Document of The World Bank Group FOR OFFICIAL USE ONLY Report No. 66443-EG INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION INTERIM STRATEGY NOTE FOR THE ARAB REPUBLIC OF EGYPT May 31, 2012 Egypt Country Management Unit Middle East and North Africa Region World Bank Strategy Unit Middle East and North Africa Region The International Finance Corporation This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The date of the CAS Progress Report for the Arab Republic of Egypt was July 17, 2008 CURRENCY AND EQUIVALENTS Unit of Currency = Egyptian Pound (LE) (Exchange Rate as of May 31, 2012: US$1= 6.04 LE) Fiscal Year: July 1 - June 30 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activity ICA Investment Climate Assessment AfDB African Development Bank IDA International Development Association AUC American University In Cairo IFC International Finance Corporation CAS Country Assistance Strategy IFIs International Financial Institutions CAPMAS Central Authority for Public Mobilization and Statistics IMF International Monetary Fund CBE Central Bank of Egypt ISN Interim Strategy Note CPS Country Partnership Strategy MENA Middle East and North Africa CSOs Civil Society Organizations MIGA Multilateral Investment Guarantee Agency CTF Clean Technology Fund MSME Micro, Small, and Medium Enterprises DPL Development Policy Loan NGO Non-Government Organization e4e Education for Employment OECD Organization for Economic Cooperation and Development ECE Early Childhood Education NGO Non-Government Organization EIB European Investment Bank OECD Organization for Economic Co-operation and Development EU European Union SCAF Supreme Council of the Aimed Forces FDI Foreign Direct Investment SMEs Small and Medium Enterprises FJP Freedom and Justice Party PMU Project Management Unit FY Fiscal Year TA Technical Assistance GAFI General Authority for Investment and Free Zones UNDP United Nations Development Program GDP Gross Domestic Product USAID US Agency for International Development IBRD International Bank for Reconstructions and Development IBRD IiFC Vice President Inger Andersen Dimitris Tsitsiragos Country Director David Craig iMouayed Makhloufun Task Manager Guido Rurangwa Nada Shousha ACKNOWLEDGEMENTS This Interim Strategy Note (ISN) was led by Guido Rurangwa, under the guidance of David Craig, Country Director, and Poonam Gupta, Country Program Coordinator. Core team members include Sidi Boubacar, Franck Bousquet, Simon Bell, Santiago Herrera, Sahar Nasr, Andrew Stone, Alaa Hamed, Adrien Pinelli, Aliya Husain, Mahmoud Gamal El Din, Hayat Al-Harazi, Lorraine James, Eman Fouad Wahby, Nehal Hasan El Kouesny, Akram El-Shorbagi, Behdad Nowroozi, Mariana Felicio, Isabelle Huyn, Karim Badr, Rapti Goonesekere, Nada Shousha and Paul Antony Barbour. Peer reviewers were Marcelo Giugale (Sector Director, AFTPM) and Laura Frigenti (Director, Strategy and Operations, LCRVP). Laurie Effron was a consultant to the ISN and supported the drafting of the document. ARAB REPUBLIC OF EGYPT INTERIM STRATEGY NOTE July 1, 2012- December 31, 2013 I. Introduction ......................................................................................................................................... 1 II. Country Context and Key Challenges........................................................................................... 2 A. Political Context ........................................................ 2 B. Economic Context ....................................................... 2 C. Governance ........................................................... 3 D. Poverty and Human Development...............4............ ................4 E. Energy, Transport, and Water ..................................... .......... 6 F. Key Challenges .........................................................7 III. Recent Bank Group Engagement in Egypt ................................................................................. 9 IV. Proposed Bank Group Interim Strategy in Egypt......................................................................11 A. Framework ........................................................... 11 B. Areas of engagement....................................................13 Economic Management.................................................14 Jobs....................................................................15 Inclusion...........................................................17 C. Enhancing Bank Portfolio Management.......................................18 D. Resources and Instruments................................................ 19 E. Coordination and Partnerships.............................................. 21 F. Monitoring and Evaluation................................................ 21 V. Risks to the Interim Strategy............................................... 21 Tables: Table 1: Gaps in Selected Social Indicators by Residence................................. 4 Table 2: Gender gaps, selected indicators ............................................ 6 Table 3: Composition of Bank Lending, by Commitments FY06-1 1 ...............................9 Table 4: Selected Analytical and Advisory Activities Recently Initiated .......................9 Table 5: Composition of IFC's Cumulative Commitments during CAS period (FY06-1 1) ............... 10 Table 6: Summary of indicative Bank program by sector, July 1, 2012-Dec. 31, 2013............. 20 Boxes: Box 1: Water Hackathon Cairo .......................................... ......... 11 Box 2: Engagement with Stakeholders in Post-Revolution Egypt ............................ 13 Box 3: Women and Jobs ........................................................ 16 Annexes: Annex 1: Revised CAS Results Matrix ....................................... ...... 23 Annex 2: Summary of ISN Consultations ..................................... ...... 32 Annex 2b: Summary of Various ISN Consultations with Key Stakeholders........... .........6...2 Annex 3: Egypt At a Glance...................................................................... 42 Annex 4: Selected Indicators of Portfolio Performance and Management .....................45 Annex 5: IBR Program Summary ...................in.Post-Revo.ution. ..............................46 A nnex 6: IBRD Portfolio......................................................................................... 47 Annex 7: Summary of IBRD Non-Lending Operations ...................................48 Annex 8: Egypt Trust Funds FY06-FY12..................................... ...... 52 Annex 9: IFC Investment Operations Program ..Summary.........4......................6.....54 Annex 10: IFC Operations Current Portfolio... .......................................55 Map.............................................................. 56  I. Introduction 1. In January 2011, Egypt erupted in large-scale anti-Government demonstrations, resulting in the resignation of President Mubarak and the collapse of the regime that had been in power for 30 years. Although economic growth had been strong in the previous six years and the Government had begun a process of economic liberalization and privatization, citizens were frustrated by a lack of Government transparency and disrespect for personal rights and dignity, and perceptions of corruption were widespread. The Supreme Council of Armed Forces (SCAF) assumed executive and legislative powers until elections are concluded for parliament and a president, and a new constitution is in place. Although conditions leading to the Revolution were specific to Egypt, the Revolution has been similar to and concurrent with widespread civil unrest and fundamental political changes in other countries in the Region, collectively referred to as the Arab Spring. 2. Given the political and economic uncertainties facing Egypt in the near term, the Bank Group presents this Interim Strategy Note (ISN) as an indicative program of support over an 18-month period, from June 2012 through December 2013. A new Government is expected to be in place toward the beginning of the 18-month period covered by the ISN, but the drafting and approval of the constitution may take some time, and the economic situation is fragile'. In the face of these uncertainties, the short-term program presented in this ISN will remain flexible and responsive to requests from the new Government. After the interim period, the Bank Group plans to develop a full Country Partnership Strategy (CPS) spanning three to four years.2 3. This ISN, jointly prepared with the International Finance Corporation (IFC), with inputs from the Multilateral Investment Guarantee Agency (MIGA), differs from the past Bank engagement in Egypt The Bank has been active in Egypt since the late 1950s and will need to build trust with the new Government, which the Bank expects to do, based on its reputation for credible economic analysis and broad international experience. In addition, the Revolution has highlighted the need for safeguarding dignity, enhancing transparency, and increasing inclusion. Therefore, all future Bank activities will be based on broader consultations than in the past, wider dissemination of analysis and information, use of social media (twitter, blogs, etc.), new partnerships, greater focus on capacity building, and introduction of mechanisms for stakeholders' participation in all phases of Bank operations, with particular attention to participation of women. The Bank has already begun these initiatives, including consultations on a wide range of topics with both men and women from civil society, newly elected members of Parliament, members of the main parties, academicians, bankers, private sector, trade unions, and donors3. Similarly, IFC and MIGA will strive to increase confidence of both domestic and international investors, and to improve the perceptions of the private sector through greater public-private dialogue and stakeholder consultations. The ISN reflects concerns and suggestions expressed during broad in-country consultations4 in February 2012. 4. The three pillars of this ISN are economic management, jobs, and inclusion. The focus will be on actions that can be carried out within the 18-month period of the ISN and that are expected to lead to sustainable longer-term benefits. The objectives of measures to be carried out under the three proposed pillars are: (i) improving economic management through control of the fiscal deficit and initiating reforms to enhance transparency in Government operations; (ii) job creation, through direct emergency lending and initiating steps to improve the environment for private sector led growth and job creation; and (iii) fostering 1 The Government remains confident that the fragility of the economic situation is temporary. 2 The last Country Assistance Strategy (CAS) was discussed by the Board in May 2005. In July 2008, the Board discussed a CAS Progress Report, recommending that the CAS period be extended to end-FYI 1. The country team had started preparing a new CPS, but that work was suspended following the January 2011 Revolution. The Government was informed about the consultation process, but the Ministry of International Cooperation did not directly participate in meetings with other stakeholders. 4 Annex 2 describes the consultations process and provides the stakeholders' feedback. 1 inclusion, which involves ensuring broader access by disadvantaged segments of the population - women, youth, the poor, and lagging geographical regions - to infrastructure (water and sanitation, energy, and reliable transport), finance, and social services (health, education, and social protection), and enhancing citizen and community participation in the design, implementation, and monitoring of Government operations. II. Country Context and Key Challenges A. Political Context 5. Egypt has undergone a dramatic political upheaval. Long simmering grievances over the lack of economic opportunities and political inclusion erupted into a revolution that led to the resignation of President Hosni Mubarak on February 11, 2011. Following Mubarak's departure, the Supreme Council of the Armed Forces (SCAF) assumed administrative control of the country, and an extended period of transition began. A series of parliamentary elections concluded in February 2012, with the Muslim Brotherhood's Freedom and Justice Party winning a plurality in both houses of the Parliament. The transition is expected to culminate in the handover of executive powers to a new president by end-June 2012 following the May presidential election. 6. The new constitution is expected to define the respective roles and powers of the Parliament, the Executive, and the Military. The two houses agreed in March 2012 to appoint a 100-member constituent assembly to draft a new constitution that will define the balance of power between the Executive and the Parliament, and also outline the future political role of the Military. However, a court decision has suspended the formation of the assembly, following complaints about the disproportionate representation of Islamists in the body, and, as of early May 2012, negotiations were underway to constitute a new assembly. The scope of freedom and rights in the new constitution, particularly those of women, and the relationships among the different tiers of the Government remain unknown. B. Economic Context 7. From the mid-2000s to 2011, the Egyptian economy has been growing at a strong pace. In 2004, the Government of Egypt embarked on a structural reform program of liberalization and privatization, which, combined with high oil prices, booming Gulf economies, and strong global economic growth, led to real GDP growth of over 7 percent per year between FY06 and FY08. The subsequent global financial, food, and fuel crises dampened economic growth in Egypt to an average 5 percent in FYO9-FY10, still a strong performance by international standards. 8. Since 2011, the macroeconomic picture has deteriorated due to unresolved political tensions and policy inflexibility. The economy contracted sharply (4.2 percent year over year) in the January-March 2011 quarter, and averaged only 1.8 percent growth for FY11. Since then, it has grown at yearly rates of 0.3 percent. The balance of payments has deteriorated sharply, driven by capital outflows and a drop in tourism, while the exchange rate remained at one US dollar to six Egyptian pounds. Consequently, international reserves fell to $15.1 billion, equivalent to about 2.6 months of imports of goods and services, by end March 2012. The fiscal deficit widened to 9.8 percent of the Gross Domestic Product (GDP) in FY11 and it could remain high in FY12. This was a result of slow growth, but also of emergency spending, including a 15 percent increase in public sector wages and pensions, rising food and energy subsidies, and payments to compensate damaged businesses and newly unemployed workers. Most of the domestic financing has been done through short-term (Treasury bills) borrowing at high real interest rates (close to 5 percent in FY12), increasing the public debt to GDP ratio (expected to reach 79 percent of GDP by end FY12). To keep interest rates from rising further, the central bank has expanded domestic credit, and reduced reserve requirements of commercial banks in an attempt to provide further liquidity to the banking sector. 2 9. Foreign Direct Investment (FDI) has been an important factor in Egypt's growth, but has fallen significantly. During the reform years and accompanied by a robust global economy, FDI rose from 5.1 percent of GDP (FY05-06) to 8.3 percent (FY07-08), when it averaged some $12 billion, but following the global slowdown, FDI dropped 8 billion in FY09 (4.3 percent of GDP). In FY11, it fell to 0.9 percent of GDP (USD 2.2 billion), while in FY12 there has been a net outflow of USD 0.4 billion. 10. The economic outlook is uncertain and depends on the Government's ability to control the fiscal deficit, manage the exchange rate, and buffer shocks arising from the domestic political situation and from the global economy. In FY12, current projections suggest that the economy will grow about 2.5 percent, and the fiscal deficit will be around 9.3% of GDP. Nevertheless, significant downward risks remain, especially if macroeconomic imbalances and political and policy uncertainty remain unaddressed. Low growth rates pose a danger to mounting social frustrations, as they will not be enough to deliver the needed jobs and opportunities. Unemployment is expected to remain around the 12 percent mark, with a significant potential upward risk. C. Governance 11. Years of widespread resentment at the lack of transparency and perceived corruption in virtually all public spheres of activities defined, on an increasing scale, the past 30 years of the regime. A lack of political and civic participation and representation, perceived arbitrariness in the implementation of the rule of law, nontransparent policy making, weak Government accountability and the political and economic influence of privileged groups - all have built long-standing grievances. The economic consequences of this system included limited economic opportunities and outcomes for those that are not politically connected, an under-developed private sector, and ultimately limited job creation. 12. Egypt is ranked behind states at similar levels of economic development on most global governance indices. Among the most significant governance challenges are limited Government transparency and public access-to-information, which are prerequisites for an informed and open society, a more accountable Government, and a more vibrant economy. For many years, control of information in Egypt has been characterized by secrecy and discretion. Several Government agencies do not publish reports and information regularly or comprehensively. Overall budget transparency levels is low. Since 2007, the Government has provided increased information on the budget, but much remains to be done to enhance transparency and accountability for public expenditures and the comprehensiveness of the budget. For example, Egypt's supreme audit institution, the Central Audit Organization (CAO), does not release audit reports to the public. The budgets and audited accounts of state authorities, public entities, and special funds are for the most part not published. 13. While Egypt signed the U.N. Convention against Corruption in 2003, international watchdogs such as Global Integrity point to a 'very large' implementation gap in Egypt. There is a disconnect between the country's legal anti-corruption framework, and actual enforcement. The absence of an efficient internal control and transparent external audit system negatively impacts Government efficiency and poses significant fiduciary risks. Regulations for public procurement are outdated and not in line with international good practice. Administrative procedures are overly complex and provide for significant discretion that negatively affects performance and fosters arbitrary decision making. 14. Investment climate assessments cite corruption and regulatory uncertainty as two of the top business constraints, and uncertainties have increased since the Revolution. Common practices include informal payments for regulatory approvals, business inspections, access to services, and the award of public contracts to private companies. In addition, Doing Business (2012) ranked Egypt poorly (bottom quartile of 183 countries) with respect to constraints on dealing with construction permits, enforcing contracts, and resolving insolvencies, which result in long delays and high costs for firms. The Bank's 3 Rapid Assessment Enterprises Survey' carried out in June 2011 and consultations with bankers and private investors point to increased risk perceptions since the Revolution. Citizens and businesses have experienced more property crimes, and both domestic and international investor confidence is very low due to the deteriorating macroeconomic conditions (as witnessed by high credit default swap spreads and a precipitous fall in FDI), uncertainties about policies during the transition period, and reversals of pre- revolutionary land transactions, licenses, and privatizations. These are compounded by uncertainty about how regulations and laws will be applied and by increased labor activism and strikes. 