Egyptian Junior Business Association

Transcription

1 National Business Agenda I. Vision To become the association of first choice among Egyptian Junior Business people who are committed to the development of a culture of Excellence, Ethics & Public service. II. Mission EJB mission is to support the comprehensive development of Egypt and its business community through the creation and coordination of a mutually supportive community of Egyptian Junior Business People committed to a culture of excellence, ethics and public service. EJB Board Members: Helmy Abouleish Mahmoud Khattab Tamer Nassar Khaled El-Mikaty Ossama Mourad Ahmed Sabbour Aly Galal Amr Assal Emad El-Sewidy Hassan Abdallah Khaled Abou-Bakr Khaled Mahmoud Mohammed Abd-El-Fadil Mohamed Shaker Nehad Ragab (Chairperson) (Vice Chairperson) (Vice Chairperson) (Secretary General) (Treasurer)

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3 Message from the Chair The National Business Agenda. (NBA) for 2004 is the first to be published by the Egyptian Junior Business Association. (EJB) and aims to contribute in the comprehensive development of the country. The NBA is the concerted effort of the members of the EJB, representing the different sectors of the economy, and their hands on experience, coupled with the knowledge of experts and academia, have contributed to the release of the agenda to the society. It was through the energetic and enthusiastic contribution of the members that such an endeavor has succeeded and with the support of different stakeholders we can safely say that this initiative can be a major addition tothe development process currently being pursued. The members of the EJB also realize that the launch of the NBA is a step in the right direction which, together with business associations, civil society, academia, public opinion, regulatory authorities, parliament and the government, will lead to a concerted effort to enhance Egypt's competitiveness and its investment climate. We are grateful and hopeful for what has been achieved so far. Grateful for the effort exerted and the support extended by EJB members. Hopeful that the release of the NBA will symbolize the beginning of the partnership of all forces in the society, pursuing the comprehensive development of our country, through entering into an implementation phase of the recommendations. The EJB believes that only through the partnership & positive engagement of all forces in the society can we achieve such a goal and that civil society has assumed its position and responsibility towards such an endeavor. Helmy Abouleish Nehad Ragab Chair ( ) Chair ( ) EJB EJB Cairo, December 2004 iii

4 Acknowledgements We would like to express our sincere gratitude and appreciation to all those who contributed to the issuance of the National Business Agenda (NBA). We are grateful to the members who contributed their thoughts, expertise and effort through the discussions; namely, Khaled El Mekati, Mohamed Hassan Aglan,Nehad Ragab, Nesrin El-Lababidy, Khaled Schuman, Amr Abouhashish, Manal Khalil, Maged Abdel Maksoud, Amr Gohar, Ehab Osman Khalil, Maryam Fayez, Mona Elkolaly, Amr El Helaly, Cherifa Rachad, Ashraf Sheta, Alaa Hashim, Adham Nadim, Amr Assal, Haytham Deyab, Amr AbuFreikha, Hassan El Khatib, Dina AbdelWahab, Hesham Dinana, Hisham El Bakry, Hatem Zaazou, Khaled Dahawy, Rania Azab, Tamer El Badri, Khaled Fawzy. We would like to thank those who shared in the review of the drafts of the NBA: Mohamed Askar, Ahmed Ghoneim, Sahar Mounir. The Egyptian Junior Business Association would like to thank the executive team who assisted in the completion of the NBA; namely Heba Askar, Ayman Salah, Amal Samir. It is quite satisfying to have such joint efforts in issuing the agenda that we know can provide the reform process with valuable recommendations. iv

5 Table of Contents: Executive Summary Introduction viii xi Section one 1 General Issues 1 1. Create a comprehensive vision for Egypt 3 2. Enhancing the concept of social entrepreneurship 4 3. Transparency and combating corruption 6 4. Pan Arab trade 7 5. Access to credit and loans to small and medium enterprises (SMEs) 8 6. Linkages of small and medium enterprises (SMEs) with international markets 9 7. Importation Procedures Decentralization of Governmental Agencies Availability and Transparency of Information Foreign Exchange problem Amendment of Export Promotion Law Competition and Consumer Protection Law Harmonization of the Egyptian standards with the International standards Corporate Governance Lack of active agencies supporting exports outside Egypt Judiciary reform 20 Section two 21 Sector Specific Issues 21 Sector focus group1 (Construction and Contracting) absence of one unified contract The Role of Egyptian Federation for construction & Building Contracting Custom duties & taxation Absence of Building Standards Human resources 29 v

