A new OECD report reveals challenges the government knows only too well, Niveen Wahish reports Absence of predictability and transparency in policy making, difficulties in obtaining licences, gaining access to land, bureaucracy, corruption and skill mismatches are only some of the difficulties faced by local and foreign investors in Egypt according to an assessment carried out by the Private Sector Development Division at the Organisation for Economic Cooperation and Development (OECD). The assessment, which also includes policy recommendations, is the first phase of the Business Climate Development Strategy (BCDS) being developed for Egypt by the OECD division. These findings are no surprise to the government. "We are aware that there is still a lot to be done in terms of reform," said Rachid Mohamed Rachid, minister of trade and industry and acting minister of investment, at the launch of the publication and the second phase of BCDS this week in Cairo. Rachid expressed an urgency to see reforms enacted. "We must run, not walk," he said illustrating the need to accelerate reform "to make sure our future is different". According to Rachid, Egypt is targeting $20 billion in foreign direct investments in the next three to four years, otherwise "it cannot achieve sustainable growth," he said. To make that happen, "we cannot avoid the hard decisions in politically difficult areas of reform," Rachid said. And many of the challenges listed by the BCDS fall within that category. Ania Thiemann, senior economist and project manager for the BCDS Egypt told Al-Ahram Weekly that it is now time to address the more difficult challenges. "It takes very firm political commitment as well as a lot of capacity and resources to really focus on the deeper reforms. But we [the OECD team] feel there is a real will from government to pursue these reforms." Whilst it does not overlook the reform achievements of the past six years, the assessment draws attention to three main policy "spheres" that have an impact on the business climate throughout the lifecycle of a company, namely the operational framework, the rule of law, and factor markets. These spheres are then divided into 12 policy dimensions. In addition, it looks at six challenges that cross-cut through these policy dimensions. The cross-cutting challenges that impact the private sector include the predictability and transparency of government policy, market openness and access, institutional overall and lack of coordination, pervasiveness of the informal sector, licensing requirements and strategy formulation and communication. Tackling problems in these areas is meant to improve the day-to-day operational environment for Egypt's businesses and foreign investors to ensure private investment, growth and job creation. The recommendations offered by the publication are varied. "Avoid sudden policy reversals," is the report's advice to the government, as "any change in policy that will have a direct and negative impact on a sector or a business should be preceded by consultation and full disclosure." To help reduce the size of the informal sector, the report believes more flexible business laws and regulations are needed, and access to finance facilitated. On another note, "the government should put in place and make public a clear privatisation strategy which would spell out the objectives and details of its privatisation programme," the report says, and "a full public debate prior to the passing of the new framework law would enhance the government's image and improve transparency." On a different front, the report recommends an inter-ministerial committee to "formulate a coherent policy towards small and medium sized enterprises [SMEs] and review all legislations affecting them." Other recommendations include clarifying and simplifying land laws and land titling and formulating and passing a new insolvency law. The latter, according to the report "would be the single most useful piece of legislation for rapidly improving the business climate and ensuring easy, speedy access to finance." The second phase of BCDS prioritises the recommendations and develops time bound projects, with proposed outputs, actions and budgets. "It is up to the Egyptian government to decide the projects," Thiemann told Al-Ahram Weekly. "Some of the proposed projects concern the SME sector because this is a big priority for the government," she said explaining that the strategy is looking at ways that we can help integrate the SME sector in the global value chain as suppliers to foreign investors for example. Another project, she said, proposes to bring Egypt closer to the OECD guidelines for anti-bribery by reviewing the aspects that still need to be covered. But these are only proposals as "it is a little early because the third phase is only about to start. We need to wait for feedback from the various government bodies we work with to tell us which they would like us to do," Thiemann said. The third phase involves providing technical assistance to the Egyptian government to assist it in carrying out the projects and recommendations identified by the assessment. But will this report make a difference? Thiemann says the BCDS team have already seen a difference. "Since we started this process beginning 2009, there has been a continuous dialogue with the government. Some of the initial recommendations we proposed have been implemented." She pointed out that since the outset of the process the team recommended a private-public-partnership law which was passed. The BCDS had also suggested the creation of a single entity which has ownership of state companies and is separated from the regulator and that is now the Asset Management Agency that is in the pipeline. BCDS had also recommended the creation of a single body servicing SMEs on the local level and the General Authority for Investment is now rolling those out in Egypt's governorates. As for the time frame, Thiemann says a lot of the measures should be able to have a measurable impact within two years if recommendations are followed. "To really see an improvement in business climate in two years is not unrealistic," she said adding that "ideally this would be the first part of a long process where the Egyptian government would agree to regularly be assessed on its progress." BCDS is a comprehensive assessment that involved private stakeholders, government officials, and partners such as the European Union and the World Bank.