15. Participation of civil society organizations and individual citizens in the design, the implementation and the monitoring of Government programs remain important challenges. Despite a large number of non-Governmental organizations (NGOs) in Egypt, freedom of association remains severely hampered by a restrictive regulatory framework and discretionary administrative decision-making. The Ministry of Social Solidarity plays an important role in the oversight of NGOs, with control over NGO activities and sources of funding and authority to intervene in their internal affairs and governance, including the power to dissolve any NGO by decree. D. Poverty and Human Development 16. Poverty has remained a serious problem in Egypt. The number of Egyptians living under the poverty line6 may have increased over the decade, and the number of vulnerable (or near poor) may have also increased, although their share of the total population declined7. To initiate a wider public debate on policies to address poverty, researchers and the public need access to available demographic and economic data. 17. Wide disparities persist between Upper Egypt (the south) and Lower Egypt (the north) and between rural and urban populations. The highest poverty is concentrated in Upper Egypt,8 where 43.7 percent of the rural population was living in poverty in 2009 and where 95 percent of Egypt's poorest villages are located. Similarly, although only a little over half of the population live in rural areas, more than 78 percent of the poor and 80 percent of the extreme poor live there. These income disparities are reinforced by the gaps in social indicators, where virtually all health indicators and literacy rates are worse in Upper Egypt than in Lower Egypt and worse in rural areas than in urban areas (Table 1). Illiteracy rates among young women in Upper Egypt are 24 percent, twice the rates of their male counterparts. Table 1: Gaps in Selected Social Indicators by Residence Lower Upper Urban Rural Egypt Egypt areas areas Infant mortality (no. of deaths per 1,000 live births) 21 36 25 31 Under 5 mortality (no. of deaths per 1,000 births) 25 43 29 36 Regular antenatal care (%) 68 56 Access to sanitation (% of population) 90 60 Adult literacy rate (% of population) 80 60 18. Egypt is going through a demographic phase marked by a significant "youth bulge" with a high proportion of youth in the population that is projected to increase in the next decade. With past high rates of population growth, the current age structure is heavily weighted towards the young: one-third of the population is under the age of 14, and another third is between the ages of 15 and 29. While this age structure can be advantageous to a country, the pressure to provide employment for a burgeoning labor market is enormous. The Rapid Assessment Enterprises Survey surveyed 360 businesses in six major cities to assess the impact of the Revolution on private enterprises. 6 Income poverty line defined as $2 a day 7 Data on poverty may not be strictly comparable from one period to the next because of differences in sampling. Based on a September 2011 report issued by the Central Authority for Public Mobilization and Statistics (CAPMAS). 4 19. Unemployment continues to be an overriding concern, especially for youth, women, and the more highly educated. In June 2011, official unemployment was 11.8 percent (9 percent in June 2010), the highest rate in ten years. In addition to declining employment opportunities, Egypt is contending with the return of migrants from neighboring countries, particularly Libya.9 Most critically, however, youth unemployment is more than double the average, at 23.2 percent in 2011; more than three-quarters of the unemployed are between 15 and 29 years of age. Female unemployment rates are close to three times that of males: 23 percent for women versus 8.7 percent for men; female youth unemployment rates are more than double the average male rate. Finally, unemployment increases with the level of education: in 2011, more than 80 percent of the unemployed attained intermediate education level or above, and the rate of unemployment among illiterates was 5.5 percent, while for university graduates it was 29 percent.0 In addition to open unemployment there is a big problem of underemployment and the quality ofjobs. 20. Egypt's social protection system accounts for a substantial share of public spending, but is highly fragmented, poorly targeted, and ineffective in reducing poverty. Egypt manages a complex social protection system, including employment services, social insurance (health, pension, and unemployment) and social assistance (food and fuel subsidies and cash transfers). The system faces significant challenges, in particular high youth unemployment, a large informal sector, and costly untargeted subsidies, which are a large burden on the budget. Energy subsidies (estimated at 6 - 8 percent of GDP) result in low cost recovery and a distorted high demand for energy, and benefit the rich more than the poor1. Egypt also uses a system of ration cards to provide food subsidies, and, in response to the adverse impact of the global crisis on the cost of imported food, Egypt increased the amounts of rice, sugar, and edible oil distributed via ration cards. As a result, the fiscal cost of food subsidies rose sharply from 1.3 to 2 percent of GDP between 2007 and 2009. The Social Solidarity Pension, Egypt's largest and main cash transfer program, reaches less than 10 percent of the poorest quintile, and less than a quarter of the program's resources accrue to the poorest quintile, making it one of the least efficient cash transfer programs in the world. 21. The education system is not providing students with skills useful for a market economy and is overly centralized, with little participation of local citizens. The adult literacy rate of 67 percent does not reflect the historically high primary school enrollment and completion rates, calling into question the efficacy of primary education. Upper secondary education and higher education are heavily oriented towards academic university degrees, instead of towards the skills demanded in the labor market, as suggested by firms in enterprise surveys identifying worker skills and education among their top five constraints. According to the Ministry of Education, the share of public expenditures on education is about 12.5 percent, close to that of the Organization for Economic Cooperation and Development (OECD) countries, which suggests that further improvements will need to come from improved efficiency. In addition, the education system needs to move to a more decentralized model, where local governments take responsibility for expenditures and build a relationship with local citizens for monitoring and evaluating educational performance. 22. Although health outcomes have improved, large regional gaps remain, efficiency and quality need improvement, and fiscal sustainability is a challenge. In the past decade, Egypt has achieved significant decreases in mortality rates among women, infants, and children and is likely to achieve most of the Millennium Development Goals by 2015. Nevertheless, rural Upper Egypt lags significantly behind the rest of the country in all of measures of health access and outcomes. Out-of-pocket health expenditures 9 Estimates of the number of returning migrant workers from Libya are inconsistent across data sources, but the impact on unemployment is estimated to be at least 0.6 percentage points. 10 The labor market suffers from rigidities across sectors (large well-paid public sector, small, well-paid high-productivity formal private sector, and large low-paid, low-productivity informal sector) and from an education system that does not produce skilled or well-qualified workers (para. 18). 1 As per 2005 Household Survey, only 11.4 percent of all energy subsidies benefited the poorest quintile (20 percent) of households, while 36 percent benefited the highest income quintile. Subsidies for specific fuels were even more regressive. For example, 91.4 percent of subsidies for gasoline went to the highest income quintile. Kerosene was the only fuel for which the subsidies benefitted poor more than the higher income households. 5 reached 70 percent in 2009, and significant inefficiencies exist in the allocation and use of resources, particularly in the public health system. Finally, demographic and epidemiologic changes will likely lead to a substantial increase in the share of mortality and morbidity due to non-communicable diseases (such as heart disease, cancer, and diabetes), which are expected to significantly increase the cost of health care and pose a substantial challenge to the financial sustainability of the health system. 23. Gains have been made in gender equality, but unemployment is Table 2: Gender gaps, selected indicators acute among women. Life expectancy Female Male for women is 75 years (71 for men), School enrolhment, primary (% gross) 97 102 female education enrollment rates are School enrollment, secondary (% net) 39 37.5 close to those of males at most levels, School enrollment, tertiary (% gross) 26.3 29.5 and more women than men are enrolled Adult literacy rate (%) 58 75 in secondary education (Table 2). The Unemployment (% of labor force), 2011 23 8.7 gender gap in adult literacy rates has Source: World Bank Development Indicators, 2011, and Recent decreased over time, but women still Developments in Egyptian Labor Market, 2011 lag (in 1996, the literacy gap was 28 percentage points; in 2009, it was 17 percentage points). In spite of rising education levels of women, labor force participation rates of women are only one-third that of men, only some 20 percent of employed people are women, and unemployment disproportionately affects women, particularly younger women (para. 19). E. Energy, Transport, and Water 24. The energy sector is key forprivate sector development, economic growth, and improving the delivery of social services, but comprehensive measures are needed to reduce costs, enhance efficiency, improve governance, and redesign energy subsidies. Egypt is practically a fully electrified country with 99 percent of households connected to the grid, but demand has grown rapidly, at more than 6.5 percent per year over the past decade. To maintain reliable electricity supply in the face of growing demand, significant investments are required to improve energy efficiency and reduce costs, to build new electricity generation, transmission, and distribution infrastructure and to scale up renewable technologies. This will necessitate further financial, institutional and regulatory strengthening of both supply and demand sides of the energy sector. The Government regulates all energy prices and has used energy pricing as part of the social safety net for households and to subsidize industrial and agricultural development. However, cost recovery is low and falling, especially in the liquid fossil fuel subsector, discouraging private investments. In addition, most of the subsidies benefit disproportionally higher income households, while the fiscal burden of these pricing policies is considerable.12 Improving both the supply and demand side requires comprehensive price and non-price measures, including improving the investment environment and transparency of the energy industry, and redesigning energy subsidies to improve targeting while gradually aligning prices with economic costs. 25. A long-term and comprehensive vision for Egypt's transport sector is long overdue, including its contribution to restoring fiscal balance. The transport sector is plagued by poor urban transport systems, bottlenecks on major roads and railways corridors, and poor governance. There are sharp differences in the availability of transport services between urban (mostly Cairo and Alexandria) and rural areas. In Cairo, as a result of rapidly increasing population, transportation conditions have deteriorated and the capacity of the Greater Cairo Region's transport systems to manage demand is nearing the breaking point. Traffic congestion and air pollution impact the quality of life, especially of women and children. Irregularity of public transport prevents women from getting home in time to collect children from school and moving to 12 After more than a decade of no price adjustments, Government began to increase electricity and fuel prices in 2004, and gas prices to energy-intensive industries reached cost-coverage. Increases were suspended in 2009, in response to the global economic crisis, reinstated in 2010, and halted again at the onset of the Revolution. In January 2012 electricity tariffs were increased by 14 to 49 percent for energy-intensive industries, depending on the specific industry. 6 jobs where they could earn higher wages, thus hindering their economic empowerment. Heavily subsidized gasoline encourages excessive car usage, clogging up road arteries, and contributing further to the Government's fiscal deficit. The annual direct cost to the national economy due to congestion was estimated in 2010 at one percent of GDP. The Government's efforts to make transportation affordable keep fares for public transport services well below their cost, thus creating a large drain on Government finances. In rural areas, poor road conditions and access to transportation severely limit access to employment opportunities and services such as schools and health, and railways, an essential mode of transport for low- income people, have suffered from acute safety issues, including deadly accidents, aging infrastructure and rolling stock, and weak management, resulting in poor quality services and huge deficits. 26. Water availability and water quality, particularly in the Delta, are critical issues. As a result of population growth, rising incomes, and low water prices, water is becoming increasingly scarce.13 In addition, because irrigation and drainage systems are connected and agricultural drainage water is often reused, semi/maltreated sewage diffuses into the waterways and reaches the food chain, negatively affecting public health, quality and yields of crop production, industrial food production, tourism, and poverty. Low water tariffs undermine both the public and private sectors' capacity to maintain existing water supply and sanitation facilities and reduce incentives to expand coverage. Low tariffs also reduce consumers' incentive to use water efficiently, but consumers are unwilling to pay higher tariffs because of a history of poor service. The cycle of growing demand, poor service performance, and private sector lack of interest can be broken through a combination of technological innovations, greater user feedback and participation, new tariff policies, and improved coordination among water agencies. F. Key Challenges 27. Egypt is at a major crossroads in its political history, and its ability to navigate many challenges in the short term will have important consequences for its longer-term stability and development. In the next 18 months, the Bank Group's interim strategy will focus on supporting the Egyptian authorities to meet these challenges, which include: (i) economic management; (ii) job creation, including through private sector development by restoring both domestic and foreign investor confidence in the short-term; and (iii) broader inclusion in access to quality infrastructure and social services and greater voice and participation in Government programs. 28. In the medium-term, more fundamental institutional changes are needed in all of these areas to ensure their sustainability. These include in particular reducing energy and infrastructure bottlenecks, reducing gender disparities, improving the governance of state enterprises and private sector companies, developing financial infrastructure to facilitate a well functioning financial sector and increase private sector efficiency, supporting investment climate reforms, and improving the effectiveness and efficiency of the educational, health and social protection systems. Bank Group support for these will be articulated in a full Country Partnership Strategy covering a three to four year period through FY17. 29. Improving economic management in the near term is key to helping maintain political stability; this in turn means having credible fiscal and exchange rate policies. Reducing the deficit below its recent high of 9.5 percent will prove challenging in the face of considerable pressure to maintain the social safety net, which is costly, inefficient, and untargeted. In particular, energy consumption subsidies need to be gradually reduced by a combination of efficiency and price measures to be implemented over time, in conjunction with strengthening the social safety net and increased outlays for social services. The Bank can add value based on analytic work already carried out in this area. In addition, it will be important to reduce capital outflows, which requires a consistent macro program in which the exchange rate is allowed to reflect the scarcity of foreign currency. 1 Available water per capita per annum amounts to some 800m', below the "water poverty" index of 1000 m'/capita/annum, and is expected to fall further unless policies are implemented to manage demand. 7 30. Strengthening governance will be crucial to support transition, enhance credibility in state institutions and restore citizen confidence in Government institutions and in the rule of law. This will require reforms14 at four levels: * To enhance Government transparency, a new regulatory framework for freedom-of- information, ideally combined with a pro-active public disclosure policy by the Government, should be put in place. Such a framework would pave the way for a more informed policy debate and - ultimately - for better policy making. In addition, the Government should pursue reforms to improve the transparency of the annual budget, the disclosure of the financial statements and audited accounts of state authorities, public entities and special funds. * To strengthen Government accountability, expenditure management and public procurement reforms should be launched, to improve the efficiency and effectiveness of public spending. * To enhance citizen participation in policy and program design and implementation, the Government should involve civil society and private sector groups in the design and implementation of Government programs, to build consensus about important policy reforms and to focus attention on the issues and concerns raised by the citizens. To this end, the Government has launched some initial steps in selected areas (e.g., budget consultations, participatory review of existing legislation). * To ensure a level playing field with equal access to public services for all citizens and firms, the Government should introduce reforms in the business environment, for instance by simplifying business entry and licensing procedures. 31. Job creation will come primarily from the private sector, which confronts many challenges over and above the short-term challenge of low investor confidence. These include the need for reliable sources of energy, an efficient transport system, and a difficult investment climate, including legal and regulatory barriers to businesses especially for micro and small and medium enterprises (MSME). In the short term, an important role for the Bank and IFC will be to disseminate findings from analytic work and good international practice in promoting regulatory reforms, creating a level playing field for access to land and finance, supporting MSME development and access to finance, and enhancing transparency. In particular, IFC will continue to support corporate governance reforms in the private sector (especially SMEs) through its Advisory Services program. In the medium term, regulatory reforms are needed to improve the environment for private sector activity, remove infrastructure bottlenecks, and reduce the mismatch between skills and labor market demand through reforms in the educational system. 32. Fostering broader inclusion in access to infrastructure (including transport, energy, water and sanitation), finance, and social services (health, education, social protection) for women, youth, the poor, and those in disadvantaged areas, including greater voice and participation in Government programs, will require explicit strategies and targeted actions. The Government needs to develop strategies to reach the disadvantaged segments of the population and of the country and to incorporate citizen consultations and participation in the design and implementation of their initiatives. This will need a move away from the highly centralized structure of governance to greater responsibilities and accountabilities by the governorates and at the local level. The Bank Group can provide support in these areas through its full array of instruments, and by ensuring that mechanisms for inclusion are retrofit into existing projects and built into future projects, including community scorecards and benchmarking. In the medium term, it will be essential to ensure a vibrant civil society with access to information and freedom of expression, and well-established mechanisms for providing feedback on the full range of public and private sector activities. 14 These reforms are expected to be undertaken within the framework of a proposed DPL to support economic recovery and governance reforms. 