6 Sector focus group2 (ICT Sector) Inability of Egyptian ICT companies in pursuing and developing business opportunities in foreign markets Low penetration rate of ICT usage in the private sector Insufficient automation of ministries 33 Sector focus group3 (Food, Agriculture & Pharmaceuticals) Low Local supplier quality & quantity Unfavorable Pricing Regime Insufficient R&D Lack of clarity & stability of regulations Importation of raw materials and spare parts Sales Tax on capital goods and machinery Inadequate transportation and shipment facilities Problems related to field crops Problems related to animal feed Problems related to health examinations Health examination of imported equipments Difficulty in retrieving the duty drawback amounts Health clearance of packaging and wrapping materials Drying Steam Pesticides analysis Coordination between Ministry of Environment and Ministry of Agriculture The documentation of shipments Steaming fees on imported agricultural materials Registration of new crops 52 Sector focus group4 (Textiles / Home Furniture) Smuggled Products Lack of well organized storage system Lack of long term agricultural planning Weakness of managerial structures Lack of access to information about factories Weakness of production structure in spinning companies Facilitate access to Finance for the production of fibers Activation of joint Arab agreements The impossibility of working with the drawback system In Wood products Export promotion of home furniture and wood products 62 vi

7 Sector focus group5 (Industrial Products) Deficiency in mechanic detecting of specification and standards Weakness of the supply chain and feeding industries Making use of military factories production to meet the various needs of internal and external markets Quality standards & exports of low value added Wet Blue 66 Sector focus group6 (Finance &Banking) All Access to Funding Access to Bond Market Access to Local Equity Market Venture Capital Availability (Alternative Investments) Ease of access to loans for SME s 71 Sector Focus Group7 (Education, Training and Consultancy) Absence and inefficient Cluster Development Lack of trust in the consultants Lack of qualified caliber per sector Lack of accurate and comprehensive information on market in general Lack of mechanism to develop the market in Egypt 76 Sector Focus Group9 (Freight Forwarding, Imports and Exports) Lack of regulator for the sector Unfair conduct by shipping lines which leads to monopolization Lack of shipping lines to East Africa Problems related to internal land transportation 81 vii

8 Executive Summary The Egyptian Junior Business (EJB) Association s National Business Agenda is an endeavor that started a year ago as a strategic mission to enhance Egypt s competitiveness. The agenda does not only reflect the EJB members voice and own point view, but rather it is a result of several initiatives bringing in different stakeholders in the Egyptian economy. Including parliamentarians, academics and policy makers. In that sense the agenda is unique as it is different from other conventional agenda which state the problems from a singular point of view. Moreover, the agenda is pro active as it suggests solutions and recommendation for enhancing the competitiveness of the Egyptian economy. It is a road map identifying problems, solutions, national and sectoral targets, while engaging the different society stakeholders in drawing this map. The EJB has taken the lead in analyzing Egyptian Competitiveness, using the tools and benchmarks provided by the World Economic Forum. The program was initiated in early October 2003 with the aim of providing the business community with a greater opportunity to participate in the development of a policy framework, aimed at increasing the Egyptian economy's competitiveness. The National Business Agenda highlights the needed and desirable reforms, using the platform of the competitiveness report, which led to the establishment of the Egyptian National Competitiveness Council, induced by EJB, the Egyptian International Economic Forum, and the Arab Business Council. Accordingly, the Egyptian National Competitiveness Council has released the first edition of the Egyptian competitiveness report. In light of the objectives of EJB which include enhancing the role of the private sector in the economic growth process, and raising the public awareness on competitiveness issues, the agenda identified specific national constraints (whether they take the form of policy or regulation) as well as specific sectoral (in the field of manufacturing, agriculture, and services) constraints. Several doable recommendations were suggested to tackle such constraints. The sectors included in this agenda represent a large proportion of Egyptian Gross Domestic Product, employ a large portion of the labor force, and has a huge potential for exporting. They included: 1) Building Materials, Contracting and Engineering Consultancy; 2) Information Technology (IT)& Communication, Publications & Copyrights products; 3) Pharmaceuticals, Chemicals & Fertilizers Industry, and Agricultural Products and Food Industry; 4) Textile, Home Furniture, and viii

9 Ready made garments; 5) Steel Industry, Electronics and Appliances, Leather and Footwear, and Wood Related Products; 6) Finance & Banking; and 7) Education, Training and Consultancy, 8) Freight Forwarding, Exports, & Imports. In undertaking this challenge of drawing the road map of competitiveness in Egypt as explained by the national business agenda, the EJB has taken an eight step approach to effectively determine the real challenges facing national economy, and develop appropriate and effective policies for improving the competitiveness: 1. Business Competitiveness Survey 2. Development of sector focus groups (SFG1,..,SFG8) 3. Validation of 2003 competitiveness Index 4. Calculate : Overall Ranking, Sector by sector ranking 5. Holding regular SFG meetings to discuss each sector s position paper 6. Identification of critical variables 7. Develop policy recommendations 8. Set Action plans for the implementation phase Based on the problematic factors identified, each sectoral focus group (SFG) has developed a set of recommendations and action plans to tackle these problematic factors. The recommendations have been discussed in detail by each SFG, and then communicated to all the participating EJB members. Furthermore, SFG heads have drafted appropriate action plans for the solution of the problematic factors. Among the general nation-wide issues tackled in this agenda were the following challenges: 1) Create a comprehensive vision for Egypt 2) Enhancing the concept of social entrepreneurship 3) Transparency and combating corruption 4) Pan Arab trade 5) Access to credit and loans for small and medium enterprises (SMEs) 6) Linkages of small and medium enterprises (SMEs) with international markets 7) Importation Procedures 8) Decentralization of Governmental Agencies 9) Availability and Transparency of Information ix

