USD50 Bn investment opportunities

• USD10 Bn infrastructure projects to be launched in the next 4 years

Size of revenue increasing measures • USD 19 Bn VAT implementation • USD 4 Bn Income & Wealth tax

reform • USD 4 Bn mining law one off

asset sales • USD 2 Bn others

• Regulatory, institutional and infrastructure initiatives that enable sector development

1 2

+ USD 17-20 Bn External Financial Support needed in 2015-2016 due to the gradual implementation of the plan

Egypt: ..fiscal consolidation.. economic stimulus.. Proposed plans in Jun 2014

Egypt: Signs of an upturn in economic indicators are more visible

5 Source: Ministry of planning

GDP growth in H1-2015 estimated at 5.6 %

• Real GDP grew by 5.6% in 1H2014/15 with investment being the main driver of such accelerated growth. The government’s fiscal stimulus whether through the central budget or through state authorities including the Suez Canal project and the expansion of the national road network supported the pick-up in investments.

GDP growth will target 6% in 2018/2019

Non-oil manufacturing is the biggest contributor to the rebound in growth

……Signs of an upturn in economic indicators are more visible

Newly established companies

• FDI inflows recorded USD2.7bn in the first half of FY14/15 up from USD2bn a year earlier. The net inflows were driven by a net inflow for Greenfield investments by USD1.4bn and USD1.2bn inflows in the oil sector.

• Number of established companies reached 6,364 companies in 8M14/15 up from 5,331 a year earlier (19%+).

• Evident recovery in corporate activity as Loans saw an accelerated growth of 17%YoY in Jan-15, the highest in 4 years.

Source: GAFI & Central Bank of Egypt

6

Loans growth Foreign Direct Investments

11.1

13.2

8.1

6.8

2.2 2.1

3.8 4.1

2.7

0

2

4

6

8

10

12

14

FY

06

/07

FY

07

/08

FY

08

/09

FY

09

/10

FY

10

/11

FY

11

/12

FY

12

/13

FY

13

/14

1H

14

/15

USD bn

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Ju

l-1

1S

ep

-11

No

v-1

1Ja

n-1

2M

ar-

12

Ma

y-1

2Ju

l-1

2S

ep

-12

No

v-1

2Ja

n-1

3M

ar-

13

Ma

y-1

3Ju

l-1

3S

ep

-13

No

v-1

3Ja

n-1

4M

ar-

14

Ma

y-1

4Ju

l-1

4S

ep

-14

No

v-1

4Ja

n-1

5

YoY

0

200

400

600

800

1000

1200

Jul-

12

Sep

-12

No

v-1

2Ja

n-1

3M

ar-1

3M

ay-1

3Ju

l-1

3Se

p-1

3N

ov-

13

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4Ja

n-1

5

Companies

Egypt: overview of Egypt’s economy..(2011/2012 till 2018/2019)

7

Source: Ministry of Finance projections

Egypt: Reform delivers

8

Reform offers strong upside to the investment environment…

As the political scene resets, Egypt commenced its reform program by tackling structural imbalances to restore macroeconomic stability and drive growth.

The medium-term strategy focus on adopting pro-investment policies and implementing key legal, regulatory and institutional reforms to expand private sector investments.

..with a development strategy that places Egypt’s growth potential on a more sustainable grounds

The government’s key objective is to create a productive, efficient and ultimately more dynamic economy and to ensure that future growth is high, sustainable and inclusive.

Hereby, priority is given to launching economically viable projects that are labour intensive to help alleviate unemployment.

Restored investors’ confidence, regional support and investment pledges should help achieve set targets

The Egypt Economic Development Conference marked a strong vote of confidence in the country’s economic policies with a unified message that highly emphasized the continued regional support and investors interest.

Adopting pro-investment policies complements reform

Pro-investment policies are key to restore investors’ confidence where several measures were already taken to remove impediments to investments;

• Addressing current investor disputes marks an entry point for potential foreign inflow. 43% of investor’s disputes were resolved under the mechanism of contract reconciliation and 60% of presented cases were solved under the dispute settlement committee.

• Settling dues with foreign oil and gas companies marks another priority to boost investors’ confidence – particularly as the sector accounts for +60% of FDI inflows.

