Recent Developments in the Egyptian Economy Ministry of

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Recent Developments in the Egyptian Economy Ministry of Investment Sep 2009

Recent Developments in the Egyptian Economy Ministry of Investment Sep 2009

Growth & Investment Source: Ministry of Economic Development Unemployment Rate Source: CAPMAS 2

Growth & Investment Source: Ministry of Economic Development Unemployment Rate Source: CAPMAS 2

Growth & Investment Comparative Sectoral Growth Rates (Semi annual) Source: Ministry of Economic Development

Growth & Investment Comparative Sectoral Growth Rates (Semi annual) Source: Ministry of Economic Development Quarterly Growth Rates 3

Public vs. Private Investments Private Investment / Total Investment Private vs Public Investment Private

Public vs. Private Investments Private Investment / Total Investment Private vs Public Investment Private investment as percentage of GDP EGP Billion Source: Ministry of Economic Development 4

Establishment of Corporations (Weekly) 5 Source: GAFI – Ministry of Investment

Establishment of Corporations (Weekly) 5 Source: GAFI – Ministry of Investment

Establishment of Corporations (Monthly) Source: GAFI – Ministry of Investment 6

Establishment of Corporations (Monthly) Source: GAFI – Ministry of Investment 6

Foreign Direct Investment Source: Central Bank of Egypt 7

Foreign Direct Investment Source: Central Bank of Egypt 7

Fiscal and Monetary Policies Fiscal Deficit/ GDP 15. 0% 10. 0% 9. 5% 10.

Fiscal and Monetary Policies Fiscal Deficit/ GDP 15. 0% 10. 0% 9. 5% 10. 4% 9. 6% 8. 2% 7. 3% 8. 0% 6. 6% 8. 0% 5. 0% 0. 0% 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 b 2009/10 Net International Reserves Source: Ministry of Finance 28. 6 34. 6 33. 43 33. 05 32. 17 31. 18 31. 2 22. 9 19. 3 39934 39904 39873 39845 39814 2008 2007 2006 2005 2004 2003 2002 2001 15. 1 14. 2 14. 1 14. 8 2000 40 35 30 25 20 15 10 5 0 8

Fiscal and Monetary Policies Yo. Y change in CPI June 09 9

Fiscal and Monetary Policies Yo. Y change in CPI June 09 9

External Sector Current Account 10 Source: Central Bank of Egypt

External Sector Current Account 10 Source: Central Bank of Egypt

External Sector Source: Ministry of Finance Source: Central Bank of Egypt 11

External Sector Source: Ministry of Finance Source: Central Bank of Egypt 11

Trading Indicators 2004 - 2008 Value of Trading Volume of Trading 12

Trading Indicators 2004 - 2008 Value of Trading Volume of Trading 12

Risk & Return analysis for S&P Board Market Index- BMI 13

Risk & Return analysis for S&P Board Market Index- BMI 13

Egyptian Market since 2004 Annual Return EGX 30 Index 14

Egyptian Market since 2004 Annual Return EGX 30 Index 14

P/E Ratio & Market Capitalization 15

P/E Ratio & Market Capitalization 15

Net Portfolio Investments and Foreigners & Arabs Trading 16

Net Portfolio Investments and Foreigners & Arabs Trading 16

The Asset Management Program EGP Million 16000 14000 12000 10000 8000 6000 4000 2000

The Asset Management Program EGP Million 16000 14000 12000 10000 8000 6000 4000 2000 0 Proceeds of the Program 14612 5643 13607 3983 1541 543 2003/042004/052005/062006/07 2007/082008/09 to date 17

Financial Sector Reform Program Phase I: 2005 -2008 Reform Objective Main Components of the

Financial Sector Reform Program Phase I: 2005 -2008 Reform Objective Main Components of the Reform Program Time Frame Improve the soundness and efficiency of the financial sector through comprehensive structural and financial reform, which would ultimately boost economic growth and development as well as enhancing competitiveness, and financial innovation. 1. Reforming the Banking Sector 2. Restructuring the Insurance Sector 3. Deepening the Capital Market 4. Developing a well-functioning Mortgage Market 5. Activating other Financial Services 2005 -2008 18

Financial Sector Reform Program Main Implemented Reforms of Phase I: 2005 -2008 1 -

