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Communication of Egyptian government needs improvement: OECD

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Report criticises labour market and education system; describes them as structural weakness

The Egyptian government needs to enhance its ability to communicate with the public, business community and internally, the Organisation for Economic Co-operation and Development (OECD) said in its Business Climate Review of Egypt report.

“It is clear that there is a disconnection in perceptions between the government officials and private sector actors on a number of fronts,” the report read. “This is particularly true with regard to the activities of the General Authority of Investment [GAFI], Egypt’s investment promotion agency”.

On Sunday, chairman of GAFI Hassan Fahmy announced that foreign direct investments (FDI) registered $2.8bn in the first half of the 2013/2014 fiscal year (FY). Throughout the 2012/2013 FY, the total FDI in Egypt amounted to $3bn.

The OECD report stated that these shortcomings can be found in the protection of intellectual rights, guarantees against expropriation, rules regarding national treatment and the conduct of international arbitration, along with several other issues.

Legislative changes and adaptation of international instruments were some of the recommendations made by OECD. The organisation’s report also recommended the fostering of conventions in order to create a favourable business and investment climate.

The report mentioned that despite the fact that Egypt has produced international obligations and domestic laws that promote investments and protect commitments, businessmen and investors witness the neglect of these laws on a daily basis.

The report also mentions that transparency remains an issue, highlighting that clarity can be beneficial and will help deal with certain expropriation cases.

“In the areas of security certificates for foreign investors, national treatment and dispute settlement mechanisms in particular, requirements, timing for determinations and reasons for determination are often unclear to those affected,” the report said, adding that Egypt has implemented “a number of foreign exchange control measures without providing certainty as to scope and timing”.

Selected Public-Private partnership projects (PPP) has not been successful in attracting investments because they have not appealed to investors, the report noted.

“The government’s financing model, including the absence of an exchange rate guarantee, and the lack of long-term project funding have also been obstacles to the success of the PPP programme,” the report added.

The report mentioned that the Egyptian labour market is “widely recognised as a structural weakness and constraint”.

Human capital faces challenges while the education system is unable to cater to the private sector’s needs, according to report.

It added that economic reforms should be pursued in order to achieve economic growth.

“Structural reforms should continue tackling pressing issues related to the strengthening of economic and legal institutions as well as improving the rule of law, a prerequisite to attract domestic and foreign investors and entrepreneurial activities,” the report read.

Macroeconomic fundamentals should be improved through the increase of international foreign reserves and through closing the gap of the fiscal deficit, the report added.

Foreign reserves have been fluctuating during the past recent months, declining continuously from September until the end of December. At the end of September foreign reserves amounted $18.7bn, a $0.2bn drop from August numbers.  Reserves fell to $18.59bn in October, $17.76bn in November and $17.05bn in December. The rise of reserves started in January, reaching $17.105bn and continued through February to register $17.3bn. In March, the reserves reached $17.414bn and in April they surged once again registering $17.48bn.


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