10 10) Foreign Exchange problem 11) Amendment of Export Promotion Law 12) Competition and Consumer Protection Law 13) Harmonization of the Egyptian standards with the international standards 14) Corporate Governance 15) Lack of active agencies supporting exports outside Egypt 16) Judiciary reform Besides such 16 national challenges that were appropriately tackled in the agenda where solutions to solve them. Those were addressed while stating the governmental partners needed to meet them. The agenda also identified similar sectoral challenges in the aforementioned sectors. The action plan has included the submission of papers to several ministries in order to start practical implementation. In a nutshell, the national business agenda represents a form of the new social contract between the government and the private sector where the private sector is heavily involved in the reform process. Despite the fact that it represents the EJB own point of view, the consultation undertaken to have the agenda in its ready camera format ensure that it reflect a consensus voice on the challenges of the Egyptian economy competitiveness. We hope, as EJB members, that this humble effort will be able to contribute to the reform process for the sake of a better future. x

11 Introduction Background Over its long history, Egypt has managed to be a leader of development in the middle-east. In assuming its leadership role, Egypt is facing the challenges of restoring its competitiveness among the region and the world as a main economic and political power. This has led to the formulation of a collaborative work environment among both the public and private sectors, which is focused towards improving Egypt Competitiveness. Through the dynamic nature of the Egyptian Junior Business Association, EJB, members representing the future leaders of the Egyptian society have engaged in the task of evaluating Egyptian competitiveness. Project objectives can be summarized as follows: To increase public and members awareness of the barriers to the economic growth and the means to challenge them To encourage the role of business participation in the government decision making process by pursuing a dialogue with the government through formulating an Egyptian Youth National Business Agenda. To capitalize on the private sectors negotiation power and the ability to influence policies. To promote membership through building EJB as the voice of Egyptian Junior businesses, enhancing members skills and the provision of business related information and support material Through the SFG program, EJB aimed at building its credibility by establishing a platform that will allow EJB to maintain its independence from while involving the government through a private-public policy dialogue. EJB has set an approach to face problems hindering business in Egypt and also set a comprehensive vision & working plan to deal with those problems. In this effect, EJB formulated its National Business Agenda (NBA) for 2004 through which a number of its members, in collaboration with other stakeholders & decision-makers in Egypt, reach a comprehensive image of a new strong Egypt, capable to compete globally. xi

12 The Egyptian Junior Business Association s NBA is an endeavor that started a year ago as a strategic mission to enhance Egypt s competitiveness. The association, with the help of professional Egyptian expertise, has formed eight Sector Focus Groups representing the various sectors of the Egyptian economy. The NBA highlights the most problematic factors facing each of the eight specified sectors and negatively affecting its competitiveness. It also suggests immediate and appropriate solutions for the problems facing each sector, as a means to increase and activate coordination among different concerned institutions and entities, while finally seeking to build networks among members for immediate benefit and realization of mutual goals. Moreover, it is attempting to enhance Egypt s Investment climate, which is a key element in attracting direct foreign investments, being a pillar for Egypt s sustainable development. The NBA highlights the needed desirable reforms, using the platform of the competitiveness report, which has induced the establishment of the Egyptian National Competitiveness Council, induced in turn by the EJB, the Egyptian International Economic Forum, and the Arab Business Council. Accordingly, the Egyptian National Competitiveness Council has released the first edition of the Egyptian competitiveness report. xii

13 Methodology To effectively determine the appropriate and effective policies for improving the competitiveness of Egypt, EJB has taken an eight step approach as presented: 9. Business Competitiveness Survey 1. Development of sector focus groups (SFG1,..,SFG8) 2. Validation of 2003 competitiveness Index 3. Calculate : Overall Ranking, Sector by sector ranking 4. Holding regular SFG meetings to discuss each sector s position paper 5. Identification of critical variables 6. Develop policy recommendations 7. Set action plans and implementation phase By following these steps, EJB was able to pursue a scientific approach in data collection, and analysis that serves as a basis for effective and accurate policy formulation. Development of Executive Surveys The overall competitive ranking of Egypt was evaluated using a comprehensive executive survey that was compiled by the EJB members. The survey is based on the business competitiveness index developed by the World Economic Forum and used in the development of the Global Competitiveness Report. The survey consists of a total of 140 variables that are grouped into the following 9 groups. Macroeconomic Environment Technology Information and Communication Technology General Infrastructure Public Institutions Domestic Competition Cluster Development Company Operations and Strategy Environmental Policy xiii