Financial Sector Reform Program Main Implemented Reforms of Phase I: 2005 -2008 1 - Reforming the Banking Sector - Merging six banks. - Settling 65% of public sector NPLs. - Privatizing Bank of Alexandria - Divesting 13 cases of public sector banks holdings in JV banks. 3 - Deepening the Capital Markets - Establishing a special registrar for qualified auditors at the CMA. - Introducing Margin Trading, Short Selling, Same Day Trading, Market Making Activity, and Securitization. - Issuing the legislative framework for organizing Acquisitions. - Issuing the new Egyptian Accounting Standards in compliance with the International Accounting Standards. - Issuing the legislative framework for combating insider trading. - Issuing regulations to organize and introduce investment funds, and organize exchange traded funds, money market funds and real estate funds. - Establish the Nile Stock Exchange (Nilex) for SMEs. 2 - Restructuring the Insurance Sector - Merging Al-Shark and Egypt Re in Misr Insurance. - Establishing the Holding Company for Insurance. - Restructuring the boards of public insurance companies. - Establishing a State Fund for compensation - Amending the insurance law and allowing corporation to act as insurance brokers. - Raising the minimum issued capital to EGP 60 million for life and non-life insurance companies. - Reducing stamp duties on insurance policies for life, property and casualty insurance. 4 - Developing a well functioning Mortgage Finance - Introducing more flexibility to income recognition rules and regulations. - Reducing the registration fee to a maximum of EGP 2000. - Establishing the Egyptian Mortgage Refinance Company. - Raising the maximum subsidy obtained from the Mortgage Finance Subsidy and Guarantee fund from EGP 10, 000 to EGP 15, 000. - Activating the role of insurance in mortgage finance activity. - Standardizing contracts of mortgage finance to facilitate the securitization process. 19

Financial Sector Reform Program Impact of Reforms of Phase I: 2005 -2008 Insurance 2004/2005

Financial Sector Reform Program Impact of Reforms of Phase I: 2005 -2008 Insurance 2004/2005 2007/2008 2 Companies and 2 Banks 10 companies and 2 banks Mortgage finance 16 Million 2. 6 billion Evaluation experts 75 117 4. 2 Intermediaries 203 234 0. 6 1. 1 Auditors 23 45 70% 49% Investors 3 4371 2004/2005 2007/2008 0. 8% 1. 1% 20 33. 4 Investments 16. 3 29 Equity 3. 8 8. 5 Volume of Premiums 4. 3 7. 4 Paid Claims 2. 4 Net profits Premiums/GDP Assets Public Companies Market Share Capital Market Mortgage Finance Institutions 2004/2005 2007/2008 Value traded 83. 7 Billion 553. 2 Billion Monthly Average value of trade 0. 6 Billion 46. 1 Billion 3 Billion Paper 19. 9 Billion Paper 270. 9 Billion Paper 1659. 3 Billion Paper 3. 64 Billion 123. 8 Billion 875 Thousand 1. 6 Billion Volume Monthly Average volume of trade Total acquisitions The number of registered investors

Financial Sector Reform Program Phase II: 2009 - 2012 Phase II of the program

Financial Sector Reform Program Phase II: 2009 - 2012 Phase II of the program comprises generic and sector specific reform measures. The generic reform measures aim at: 1. Increasing the efficiency of regulation and shifting it from a rule -based to a risk-based regulation to ensure the soundness of the financial system. 2. Improving access to finance. 3. Developing the financial culture. 4. Developing and deepening the markets through introducing new instruments and encouraging financial innovation. Main Pillars of the Reform Program The sector specific reform measures aim at: 1. 2. 3. 4. 5. Improving bank’s Efficiency for financing economic growth. Developing and deepening the Insurance Market Deepening and improving the efficiency of Capital Markets on both the equity and fixed income sides. Further activation to, and increasing the efficiency of the Mortgage Market 21 Activating Financial Leasing and Factoring activities

GOE’s Stimulus Package Measures aiming at boosting economic growth amid the international financial crisis

GOE’s Stimulus Package Measures aiming at boosting economic growth amid the international financial crisis and its negative implications on developing and emerging countries. 1. - Availing and lowering the cost of credit Reducing interest rates. Exempting credit extended to SMEs from the reserve requirement. 2. - Increasing public spending and subsidies Investing EGP 30 bn in infrastructure projects (budget and PPP) Sales tax exemptions of a magnitude of EGP 1 bn on capital goods. Full Tariff exemptions on imported capital and 250 items of intermediate goods. Increasing Export subsidies by EGP 2. 6 bn. 3. - Promoting investments Revising measures that had an adverse impact on investments. Intensifying promotional campaigns. 4. - Supporting the Capital Markets More flexibility on dealing on treasury stocks and tender offers More flexibility in reporting financial investments by companies via amendment of the Egyptian Accounting Standard (in compliance with IAS). 5. Legislative reforms 22