8 III. Recent Bank Group Engagement in Egypt 33. Starting in 2004, and until the Revolution in 2011, the Table 3: Composition of Bank Lending, Bank Program was scaled up, peaking in FY10 at $2.16 by Commitments FY06-11 billion." From FY06 through FY11, a total of 23 lending Total value Percent operations for $5.45 billion were approved, including four eco development policy loans (DPLs) to the financial sector for a total of $1.8 billion, and five investment loans for power Financial 2,137 39 development for a total of $1.9 billion (Table 3). Other areas of Power 1,885 35 focus included expansion and improvement of services in Transportation 640 12 transport, water, sanitation and irrigation. Since January 2011, Water & Sanitation 320 6 the Bank has approved a $200 million investment operation for 275 5 sanitation and sewerage infrastructure and $240 million Agriculture additional financing for North Giza power project. Total 5,452 100 Table 4: Selected Analytical and Advisory Activities Recently Initiated Area offocus Topic Economic management and governance Energy pricing and subsidy analysis Stolen Asset Recovery Initiative Banking Sector Corporate Governance Job creation through private sector development TA on Labor Markets TA on Jobs Youth: Expanding Opportunities for the Next Generation Rapid Assessment Enterprise Survey Rapid Investment Climate Assessment Education Quality (joint Bank-OECD) Inclusion Social Accountability Stakeholder Mapping Inequality Water Hackathon additionlFinancial Development and Growth in Egypt 34. The Bank delivered a substantial program of analytical and advisory activities (AAA) prior to the Revolution'16 and has responded quickly to new needsJfor analysis. In response to the Revolution, the Bank delivered shorter analytic pieces on topics of more immediate interest, engaged in broader consultations, and increased the use of innovative approaches. The analytic work has been centered on the three themes of improving macroeconomic management and transparency; job creation through private sector development and an inclusive financial system; and enhanced inclusion (Table 4). Broader consultations on analysis and policy dialogue included civil society organizations (CSOs), youth groups, 15 Egyptjoined the Bank Group in 1945. Since that time, IBRD and IDA have approved 128 projects for Egypt, valued at about $11.8 billion. Once Egypt graduated to IBRD in 1999, however, its borrowing was modest until the start of the refom initiatives in 2004. 16 This includes analytic work on macroeconomic issues, such as policies for tackling the global crisis, determinants of savings, a public financial management review, and programmatic public expenditure reviews, covering education, health, debt sustainability, food subsidies, and costs of congestion in Cairo. The Bank addressed a major theme of the Arab Spring, the inequality of opportunities, in its work From Privilege to Competition: Unlocking Private-Led Growth in the Middle East and North Africa. There has also been significant policy dialogue in the energy sector, especially in energy pricing (several analytical studies were delivered, including one on a comprehensive energy pricing and subsidy refom), renewable energy, private investment, energy efficiency, and regional integration within the Arab League. In human development sectors, the Bank launched AAA on over 20 topics in the last four years in poverty and inequality, labor markets, gender issues, the quality of secondary and tertiary education, and Infomation and Communications Technology. 9 women, and private enterprises, as well as members of new political parties and recently elected Parliamentarians, some of whom the Bank had no previous contact with. Innovative approaches include the Stolen Asset Recovery (StAR) initiative, a partnership with the United Nations Office on Drugs and Crime, through which the Bank is assisting Egypt to recover stolen assets hidden abroad. This assistance includes capacity building and advice to the authorities in charge of seeking international cooperation to trace, seize, and confiscate these assets and a facilitator role to smooth and accelerate dialogue with Egypt's counterparts in financial centers where the assets may be hidden. Bank staff working on StAR also participated in December 2011 on an awareness-raising event with civil society on how to recover such assets. A second example of an innovative approach, emphasizing broad consultation particularly with youth, is the Water Hackathon (Box 1). The Bank is also using social media such as Facebook and blogspot. Annexes 7 and 8 provide complete lists of completed and on-going AAA and active trust funds respectively. 35. Egypt is IFC's largest exposure in the MENA Region, with a total committed portfolio of around $1.1 billion in 31 companies (as of end-April 2012). The portfolio is diversified and includes investments in the financial markets, chemicals, infrastructure, agribusiness, manufacturing and health care sectors. Due Table 5: Composition of IFC's Cumulative to the increased decentralization of staff and Management Commitments during CAS period (FYO6-11) in the region's hub office in Cairo, as well as increased business development efforts, IFC was able to grow its Total Value portfolio in Egypt significantly over the last few years, Sector (US$ million) Percent from $296 million in FY06 to the present $1 billion. IFC's Financial 481.0 39 annual investment commitments in Egypt have increased Chemicals 282.0 23 from $66 million in FY06 to $340 million in FY10. Manufacturing 200.0 16 Infra/Oil & Gas10.9 Despite the challenging environment for the private sector Agrisines 75.5 6 since the Revolution, IFC committed $221 million Agribusiness 5.0 4 (including mobilization) in five projects in FY11, resulting Other 48.5 4 in total commitments of US$1.2 billion over the 2006- Total247.0 2011 period (Table 5). Total IFC investment commitments in Egypt in FY12 as of end-April 2012 amount to $398 million 17 in 4 projects, including a large investment package in Orascom Construction Industries (OCI) to help boost confidence in the private sector and the country as a whole. IFC has a large program of advisory activities to complement its investment program. During the last few years, advisory activities have been scaled up, focusing on corporate governance, simplification of business start-up procedures and building permits, facilitating SMEs, access to finance, public-private dialogue, introducing mediation and providing transaction advice for public-private partnerships (PPPs) in health and infrastructure. 36. MIGA 's most important contribution to date was to support investments by an Egyptian telecom company in two telecom projects in Pakistan and Bangladesh, with a combined gross exposure of $152 million - an example of South-South investment which is a key priority for MIGA. 37. Donor agencies provided significant support to Egypt, and the Bank has worked with a number of them, particularly in the financial sector, and engages in a regular exchange of information. Key development partners in Egypt include: the United States Agency for International Development (USAID), which has financed analytic work underpinning the Bank's affordable housing loan, the European Commission, the European Investment Bank (EIB), Japan, Germany, and other bilateral donors, the Gulf countries, and the African Development Bank (AfDB), which provided parallel financing for the Bank's first financial sector DPL. 17 The $398 million amount does not include the recently Board approved $100 million for OCI, which has not yet been signed. 10 Box 1: Water Hackathon Cairo The Water Hackathon brought together young Egyptian technologists with water specialists and local communities to develop new ICT solutions to Egypt's biggest water challenges. The consultations and outreach included the public and private sector, civil society, and developers. In the months leading to the "hackathon", the Bank together with a wide range of stakeholders identified critical challenges in water and sanitation: the need for more effective water conservation and water saving in industrial and agricultural production; better feedback mechanisms from farmers on irrigation modernization in the Nile Delta for remote irrigation scheduling; providing communities with alerts on water-related emergencies; tracking sewage disposal in rural communities; and facilitating more equitable water distribution. Technologists and water specialists then worked together to translate these challenges into problems that ICT could address. A Tech Camp was held for one day, hosted by the American University in Cairo (AUC). The Water Hackathon followed in Cairo (at the AUC) in October 2011 and attracted more than 70 participants from the technology and water communities. The private sector sponsored prizes, awarded by a panel of judges. The award winners used mobile and web-based applications to suggest solutions for more equitable water distribution among farmers, irrigation optimization and water saving in agricultural and industrial production. The Hackathon will be followed up by practical development of the proposed solutions. The Water Hackathon had extensive partnerships both within the Bank and externally. External partners included the Desert Development Center at the AUC, the Technology Innovation and Entrepreneurship Center, Mobile Monday Cairo Chapter, and Random Hacks of Kindness. Sponsors included PepsiCo, Farm Frites, TA Telecom, Nokia Lab, ElGouna, Isis, Diwan, and Arabnet. 38. In response to the political transformations underway in MENA countries, the Deauville Partnership was launched at the G8 Summit in May 2011. The aim of the Deauville Partnership is to provide a coordination framework based on a political process to support the democratic transition, and on an economic framework that helps transitioning countries implement reforms. The Partnership was formed with the expectation that G8 countries, Turkey, and the Gulf Cooperation Council (GCC) donors, working with international financial institutions (IFIs), would mobilize significant financial and non-financial support for the transforming countries. IV. Proposed Bank Group Interim Strategy in Egypt A. Framework 39. In response to the Arab Spring, the Bank Group has articulated a Framework for Engagement in the MENA Region that proposes to do things differently and to provide support that could not be provided before. The Bank Group's priorities for the Region under this framework are to support: (i) better governance through enhanced transparency and accountability; (ii) increased social and economic inclusion of disadvantaged groups through economic measures and enhanced voice and participation, particularly of women and minorities; (iii) job creation, including for youth and women, by providing an enabling environment in which both the public and private sectors can function efficiently in order to foster opportunity, competition, innovation and entrepreneurship; and (iv) accelerating sustainable growth through short and long-term policy actions promoting climate-friendly growth in recognition of the stresses on the Region's natural resources. Throughout the Region, this Framework faces considerable uncertainties - political, macroeconomic, and external support - as well the challenges of working with new partners and implementation capacity weaknesses of new authorities. 40. In Egypt, the Bank Group is embarking on a partnership with a newly elected Government, which will involve a different way of doing business. This ISN is therefore guided by three principles: (i) 11 building trust and restoring confidence; (ii) consultations, outreach, and capacity building; and (iii) flexibility. IFC will engage more closely with civil society using its public-private dialogue (PPD) tool to improve public perceptions of the private sector and facilitate greater corporate social responsibility. o Building trust As the Bank Group has provided large amounts of assistance to Egypt throughout the previous regime, it will be important to ensure that the Bank Group establishes its reputation - not only with the new Government but also with the business community and the wider population - for bringing international expertise and experience and politically impartial analysis. To build trust, the Bank Group will engage in wide dissemination and transparency on its current and potential assistance program, work closely with all new political actors, help restore the confidence of the private sector and improve public perceptions of the private sector, and play a convening role by bringing a variety of experiences and policy options to Egypt, making full use of the array of instruments for knowledge exchange. o Consultations, outreach, and capacity building. The Revolution highlighted the need to consult widely, and in particular with citizens who have been politically, economically, and socially excluded in the past. In response, the Bank Group has been engaging with new stakeholders (See Box 2) , including "agents of change" such as young opinion leaders, members of the new emerging political forces, members of Parliament, private entrepreneurs, bankers, CSOs, academicians, women's groups, and trade unions, including members of their youth wing. A summary of the consultations held in the preparation of this strategy note is in Annex 2. Dissemination of Bank reports will be expanded through blogs, Facebook, and Twitter in English and Arabic. In addition, the Bank Group plans to deepen its partnership with other donors through joint analytical work and missions, and to broaden partnerships (Islamic banks, think tanks, etc.). These efforts will be combined with innovative capacity building initiatives, including training programs led by the World Bank Institute in partnership with think tanks, aimed at stakeholders that will be part of the new public structure. o Flexibility. The Bank Group plans to focus on interventions that address the country's immediate needs as described in Key Challenges above (paras. 27-32). The indicative program presented here reflects the comparative advantage of the Bank. Nevertheless, the Bank is prepared to respond to requests from the Government on other initiatives. IFC will strive to maintain its strong investment and advisory engagement in Egypt with flexibility in use of a mix of lending instruments (e.g., debt, equity, guarantees, refinancing) and mobilization of other investors into the country. IFC will also monitor its portfolio closely to mitigate any headroom issues and portfolio risks. 41. The main instruments of the Bank's assistance over this 18-month period will be a lending program targeting jobs and enhanced transparency, including the pipeline under preparation, and extensive policy dialogue. The Government has indicated that it intends to continue borrowing from the Bank for "productive" purposes, which in the past has meant mainly infrastructure. Thus the indicative lending program consists of infrastructure operations that have been in preparation over the past year, and includes a loan focused on emergency job creation, and a DPL to support economic recovery and governance reforms in coordination with an IMF program. For the non-lending program, the focus of the Bank Group's assistance will be on establishing a policy dialogue with the Government and on outreach to the private sector and civil society to increase their participation in public policy debate. The Bank Group will also provide technical assistance in priority areas (e.g., transparency reforms, public expenditure management) and support the current transition process through on-time policy advice and sharing of global good practice. 42. Expected outcomes over this relatively short 18-month period are modest. Because of the short time frame and the uncertainties involved in the near future, Bank Group efforts during this period are expected to help lay the foundation for more fundamental structural changes in the medium term. 12 Box 2: Engagement with Stakeholders in Post-Revolution Egypt Since May 2011, the World Bank in Egypt has been reaching out to new stakeholder groups, agents of change and future reform champions, with the objective of seeking viewpoints on key issues and priorities for new Egypt and how best the Bank can support Egypt going forward. Overall, these early engagements and multi-stakeholders consultative meetings were helpful in informing the ISN about (i) what the development priorities are for Egypt; and (ii) where stakeholders see the World Bank playing a role. Below is a list of key events. May 8-10, 2011- Regional launch of the World Development report 2011 on Conflict, Security and Development: This event attracted participation from a wide range of youth groups, civil society, and political parties. Politicians from South Africa, Chile and Georgia shared their countries' experiences about reform and transition. May 12, 2011 - Consultation on the World Bank Group's Social Protection and Labor Sector Strategy 2012-2022: The multi- stakeholders consultative meeting discussed the issues of (i) from the current safety nets system to cash transfer; and (ii) better targeting of the subsidies. June 28, 2011 - Session on Access to Information Policy: The meeting was an opportunity to discuss major shift in the Bank's approach to information disclosure, transparency, sharing of knowledge, and accountability. Media and civil society representative were also introduced to the Bank's Open Data Initiative platform. August 22, 2011- Meeting with Young Egyptian bloggers: The meeting was an opportunity to listen about how the youth viewed the main priorities for the Bank engagement in Egypt. Access to quality education and skills, bridging the gap between labor supply and labor demand, and creating the enabling environment for youth entrepreneurship were among the top priorities for young bloggers. October 12, 2011-Supporting Social Entrepreneurship and Inclusive Business in Egypt: This was a valuable opportunity for the Bank team to learn from CSOs' grassroots experiences and benefit from their viewpoints in the preparation of the upcoming competition. The Egypt Development Marketplace aims to contribute to directly creating jobs for at least 100 marginalized young men and women, and indirectly contribute to alleviating at least 500 out of poverty, with a focus on poverty pockets in rural and urban Egypt. October 21-22 - Egypt Water Hackathon: Bridging Innovation and Development Challenges: This knowledge product was in the form of a tech camp that convened a volunteer community of water and sustainable development industry leaders, ICT experts and software developers (see Box 1). October 26, 2011- Roundtable discussion with World Bank's MENA Vice President Inger Andersen: The meeting brought together young Egyptian leaders who work in water and sanitation, microfinance, ICT, renewable energy, job creation and entrepreneurship. The discussion focused on: (i) the importance of an effective role of the private sector with a strong concern for social justice; (ii) strong "green" leaning - solar energy, efficient use of scarce water resources, environmentally sustainable agriculture; and (iii) education and employment skills requirement. November 16, 2011- A Stakeholders' Consultation Workshop on Inequality of Opportunity: The workshop brought together diverse set of stakeholders, from the government, civil society, youth organizations, local academia and think tanks, and international organizations. Moving forward, consultations will be used to facilitate dialogue on Bank operations in Egypt, during preparation, implementation, and after project and/or study completion. The stakeholders will include sector specialists, civil society organizations, private sector, academia, think tanks, women and youth groups, from Cairo and outside Cairo. Consultations will be conducted using a combination of tools including: face-to-face meetings and workshops, web-based applications, such as surveys, social media (e.g., Facebook and Twitter), and videoconferences. To strengthen the Bank's transparency and accountability towards its stakeholders, the process will require proactive dissemination by the Bank of any relevant project, study, or policy documents in advance to the consultation process. Mechanisms for feedback by stakeholders, during and after consultations will need to be established, (e.g., Web-based inbox, follow up discussions with country-based Civil Society focal points). Communication to stakeholders about how issues have been addressed will be important to build trust. B. Areas of engagement 43. The three pillars of this ISN are economic management, jobs, and inclusion, all of which are mutually reinforcing and interdependent. The overriding objective is to help the Government realize early credible gains that do not compromise the medium-term outlook. The focus will be on actions that can be carried out within the 18-month period of the ISN and that are expected to lead to sustainable longer-term benefits. The objectives of support under the three proposed pillars are: (i) improving economic management through control of the fiscal deficit and initiating reforms to enhance transparency in Government operations; (ii) creating opportunities for short-term productive job-creation, particularly for women, and initiating steps to improve the environment for longer-term private sector job creation; and (iii) 13 fostering approaches that will broaden access to and greater participation in the delivery of economic and social services for disadvantaged groups, particularly for women and in lagging regions of the country. Success under each pillar is dependent on success under the other two, and on success of the Government engagement in the governance area. 44. Improving governance through greater transparency and stronger accountability, and increased participation will be a cross-cutting theme in all Bank initive% to support the three pillars. All lending and analytic work will explicitly aim to achieve these principles and promote their application in the various sectors. This will include, in particular, establishing mechanisms for community involvement and citizen feedback in all phases of Bank operations. Economic Management 45. The Bank plans to support the Government in its efforts to improve fiscal policies, improve transparency of public sector management, and elaborate sector-wide development strategies in selected areas. The objectives will be to improve efficiency of the social safety net and targeting of subsidy programs, underline the importance of increasing transparency of public expenditures through greater disclosure, and support Government efforts to develop sector-wide strategies in critical areas. If the outcome of the new constitution is a change in the centralized model of government, the Bank will support areas such as fiscal decentralization and local economic development. 