14 Each of the 140 variables is assigned a 7 point Likert scale, where respondents are required to rank them based on their expectations, (1 being very low, up to 7 very high). The surveys were filled by executives and managers from different sectors of the economy and based on their responses the overall competitiveness ranking was calculated. The survey was reviewed by the EJB executive board and local authorities in competitiveness to validate its robustness and assure its proper comprehension by the respondents. Formulation of Sector Focus Groups In addressing the Egyptian Competitiveness ranking, the EJB board with the help of professional expertise, has elected to form eight Sector Focus Groups representing the various sectors of the economy. This approach facilitated the evaluation of the overall economy as well as sector by sector competitiveness evaluation. EJB members were then invited to join the SFG related to their field of business. Validation of 2003 Competitive Index The board members obtained a copy of the 2003 Egyptian Competitiveness Index, and forwarded it to the various SFGs. The data from the 2003 Competitive index was used as a base for comparison and validation of the SFG participant responses. This resulted in more understanding by the participants of the competitiveness survey, as well as validation of the tool used. Development of Rankings Following the validation of the competitiveness survey, each SFG performed detailed evaluation of the Competitiveness index from the perspective of the sector they represent. This resulted in the development of sector based competitiveness ranking. Further, the various SFG responses were collected to evaluate the overall Egyptian Competitiveness Index. SFGs meetings and identification of Critical Variables After the calculation of the various sector competitiveness ranking, each SFG held regular meetings to analyze the data and to determine the variables that are significantly lagging behind the world averages. These variables were carefully xiv

15 identified and evaluated to determine the problematic factors behind them. This was performed using the statistical data presented as well as through focus group analysis. The resulting problematic factors were obtained on sector by sector basis, and then combined to determine the common problems experienced throughout the economy as well as sector specific problems. Developing policy recommendations and action plans Based on the problematic factors identified, each SFG developed a set of recommendations and action plans for the solution of these problematic factors. The recommendations were discussed in detail by each SFG, and then communicated to all the participating EJB members. Further, the SFG heads, together with the EJB board drafted appropriate action plans for the solution of the problematic factors xv

16 Section One: General Issues Create a comprehensive vision for Egypt Enhancing the concept of social entrepreneurship Transparency and combating corruption Pan Arab trade Access to credit and loans to small and medium enterprises (SMEs) Linkages of small and medium enterprises (SMEs) with international markets Importation Procedures Decentralization of Governmental Agencies Availability and Transparency of Information Foreign Exchange problem Amendment of Export Promotion Law Competition and Consumer Protection Law Harmonization of the Egyptian standards with the International standards Corporate Governance Lack of active agencies supporting exports outside Egypt Judiciary reform xvi

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18 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Create a comprehensive vision for Egypt Objective: To have a specific common vision for all partners in the society: government, private sector, and civil society. - A vision is a clear, concrete guiding picture of the results or conditions to be achieved - A vision is a source of inspiration and guidance - A vision is the glue that holds everyone together in a group, organization, or movement - A vision is a basic understanding of the nature of the opportunities and problems facing the country. - A vision is a parallel realistic and concrete medium-term strategy for the country. - Many less developed countries do not have a clear vision because of the lack of awareness of the importance of long-term goals, lack of structure for building a vision. - Lack of common vision misallocate our resources and efforts for development and direct it to wrong ways. Action needed: Create a national dialogue between all institutions representing all partners in the society to formulate a common obvious vision. Association recommendations To have a vision we have to look back where we are coming from and then we should see where we are now and think where we want to be in the future. All the people should be consulted (government workers, private sector workers, employers of labor, institutions, organizations) to make contribution to the national dialogue. This can be done through asking every institution or organization in the society to develop a sentence defining its vision for Egypt through the next 20 or 30 years. Relevant authority Ministry of Planning. Ministry of Foreign Trade and Industry Ministry of Agriculture. Ministry of Education All associations representing the civil society. xviii

