2 EBRD and Egypt - timelines March 1991Egypt co-signs AEB and becomes a founding father of EBRDMay 2011G-8 expresses support of Arab spring countries (Deauville)September 2011EBRD Board approves geographical expansion into SEMEDOctober 2012Egypt request to become a potential recipient countryNovember 2012Egypt becomes a potential recipient countryDecember 2012EBRD signs its first transaction in EgyptMay/June 2013Article 1 & 18 ratified - Egypt eligible to become a CoOSeptember 2013Opening of EBRD Resident Office in CairoMay 2012EBRD Governors approves €1 bn special fund for SEMED regionHost Country Agreement signed with Egyptian GovernmentLet me 1st add the context and share quickly some timelinesFirst – history EBRD and Egypt go back long time – 20 years – first of 25 founding fathers of EBRDTwo – non of us would be here if it was not for Arab Spring – Tunisia then to Egypt – January 2011 Mubarak resigned
3 Summary key transition challenges Manufacturing & Services: Weak contract enforcement & limited competition & high firm disclosure costsEnergy: Unbundling & gradual price liberalization & regulator independenceInfrastructure: Underinvestment & tariff structures & little private sector involvementFinancial sector: State dominated banking sector & access to financeAgribusiness: Low yields & limited logistics & resource inefficiencyStarting point EBRD – to understand the specific needs of Egypt – overall assessmentTransition gaps in all sectors:Financial sector: Relatively well developed but state dominatedAgri: Resource inefficiencies – 50% production is wasted in the production chainCross sectorial:Fuel subsidies distort systemLack of regulatory independenceLarge public sector poses challenges to private sector developmentChallenge for economic inclusion: Youth, women, rural/urban divideEBRD lessons learned:Institutional reform criticalSequencing difficult – big bang an illusionStuck in transit – EU or other anchor
4 EBRD Egypt Operational priorities Finance and improve conditions for investments in the private sector, including mid-sized companiesModernise the financial sector by strengthening its capacity and diversifying financial products and support of MSME’sEnhance the agribusiness value chain to improve food security and strengthen the distribution chainIncrease the role of cleaner fuels and renewable energy and improve energy efficiencySupport reform and commercialisation of the transport, fuels and power sectorsUpgrade and expand municipal infrastructureEBRD currently operating under a Needs Assessment of October to be followed by (first) Country StrategyYou will hear a lot – private sector – main focus and raison d’etre our focus on private sector.Private sector driven:Dedicated team focused on smaller transactionsBut also direct lending to larger companies and property projectsStrong capacity building element: SBS – improve competitiveness and productivityFinancial sector:Particular focus SMEs: 75% GDP, 80% employment, 5% of creditCornerstone engagement: Medium term finance to local banks to on-lend to local MSMEsPossibly targeted: Focus on energy efficiency projects, regionalTFP – Successful – transaction – credit enhancement - support trade flows – particularly important for Egypt (exportLook at alternative forms of finance, leasing and mortgage finance.Agri:Investing in entities/projects along the food chain (storage, logistics, processing and retail)Agricultural infra projects (warehousing, (cold) storage facilities)EE & renewable energy:Support energy efficient investments in manufacturing & agribusinessInvestment to reduce energy & water consumptionRenewables – wind and solar (wish list of each IFI)Transport , fuels, power:Private sector participation in infra development (ports) but also projects with ENR, water and waste water)Supporting critical investments that promote a high quality and a stable secure supply of fuel and energyPower: Possible PPP solutions, focus on increase of efficiencies and cost covering – also smart meteringMunicipal: Promote financially viable public sector entities, possible PPP basisEarly days – still learning !
5 EBRD strengths & added value Strong international recognised financial partner with long term perspective and deep private sector focus and experienceTriple A rated as recently confirmed by all three major rating agenciesClose working relationship with governments and shareholdersInternational Financial Institution with a preferred credit statusWide tool kit, including technical assistance (energy efficiency)Stamp of approval on corporate governance & environmental standardsStrong Int. Partner: Triple A status recently confirmed.Political leverage due to EBRD’s mandate and shareholder structure
6 EBRD Finance Tool Kit Loans Equity Senior, subordinated, convertible Long term (up to 10yrs or more) or short term revolvingFloating/ Fixed ratesChoice of currencies (EUR, USD, RUB etc.)Mobilize external financeCommon stock or preferredMinority position only (up to 35%)Mezzanine debtParticular focus private sectorWithin private sector - SME sector – direct lending – LEF: dedicated team on the groundEBRD value chain: BAS – EGP – become EBRD finance prospectsALWAYS: Additionality
7 EBRD Egypt – Activities to date Hired a team of 10 Egyptian professionalsSmall Business Support: > 50 technical assistance projectsGeneral PD TA programs (including obtaining funding for MSME/WIB programme with the Social Fund for Development)Already signed 2 transactions for aggregate amount of Euro 29 mm:Euro 19 mm – White good manufacturing companyEuro 10 mm – Waste water treatment plantIn process to building a diversified pipeline of new projectsOver 200 visits to EgyptAll without an operating RODeals in pipeline: Very diversified: MSME credit lines with local banks; leasing; regional waste water plant & wind park, a gas flaring project
8 EBRD in Egypt – Open for business! Can forget anything from presentation – but remember ‘open for business’Egypt has many challenges indeed – but the private sector I have met so far is impressive, forward thinking – can become a tugboat for economic progress and be a positive contributor to Egypt in transitionMy privilege to be able to represent EBRD in Egypt in these challenging times – I hope EBRD can play a positive role and contribute in overcoming some of these challengesContact: Philip ter Woort,
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