46. To help improve transparency, the Bank is discussing with the authorities a program of reforms that could be supported through DPL financing of up to $1billion and will support other inhiative in both lending and policy dialogue. DPL financing would focus on reforms to support Egypt's economic recovery and to strengthen economic governance, and would be prepared in coordination with an IMF program. Other IFIs and bilateral development partners could also be part of a financing package. This DPL would benefit from the various diagnostics and Economic and Sector Works (ESWs) available, such as a Public Expenditure and Financial Accountability Assessment. In the absence of an IMF program, the Bank will not provide budget support, but will continue to support investment financing, analytical work and technical assistance. The Bank will also pursue dialogue and provide capacity building and training activities for the Government officials and Parliamentarians and their staff on good international practice on legislation and oversight for ensuring effective public financial management, covering strengthening the country's systems of internal controls, management information, auditing, investigative mechanisms, and transparency in the use of public funds, and including the quasi-fiscal activities of public banks and the post office and increasing the transparency of state-owned enterprises. 47. On fiscal management, the Bank plans to provide on-demand advice with regard to reforming the social safety net to improve efficiency and targeting, with particular focus on energy pricing reforms and on targeting women. Analysis has already been carried out on fuel subsidies. The dialogue on reforming energy subsidies will be done jointly with proposals for alternative safety nets that are better targeted and more geared towards enhancing human capital. 48. On sector strategies, the Bank will support the Government's efforts to develop coherent policies in water supply and sanitation, transport, and energy, in particular. An important theme will be a greater role for governorates and for local participation. In the social sectors, the Bank will continue to engage in broad dialogue on the key challenges of education and health quality, nutrition, labor markets and safety nets. This broad engagement is designed so it can quickly become more operational, if a new Government should wish to engage in the much needed reforms in the social sectors. 14 Jobs 49. The Bank Group's support will be for creating productive short-term employment and initiating improvements in the environment for sustainable private sector job creation. The objectives will be to make a visible short-term impact on unemployment and to initiate dialogue on the longer-term constraints faced by the private sector in generating sustainable employment opportunities. These constraints include a difficult regulatory environment and investment climate, access to sustainable energy, reliable transport, and finance, and a supply of appropriately skilled and educated workers. However, adequate job creation by the private sector is also contingent, especially in the short-term, on restoring investor confidence by ensuring a stable political environment and a sound macroeconomic situation. 50. For supporting the creation of short-term employment, the Bank plans to fund an Emergency Labor Intensive Investment Project ($200 million), the first new project to be requested by the Government since the Revolution. The project will focus on creating short-term employment, through implementation of small-scale sub-projects at the govemorate and local levels. The sub-projects will consist of infrastructure public works such as canal maintenance, education, housing, and rural roads. In addition, support for early childhood education, maternal and child health, nutrition, and population services will target poor populations and provide short-term employment for more skilled workers including those with higher education. It is expected to generate 200,000 direct and 65,000 indirect job opportunities, with a particular focus on youth and women. The project will be implemented in a decentralized manner by the Social Fund for Development (SFD), which will transfer funds based on agreements with local agencies, which could be governorates, sector ministries at the governorate level, local authorities, NGOs, and Community Development Associations. A number of the sub-projects selected for financing will be identified in consultation with local communities and will strengthen participation and accountability mechanisms at the local level. 51. IFC will help portfolio clients restructure their balance sheets and invest in local and foreign companies, especially in the manufacturing and services sectors, which will have an impact on job preservation and/or creation in Egypt. IFC will also try to increase its focus on addressing the needs of underserved groups to promote employment opportunities by scaling up private investments in export- oriented activities, infrastructure, health, and education sectors, particularly through public-private partnership mechanisms. Labor-intensive sectors such as retail and construction will take priority. MIGA will actively seek to support labor-intensive investments. 52. Bank Group support for improving the investment climate will focus on capacity building and dissemination of good practice. Capacity building will be aimed at parliamentarians and their staff and Government officials and will include bringing international experts and leaders of other client countries to discuss their experience with promoting a welcoming investment climate for the private sector. Both the Bank and IFC plan to hold wide consultations with public and private stakeholders, marginalized groups, and underserved sectors such as micro- and SMEs on the business environment and access to finance and their importance for enabling private sector led growth. Wide dissemination of Bank analysis of the business environment in Egypt - findings from ICAs, Doing Business, and the recent and ongoing Rapid Assessment Enterprises Surveys - will highlight areas where quick gains can be made through administrative changes. IFC will also support regulatory reform, focusing on construction permitting and licensing, which pose serious obstacles to smaller firms. IFC is also helping Egypt to become a regional hub for commercial mediation, and is planning to support reforms that will increase the rate of recovery from non-performing loans and lower the time and cost of such recovery. IFC will re-activate and expand its network of licensed Business Edge trainers to support MSMEs by providing them access to appropriate management information and business skills. With a view to encouraging smaller scale private investments that will support job creation, the Bank will provide training in entrepreneurship and leadership, targeted in particular at women (See Box 3). 15 Box 3: Women and Jobs The ratio of female to male secondary school enrollment presently stands at 0.94, and more women than men are enrolled in secondary education. However, these gains have not translated into improvements in women's participation in the workforce. In 2006, the female labor force participation rate in Egypt was about 28 percent, a third that of Egyptian male participation in both rural and urban areas. A 2007 report by the World Economic Forum ranked Egypt 120th among 128 countries in terms of women's economic opportunity. Women in the workforce are largely concentrated in a few sectors and activities with educated women largely represented in the public sector which has limited growth prospects. Women's limited mobility is a key factor behind this disparity; this prevents women from moving to jobs where they could earn the right wage given their human capital. To strengthen gender aspects in the Egypt program, the ISN proposes the following: (i) support access to reliable and safe transportation for women in design of transport projects (Urban Transport Infrastructure project scheduled for FY13/14); (ii) gender disaggregated monitoring (e.g., Emergency Labor Intensive Investment Project presented with this ISN) and two specific assistance activities targeted to women: (a) training in entrepreneurship and leadership; and cash grants to assist start-up entrepreneurs with seed funding and existing ones with scale-up funding -n addition to funding, this activity would include training, market access, and women mentoring services; a competitive selection process will be used to solicit project and funding proposals meeting pre-determined criteria, targeting women with new and ongoing projects and emphasizing scalability/replicability and financial sustainability; and (b) joint IBRD/IFC Policy dialogue on access to finance for women-run MSMEs. 53. The Bank plans to continue supporting the Government efforts to secure reliable energy supply through conventional and renewable sources and introduce institutional reforms. The proposed loans represent existing commitments to the Government to support the energy sector as a critical input to economic growth, job creation, improved sector governance, and citizen participation, and have been under preparation for some time. Helwan South Power Project ($536.6 million, plus co-financing with several multi-lateral and bilateral donors) will finance strengthening of electricity and gas supply. It will strengthen energy infrastructure in the Upper Egypt region, one of the poorest areas in Egypt, and will be complemented with advisory services for private investment, energy subsidy reform, and sector institutional reform, including introducing participation mechanisms through disseminating information on service standards, customer entitlements, and customer feedback. The Kom Ombo Concentrated Solar Power Project ($170 million IBRD and $50 million from the Clean Technology Fund (CTF)) will provide support for harnessing carbon revenues from wind power development under the Renewable Energy Carbon Asset Program. It will contribute to the Government's ambitious objective of achieving 20 percent renewable energy by 2020. The analytic and advisory work will focus on improving the governance and regulatory framework of the power industry, particularly in collaboration with the EU, and power investment planning and financing, private investment framework, energy efficiency, and carbon capture and storage. The IFC is also supporting energy development through its role as a transaction advisor for private financing of a 2,250-MW Dairut power plant and is currently discussing with the Government possible support for a number of Waste to Energy projects. MIGA stands ready to support investors in the energy sector. 54. In the transport sector, the Bank will help address the existing urban congestion, which is a barrier to employment generation and affects the quality of lfe. The Urban Transport Infrastructure Development Project ($150 million and $100 million from the CTF) will seek to improve the livability of the Greater Cairo through coordinating city growth and the development and the interconnection of the public transport modes, and integrating slum areas with the transport system. In particular, it will help connect new urban centers (such as New Cairo and 6th of October cities) with Cairo city center through more reliable and less polluting transport modes (including clean technologies like compressed natural gas), thus allowing easier commuting between employment centers and residential areas, making jobs more accessible, especially for women. It will also use an innovative consultative process with underserved communities, whose input would influence project design. The aim is to achieve a shift from private vehicles and shared taxis/microbuses to mass transit system and large size (preferably private) buses to 16 tackle traffic congestion and air pollution, and improve service provision to citizens, including road safety. TA will be provided to build capacity, improve road infrastructure safety, and leverage related road safety investments as part of a larger on-going initiative. Policy dialogue will be carried out to improve the quality of and access to urban transport, with a focus on reducing congestion and air pollution. 55. Access to finance, particularly for underserved segments of the economy - MSME, women, and youth - will be important for helping the private sector generate jobs. IFC will be particularly active in this area. IFC helped to establish iScore as the first private credit bureau in the country and is now working to extend iScore coverage to microfinance borrowers. IFC plans to continue enhancing commercial banks' SME lending capabilities, and good Corporate Governance practices. It is also working with microfinance institutions (MFIs) to increase access to finance particularly in Upper Egypt, and it plans to continue to train SMEs through its Business Edge Program. The joint IBRD and IFC MSME-Technical Assistance Facility (TAF), which is part of the broader World Bank Group MSME Facility and a joint initiative under the Deauville Partnership process, provides a comprehensive package of Technical Assistance (TA) to: (i) improve the business environment for MSME finance, including financial infrastructure as well as legal and regulatory frameworks; (ii) build the capacity of microfinance institutions and financial institutions (FIs) for sustainable SME banking; and (iii) support MSME business development services. In Egypt, the World Bank Group is seeking to improve the regulatory framework for leasing, secured lending, microfinance, Islamic finance and SME banking. The program also includes capacity building support to FIs and MFIs as well as Advisory Services in SME banking. Finally, a component for direct support to MSMEs is being designed. IFC will also be ready to provide financing to local banks, if needed, including short-term finance instruments, risk sharing facilities, SME credit lines, micro and trade finance, with a special emphasis on targeting women and youth. MIGA will actively seek to support foreign banks with their lending operations in Egypt. 56. A key challenge in the education sector is to modernize the curricula of both vocational and general education so as to enable graduates to find employment in a market economy. The Bank plans to support the elaboration of a five-year strategy for pre-university education, including technical and general education, to address this challenge and establish benchmarks on outcomes. TA will be provided to help make a Skills Development Fund operational; support planning and information monitoring, which could include strengthening policy analysis within the Government and in university and research institutions; and expand the use of a benchmarking tool developed by the Bank for Egyptian universities, which would improve the transparency of the higher education system. Building on the education for employment initiative for Arab youth (e4e), IFC is seeking to complete a diagnostic and identify specific projects in Egypt that would strengthen quality assurance (standards, accreditation) and address regulatory issues that constrain private provision of education services. The focus of the e4e initiative will be primarily on tertiary and technical and vocational training that are better aligned with market and employer needs. Inclusion 57. Promoting inclusion involves ensuring broader access by disadvantaged segments of the population - women, youth, lagging geographical regions (Upper Egypt in particular) - to infrastructure and social services, improving the social safety net, and enhancing citizen and community participation in the design, implementation, and monitoring of the Government's inilialive and programs. The Bank's support in this area over the next 18 months will consist of new lending, retrofitting the existing lending portfolio, and policy dialogue in key sectors. 58. Given wide disparities in income and social indicators between geographical regions (para. 17), a possible multi-sector operation is proposed for Upper Egypt. This operation would contribute to creating economic opportunities and improving services in Upper Egypt, with a special attention to the poorest part of the population, by: (i) improving the stock and quality of basic infrastructure at the governorate and district levels; and (ii) reducing costs, improving quality, and promoting supply chain development for 17 competitive crops and livestock products that can benefit small holders. The operation would adopt a participatory design and monitoring of results by the beneficiaries. 59. In social protection, the Bank will engage the Government on consolidation and strengthening of the social safety net system. Egyptian policymakers and development partners agree on the need to gradually remove costly and inefficient subsidies, and replace them with a more efficient social protection system (paras. 45 and 47). The gradual phase out of subsidies would provide resources to fund the consolidation and expansion of a targeted social safety net (SSN) for the poor and vulnerable households and those that would be affected by subsidy reform. The Bank plans to help develop a roadmap for this important multi-sector reform. Other new initiatives include TA on employment, focused on youth and self-employment, school-to-work interventions, and skills development. 60. To improve access to finance, particularly for MSMEs and women, the Bank will pursue dialogue on further reforms needed in the policy and regulatory environment and financial infrastructure. The Bank and IFC also plan to provide TA for capacity building for financial and non- financial institutions, particularly those engaged in supporting MSMEs, in the context of the Regional MENA MSME Technical Assistance Facility. 61. To broaden citizen participation in delivery of water services, policy work would focus on retro- fitting the existing portfolio of projects to enhance community-based management of decentralized schemes, and citizen feedback and grievance redress mechanisms; improve efficiency and equity in service delivery; improve targeting of subsidies; and reduce the cost of pollution through better management of wastewater. The Bank will pursue the sort of ground-breaking policy work in the sector exemplified by the Water Hackathon (Box 1), relying on broad consultations, especially among youth, to address these issues in the sector and propose solutions. TA would also be provided on solid waste management, with a focus on the poor and underserved areas of greater Cairo. 62. Policy dialogue will be pursued in the health sector, with the objective of improving access by the poor and improving efficiency of services. The Bank proposes to examine the scope for providing universal health insurance for the poor and those working in the informal sector under the on-going Health Insurance Systems Development Project, and to pursue the possibility of carrying out work on health sector governance. Grants are also possible to support pilot schemes, such as contracting NGOs and private sector providers. 63. In education, the Bank plans policy dialogue on early childhood education (ECE) to increase coverage, especially in rural and poor urban areas. In addition, IFC's regional e4e initiative will help improve the quality and relevance of post secondary education to better meet labor market needs. C. Enhancing Bank Portfolio Management 64. Portfolio implementation needs to be improved. Disbursement has been slow. As of May 14, 2012, commitments stood at $3. 8 billion, of which 81 percent was undisbursed (MNA Regional average, 63 percent). The disbursement ratio - the amount of investment lending disbursed in the FY as a percentage of the undisbursed balance for investment loans at the beginning of the FY - was 10.6 percent as of May 2012 (up from 6.7 percent in FY11 and down from 13.5 percent in FY10), compared to 10 percent for the MNA Region and 14 percent Bankwide. In addition, the number of problem projects rose from 5 percent in FY10 to 24 percent in FY12, while the share of commitments at risk decreased from 4.3 percent in FY10 to 1.5 percent in FY11, before rising to 9 percent in FY12. Three IBRD loans were approved in FY11, but two of them had not been declared effective as of early May 2012. Political uncertainty has created a slow decision-making process in project implementation units and line ministries, as well as in the new legislative framework (for the ratification of agreements), delaying project effectiveness and implementation, especially in the context of high rotation of cabinet ministers and their aides. Overall, 18 Egypt projects' portfolio risk is assessed as moderate, and portfolio compliance is rated high. Reliance on civil servants of projects implementation entities is high, but weak system and staff capacity persist. 