Sherine Nasr explains why Egypt continues to lead the region's economic reform For three years in a row, Egypt has managed to stay among the top 10 business reformers worldwide. This year it stands as the top regional reformer, according to the World Bank's 2009 Doing Business Report, launched 9 September. "Egypt advanced 11 places in the global rankings on the ease of doing business, ranking as country number 114 this year," Minister of Investment Mahmoud Mohieddin said during a press conference he held to discuss the report. Egypt continued to lead with improvements in six of the 10 areas the report covers. These include starting a business, dealing with construction permits, registering property, getting credit information, protecting investors and trading across borders. In the meantime, Egypt made meagre or no improvements in the remaining four areas covered. These include the employment of workers, paying taxes, enforcing contracts and closing a business. Notably, Saudi Arabia and Tunisia are two other economies in the region that have managed to make good advancements in four areas. Doing Business 2009 is the sixth in a series of annual reports published by the International Finance Corporation (IFC) and the World Bank (WB), investigating regulations that enhance business activity and those that constrain it. This year, the report, which tallies 10 indicators perceived as easing business, examined the economies of 181 countries during the period between June 2007 and June 2008. "Economies need rules that are efficient, easy to use and accessible to all who use them. Otherwise, businesses are trapped in the unregulated, informal economy, where they have less access to finance and where labour lacks the protection of labour law," said Michael Klein, WB/IFC vice-president for financial and private sector development. The report, however, is by no means exhaustive and does not cover other certain areas that can also impact businesses. For example, it does not look into factors affecting competitiveness, nor does it measure security, macroeconomic stability and corruption, or labour skills. Nevertheless, it is clear that economies worldwide are increasingly committed to regulatory reforms, and the competition among countries investigated by the report is becoming tougher each year. The good news is that the Middle East and North Africa is the region with the second- largest share of economies that made it easier to do business, according to Dahlia Khalifa, who co-authored the report. Khalifa added that many of the region's economies, including Egypt and Saudi Arabia, are consistently making improvements and are advancing in the global rankings. Notably, the six areas that recorded improvement according to this year's report are closely and most effectively related to the small and medium-sized enterprise (SME) sector in Egypt. "A strongly favourable aspect of the report is that it deals mainly with SMEs, which form the backbone of any economy," said General Authority of Free Zones and Investment's Chairman of the Board of Trustees Ziad Bahaaeddin. Meanwhile, starting business has become easier by reducing the paid-in minimum capital requirement by more than 80 per cent, decreasing from LE50,000 to a minimum of LE1,000. "This major reform has enabled a countless number of limited liability companies to be established and to be able to apply for credit and loans," said Mohieddin, who added that more than 60 per cent of the companies established in Egypt involve less than LE1 million paid-in capital, "the figure will multiply during the next few years," said Mohieddin. Another top reform is the new building code, introduced this year to reduce procedures and time required to deal with construction permits by establishing a single window for processing construction-related approvals. Building permits for new projects have increased by at least 49 per cent during this year, while the construction sector in Egypt has witnessed an unprecedented boom. Other impressive improvements have also been noticed in areas related to registering property, as simplified administrative procedures have been introduced. Property transfer in Cairo takes 72 days now, instead of the previous 193. In the meantime, trading across borders constitutes another point of strength as the port of Alexandria continues to upgrade its facilities and speedy customs clearance have reduced the time to export by one day and the time to import by three days. Additionally, new listing rules for the Cairo Stock Exchange strengthened protections for minority shareholders. Thanks to new regulations issued by the Central Bank of Egypt borrowers have the right to inspect their data in the private credit bureau. Meanwhile, greater advancements in areas where less notable improvements were recorded will be noticed once certain laws are passed and become effective. Otherwise, they may not be improvements that Egypt is interested in because of the social implications they might entail. According to Bahaaeddin, Egypt would have made a good improvement, from the WB point of view, if it passed laws that would allow companies to fire workers within a window of 24 hours. "But do we really want this to happen? What social implications would such a decision have on the Egyptian labour force at large?" said Bahaaeddin. Indicators relative to closing a business and enforcing contracts, two other areas where Egypt did not score too highly, are closely related to the passing and implementation of the bankruptcy law and the establishment of special economic courts to settle economic disputes through expert judges. "The impact of these improvements will take time before they are noticed but will result in a considerable leap in many areas of the country's economic performance," said Bahaaeddin. On the whole, meanwhile, there is no doubt that the package of reforms launched by the government in 2004 is translating into greater confidence in the performance of the Egyptian economy among international financial corporations, and eventually into a greater influx of foreign direct investment (FDI). According to Mohieddin, net FDI into the country is expected to reach $13 billion for 2007-2008, while foreign reserves for the same year jumped to $35 billion compared to $14 billion in 2004. "More improvements will mean more investments, and this is what we will be working on during the next year," the minister told reporters.