19 Regulatory Reform: All sectors Egyptian Junior Business Association National Business Agenda Challenge: Enhancing the concept of social entrepreneurship Objective: To create a strategic partnership between the business sector and civil society. - The terminology of Social Entrepreneurship is not familiar in Egypt and the Arab region. An appropriate Arabic translation does not exist for it and the meaning is often lost in translation. A dialogue needs to be initiated on the concept to reach either an acceptable terminology appealing for both the social and business sectors or at least a mutual understanding of the concept. - Social Entrepreneurship (SE) and Corporate Social Responsibility (CSR) are new practices for both the Civil Sector and the Private-Business sector in Egypt. The majority of the work done so far in the social sector was under the charity umbrella. A campaign and a plan of action need to be designed to promote the SE and CSR trends. - Both the business entrepreneur and the social entrepreneur can learn from each other to advance their goals. Successful partnership models between both the civil and the business sectors need to be widely broadcasted for further spread and replication. Action needed: cooperation between the government, the private sector, and the civil society to spread the concepts of Social Entrepreneurship and Corporate Social Responsibility. Association recommendations To spread awareness among the donor community and the private sector companies on the concept of Social Entrepreneurship. We also need to provide them with the various tools to identify the Social Entrepreneur and possible ways to support her/him to achieve its goals. To highlight to the various players and stakeholders in the Civil Society the benefits of Social Entrepreneurship on increasing their organizations efficiency, competitiveness, and sustainability as well as the benefits on the overall development of Egypt. To launch a campaign on Corporate Social Responsibility and on current successful examples of partnership between the social and the private sectors. Relevant Authorities Donor Community. Private Sector. NGOs and Civil Society. Ministry of Social Affairs. The Egyptian Federation of NGOs. Social Fund for Development. Ashoka. Ministry of Finance. Ministry of Investment. xix

20 To create models for replication on the best practices of a civil-private partnerships for a social agenda. To lobby with the Ministries of Finance and Investment on providing additional incentives and tax cuts to the private sector based on their Social Corporate Responsibility programs. xx

21 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Transparency and combating corruption Objective: Clear and transparent business environment, and economic efficiency. There is a global movement towards fighting corruption and ambiguity. Most developing countries on their transitional stages suffer from high levels of corruption. Corruption represents a burden on the country and results in political, economic, and social deterioration Corruption and bribery led to distortions in business environment, unfair distribution of wealth, discourage private and foreign direct investment, and misallocate resources. Corruption results from: 1. Centralization of power and authority in addition to low level of transparency. 2. Low income levels in developing countries which make employees increase their income with bribery. 3. Social relations and favoritism. 4. Complicated regulations and restrictions in business environment, a matter that make businessmen try violating it, in addition to 5. The judgment system and laws is not straight forward which facilitates violating the law. Action needed: Cooperation with national and international organizations to combat corruption and enhance the concept of transparency Association recommendations Establish alignments on national, regional, and international levels, including the government, civil society, and private sector to combat corruption. Help in designing and activating a mechanism to enhance transparency and clarity. Decentralization of decision making process. Collect, analyze and publish data in a way that increase public awareness with the destroying effects of corruption on the human being and economic development Ministry of Foreign Trade and Industry. Ministry of Administration Development. xxi

22 Regulatory Reform: All sectors Challenge: Pan Arab trade Egyptian Junior Business Association Objective: Increasing overall productivity, and competitiveness of Arab region Inter-regional Arab trade represents only 9 % of Arab countries' overall trade. The world's most developed economies have the highest inter-regional trading figures. For example, inter-regional trade amongst European countries represents over 60% of Europe's worldwide trade, and inter-regional trade among Asian countries exceeds 30%. The realities and demands of the global economy require the removal of trade barriers, standing against national protectionist policies and the development of regional economic blocs. This is reflected in the growing influence of trading blocs such as The European Union, the North American Free Trade Area, and the Association of South Eastern Asian Nations. Even the GATT/WTO rules provide for economic regional blocs Action needed: Increasing the percentage of inter-regional Arab trade. Association recommendations Immediate and full removal of trade barriers, among Arab countries. The development of regional economic blocs. Formation of pan Arab business associations to increase cooperation between business associations in different Arab countries. The Arab junior business union is an initiative from Arab business men that needs support. Ministry of Foreign Trade and Industry Ministry of International cooperation. xxii

23 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Access to credit and loans for small and medium enterprises (SMEs) Objective: promotion of small and medium enterprises. The main problem that faces SMEs in Egypt can be specified in their access to credit and loans. The clear fact is that SMEs are not able to access credit through the banking system due to many reasons: 1. Lack of professional expertise at the SMEs level that are able to deal with banks. 2. Banks are not catering for SMEs while demanding excessive guarantees, a matter that makes dealing with banks the last resort for finance. Action needed: Facilitate access to credit and loans for SMEs. Association recommendations Encouraging the existence of credit rating companies that act as a third party in order to ensure fairness in access to credit. (Not addressed in law 141/2004 for SMEs development) Coordinating with the social fund for development in order to establish a ready-made system of finance to all SMEs with prespecified procedures with no personal guarantees. A certain percentage of credit loans should be dedicated to finance SMEs. (Not addressed in law 141/2004 for SMEs development). Ministry of Foreign Trade and Industry. Ministry of Investment. xxiii