• Easing repatriation issues marks another boost; improved foreign currency inflows with a pick-up in FDIs and continued Gulf support should ease capital controls.

• The Central Bank of Egypt swift move to a sustainable policy mix with a cut in policy rates accompanied by a depreciation in the cut-off FX auction rate will help limit the currency overhang and revive lending activities. Such pro-investment stance will help setting the stage for a series of sovereign rating upgrades during 2015 which should bode well for equities.

Contracts reconciliation committee Ministerial dispute settlement committee

Source: Ministry of Investment

Authority Number

Governorates and affiliates 268

Ministry of Finance and affiliates 141

New Urban Communities Authority 79

Ministries 27

Tourism Development Authority 8

Others 6

Total Settlement 529

9

9

1

4 3 1 2 3

23

3 3 3 1 0 0 0

10

0

5

10

15

20

25

Re

al-e

stat

e &

co

nst

Tou

rism

Agr

icu

ltu

re

Oil,

Gas

&

Pe

tro

che

mci

als

logi

stic

s

Min

ing

& F

ert

oth

ers

Tota

l Contracts

No of disputes solved

As of March 2015

Creating a welcoming climate for investors

The government is determined to remove constraints and inappropriate legal provisions to create a healthier business climate. Thus, several amendments to a number of laws were recently passed, in addition to few that are expected to be released in the coming period.

10

Investment Law

Status

Passed

Measures taken

▪ Create a one-stop-shop at GAFI that will reduce for investors the time needed for issuing investment licenses, procuring land and obtaining utilities.

▪ Establish the National Center for Developing & Promoting Investments at GAFI that will be in addition the sole liable for preparing an investment map for Egypt.

▪ Set a legal framework for dispute resolution as well as standard procedures for solving investors’ disputes that may arise in the future.

▪ Emphasizing and adding some investor rights to the existing ones.

Passed

Taxes Law

▪ Income Tax: Reduce the maximum for corporate income tax from 25% percent to 22.5%.

▪ Wealth Tax: Cancel the 5% tax imposed on individuals and corporations with annual income above EGP 1,000,000.

Passed Civil Service

Law

▪ Guarantees citizens’ rights to civil jobs based on merit hence eliminating favoritism & discrimination.

▪ Address government bureaucracy and establish a strong governance system.

Creating a welcoming climate for investors cont..

11

Measures taken Status

Mining Law

Passed ▪ Implement a more effective tax & royalty structure that ensures a swift allocation of mineral concessions to domestic & foreign firms.

Third Party Contract Appeal

▪ Organize appeal procedures and prohibit any third party interference in contracts between the state and the investor. (to protect the investor rights in their contracts with the government.)

Passed

Electricity

Passed ▪ Restrict the state’s role in the electricity sector to regulation and supervision. (more liberalization of the sector)

▪ Separate the production, transmission and distribution functions in order to foster the private sector’s role and bring out greater competitiveness.

Passed Competition Law

▪ Ensure competitive practices in markets by allowing the Competition Authority to independently file lawsuits and settle cases against violators.

Microfinance Law

Passed ▪ Allow licensed entities to offer microfinance loans up to EGP 100,000 to individuals or small companies

▪ Grant the Egyptian Financial Supervisory Authority (EFSA) the power to supervise the microfinance entities to ensure their financial transparency .

Passed ▪ Unveil "feed-in-tariff” and legal provision for the development of the country’s wind and solar potential. (PPA, Sovereign guarantee, feed-in-tariff were introduced to facilitate more investments)

Renewable Energy

Upcoming legislative reforms

12

Status Measures Taken

Upcoming Value-Added Law

▪ Replace the general sales tax and create an incentive to join the formal economy.

Upcoming Bankruptcy Law

▪ Inform and empower bankruptcy judges in facilitating the bankruptcy settlement.

Upcoming

Companies Law

▪ Ease procedures for holding shareholder and general assemblies and raising capital.

▪ Facilitate company liquidation and setting 3 years as a cap for companies to be liquidated instead of being open in the current version.

Upcoming

Customs Law

▪ Aims at clearing and simplifying customs to ensure timely release of goods from the customs zone which will cut costs and time needed for the goods to enter the local market.