65. To improve portfolio performance, the Bank plans to focus on those areas within its control. These include (i) restructuring two water projects during their mid-term reviews to accelerate disbursement and improve efficiency and equity in service delivery; (ii) restructuring the Ain Sokhna Power project to use its savings to strengthen electricity transmission; and (iii) closely monitoring procurement of other infrastructure projects (Giza North Power, transport projects) which just started disbursing. The Bank will also continue to: provide support to project management units (PMU) on procurement and implementation through frequent training on disbursements and financial management for low-disbursing projects; help prepare realistic procurement plans; and introduce flexibility to speed up procurement while ensuring transparency and efficiency. Finally, the Bank will work with the Government to improve new projects readiness for implementation, including establishing PMUs early in the project cycle, ensuring realism in project design, and undertaking advanced procurement. Other issues, such as the slow pace of parliamentary approval of Bank loans, continue to present risks to portfolio implementation; when possible, parliament's endorsement will be sought ahead of time. 66. IFC's portfolio is performing satisfactorily despite the operating environment. Active portfolio management has been underway since last year, including stress-tests conducted as part of the Regional reviews. A number of adjustments/cancellations of undisbursed amounts were concluded. The ongoing legal challenges to projects stemming from past privatization programs are being monitored carefully by IFC teams. D. Resources and Instruments 67. Egypt's IBRD exposure reached $2.8 billion at end-2011 and will increase in the near future. There is a large undisbursed balance ($3.1 billion at end-March 2012), which reflects IBRD's strong past engagement and financing support. Before taking into account any new loans, IBRD exposure is projected to reach $3.5 billion by end-2013 (end of the ISN period) and $4.3 billion by end-2016. 68. IBRD financial support of some $2.1 billion is proposed for the ISN period. The emphasis of this ISN for the next 18 months is on dialogue, AAA, and TA, although significant financial support is also being considered. The Bank will continue to seek to engage with the new Government and the civil society on a broad range of topics that are at the heart of the Revolution, as it has since the Revolution began. Regarding IBRD financial support, a total of $1,057 million for investment loans is planned during FY12- 13. This includes the Emergency Labor Intensive Investment Project, two Energy projects, and an Urban Transport (table 6). As requested by the Government, a total of $1 billion of budget support may also be considered with a view to support macroeconomic stabilization efforts and governance reforms, in conjunction with and phased along an IMF program, and assuming appropriate burden sharing with other IFIs and bilateral developments partners to cover the overall anticipated financing gap. This level of support would be consistent with the Bank's announcement at the G8 Deauville summit which assumed concerted action with the IMF, other IFIs and bilateral donors in order to collectively finance and sustain bold progress towards macroeconomic stabilization, improved governance and transparency, and sound structural policies. In the context of such concerted actions, additional IBRD support, including partial Bank guarantees, could be contemplated towards the end of the ISN period if requested and once the future Government has clarified the policy and reform areas where the Bank can bring significant expertise and value-added. As usual, the availability of additional resources would depend on the overall demand for IBRD resources, global economic developments and IBRD financial capacity. 69. IFC's committed portfolio in Egypt reached $1 billion mark in December 2011, and is expected to maintain its steady growth. IFC expects to commit between $300 and $400 million (including mobilization) in Egypt during the ISN period, assuming an improvement in the macroeconomic and policy 19 environment for private sector activity. IFC will use a mix of investment instruments including debt, equity, guarantee, and re-financing products. IFC will continue to focus on increasing south-south investments into Egypt, especially from Gulf investors, while also playing a strong role in mobilizing external investors into the country through its projects (e.g., B-loan participation, parallel loans). MIGA is appraising support to one investment in the oil and gas sector, for a total of $100 million. Table 6: Summary of indicative Bank program by sector, July 1, 2012-Dec. 31, 2013 Economic manaRement Jobs Inclusion ----- ------------ New initiatives (lending operations in bold)---------- - DPL Financing ($1 billion) - Analytical work on labor markets - A multi-sectoral operation to improve - Policy note on social safety net - Job study economic opportunities and access to reforms for fiscal sustainability - Dissemination of ICAs, Doing Business, and basic services in Upper Egypt - Policy note on energy pricing and Rapid Assessment Surveys - Joint IBRD/IFC Policy dialogue on access subsidies - Capacity building for Parliament and to finance for women-mn MSME - Other policy notes on economic Government on investment climate - Joint IBRD-IFC TA for capacity building governance issues - Dissemination of the reshaping economic for financial and non-financial institutions - Policy dialogue on land management geography study for lending to MSME as part of the MSME strategy TA on cash grants to young women to start TA Facility - TA to support economic governance business and training in entrepreneurship & - TA on Banking Sector Corporate reforms (e.g. transparency, leadership Governance expenditure management, public IFC investments - IBRD/IFC TA on new approaches to procurement) IFC TA on corporate governance mobile banking) - Policy dialogue on energy sector Helwan South Power Project ($536.6 n), strategy FY13 - TA on improved targeting of ffiel -Kom Ombo Concentrated Solar Power subsidies Project ($170 m IBRD and $50 million o from the CTF), FY13 -Urban Transport Infrastructure -Analytic support and policy dialogue to Development Project ($150 m IBRD and improve the quality and access to urban $100 m from the CTF), FY13/14 transport for low income households -Restructure water portfolio to enhance equity in service provision and disbursement - Policy dialogue on water sector strategy TA on solid waste management, focus on underserved areas in Cairo Emergency Labor Intensive Investment TA on social safety net, to improve Project ($200 ), FY12 effectiveness and efficiency TA onsocial insurance - TA to strengthen planning and - Dialogue on 5-year strategy for pre- - Policy dialogue on Early Childhood monitoring in education university education. Education to increase coverage, especially - TA on Skills Development Fund in rural and poor urban areas - TA to expand use of a benchmarking tool for 0 Egyptian universities - Potential IFC investments and TA in education, especially through the e4e initiative - TA on health sector governance Dialogue/consultation on universal health insurance for the poor and informal - Heworkers 20 E. Coordination and Partnerships 70. Egypt enjoys strong donor support from a wide variety of institutions and countries, including USAID, the EU, Saudi Arabia, Germany, Kuwait Fund, UNDP, AfDB, IMF and the Islamic Development Bank. The Bank Group will continue to work with Government counterparts to define development programs in close coordination with these development partners. The AfDB, the Islamic Development Bank, the Kuwait Fund for Arab Economic Development, and the Arab Fund for Social and Economic Development are all providing significant funding (together over $1.3 billion) for the Helwan South Power project, and the AfDB is also co-financing the Kom Ombo project (para. 53). In November 2011, the EU approved a £22 million project to support the development of agricultural SMEs and job creation in rural areas of Egypt, through improved access to finance for farmers and increased productivity in the dairy and aquaculture sector, and in January 2012, the EU also provided £30 million grant which includes £4 million of TA for energy sector policy reforms. The International Islamic Trade Finance Corporation, the trade- financing arm of the Islamic Development Bank, has provided $400 million to help Egypt finance imports of petroleum products, wheat and other foodstuffs. Qatar and Saudi Arabia have provided $500 million each to Egypt in budget support. To complement the Bank's $240 million additional financing for Giza North Power Project, the EIB approved an additional loan of £50 million. Egypt is expected to be a beneficiary from the regional MSME Facility and Arab Financing Facility for Infrastructure (AFFI) which have both technical assistance facilities (TAFs) and investment lending that is being prepared and rolled out in partnership with donors, bi-lateral partners, and regional IFIs like Islamic Development Bank (IsDB). F. Monitoring and Evaluation 71. The CAS Progress Report Results Matrix has been revised. Because Egypt has undergone radical changes since the 2005 CAS and the 2008 CAS Progress Report, development priorities specified in those documents have changed. A revised results matrix is therefore proposed (Annex 1), covering both the 2006-11 CAS period and this ISN, and will be used to prepare a CAS completion report to be used as input for the full CPS planned for end-calendar year 2013. Implementation Status and Results Reports (ISRs) and Implementation Completion and Results Reports (ICRs) will continue to be important tools to monitor program performance. The Bank will regularly hold Country Portfolio Performance Reviews (CPPRs) to evaluate program performance jointly with Egyptian counterparts. At the outset of the ISN period, sector portfolio reviews will take place to analyze the active portfolio with a view to identifying restructuring needs of ongoing projects. V. Risks to the Interim Strategy 72. The political, constitutional, and legal uncertainties facing Egypt and the risk of lack ofprogress on the democratic governance agenda all have major implications for the economy and present significant risks to the Bank Group's program of support. Until a new Government and a new constitution are in place, the legislative and administrative roles of the SCAF, the Parliament, and the Government will remain unsettled. It is also uncertain whether the transition to a new Government and a new constitution will proceed quickly and peacefully. Lack of progress in any of these dimensions, particularly if accompanied by violence, would cause further capital outflows and declines in tourism and investment, and could also limit the Government's access to donor financing. The negative consequences on growth and employment could lead to increased discontent, engendering a cycle of political unrest and economic difficulties. These uncertainties present reputational, legal, and operational risks for the Bank Group's proposed program of lending (reduced ability of the Government to ratify; to complete agreed prior actions; to implement programs; lack of risk appetite of investors) and policy dialogue (inability of the Government to introduce coherent strategies and policies), and cannot be mitigated by the Bank Group alone. The situation underscores the importance of working closely with members of the international 21 community to address the political and economic dimensions of Egypt's transition. In the event of continued violence, the Bank will have to assess its ability to continue to engage in policy dialogue and to monitor on-going lending operations. Similarly, IFC may have limited opportunities for increasing investment lending in Egypt and will focus instead on portfolio management, assisting portfolio companies mitigate risks, and remain engaged primarily through its Advisory Services program. Requests for MIGA's guarantees into Egypt are limited for now, as many investors are holding back on investments until the political situation stabilizes. 73. Inadequate macro management could lead to macroeconomic instability, as could other short- term risks to the economy, which in turn would have a politically destabilizing effect A further fall in reserves would precipitate a currency crisis with far-reaching consequences. Assuming this risk can be avoided, Egypt's main weakness stems from continuing high fiscal deficits and large public debt with substantial rollover needs. Excessive delays in fiscal consolidation and a spiraling public debt would negatively bear on confidence of domestic and external investors. Such risks are high because deciding on the necessary fiscal measures and consistently implementing them will be challenging. The challenges to an agreement include agreeing on bold policy measures, for example to reduce the current system of costly, inefficient and untargeted subsidies, obtaining a sufficiently broad political support and assembling the remaining external financial package necessary to close the gap drawing on the IMF, the Bank and other donors. The Government may also prove reluctant to allow a floating exchange rate, which could result in an overvaluation of the currency and a capital outflow. Other short-term risks to the economy include the impact of a continued downturn, especially in Europe, which is a major trading partner; regional geopolitical instability, which could have economic spillover effects on the economy; and possible failures in the banking sector that represent potentially large fiscal contingencies. 74. The attitude of both the new Government and the population at large towards IFIs in general and the Bank Group in particular is uncertain, while international donor commitment toward Egypt may also be tested in the near term. To mitigate the first risk, of possible negative sentiments towards IFIs, the Bank Group has begun to engage with a broad set of stakeholders, including members of political parties and Parliamentarians, as well as CSOs and youth leaders, and will make further efforts at outreach and consultations (para. 40). Given recent legal issues with foreign non-governmental organizations, however, the willingness of the international community to support Egypt could also be strained, which in turn could have a negative impact on Egypt's macro-economy. 75. Reforms aimed at improving the environment for private investment may be deeply unpopular. The new Government may respond to public opinion by introducing re-nationalization or tighter state control over the private sector. To deal with this risk, the Bank Group plans to engage policy makers, Government officials, private groups, and the broader public, via the wide array of means (including analytical and advisory services) and technology, including social media, to disseminate findings from global experience on the role that a properly regulated private sector plays in promoting growth. The Bank Group also plans to bring international experts to Egypt and conduct regional seminars to discuss these issues in public forums, training sessions, and webinars for both targeted and wider audiences. The regional conference on PPPs which took place in Marrakesh, Morocco in April 2012 is an early example of these efforts at knowledge sharing on key topics in the region. 76. A significant longer-term risk for Egypt is lack of sufficient progress in governance, in particular improving the transparency and accountability of decision-makers. Until a new constitution is in place, it is not clear whether the legal framework will be conducive to improving transparency and oversight in Government operations. To address this, the Bank will continue to engage with the authorities on all relevant economic governance issues; it plans capacity building for Parliamentarians and their staff on good international practices in legal frameworks governing budget transparency, oversight, and public access to information, and on specific reforms that the Parliament and the Government can take in the short term, even as the constitution is being drafted. 22 Annex 1. Revised CAS Results Matrix Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period Strategic Objective 1: Economic Management 1.1. Contain the fiscal deficit * Reduce the fiscal deficit * Effective implementation of the * Policy dialogue on * Gradual phasing-out Mode of intervention: Monitoring, analytical work, by 1 percent of GDP Government's plan to gradually macroeconomic targets and of energy subsidies for and TA every year (on track, reduce fiscal deficit by end ISN priority activities is ongoing and energy-intensive * Economic monitoring until FY08, this target period constructive industries is launched * Macro report has been missed since * PER notes then) * Policy note on social safety net reforms for * Manage inflationary fiscal sustainability pressures (inflation at 1 * Policy note on energy pricing and subsidies percent in FYI 1) 1.2.Improve transparency of public sector management * Increase transparency of Government's annual e Economic recovery and governance DPL the budget process budgets, audited 9 Policy notes on economic governance issues accounts and audit Support for economic governance reforms reports are disclosed (TA) * Improve perception of * Increased rating on governance and The findings and Launch of a formal e Country Procurement Assessment Update public service efficiency transparency scorecards issued by recommendations of sectoral PER program to improve (ESW) and address lack of major independent observatories of notes were published on the perceptions of public * Support to procurement reform (TA) transparency perceptions of transparency - by internet sector transparency * Support to Transparency and Anti-Corruption end-CAS Commission (TA) * WBI Local Governance Management Program (TA) s Policy dialogue on land management Strategic Objective 2: Jobs 2.1. Create an enabling environment for private investment and businesses " Improve the business e Improvement in the Business *Information on key Doing * Improvement of Doing Mode of intervention: Benchmarking, analytical environment Environment as measured by Doing Business indicators is available Business ranking fr7om work, and TA " Attaining a level playing Business surveys - by end-ISN and debated among stakeholders; 108 (2011) * Benchmarking through Doing Business (TA) field, promoting e Successful completion of regulatory demonstrated influence of the * New investment * Investment Climate Update (ESW) regulatory reforms, reforms that would lead to a level benchmarking exercise on reforms opportunities Rapid Assessment ICA enhancing competition, playing field and a more competitive over the last period. Investments in PPPs (IFC) 23 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period and improving environment * Management training for close to * Commercial justice/Debt Resolution (IFC TA) governance. 