24 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Linkages of small and medium enterprises (SMEs) with international markets Objective: To support the growth of small and medium enterprises. Almost all SMEs need help in exporting to the international market as they lack linkages and connections with foreign importers. Action needed: Help in marketing the production of SMEs in foreign countries. Association recommendations Working on categorizing SMEs according to their activity and field of production in unions that would help them to export their production collectively to international markets. This will reduce their cost and increase their competitiveness. Establishing a separate entity that is responsible for marketing and promoting the production of SMEs abroad, in addition to providing them with the needed information in order to penetrate those markets.(not addressed in law 141/2004 for SMEs development) Providing technical and vocational training programs to SMEs especially in fields that inhibit their exports (conformity assessment with international standards, environmental assessment). Cooperate with the Industrial Modernization Center in order to upgrade SMEs capabilities (wonderful examples of technological centers implemented by IMC that need to be generalized Organizing special fairs outside Egypt to promote the production of SMEs Ministry of Foreign Trade and Industry. Ministry of Investment. xxiv

25 Regulatory Reform: All sectors Challenge: Importation Procedures Objective: Facilitate importation procedures. Egyptian Junior Business Association Absence of sufficient local supply with adequate quality led to the dependence of the industrial sector on imported raw materials, but the existence of complex border clearance systems which are time-consuming, cumbersome registration and customs procedures, including custom valuation resulted in delay and inefficiency in production. The sampling of products by several different government bodies (The Ministry of Foreign Trade and Industry, The General Authority for Export and Import Control, The Egyptian Organization for Standardization, The Customs Authorities.etc.) is sometimes excessively destructive, especially when done on each package of goods. Likewise, sampling is done sequentially, rather than in parallel which would save time. As a result, goods are frequently blocked in the harbors. Customs duty assessment is not transparent and rates charged are often subject to arbitrary decisions taken by customs officials. (The same problem is repeated with imports of machinery spare parts.) Action needed: Customs reform and procedures reduction. Association recommendations Assigning a single agency to be responsible for approving and facilitating the entrance of imports within minimum specified time (especially for imports that are more eligible to damage) Adopting an initiate for customs reform where customs on raw materials, machinery and spare parts should be reduced. Eliminating all the unnecessary procedures and regulations that are considered technical barriers to trade and that caused us severe problems with our major trade partners (United States of America and The European Union) as tests on shoes, imports of animal products certification requirements, labeling requirements for poultry and meat, fat content of frozen meat.etc. Ministry of Foreign Trade and Industry Ministry of Investment Ministry of Finance xxv

26 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Decentralization of Governmental Agencies Objective: Facilitation of procedures and reducing bureaucracy and red tape. The absence of ministries' branches and agencies in Egyptian governorates caused severe crowding of investors and stakeholders on main ministerial office. This caused a vicious circle of bureaucracy and red tape, in addition to wasting time and effort. Action needed: Establishing Ministries branches and agencies in Egyptian governorates. Association recommendations Establishing Ministries branches and agencies in Egyptian governorates and/or cities, given all the authorities of the main ministries and agencies. Establishing an office or center in each branch responsible for investigating problems and complaints and reporting to the main office in Cairo. Ministry of Foreign Trade and Industry. Ministry of Investment. xxvi

27 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Availability and Transparency of Information Objective: Encourage private and foreign direct investment. All Egyptian businessmen suffer from lack of available data for research and/or decisionmaking. This problem is so clear especially when comparing the data on Egypt to that published by international organizations and those published by Egyptian authorities. Huge differences appear due to exaggerated and inflated figures of the Egyptian authorities that are usually misleading. Another problem appears in the fact that essential data are not simply published due to the lack of transparency. The lack of coordination between different entities and information centers, a matter that lead all of them to loose their credibility. Action needed: Harmonization of data and providing easy access to information. Association recommendations Establishing information centers in all essential areas (ports, airports, customs authorities, industrial zones etc.). Harmonize all the data published by Egyptian authorities (especially that of The Ministry of Foreign Trade and Industry, CAPMAS, The Central Bank of Egypt). Harmonize all the data published by Egyptian authorities with international sources and try to know the reasons for those huge differences. The necessity of creating a strong updated database that could be accessed through the website of The Ministry of Foreign Trade and Industry that is able to provide all needed data on various companies, industries and trade relation. Ministry of Foreign Trade and Industry. Ministry of Investment. xxvii

28 Regulatory Reform: All sectors Challenge: Foreign Exchange problem Egyptian Junior Business Association Objective: Provide foreign currency for importation. Due to the decision of floating the exchange rate regime and the devaluation of the Egyptian pound, two ministerial decrees were issued: 1.The Prime Minister s Decree 506/ The Minister of Foreign Trade Decree 139/2001 Those decrees require exporters to exchange 75% of their net foreign exchange earnings into local currency. On the contrary, in the process of importation, usually banks are unable to provide the required amount of foreign currency causing a problem to several industries. Action needed: Abolishment of the decrees concerning exchanging export revenues into local currency. Association recommendations Abolishment of those two decrees and depending mainly on inflation targeting systems to ensure stability of the foreign exchange market and prices. Ministry of Foreign Trade and Industry. Ministry of Investment xxviii

