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Egypts Economic Reforms: Achievements and Challenges

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Presentation for Cairo Investment Forum. 9-10 December 2006. Recent Performance: ... Domestic investment has shown signs of dynamism ... – PowerPoint PPT presentation

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Title: Egypts Economic Reforms: Achievements and Challenges


1
Egypts Economic ReformsAchievements and
Challenges
  • Mustapha K. Nabli
  • The World Bank
  • Presentation for Cairo Investment Forum
  • 9-10 December 2006

2
Recent PerformanceStrong Investment and Growth
Revival
  • Higher growth rate from 3 p.a. in 2003-04 to
    around 7 now
  • Surge in foreign private capital flows both
    portfolio and FDI (almost 6 of GDP in 2005-06)
  • Domestic investment has shown signs of dynamism
  • Higher exports rise by 37 in FY2005-06, which
    shows enhanced competitiveness
  • Some indications that this is having an impact on
    employment, including a reduction in unemployment
    (Ragui study)

3
There is no doubt that the external environment
has contributed to these results
  • The most important impact stems form the recent
    expansion especially in the GCC in relation to
    the regional oil boom a number of links are
    producing a positive impact on the Egyptian
    economy ---these effects are significant but much
    weaker than in previous booms
  • Higher remittances 14 of GDP in 1979, 3 today
  • Significant increase in tourism activity
  • Foreign investment flows FDI 7 of GDP in 1979,
    4 in 2005
  • Official aid 19 of GDP in 1975, 2 today
  • Indirectly encouraging reforms

4
But reforms must have contributed significantly
  • On macro-economic management
  • 2003-04 exchange rate correction
  • eliminated parallel market
  • Cumulative 26 trade-weighted nominal
    depreciation in 2000-05, much of it concentrated
    in 2003.
  • Significant structural reforms
  • The tax rates and administration reforms
  • Tariff reduction and customs reform (inspections,
    clearance processes, faster processing using IT)
  • Business environment reforms registration and
    licensing and establishment of a one-stop-shop,
  • Financial sector reforms
  • Privatization of SOEs, including in the banking
    sector infrastructure concessions

5
Evidence of this impact from Investment Climate
Assessments by the World Bank
  • Investment climate surveys have shown a
    significant improvement in perceptions in 2006
    compared to 2004 in a number of areas where these
    perceptions were highly negative and considered
    as major impediments to investment (same 738
    firms surveyed in 2004 and 2006)
  • Enormous improvement on perceptions on tax rates
    and tax administration
  • Significant improvements on perceptions about
  • customs administration and trade regulations
  • Business licensing and regulation permits
  • Legal resolution of disputes
  • Access to finance and to land

6
Sustaining and reinforcing growth requires a
virtuous cycle which leads to
  • Higher rates of private investment
  • Domestic as well as foreign the overall private
    investment to GDP ratio remains relatively low in
    Egypt
  • productivity increases
  • Vibrant firms that innovate respond quickly and
    flexibly to changing markets
  • The investment climate surveys shows little
    improvement in the productivity of firms over the
    last few years

7
Which requires deepening the reform program
  • A number of areas are shown by the Investment
    Climate Surveys to require more attention to a
    number of areas on which the government is
    working already
  • Improving access to finance and the effectiveness
    of the financial sector to intermediate
    resources, especially to SMEs and services firms
  • Reducing barriers to entry, enhancing competition
  • reducing regulatory uncertainty especially for
    services firms
  • Dealing with informal practices of competition
  • Developing workforce quality skills
  • Combating corruption
  • Ensuring that the benefits of the reforms benefit
    the smaller firms as much as the larger ones

8
and requires also enhancing its credibility
  • -- Making sure that the direction and
    momentum of reforms are well understood and are
    maintained
  • Making sure that announced policies are
    implemented and no reversals take place
  • Making sure the benefits of growth are broadly
    shared creating jobs, reducing poverty, more
    generally spreading benefits to the large
    population
  • Ensuring that these benefits from the reforms are
    known by the public
  • Then the virtuous circle of better
    policiesbetter resultsbetter expectations---bett
    er policies and so on continues to be operating
    for the benefit of the Egyptian people.
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