7,000 persons from 1,000 SMEs. * SME Training through IFC Business * Improve the environment * Creation of Egyptian Institute of Edge/Toolkit (IFC TA) for private sector-led Directors (EloD); building * Streamline construction permits and licenses growth and employment capacity of more than 80 board (IFC TA) creation. directors and reaching more than * Roll out Competitiveness Index nationwide 1800 people at EloD (IFC TA) * Developed competitiveness index * Development of the SubNational DB in FY13, "Islah" at the governorate level in to cover 15 governorates and 5 indicators Alexandria and Cairo (IFC TA). * Capacity building for Parliament and Government on business environment * MIGA support for PPPs. 2.2. Improve financial sector competitiveness and efficie cy " Broaden access to credit, e Adoption by the Government of a e Increase in lending to MSMEs. e Effective Mode of intervention: Integrated package of in particular for micro, sound strategic approach to expand e Increase of annual mortgage loans implementation of analytical work, technical assistance, JBRD small and medium access to finance to the poorest - by extended by primary lenders. ongoing financial lending, and JFCfinancial support enterprises (MSMEs), end-CAS e Adoption by the Government of a refoms e Financial Development and Growth (ESW) especially for women e Substantial increase in access to sound strategic approach to e Successful operation e Islamic Finance (ESW) and youth finance, evident in the rise in credit - expand access to finance by the of the mortgage e WBI - financial sector (TA) * Enhance access to by end-CAS poorest refinancing facility e Support to financial sector reform (TA) finance to underserved e Increase of annual mortgage loans e Improved governance structure (which provides long- e Stress-testing Institutional Reforms (TA) and unserved segments extended by primary lenders- by for the overall banking sector maturity loans to e Strengthening Corporate Governance of the of the economy end-CAS primary mortgage Financial System (TA) * Strengthening the e A developed NBFI regulator and a providers) e Affordable Mortgage Finance Development supervisory and more sound Egyptian Financial e Development of a Policy Loan (SPN) regulatory framework for Supervisory Authority (EFSA) strategy to expand e Enhancing Access to Finance for SMEs Project the financial sector- e Issuance of the Corporate access to finance (SPN) both banks and non-bank Governance Code for the banking e Further improvement e Potential investments in finance institutions financial institutions sector, preventing potential conflict and enforcement of the (IFC) (NBFI) of interest, improving transparency, corporate governance e Credit Bureau (IFC TA) * Improve the financial and establishing good governance. regulation e Corporate Governance (FC TA) institutional architecture Amendment of the Central Bank, e Publication of the e SME banking (IFC TA) (credit bureau, payments Money and Banking Law, improving Financial Stability system, collateral the governance of the Central Bank Report, enhancing registry, etc.) of Egypt (CBE) transparency * Strengthening the e Effective conduct of governance and fnstress testing, using 24 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period transparency of the Financial Projection banking sector Model 2.3. Expand and impro e power and transport infrastructure * Expand energy and Energy Construction of 700 MW El Effective advancement Mode of intervention: Integrated package of transport infrastructure, e Expansion of power generation Tebbin was completed in 2010; of works on power analytical work, technical assistance, and IBRD to catch up with capacity by 27,000 MW - by end- construction of 140 MW projects and natural lendingfor infrastructure population growth, CAS; increasing share of renewables Kureimat Solar-Thermal Power gas connections e El Tebbin Power Project (SPN) urbanization, and in generation mix was completed in 2011 project e Kureimat Solar-Thermal Project (completed) increased economic e Conversion from highly-subsidized *Construction of gas distribution *Design of a gradual e Natural Gas Connections Project (SPN) activity and jobs LPG to natural gas consumption for infrastructure for 300,000 yet substantial energy e Am Sokhna Power Project (SPN) creation- through 300,000 households - by end-CAS households is under way pricing reform and e Wind Power Development Project (SPN) selected public e Reform of energy pricing and Construction of 3,550 MW in gas- launch of its first e North Giza Power Project (SPN) investments, sector subsidies, to reduce the fiscal impact fired power plants under way phase e Helwan South Power Project (LEN) policy improvements and of global price increases by end- Windpowerproject for e Kom Ombo Concentrated Solar Power PPPs. CAS - by end-CAS construction of high-voltage (LEN) * Improve management transmission lines and a 250-MW e TA on Energy pricing strategy and quality of services of wind power plant under e TA on improved targeting of fuel subsidies energy and transport implementation systems, esp. as regards Substantial policy advice (options, financial sustainability, simulations, and private sector recommendations) was provided participation, sector to the Government on energy governance and pricing and subsidies; involvement of users. development of renewable energy; energy planning; energy efficiency; sector governance; and private investment Transport Construction of a new airport Rehabilitation and Mode of intervention: " Increase of capacity of key terminal has been completed in expansion of an Airports Development Project (SPN) international airports (Cairo and Cairo airport (T3) and Sharm El existing terminal (T2) e Railways Restructuring Project (SPN) Sharm El Sheikh) and delegation of Sheikh airport; airports in Cairo airport is well e Urban Transport Infrastr. Project (LEN) airports management to the private management has been advanced; an air Trucking industry AAA sector strengthened with the assistance transport liberalization e Road asset management AAA " Increase of financial viability and of the private sector policy is adopted e Transport regulations TA safety of Egypt National Railways *The Government has approved a *The Government has e Policy dialogue to improve the quality and Increase of financing for and restructuring plan of Egyptian completed the access to urban transport for low income regularity of road maintenance National Railways (ENR), reorganization of ENR; households t Improve public urban transport in inspired by Bank-recommended modernization of 25 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period Greater Cairo area priorities, and focusing on signaling on Cairo increasing the safety, quality and Assiut is ongoing. reliability of services and financial viability of railways * The Government has services; the financing of a adopted a road asset modernization program of management strategy signaling systems between aiming, among others, Alexandria and Assiut is in place. to improve road Financing of road maintenance maintenance; a pilot has increased. PPP road project is * An urban transport authority for underway. Greater Cairo has been * The Greater Cairo established but is not yet Urban Transport operational. Authority is in place and fully operational; the Cairo Urban Transport Infrastructure Development project (CUTIDP) is underway, Restructuring of the freight road transport sector is underway and an effective regulation is in place to improve the performance of logistics. Expand Telecommunications * Substantial (fee-based) technical * Award of a second Mode of intervention: Technical assistance by telecommunications * Reduction in the cost of assistance was provided to national fixed line both IBRD i'.. -h infrastructure - through telecommunications services - by improve the regulatory framework operator license * Support to regulatory reform (IBRD fee-based selected public end-CAS and increase the number of TA) investments and PPPs licensed operators * Improve management of telecoms infrastructure systems, esp. as regards financial sustainability, private sector participation, and 26 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period involvement of users 2.4. Increase relevance of education for labor market * Pursue efforts to increase Successful testing (for an eventual Implementation of pilot schemes Mode of intervention: JBRD lendingforpilot access to all levels of scaling-up) of pilot schemes for is underway for (i) higher e Effective dialogue to activities and stand-alone analytical work education (gross improving quality/relevance of. (i) education; (ii) skills development; scale up the skills e Early Childhood Education Enhancement enrollment ratio higher education, (ii) skills and (iii) early childhood development pilot Project (SPN) increased to 28 percent development, and (iii) early development project e Secondary Education Enhancement Project in pre-school, 94 percent childhood development - by end- Curriculum for the first year of e Effective policy (SPN) in primary, and 84 CAS secondary school has been dialogue to support e Dialogue on 5-year strategy for pre- percent in secondary) Improved curriculum especially with revised. Second and third year Government efforts to university education * Enhance the regard to the transition from secondary curriculum reforms are improve technical- e Policy dialogue on early childhood education employability of secondary to post secondary still at a dialogue stage. vocational education. e TA for the Skills Development Fund graduates from education education and to the labor market - e Education Policy Note: Improving e TA to expand use of a benchmarking toll for and non-formal by end-CAS Quality, Equality, and Efficiency universities education/technical in the Education Sector: Fostering e TA to strengthen planning and monitoring in training and skills a Competent Generation of Youth education upgrading by enhancing e High Level Round Table e Potential IFC TA in education the quality and relevance organized on Quality of of technical education Education: The Gateway to and training. ________________ Employability (March 2010) ___________ 2.5. Increase trade with regional and global partners " Facilitate trade, including * Successful development of schemes Policy proposals and pilot Successful completion Mode of intervention: Analytical work, technical simplifying customs for improving the linkages between schemes are being developed for of the pilot schemes assistance procedures and building suppliers and external markets in (i) agriculture in Upper Egypt and effective launch of e Supply Chain and Trade (TA) infrastructure, etc. services, (ii) agriculture in Upper a substantive dialogue Trade ESW (external trade increased Egypt - by end-CAS on their scaling up by 22 percent since adjustment 2006; average number of tIncreased trade days to clear imported infrastructure capacity goods reduced to 2) b Strengthen linkages between producers and external markets in priority sectors and geographical areas 27 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period Strategic Objective 3: Inclusion 3.1. Improve management of water, sanitation and irrigation systems * Improve access and Successful testing (for an eventual e Launch of rural networked Expansion of Mode of intervention: JBRD lendingfor pilot management of water scaling-up) of pilot schemes for (i) sanitation program in 4 needy networked sanitation activities underpinned by analytical work supply, sanitation and expanding networked sanitation governorates services m targeted * Comprehensive water sector portfolio review irrigation and drainage infrastructure into rural areas; and e First waste water PPP in Egypt rural areas in * Restructuring of the Integrated Irrigation infrastructure systems (ii) increasing efficiency and successfully completed (JFC) Gharbeya, Beheira, Improvement and Management project and beneficiary participation in irrigation e Improved irrigation and drainage and Kaft-el Shek the Integrated Sanitation and Sewerage management; and (iii) developing services to 40,000 farmers and implement at least Infrastructure I to improve equity in service PPPs - by end-JSN 1,420 water user associations 6 decentralized waste provision and disbursement established of which 765 water systems Support to labor intensive irrigation registered * Improved irrigation infrastructure maintenance management * 14 integrated irrigation water and drainage services * Policy dialogue to improve user participation e A pilot scheme for r is to 65,000 farmers in sector governance, transparency and irrigation has been launched * All 1,420 water user social accountability procurement aborted associations registered * Agreement on alternative model for PPPs in irrigation * management 3.2. Tmprove air and water quality e Improve environmental *Successful testing (for an eventual *Implementation of a pilot scheme *Effective launch of a Mode of intervention: JBRD lending for pilot standards for air and scaling-up) of pilot schemes for: (i) for reducing industrial air substantive dialogue activities and stand-alone analytical work water pollution and reduction of industrial air pollution; pollution is well underway; a pilot on the scaling up / * Pollution Abatement Project 11 (SPN) strengthen their and (ii) waste management - by end- scheme for waste management is adjustment of the pilot * TA on solid waste management, focused on enforcement including by CAS under preparation scheme for industrial underserved areas of Cairo developing market- *Improvement of environmental *Significant progress was achieved air pollution * Update of Country Environment Analysis friendly incentives for standards regulations - by end-CAS on environmental standards: abatement (ESW) polluters to reduce country systems are partly *Launch of a pilot 9 Climate change mitigation and adaptation pollution applicable for Bank projects scheme for waste (ESW) management pollution * Environment strategy (ESW) abatement 28 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period 3.3. Expand access to healthcare * Expand coverage of * Adoption of a health insurance Implementation of family health Completion and Mode of intervention: Integrated package of health insurance systems reform reflecting international best funds was piloted in two adoption of actuarial analytical work, technical assistance, and JBRD in a fiscally sustainable practice - by end-CAS governorates (Menofia and studies and an lending manner Alexandria): 2.4 million people implementation plan e Health sector reform project (SPN-closed) have been covered with a package for rolling out the e Health Insurance Systems Development Project of primary health care services, reform. (SPN) representing 100 percent of the Contract a Verification e Dialogue on Universal Health Insurance (TA) targeted population in these and Validation firm to e Governance in Health Sector (TA) governorates; and physical deliver hands-on accessibility to primary health support to the health care services was improved for 3 insurance payor for million people. As a result of the decision-taking, project, 'family health services' technical advice, and was adopted as the service verification and delivery model for primary health validation services. care in Egypt and is being rolled Commitment of the out nationwide supported by the Government to expand Government and EU budget universal health support. coverage to a new * Technical assistance and policy group of uninsured guidance were provided to the population, mainly the Government in the areas of health poor. insurance and actuarial modeling. * Assistance was provided to the Government in its commitment to establishing a social health insurance system with universal coverage, through the preparation and implementation of the Health Insurance Systems Development Project. * Successful commercial closing (pending financial closing) of the sAlexandria Hospitals PPP. 29 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period 3.4. Develop targeted and sustainable safety nets " Transform current e Definition and implementation of a *Technical advice was provided to *Preparation of an Mode of intervention: Hands-on technical subsidy system into a sound plan to move towards a more the Government on subsidy implementation plan assistance by JBRD (.e. ,I., - fee-based) better targeted and transparent and sustainable system reform and cash transfer for subsidy reform e Emergency Labor-Intensive Works (LEN) fiscally sustainable e Definition and implementation of mechanisms: design of options informed by e Pension reform (RTA) system new pension regulations reflecting and timetables, organization of international best e Inequality of Opportunity Study * Increase sustainability international best practices South-South exchange of practice e Subsidy Reform Paper (cross-sectoral team) and coverage of the experience (with Mexico), e Social Protection Strategy Note (TA) pension systems capacity building of selected Completion of the * Make benefit systems institutions to be involved in the technical work on conducive to graduation reform pension reform and labor market Technical advice was provided to (including regulations insertion the Government (on a fee-based and actuarial work) basis) on pension law and relevant newpesionrgulatinsrefecnregulations 3.5. Reduce interregional disparities " Increase public * Strong pro-poor targeting of public * Analytical work on Upper Egypt Adoption by the Mode of intervention: BRD lendingfor investments in Upper investment in Upper Egypt - by end- constraints and opportunities Government of the community-level activities and stand-alone Egypt (average per CAS completed findings and analytical work capita transfers to Upper e Mechanisms for community-level recommendation of Possible multi-sectoral operation to improve Egypt Governorates investment in Upper Egypt were analytical work on economic opportunities and access to basic increased from 79% of successfully tested Upper Egypt sources services in Upper Egypt (LEN) all-Egypt average of growth and poverty Support to developing a decentralization (2003/2004) to over 100 strategy (TA) percent of all-Egypt e Growth in Upper Egypt (ESW) average) c Strengthen capacity among local administrative authorities and community groups in Upper Egypt 3.6. Reduce gender disparities _____________ __________ " Focus on reducing e Effective contribution to informed e Capacity of selected women *Adoption by the Mode of intervention: benchmarking through inequalities related to advocacy and policy making on groups to engage in gender policy Government of the analytical work and technical assistance economic empowerment gender issues - by end-CAS issues was strengthened findings and recommendations of e Update the Women Economic Empowerment " Improve women's access * Specialized windows for women to i Building the capacity of women Bank analytical work (ESW) to finance improve their access to finance entrepreneurs on gender and e Training and building the capacity of women 30 Outcomes influenced by CAS Program Key Government Milestones for Bank Program objectives Revised CAS outcomes monitoring further (in bold, proposed program for the ISN period) progress by end ISN period economic entrepreneurs (TA) opportunities * Engendered Rapid assessment-ICA (ESW) * TA on cash grants to young women to start business and training in entrepreneurship & leadership 31 Annex 2. Summary of ISN Consultations 1. The Process After the Revolution of January 25, 2011, the World Bank in Egypt has been keen to engage and reach out to new stakeholder groups, agents of change and future reform champions. In the new political landscape, meetings were held with post-revolution liberal and Islamist political parties (liberal/Islamists) in addition to revolutionary youth and young leaders. Such meetings represented valuable opportunities for the Bank to seek stakeholders' viewpoints on key issues, priorities for new Egypt and how best the Bank can support Egypt going forward. In February 2012, ISN consultations were held with various tiers of the Government, civil society organizations, representatives of political parties, parliamentarians, donors, academia and the private sector which have been an integral part of the ISN formulation process. Given the multiplicity of stakeholders in the Bank Group's work in Egypt, and their wide range of priorities and points of view, the challenge was to conduct truly representative and focused consultations that could provide meaningful inputs and direction to ISN formulation. The consultation strategy has, therefore, been based on the following principles: a) participants would reflect a divergence of views, and would include new forces that drove the January 2011 Revolution; b) consultations would be transparent so that expectations from the exercise were realistic; and c) feedback would be elicited in a focused manner on the emerging themes and issues that were expected to underpin the ISN. The consultation process comprised two elements: * Targeted meetings: Since the drafting of the ISN began, a series of meetings was held over a few months by sector staff with sector ministries to discuss key sectoral challenges and how best the Bank could help. These discussions provided an important input to the subsequent drafting of the proposed World Bank Group Program priorities. In addition, in February 2012, the Bank Group hosted a series of 2-3 hour meetings in Cairo, in Arabic and English, with representatives of the Government, donors, the private sector, academia, labor unions, parliamentarians, political parties, and CSOs. These meetings were aimed at obtaining direct feedback on the main priorities to be reflected in the ISN draft. Pillars foreseen for the ISN were presented to participants, together with the ongoing program when the audience was not familiar with the World Bank's work in the country. Participants' feedback was sought on (i) what role the World Bank Group could play in supporting Egypt's transition; (ii) the adequacy and relevance of ISN objectives; (iii) the suitability of areas foreseen for World Bank engagement; and (iv) what the World Bank should do differently in Egypt. * Online consultations: In mid-February 2012, a summary of the draft ISN, together with a PowerPoint presentation of the Bank in Egypt and the ISN, both in English and Arabic, was posted on a blog, twitter and facebook for public review and comments. Awareness of this facility was created through email to Bank contacts and other means of outreach. Feedback received is summarized below. 