29 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Amendment of Export Promotion Law Objective: Egyptian exports promotion. There are some differences between the suggested draft bill presented by the business associations and the law No. 155/2002 on Development of Exports. Business association suggested exempting exports from all taxes; however, the issued law has kept the 40% taxes and exempted exports only of the so-called services fees (amounting to only 3%). Another conflict appears in the drawback system, which is controlled by a joint unit of the Ministry of Foreign Trade and Industry, the General Authority for Export and Import Control (GAEIC) and headed by the Ministry of Finance, while the draft bill put it under the authority of the GAEIC solely. Action needed: Amending the export promotion law according to the draft bill presented by business associations. Association recommendations Adopting the initiative of business association of exempting exports from all taxes. Organizing the drawback system under a sole entity under the authority of the Ministry of Foreign Trade in order to facilitate the procedures of refunding. Ministry of Foreign Trade and Industry. Ministry of Investment xxix

30 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Competition and Consumer Protection Law Objective: Create an encouraging business environment. The business environment felt the urgent need for having a competition and consumer protection law especially when addressing the case of steel prices and the accusation of the existence of illegal monopolistic practices that affected market prices. Although a draft of Competition and Consumer Protection Law is in the process of preparation, it took a lot of time to reach its final shape and take the approval of the People s Assembly. Action needed: Final approval of the competition and consumer protection law Association recommendations Reaching the best shape and final approval of the competition and consumer protection law as soon as possible in order to avoid the appearance of other monopolistic practices in more fields (especially that the overall climate would encourage that). Ministry of Foreign Trade and Industry Ministry of Investment xxx

31 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Harmonization of the Egyptian standards with the international standards. Objective: Improve the standardizations process in Egypt. Although the Egyptian law gives the right to importers and exporters to use either the Egyptian standards or the international standards (CODEX, ISO. etc.), practically in some cases this is not applied. Action needed: Enhance the role of the Egyptian organization for standardization. Association recommendations Enhance the role of the Egyptian organization for standardization in order to harmonize the Egyptian standards with the international standards. Prepare a committee that consists of a representative from each industry (private sector) in order to assist in the process of standard specification. Give freedom to the manufacturer and the supplier to choose among the different international standards, parallel to the Egyptian standardization. Publish those standards through a monthly magazine that is available to all manufacturers through local bookshops. Ministry of Foreign Trade and Industry. Ministry of Investment xxxi

32 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Corporate Governance Objective: To provide a transparent encouraging business environment. Corporate Governance looks at the institutional and policy framework for corporations from their very beginnings, in entrepreneurship, through their governance structures, company law, privatization, to market exit and insolvency. Sound corporate governance is crucial, not only for private sector development, but also for economic growth. Corporate governance principles (OECD, 1999) I. Rights of shareholders Equitable treatment of shareholders II. Disclosure and transparency III. Role of stakeholders IV. Responsibilities of the board One of the most important obstacles facing investment in Egypt is the existence of corruption, bribery, and lack of transparency, and unified accounting systems Action needed: Cooperation of all social partners to enhance the concept of corporate governance. Association recommendations All partners in the society must cooperate each with his role to support corporate governance I. Government Coordination between ministry of media, foreign trade, and high education to form a campaign aiming in increasing the awareness of corporate governance among managers and investors. Provide a legislative and regulatory environment that encourages companies to adopt corporate governance. Reform legal framework (corporate, capital markets, bankruptcy laws, etc.) to conform with international standards and rules (IOSCO, OECD, IAS, FSAP, etc.) in order to provide a legislative Ministry of Media Ministry of Foreign Trade and Industry Ministry of Public enterprises Ministry of Investment xxxii

33 regulatory environment that encourages companies to adopt corporate governance. Build institutional capacity (regulators, stock exchange) to ensure effective regulation of market, and strong enforcement of rules. Establish Institutes of Directors to provide a sufficient pool of competent and qualified directors. II. Companies Ensure board independence (2-tier board structure, non-executives, independent outsiders, audit committee, representation of minority, separation of CEO and chairman) Provide accurate and timely information of financial statements and material information (board remuneration, ownership structure) Strengthen shareholders rights through building a sound investment relations policy (specialized officers, rich web-sites) III. Civil Society Universities, Think Tanks, Business Associations, and the Media have to play a key role in promoting the culture of corporate governance in the region xxxiii

34 Regulatory Reform: All sectors Egyptian Junior Business Association Challenge: Lack of active agencies supporting exports outside Egypt Objective: Providing support to Egyptian exports The Egyptian commercial representation agencies are not active enough to support exports in foreign countries. Marketing production in foreign countries represents a burden on exporters, as it costs much money, especially for SMEs. Action needed: Activate the role of commercial agencies and support private companies providing services to exporters to facilitate exporting procedures. Association recommendations To reform the commercial representation agencies to provide a clear set of services (for fees or free) to Egyptian exporters. To receive periodical market data on target markets for exporters. To encourage Egyptian exporters to enter in E-commerce through supporting the establishment of companies providing services related to exports and marketing Egyptian exports through the Internet : (Shipment facilities, providing basic information needed, required information regarding the standard specification on the importer country announcing exporting opportunities providing storage places in foreign countries). Ministry of Foreign Trade and Industry. xxxiv