Upcoming

Commercial Register Law

▪ Modernizing the commercial register’s services to prevent any conflicts arising from multiple registrations and to include all the updates pertaining to any one company in a single register.

EEDC reflected a strong vote of confidence

• The Egypt Economic Development Conference mirrored a strong recognition for Egypt’s economic plan and a unified clear support message; especially with the IMF statement praising reforms undertaken so far.

• Key international companies, namely General Electric and Siemens as well as BP, expressed their determination to expand in Egypt. Moreover, the conference witnessed the signature of a number of deals and MoUs both on the governmental and the private sector levels; with the announcement of Egypt’s new capital city standing out as one of the main highlights.

• Gulf financial support remained persistent with USD12.5bn in pledges from KSA, UAE, Kuwait and Oman. (6 bn entered the CBE last week)

• Having the conference on annual basis, as highlighted by the President, should improve transparency and speed-up the reform process.

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EEDC

Private sector investments

Governmental MoUs

Economic Development

Strategy

Legislative reforms

Financial Support Packages

Egypt: strong potential overrules

14

Location

Solid Fundamentals

Demographics

Cost Edge

Trade agreements

Political Stability

“New Egypt” Catalyst

Clear Governance

Reduced Corruption

Commitment to Economic &

legislative Reform

Business Confidence

Rising Investment

STRONG GROWTH POTENTIAL

Mega projects are the onset of the investment stimulus

•The government launched a number of national mega projects that are labor intensive, offering various investment opportunities to the private sector

•A different style of screening priority sectors is adopted where investment opportunities that tap into current market needs while providing adequate financial and socioeconomic returns are prioritized. This is highly reflected in the focus on power, energy and labor-intensive infrastructure projects.

15

Mega projects

Suez Canal Area

Development Project

New Suez Canal

(Parallel water way)

(to open on Aug 5th)

Upper Egypt Red Sea

Development

Airport City

presented in the conference

Northwest Coast

Development

Golden Triangle

The master planner was declared in

March

A wide range of logistic, industrial, touristic, medical, infrastructure, mining and power investment opportunities

Its main features were presented in

the conference

Investment projects signed.. exceeded USD150 bn

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Ministry Agreements MoUs Grants/loans

No Value No Value No Value

Electricity 10 31.725 12 33.05 - -

Transport

4 1.665 1 0.49 - -

Petroleum 4 21 2 0.1 - -

Supply and Internal Trade

- - 4 6 - -

Housing and utilities - - 8 80.14 - -

Planning and Admin Reform

- - 3 0.506 - -

Tourism 1 To target 1 bn

- - - -

International cooperation

- - - - 17 8.498

Environment - - 1 n.a - -

Investment - - 3 5.105 - -

Total 19 54.39 35 125.391 17 8.498

Bn… USD

Total by ministry

Value

64.775

2.155

21.1

6

80.14

0.506

(not counted)

8.498

-

5.105

188.297

Investment projects … prepared before z conference to promote

17

Sector No of projects

Agriculture 8

Housing & Utilities 14

Industry 2

ICT 6

Tourism 7

Petroleum and Mining 9

Transport and Logistics 7

Retail 2

Total 55

Published in a booklet distributed in the

conference

• 29 Projects under the IBs

• 7 under private sector

• 7 under PPP

• 1 stands alone under Ministry of Petroleum

• 11 as advanced ideas to test the appetite of investors Note1:

3 of housing projects were signed in the conference

Note2: 3 new projects were added after the conference to IBs

Reached now 58

IBs term stands for Investment Banks

Investment projects … follow up is highly needed for all projects

18

Projects Published in the booklet distributed in

the conference

a steering committee was formed for follow up.. Regular reports being submitted

Signed projects in the conference

Egypt: what next

19

Commitment to the Egyptian economic, social and political

plan

Maximise FDI attraction efforts

To keep sustainable development

Social Impact

STRONG GROWTH POTENTIAL

Other Reforms will continue

Encouraging local investors (new and

expansion investments)

Work and Work and Work…

20

Egypt: signals from z famous newspapers, Al Ahram, Friday April 24th

HSBC, Adv Renault, Adv

We are very much optimistic..

That’s why we are here presenting, discussing, sharing views…etc

Awaiting you in Egypt!!

Thank you

21

From EEDC….Egypt delivers