2. Consultations Feedback Feedback from various stakeholders is grouped into three areas, namely economic management and transparency, jobs, and inclusion. In the various sectors, political parties and MPs have expressed interest in 32 benefiting from the Bank as a knowledge platform for sharing global experiences and practices from across the world. Area 1: Economic management and transparency Issues raised by participants: * Corruption in land allocation and use, and in privatizations; * Unfair contracts in energy sector; * Large amounts of fuel subsidies for companies, especially cement factories; * Deficient subsidy system, as subsidies do not reach all the poor, and cover also the rich; * Too large fiscal and current account deficits; * Borrowing should not be a priority: Egypt should use effectively and efficiently its resources; * Poor quality of, and low access to, survey data; and * Political uncertainty, no clear vision, indecision, and conflicting messages. Ideas to address those issues: * Foreign financing can bring confidence, but better management of domestic resources should be improved, by reforming public expenditures and increasing domestic revenues (e.g., revisit taxation system to increase real estate tax, renegotiate gas exports prices); * Make public expenditures more transparent; * Budget should be consolidated to include special funds; * Government should listen to people, have a clear vision, design programs and implement them; * Government should increase the use of natural gas, including CNG; and * Reform the subsidy system to make it pro-poor. Suggestions for Bank involvement: * Focus on social protection (e.g., conditional cash transfers for education, nutrition, and targeted energy subsidies); * Promote institutional development to guarantee public access to information to inform the policy debate and assess the impact of public policy; * Support increased use of natural gas in Egyptian economy, including transport (CNG); and * Support to governance, accountability, monitoring and evaluation, and transparency. Area 2: Jobs Issues raised by participants: * Unfriendly environment for private sector development, no direction to investors; * There are too many "unpublished" rules and it is costly to follow rules; * Middle class shrinking; * The Labor market suffers from a serious mismatch between labor supply and labor demand; and the outcome of the education system does not respond to the demands of the employers and thus triggers low productivity, waste, lack of competitiveness, etc; * Technical education and vocational training system is fragmented and not responsive to the needs of the market (neither at the governance level/institutional set-up for policy directives nor at the service delivery level); * Continuing education is missing; * Poor quality of documentation for mortgage business leading to long delays of turnaround; 33 * Lending to the private sector is expensive and crowding out issue; and * Media is ignorant and confused about private sector and investment finance, and needs educating. * Inefficient urban transport services limit access to employment opportunities. Ideas to address those issues: * Need predictability: laws to be enforced; contracts/transactions to be respected; confusion about past privatizations to be clarified; better communication on all issues; * Improve technical education and vocational training, with entrepreneurs' involvement in the skills development; * Promote mentorship/apprenticeship in schools/employers partnerships; * Simplify, publish and enforce laws and regulations; * Support SMEs development, for employment generation; * Inefficient urban transport services limit access to employment opportunities; and * Capacity building for media. Suggestions for Bank involvement: * Support technical education and vocational training; * Support improvement of business environment and doing business, especially for SMEs development, including through capacity building; * Support lending for SMEs development, for employment generation; and * Reach out to the parliament and media; Area 3: Inclusion: access to finance, water and sanitation, social services, transport, reliable energy, and safety nets Issues raised by participants: * Inequitable access to finance, and micro, small and medium enterprises (MSME) development; * Improving affordability of housing for low-income segments of society as key demand of the Revolution; * Lagging regions: corners of Egypt such as Upper Egypt, Sinai and the New Valley; * Lack of trickledown effect: Egypt was doing well at the macro level, but growth did not trickledown at the micro level; * Improve roads in rural areas so as to have better access to schools and health services; * Improve access to affordable and reliable energy by expanding natural gas networks, particularly in Upper Egypt; * Access to education is low in lagging regions; * Illiteracy is high; * Social security and health insurance are fragmented and do not cover the poor; * Population growth is too high; * Insurance regulation is weak; * Inadequate legislation in health sector; * Low access to jobs, especially for women and youth; * Low and costly access to finance in Upper Egypt; * Lot of problems in land management, energy and water; * Energy subsidies are becoming unsustainable burden on the budget and disproportionately benefiting higher income households and profitable industries; * Negative impact of the heavy traffic in Cairo, affecting citizens and the economy; and 34 * In rural Egypt, poor roads limit access to health and education services, particularly girls who do not attend school due to poor access. Ideas to address those issues: * Bring together all stakeholders involved in social safety nets and facilitate communication and sharing of information on what they are doing and identify areas of complementarities, to achieve synergies, and to avoid duplication of efforts; * Increase access to education in poor areas to improve equity; * Early childhood development interventions to address inequality of opportunity; * Improve social justice in health, for example focusing on achieving MDG targets on child mortality and maternal mortality in Upper Egypt; * Maintain the balance between expanding universal health coverage to new groups and addressing gaps for those who lag behind in terms of achievement of health outcomes; * Health Insurance Law: develop a strategy plan for the health system and specifically revise the Health Insurance Law; * Expand social health insurance to the poor; * Assessment/monitoring and evaluation tools must be developed in order to enhance accountability and governance in education and health sectors; * Expand social assistance programs, especially to poor female-headed household; * Create employment opportunities for the poor, such as through the public works program and other labor intensive investment activities; * Improve self-employment, such as through training and capacity building, improving access to micro- credit, supporting potential own account business owners by helping them to prepare business plan and guiding them where to look for support and resources; * Developing small and micro jobs is needed in villages; and * Improve energy efficiency and develop renewable energy - especially wind, but also increasingly solar. Suggestions for Bank involvement: * Working further on access to education in poor areas to improve equity (medium-term); * Early childhood development; * Engage in benchmarking, capacity building, monitoring and evaluation (education); * Cooperation on eradication of illiteracy (medium-term); * Dialogue on designing the transition to universal health coverage for the poor; * Health sector governance; * Results-based financing and pay for performance * Support temporary employment (such as waste collection, canals cleaning, and other poor self- selective labor intensive works) and be involved in social protection programs; * Support rural road improvements; and * Support agriculture to eradicate poverty. 35 Annex 2.b: Summary of Various ISN Consultations with Key Stakeholders A. Consultations with Political Parties and Parliamentarians: Al. Meetings with Freedom and Justice Party (FJP) and Al-Wafd: Al Wafd presented a number of ideas and activities that mainly fall within the scope of training and skills development. Freedom and Justice Party discussed the following main points: (1) Expressed their willingness to work with the Bank in the future based on areas of comparative advantage and wanted to use the "Knowledge Bank" as a first step, thus, benefiting from a knowledge platform for sharing global experiences and practices from across the world; and (2) Expressed increased interest in skills development and possible programs to bridge the gap between labor supply and labor demand, thus, overcoming low productivity and poor competitiveness. A2. Meeting with Al-Nour party: This was the first meeting with Al-Nour party and it was a good opportunity to give an overview of the Bank program in Egypt with a focus on education and health. The main discussion points included: (1) The head of the education committee at the People's Assembly expressed surprise that very few projects were dedicated over the past years to such important sector of education in a country like Egypt; (2) Illiteracy eradication top the party's priority projects, followed by scientific research, technical education, early childhood education, cooperative training, and the need to improve innovation and schools for the talented; (3) The party is interested in World Bank anti-corruption measures (FM/Procurement/ debarment mechanism for violating companies); and (4) Al-Nour representatives expressed the need to learn from other countries that progressed along the road of education improvement (Turkey and Malaysia). A3. Thematic Consultations on Human Development-related issues: The meeting was attended by representatives from the following political parties: Freedom and Justice (FJP), Al-Wafd, Egyptian Social Democratic Party. On the draft ISN, participants mentioned the following elements: (1) The Egyptian revolution underlined the importance of social justice. Therefore, political parties that represent the people and CSOs should both have a seat at the table with the Government during the process of decision-making. (2) The labor market suffers a serious mismatch between labor supply and labor demand; and the outcome of the education system does not fulfill the requirements of the employers and thus triggers low productivity, waste, lacking competitiveness, etc. Thus, technical and vocational education and training (TVET) should be considered as a priority area for Bank's support, while ensuring coordination with on-going activities and other donors' interventions (those that are on-going and under preparation). (3) One particular area that came out strongly during the discussions, which was not raised before and that requires coordination between those in the Government and those who will be representatives in the People's assembly and Shoura Council, was the importance of legislation in health sector reform especially issues related to civil service reform. This is an area that is outside the health sector but seems clearly to affect progress in reform in the health sector. (4) Cooperation on eradication of illiteracy was also requested by many as one of the main blocks for real development and for democracy. (5) One party underlined the necessity to have quick wins during the next period to instill confidence in the health sector. Social Justice in health could be a possible way to achieve that. For example, focusing on achieving the MDGs 4 and 5 in rural Upper Egypt and/or addressing stunting in Lower Egypt. Public Private Partnerships with civil society organizations was proposed as a strong vehicle to do that. Enrollment of the poor in social health insurance is another area for consideration. (6) More attention should be given to scientific research and more financing should be allocated to such untapped sector with high potential for Egypt's future. 36 B. Consultations with the Government, Civil Society Or2anizations on Human Development-related issues: B1. Education: The main requested areas for Bank involvement were: cooperation on TVET and cooperation on eradication of illiteracy - as one of the main blocks for real development and for democracy. During the meeting with the Minister of Education and other MOE officials, they requested cooperation on: (i) access to education through targeting construction of schools in poor areas to improve equity; (ii) technical education; and (iii) early childhood development (where we can build on the ongoing Early Childhood Education Enhancement Project). B2. Labor Markets: (1) The labor market suffers a serious mismatch between labor supply and labor demand; and the outcome of the education system does not fulfill the requirements of the employers and thus triggers low productivity, waste, lacking competitiveness, etc. (2) The Technical Education and Vocational Training System is fragmented and not responsive to the needs of the market (neither at the governance level/institutional set-up for policy directives nor at the service delivery level). (3) Work will not be started from scratch as there are a number of initiatives either at the formal or the informal education (including technical training) that can be drawn on for further policy dialogue during the ISN's 18 months; and also possibly a pilot service delivery modality that can be replicated (scaling up of the skills development project, operationalizing of the Training Fund, etc). B3. Health: (1) Issuing a new social health insurance law will take some time, as many issues need to be addressed before the law can be presented to the People's assembly. Wider participation in the draft law discussion is required, with the involvement of experts in the sector. Technical assistance for designing the transition to universal health coverage is much needed. (2) There is a necessity to have quick wins during the next period to instill confidence in the health sector. Social Justice in health could be a possible way to achieve that objective, for example focusing on achieving the MDGs 4 and 5 in rural Upper Egypt and/or addressing stunting in Lower Egypt. Public private partnerships with civil society organizations were proposed as a strong vehicle to do that. Enrollment of the poor in social health insurance is another area for consideration. (3) Governance in the health sector is getting a higher priority and will be an essential part of the agenda of any future health reform. (4) The balance between expanding universal coverage to new groups and addressing gaps for those who lag behind in terms of achievement of health outcomes will be important to maintain. (5) Introduction of new innovative tools for health workforce development will need to be taken into consideration. C. Consultations with Economists, Private Sector Representatives and Financial Sector C1. Representatives from think-tanks and economists stressed that: (1) "It is necessary to do fiscal adjustment, and in particular adjusting spending via energy subsidy reduction". (2) "The Bank should focus on social protection and employment generation. The social protection proposals were more concrete (conditional cash transfers for education and nutrition), while the 37 employment generation were not as concrete. Probably the most concrete idea in this respect was to support lending for SME development." (3) "The Bank should promote institutional development to guarantee public access to information to inform the policy debate and assess the impact of public policy." C2. Private Sector Development: (1) "Security is a priority to attract investment". (2) Slow down or stoppage of Government approvals, bureaucratic procedures: "There is difficulty in getting approvals, permits and licenses. Even big companies cannot get building licenses, and have allocations of land cancelled". (3) "Government lacks capacity, administration, programs." (4) "Lack of key legislative and regulatory reforms such as bankruptcy, microfinance law, etc is constraining." C3. Financial Sector Development (1) Inequitable access to finance, and micro, small and medium enterprises (MSME) development. The Bank should provide further support in developing the MSME sector within a broader context, addressing the following issues: o Attaining a more inclusive system catering the marginalized MSMEs as credit to the private sector in Egypt remains very concentrated in large, connected and well-established enterprises. o Accelerating measures to achieve inclusive growth through strengthening the institutional framework through improving the regulatory environment, building the capacity of financial institutions (banks and non-bank financial institutions). o Building the capacity of the Social Fund for Development (SFD) to be able to support further the development of MSMEs. o Strengthening the legal infrastructure for MSMEs is crucial through various legal and regulatory reforms, including the microfinance law, bankruptcy to facilitate exit, registry of movable assets, enforcement of collateral foreclosure, private pensions, etc. o Initiating innovation, including mobile banking, branchless banking, internet banking, and agriculture insurance, as well as Islamic finance and Sha'ria compliant financial products. o Banks need to build its capacity and establish SME units with specialized staff to deal with SMEs, being different from the mid-caps and large corporates. o Addressing the issue of "crowding-out" of the private sector credit by the Government borrowing. In order for private activity to expand, the Government must allow room for bank loans, as well as capital market instruments for the private sector. o World Bank support should encourage private sector involvement, women empowerment, and support generic programs-capacity building and training, improving the legal environment, transparency. However, not feasible without a Government strategy. (2) Weak regulatory and supervisory architecture for non-bank financial institutions (NBFI): Much more effort is required on the NBFI regulatory regime. o Building the capacity of the Egyptian Financial Supervisory Authority (EFSA) is crucial to enhance competition in the financial sector, and improve financial intermediation. o Removing restrictions on banks selling insurance as it is limiting growth of the insurance sector, attaining a level playing field. o Building the capacity of the insurance sector as they suffer from limited skills, especially with regard to actuaries. (3) Poor corporate governance and lack of transparency are key problems in the financial sector: 38 o The issuance of the Banks Corporate Governance Code, and the amendment of the Banking and Central Bank Law was commended in terms of improving the governance of the banking system. o Supporting the banking sector in the implementation of the Banks Corporate Governance Code, and ensure timely compliance of the new regulations. o On transparency, the Central Bank of Egypt (CBE) should begin to disclose financial statements of banks and other important information, as well as publishing and posting on the website a full- fledged Financial Stability Report. o Strengthening the corporate governance of the non-bank financial institutions (4) Improve affordability of housing, and attain a more inclusive mortgage finance system: One of the priority areas that Egypt needs to focus on is supporting the housing sector, especially low-income housing. o Accelerating the regulatory reforms for developing the mortgage market, especially in terms of improving housing affordability--a main problem facing developers and housing contractors. o The Ministry of Housing, Utilities and Urban Development needs to move forward with the implementation of the Affordable Housing Program, and continue reforming the housing subsidies system to be more efficient, transparent and well targeted. o Facilitate the operationalization of the Mortgage Finance Fund (MFF)-in charge of financing low-income households and the provision of housing subsidies. o Government policy on housing, real estate, financial sector is not guided by any vision, only confusion. People are not making decisions; there is poor coordination between Ministries. After Revolution, "no one in any Ministry will sign anything." D. Consultation on Ener2y (1) Energy prices and subsidies: Subsidies account for about LE100 billion in Egypt's budget and are on the rise, becoming unsustainable burden on the budget (a number of participants stated that the least that can be done was to cap the subsidies at the current level). Equally worrisome is the fact that these subsidies disproportionately benefit higher income households and profitable industries, which can afford to pay full price (some said that 80% of subsidies go to 20% of the highest income earners). However, all discussants emphasized social sensitivity of energy price increase, the importance of gradual and selective price adjustments, and importance of energy efficiency in reducing the gap between energy costs and prices. The use of "smart cards" to allow for a lower price of fuel for limited amounts of consumption per eligible categories (or in general) is also being proposed. The need for financial restructuring of the balance sheet of EGPC (Egyptian General Petroleum Corporation) was stated by the Ministry of Finance. A number of participants noted the need for greater transparency in tariff setting methodology and participation in the process. The Ministry of Finance invited the Bank to help with analytical work and policy recommendations to reduce subsidy burden by 1% of GDP for the next FY. (2) Increased use of natural gas: Increased use of natural gas was strongly emphasized, especially in the transport sector (use of compressed natural gas - CNG), but in other sectors as well (conversion of industrial facilities, such as brick factories; increased access to natural gas by population; etc). (3) Energy efficiency, renewable energy, local manufacturing and know-how: In general, the need to improve energy efficiency and develop renewable energy - especially wind, but also increasingly solar (PV, CSP, solar water heating) - was noted. Development of appropriate incentives and financing (softer terms) was also considered very important. Development of local manufacturing and transfer of knowledge were emphasized. (4) Security of energy/electricity supply: Participants noted that this was very important, to ensure industrial and economic development. (5) Private investment: Energy sector should attract private investment, including through PPP models. The Government should facilitate this, including in early stages by providing guarantees when needed. 