35 Regulatory Reform: All sectors Challenge: Judiciary reform Egyptian Junior Business Association Objective: Providing fair environment provided withal forms of security to business men and consumers in the same time. There is a negative environment in the field of suppliers' dues, as a result of the violation of some parts with their due debts as a result of weakness of laws of bills and checks and the difficulties in its application in many cases. There are some concerns from the investors either Egyptians or foreigners due to the inability in solving disputes due to slowness of judiciary system and the lack of a decisive system to protect the rights of serious respectable investors Action needed: The acceleration of releasing checks and bills laws. Association recommendations The acceleration of a law to prevent the carrier of bills and supporting them to take their rights in no more than 10 days so as to get rid of manipulators and to activate released laws and to protect investors rights. Ministry of Justice Ministry of Foreign Trade and Industry. Establishing a neutral agency separate from any governmental authority to be assigned to solve commercial disputes This agency should be formed from experts who have enough knowledge and experience. To accelerate the payment of government debts to private sector to refresh the market and enhance the circulation. xxxv

36 Section Two: Sector Specific Issues Building Materials, Contracting and Engineering Consultancy; Information Technology (IT) & Communication, Publications & Copyrights products Pharmaceuticals, Chemicals & Fertilizers Industry, and Agricultural Products and Food Industry Textile, Home Furniture, and Ready made garments Steel Industry, Electronics and Appliances, Leather and Footwear, and Wood Related Products Finance & Banking; and Education, Training and Consultancy Freight Forwarding, Exports, &Imports. xxxvi

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38 Regulatory Reform SFG1 (Construction and Contracting) Challenge: Absence of One Unified Contract Objective: Improve the competitiveness of Egypt s construction sector in a way that would accelerate the growth of that sector both locally & internationally. The constructions sector contributes to 4.7% of GDP, 8.3% of employment & 48% of total investment in Egypt which makes the construction sector one of the most dynamic & important economic sectors in the Egyptian economy. Certain Egyptian laws have a negative impact on the construction & contracting sectors such as law no. 89 of 1998 replacing law no. 9 of 1983 for bidding Although there were several amendments made in law 89/1998 it still has a negative impact on the construction sector due to a number of problems. No real concern for quality, despite the law stating that both the price & quality are the main factors in choosing a bidder for any project; low price is usually favored over quality. Arbitrating conflicts between contractors & clients takes a long time in courts. No penalties are imposed on governmental authorities for payment delay although this may delay construction schedules. The overall bureaucracy & red tape in various government agencies as most of the investors effort is wasted in obtaining various licenses. Unfair contract conditions that do not compensate contractors when owners default on timely payment. (no obligation for payment) Action needed: Adopt an initiative for a unified contract form (taking FIDIC Contract as a reference) Association Recommendation The EFCBC (Egyptian Federation for constructions & Building Contracting) & Engineering Syndicate should play an important role & an effective one in setting rules & regulations for the construction business.(privatize the EFCBC) Establishing well defined criteria in choosing the bidder that is mainly characterized by transparency and non-bias in order to ensure fair competition. Omitting first and last bidders in bidding like applicable in other countries (country) Having a considerable time limit for choosing the bidder according to the nature Ministry of Housing, Utilities, and New communities. Ministry of Justice. Egyptian Federation for constructions & Building Contracting xxxviii

39 and scope of the project, three months maximum (two months to choose the bidder and one month to finalize the contract). Establishing an electronic portal for bids and tenders to facilitate the application process and establishing a database for all applicants (which is already done in many Arab countries i.e. Oman) Studying the exemplary law of international bids and tenders that is prepared by the United Nations Commission on International Trade Law in order to make use of it when amending the existing Egyptian law 89/1998. Investigating the responsibility of the contractor towards the designs. Identifying exactly what is meant by the responsible authority in order to avoid conflict in resolving problems. (Amendment of article 2 of law 89/1998). Facilitating investment through approving all licenses from one place. The new unified contract should contain the following points in order to solve the existing problems: Balancing duties and rights of all parties involved in the contract (owners, contractors, suppliers..etc.) in the form of clear terms and conditions. Pre-specified affirmative steps should be enclosed in the contract in case of unpaid dues leading to a final step of the whole project suspend (taking the steps specified in the FIDIC contract as a reference). Definition of the responsibilities of the consultant and the owner. To have the so called Owner consultant agreement document which defines the role of the consultant and prevents his biasness to the owner against the contractor? Resorting to arbitration solutions better than courts in order to save time and effort. Therefore, putting arbitrary option as a first step action in case of resolving conflicts. Those arbitration rules should be streamlined with law 27/1994 of arbitration with the recommendation of ignoring the necessity of xxxix