39 (6) Energy program under the ISN and beyond: The relevant Government ministries - the Ministry of Electricity and Energy, and the Ministry of International Cooperation - fully endorsed the proposed program (Helwan South power project for Q4 of FY12 or QI of FY13; Kom Ombo in FY 13; restructuring Ain Sokhna in FY13 to use the savings to strengthen transmission). A strong interest was expressed to finance Egypt-Saudi electricity transmission line, provided Bank lending envelope can accommodate it. The Ministry of International Cooperation also expressed interest in a programmatic lending for energy sector. (7) Sector governance: the Egypt Electricity Regulatory Agency is spearheading the effort to improve sector governance and expressed strong interest in cooperation with the World Bank, to complement EU technical assistance in this area. EU also expressed strong interest in joining forces with the Bank in this area. (8) Advocacy/awareness/participation in the sector: The representatives of the Egypt Energy Consumer Organization, an NGO said that there were few energy-focused CSOs/NGOs in Egypt and that, as result, consumer's voice in the energy sector planning and management is weaker than it should be. There is a need to improve public debate at the policy level, and public awareness and participation at various levels of sector affairs. (9) Bank assistance: Generally, there is a very strong interest across the spectrum of stakeholders in having Bank stay involved in investment and policy work in the energy sector. E. Transport Consultations (1) Urban transport: Several stakeholders stressed the tremendous negative impact of the heavy traffic in Cairo, affecting everyone and the economy. One participant stressed that the Government has limited resources and has to look at the scale of all of the problems to decide where to invest. Given all the transport issues, what do you address first? One participant suggested that public investment has not been pro-poor. The problem of transport in Cairo is land use and the only solution is to move commerce outside of Cairo. Another responded that when you take commerce out of Cairo you need transport to get there. Poor housing was moved out of the city but they have poor transport which limits their access to schools, health. Another participant noted that Egypt has developed new cities around Cairo and Alexandria but transport to and from them is a problem. (2) Transport and gender: At the planning stage of proposed transport investments, when gender issues are raised, gender specific aspects are dropped because it is assumed that transport investments aim to serve all users, without the need for differentiating between men and women. However transport is a problem for everyone in Egypt - traffic and security issues have increased since the Revolution - accidents, carjacking. But women are more vulnerable to these risks. Irregularity of public transport is a greater issue for women because they have to get home in time to collect children from school. Thus it hinders women's economic empowerment. It does seem that one of the most difficult aspects to tackle (beyond that of congestion in the city) will be harassment of women who use public transportation. What clearly came out of the discussion is that 'women-only' modes would foster an image of gender inequality in the country - which is obviously inappropriate and comes at an inopportune time given the current political climate. (3) Transport subsidies: Several participants questioned the feasibility of subsidies in the current economy. Some questioned the idea of reducing fares to make them more affordable, stating that they were already "suffering from subsidies" and want to decrease, not increase them (in fact and as an example of the acuteness of the problem, delays in public service obligations (PSOs) payment which are ruled by agreements signed with Ministry of Finance, combined with the spike in operating costs of the Egyptian National Railways without any possibility to increase revenues at the same pace, jeopardize ENR's financial health and therefore its capacity to deliver adequate transport services). (4) Rural and urban transport issues: Several stakeholders noted the sharp differences between transport needs and constraints in Cairo and Alexandria, compared with the rural areas. One noted that traffic is not a problem in Upper Egypt. Another noted that poor roads limit access to school, health services. 40 Another complained that the discussion was not paying attention to the poor in rural areas, particularly girls who do not attend school due to poor access. (5) Transport program under the ISN and beyond: The relevant Government ministries - the Ministry of Transport, and the Ministry of International Cooperation - fully endorsed the proposed program (Cairo Urban Transport Infrastructure Project Q4 FY13). A strong interest was expressed to finance very soon another Railways Project that would complement the existing modernization of the signaling system through the replacement of the obsolete system currently on board of the locomotives. Further involvement in the Aviation sector (a feasibility study comparing a new airport next to 6th of October City or a new terminal 4 at Cairo Airport) was also mentioned by the Ministry of International Cooperation and the Ministry of Civil Aviation. Technical assistance for Road Safety was also mentioned by the Ministry of Transport. (6) Bank assistance: Generally, there is a very strong interest across the spectrum of stakeholders in having Bank stay involved in investment and policy work in the transport sector. F. Consultations with Donors The World Bank operates in Egypt in an environment where major IFIs, bilateral and UN agencies are active. The key areas in which the donors would like the Bank to focus in the coming months are: governance, and civil society engagement; public sector reform; and, environment. G. Consultations with Labor Unions Federation The key areas which the Federation would like the Bank, other donors and the elected Government focus on are "social justice" that they define as: 0 Access to medical and health insurance; 0 Minimum wage in the private sector; 0 Maximum income in the public sector; 0 Equal access to education; and 0 Increased opportunities for the poor to access employment. 41 Annex 3. Egypt At a Glance Egypt, Arab Rep. at a glance 4/4/12 M.East Lower Key Development Indicators &North middle Egypt Africa income Age distribution, 2010 172010) Male Female Population, mid-year (millions) 81.1 331 2,519 75-79 Surface area (thousand sq. km) 1,001 8,775 23,579 60-64 Populationgrowth(%) 1.8 1.7 1.5 Urban population (%of total population) 43 58 39 45-49 30-34 GNI (Atlas method, US$ billions) 196.2 1,283 4,078 GNI per capita (Atlas method, US$) 2,420 3,874 1,619 15-19 GN I per capita (P P P, international $) 6,060 8,068 3,632 0-4 10 5 0 5 10 GDP growth (%) 5.1 4.3 6.9 percent of total population GDP per capita growth (%) 3.3 2.5 5.3 (most recent estimate, 2004-2010) Poverty headcount ratio at $125 a day(PPP, %) <2 3 Poverty headcount ratio at $2.00 a day(PPP, %) 15Under-5 mortality rate (per 1,000) Life expectancy at birth (years) 73 72 65 Infant mortality(per 1000 live births) 19 27 50 loo Child malnutrition (%of children under5) 7 8 25 so Adult literacy, male (%of ages 15 and older) 75 82 80 60 Adult literacy,female (%of ages 15 and older) 58 66 62 Gross primary enrollment, male (%of age group)8 Gross primary enrollment, female (%of age group) 198 96 10 2 Access to an improved watersource (%of population) 99 89 87 9991 89 87 20 21 Access to improved sanitation facilities (%of population) 95 88 47 =Egypt, Arab Rep. UMiddle East & North Africa Net Aid Flows 1980 1990 2000 2010 (US$ millions) Net ODA and official aid 1,383 6,065 1,371 594 Growth of GDP and GDP per capita (%) Top 3 donors (in 20.10): France 33 140 242 140 8 European Union Institutions 32 48 73 137 Germany 107 347 65 194 4 Aid(%ofGNI) 6.4 14.4 1.4 0.3 2 Aid per capita (US$) 31 197 20 7 Long-Term Economic Trends -2 95 05 Consumer prices (annual %change) .. 21.2 2.8 11.7 GDP implicit deflator(annual %change) 1B.0 18.4 4.9 1D.1 Z GDP COGP per capita Exchange rate (annual average, local per US$) 0.7 2.2 3.4 5.5 Terms of trade index (2000 = 10) .. 108 0 86 1980-90 1990-2000 2000-10 (average annual growth %) Population,mid-year(millions) 45.0 56.8 67.6 81.1 2.3 17 1.8 GDP (US$ millions) 22,912 43,130 99,839 215,894 5.4 4.4 5.1 (%ofGDP) Agriculture 18.3 19.4 16.7 14.0 2.7 3.1 3.3 Industry 36.8 28.7 33.1 37.5 3.3 5.1 5.5 Manufacturing 12.2 17.8 19.4 15.8 .. 6.3 4.9 Services 45.0 52.0 50.1 48.5 7.8 4.1 5.4 Householdfinalconsumptionexpenditure 69.2 72.6 75.9 74.7 3.6 3.8 3.6 Generalgov'tfinalconsumptionexpenditure 15.7 113 11.2 11.2 3.1 4.4 2.7 Gross capital formation 27.5 28.8 19.6 1B.9 0.0 5.8 7.2 Exports of goods and services 30.5 20.0 16.2 21.3 5.2 3.5 15.1 Imports of goods and services 42.9 32.7 22.8 26.1 -2.0 3.0 12.9 Gross savings .. 24.8 18.6 19.3 Note: Figures in italics are foryears otherthan those specified. .. indicates data are not available. Development Economics, Development Data Group (DECDG). 42 Egypt, Arab Rep. Balance of Payments and Trade 2000 2010 (US$millons)Governance indicators, 2000 and 2010 (US$ millions) Total merchandise exports (fob) 6,388 21,865 Total merchandise imports (cif) 17,860 9,524 Voce and accountability Net trade in goods and services -6,774 -10,416 Political stability Current account balance -1,163 -4,318 asa%ofGDP -1.2 -2.0 Regulatoryquality Workers' remittances and compensation of employees (receipts) 2,852 7,725 Control of corruption Reserves,Gincludingogold 15,11 54,029 0 25 50 75 100 Central Government Finance B201 0 Country's Percentile rank (0-100) R2000 highqu alit iyply beter ratngs (Rloof GlP) Current revenue (including grants) 21.6 21.9 Souce: Wodrdwide Goverance Indicators (wwwgovindicators.org) Tax revenue 14.6 14.1 Current expenditure 20.5 26.3 Technology and Infrastructure 2000 2010 Overall surplus/deficit -3.9 -7.3 Paved roads (%of total) 78.1 89.4 Highest marginal tax rate (%) Fixed line and mobile phone Individual .. 20 subscribers (per 100 people) 10 99 Corporate .. 20 High technology exports (%of manufactured exports) 0.3 0.9 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 29,010 34,844 Agricultural land (%of land area) 3 4 Total debt service 1,832 2,972 Forest area (%of land area) 0.1 0.1 Debt relief (HIPC, M DRI) - - Terrestrial protected areas (%of land area) 4.3 5.9 Total debt (%of GDP) 29.1 15.9 Freshwater resources percapita (cu. meters) 26 23 Total debt service (%of exports) 8.9 3.2 Freshwater withdrawal (%of internal resources) 3,788.9 179.0 Foreign direct investment (net inflows) 1,235 6,386 C02 emissions per capita (mt) 2.1 2.7 Portfolio equity (net inflows) 269 0 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) 6.2 5.9 Composition of total external debt, 2010 Energy use per capita (kg of oil equivalent) 668 903 Short-term, IBRD, 2,543 DA, 1,338 3,149 IMF, 0 Private, 3,832 World Bank Group portfolio 2000 2010 Other multi- ateral, 5,138 (US$ millions) IBRD Total debt outstanding and disbursed 639 2,543 Disbursements 6 777 Principal repayments 87 83 Bilateral, Interest payments 41 41 18,844 US$ millions IDA Total debt outstanding and disbursed 1,266 1,338 Disbursements 49 10 Private Sector Development 2000 2011 Total debt service 32 64 Time required to start a business (days) - 7 IFC (fiscalyear) Cost to start a business (%of GNI per capita) - 5.6 Total disbursed and outstanding portfolio 163 432 Time required to register property(days) - 72 of which IFC own account 163 432 Disbursements for IFC own account 25 63 Ranked as a major constraint to business 2000 2010 Portfolio sales, prepayments and (%of managers surveyed who agreed) repayments for IFC own account 14 58 Tax rates .. 80.0 Economic and regulatorypolicyuncertainty .. 63.8 M IGA Gross exposure - 0 Stock market capitalization (%of GDP) 28.8 37.7 Newguarantees 0 0 Bank capital to asset ratio (%) 5.6 6.2 Note: Figures in italics are for years other than those specified. 4/4/12 ..indicates data are not available. - indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 43 Millennium Development Goals Egypt, Arab Rep. With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, 4/-2 years) Egypt, Arab Rep. Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2010 Poverty headcount ratio at $1.25a day(PPP, %of population) 4.5 2.5 <2 <2 Poverty headcount ratio at national povertyline (%of population) .. 19.4 16.7 22.0 Share of income or consumption to the poorest qunitile (%) 8.7 9.5 9.0 9.2 Prevalenceof malnutrition (%ofchildren under5) 10.5 10.8 4.3 6.8 Goal 2: ensure that children are able to complete primary schooling Primaryschool enrollment (net, %) .. 81 90 96 Primarycompletion rate (%of relevant age group) .. 84 94 98 Secondaryschool enrollment (gross, %) 69 71 83 Youth literacy rate (%of people ages 15-24) .. 73 .. 85 Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primaryand secondaryeducation (%) 80 84 92 Women employed in the nonagricultural sector (%of nonagricultural employment) 21 19 19 18 Proportion of seats held bywomen in national parliament (%) 4 2 2 2 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 94 67 47 22 Infant mortality rate (per 1,000 live births) 68 51 37 19 Measles immunization (proportion of one-year olds immunized, %) 86 89 98 96 Goal 5: reduce maternal mortality by three-fourths M eternal mortality ratio (modeled estimate, per 100,000 live births) 220 150 110 82 Births attended byskilled health staff (% of total) 37 46 61 79 Contraceptive prevalence (%of women ages 15-49) 48 48 56 60 Goal 6: halt and begin to reverse the spread of HIVIAIDS and other major diseases Prevalence of H IV (% of population ages 15-49) 0.1 0.1 0.1 0.1 Incidence of tuberculosis (per 100,000 people) 34 32 26 18 Tuberculosis case detection rate (0/, all forms) 11 57 62 64 Goal 7: halve the proportion of people without sustainable access to basic needs Accessto an improved watersource (%of population) 93 94 96 99 Access to improved sanitation facilities (%of population) 72 79 86 95 Forest area (%of total land area) 0.0 .. 0.1 0.1 Terrestrial protected areas (%of land area) 1.9 2.0 4.3 5.9 CO2 emissions (metric tons percapita) 1.3 15 2.1 2.7 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 5.8 6.2 6.2 5.9 Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 2.8 4.4 8.1 11.9 Mobile phone subscribers (per 100 people) 0.0 0.0 2.0 87.1 Internet users (per 100 people) 0.0 0.0 0.6 26.7 Computer users (per 100 people) .. 21.6 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 120 100 75 100 75 80 SO. 50 60 25 40 2000 2005 2010 25 2L0rj 0 i0 .W 1990 1995 2000 2010 2000 2005 2010 Primary net enrmilment ratio UFixed + mobile subsribers Ratio of girs to boys in primary & secondary OEgypt, Arab Rep. OMiddle East & North Africa lnte met users education I II IItre sr Note: Figures in italics are for years other than those specified. .. indicates data are not available. 4/4/12 Development Economics, Development Data Group (DECDG). 44 Annex 4. Selected Indicators of Portfolio Performance and Management Selected Indicators* of Bank Portfolio Performance and Management As Of Date 5/14/2012 Indicator 2009 2010 2011 2012 Portfolio Assessment Number of Projects Under Implementation a 14 18 19 18 Average Implementation Period (years) b 4.3 2.5 3.6 4.3 Percent of Problem Projects by Number a, 14.3 5.6 10.5 33.3 Percent of Problem Projects by Amount a, c 14.8 4.3 1.5 11.7 Percent of Projects at Risk by Number a, d 21.4 5.6 10.5 33.3 Percent of Projects at Risk by Amount a, d 16.0 4.3 1.5 11.7 Disbursement Ratio (%) e 25.2 13.5 6.7 8.8 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eral by OED by Number 98 8 Proj Eral by OED by Amt (US$ millions) 5,899.3 1,166.9 % of OED Projects Rated U or HU by Number 22.3 12.5 % of OED Projects Rated U or HU by Amt 11.4 8.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on de\elopment objectives (DO) and/or implementation progress (IP d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects acti\e in the Portfolio, with the exception of Disbursement Ratio, which includes all acti\e projects as well as projects which exited during the fiscal year. 45 Annex 5. IBRD Program Summary As Of Date 5/14/2012 Proposed IBRD/IDA Base-Case Lending Program a F a Strategic Rewards b Implementation b Fiscal year Proj ID US$(M)(HM)Rik(IM) (H/MIL) Risks (H/MIL) r 2012 EG Erergency Labor Intensive Investment 200.0 Resul 200.0 Pr 2013 EG - Helw an South Fbw er Project 536.6 EG-Kom Onbo Solar 170.0 Resul 706.6 Pr 2014 EG-Urban Transport Infrastructure Dev 150.0 Result 150.0 Overall Result 1,056.6 46 Annex 6: IBRD Portfolio Operations Portfolio (IBRD/IDA and Grants) As Of Date 5114/2012 Closed Projects 114 IBRD/IDA * Total Disbursed (Active) 757.36 of which has been repaid 20.06 Total Disbursed (Closed) 2,613.47 of which has been repaid 1,232.23 Total Disbursed (Active + Closed) 3,370.83 of which has been repaid 1,252.30 Total Undisbursed (Active) 3,062.22 Total Undisbursed (Closed) Total Undisbursed (Active + Closed) 3,062.22 Active Projects ifference Betweer Last PSR Kpected and Actua Supervision Rating Original Amount in US$ Millions Disbursementsal Development Implementatio Frm Project ID Project Name Oeves n pee Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Rev Objective_ n Progres Rev'd P094311 EG INTEGRATED SANITATION & SEWERAGE INFR MU MU V 2008 120 106.86 63.46 6.02 P050484 EG Secondary Education Enhancement Proj MU MU ' 1999 50 7.79 3.87 4.92 P112346 EG-Affordable Mortgage Finance DPL S S r 2010 300 100.00 P100047 EG-Ain Sokhna Power S S ' 2009 600 479.55 66.22 P101201 EG-Cairo Airport Development Project-TB2 S S V 2010 280 258.31 63.31 P082952 EG-Early Childhood Education Enhancement MS MS ' 2005 20 8.65 (3.40) 0.32 P116011 EG-Enhancing Access to Finance for SMEs S S ' 2010 300 136.21 (59.21) P117745 EG-Farm-level Irrigation Modernization S S 2011 100 100.00 11.20 P116194 EG-Giza North Power Project S S V 2010 840 806.51 89.01 18.28 P080228 EG-Health Insurance Systems Development MU U 2010 75 75.00 15.67 P073977 EG-INTEGRATED IRRIGATION IMPR. & MGT MU MU ' 2005 120 77.62 71.37 19.60 P120161 EG-Integrated Sanitation & Sew. Infra. 2 S S 2011 200 200.00 P045499 EG-NATIONAL DRAINAGE II MU MU ' 2000 80 0.00 28.43 (1.57) 3.26 P095392 EG-Natural Gas Connections Project S MS ' 2008 75 6.93 (10.07) P090073 EG-Second Pollution Abatement MS MS ' 2006 20 8.73 8.73 2.10 P113416 EG-Wind Power Development S S ' 2010 70 70.00 34.67 P095925 EG:GEF Alexandria CZM /Lake Mariout MU MU 2010 7.15 6.75 0.13 P101103 EGYPT-Railways Restructuring MS MS ' 2009 600 591.64 196.97 5.26 Overall Result 3,800 50 7.15 0.00 3,068.97 550.34 59.75 47 Annex 7. Summary of IBRD Non-Lending Operations Proj IID ESW/T Cost (AAA) A/FBS Output Type FY ($'000) Audience Objective Recent Completion P123362 EG-RTA Broadband Impact Assessment(Ph.3) FBS Institutional Development Plan FY12 150 Bank, Gov. Knowl. generation, Probl. solving P127518 Egypt NHA Institutionalization TA TA/EPD FY12 81 Bank, Gov. Knowl. generation P079934 EG Nile Basin Initiative Support TA Institutional Development Plan FY11 728 Bank, Gov. Knowl. generation P110669 Egypt-EITI Development TA "How-To" Guidance FY11 9 Bank, Gov. Knowl. generation P116956 Skills Upgrading & Institutional Dev TA Institutional Development Plan FY11 0 Bank, Gov. Knowl. generation P118171 Egypt - Programmatic Poverty Monitoring TA "How-To" Guidance FY11 310 Bank, Gov. Knowl. generation P118587 EGYPT - Macro Notes ESW Report FY11 301 Bank, Gov. Knowl. generation, Probl. solving P121254 EG-Energy Efficiency Strategy ESW Policy Note FY11 59 Bank, Gov. Knowl. generation, Probl. solving P122907 EGYPT - Savings Study ESW Policy Note FY11 86 Bank, Gov. Knowl. generation, Probl. solving P124758 EG (FBS) GDP deflator of ICT FBS "How-To" Guidance FY11 29 Bank, Gov. Knowl. generation, Probl. solving P124759 EG (FBS) Rapid Resp in ICT Stats / FDI FBS "How-To" Guidance FY11 30 Bank, Gov. Knowl. generation, Probl. solving P089803 EG-Alexandria Development Strategy TA Institutional Development Plan FY10 50 Bank, Gov. Knowl. generation P107017 EG Growth in Upper Egypt ESW Report FY10 217 Bank, Gov. Knowl. generation P107463 Egypt Supply Chain and Trade TA Client Document Review FY10 246 Bank, Gov. Knowl. generation P107704 EG: Tertiary Education Review (WB-OECD) ESW Report FY10 273 Bank, Gov. Knowl. generation P111340 EG-Inventory of POPs Materials TA "How-To" Guidance FY10 344 Bank, Gov. Knowl. generation, Probl. solving P111559 EG-RTA Social Health Insurance FBS Client Document Review FY10 239 Bank, Gov. Knowl. generation, Probl. solving P112209 Egypt GAC - Health Pets ESW Report FY10 374 Bank, Gov. Knowl. generation P112344 EG: Trade ESW Report FY10 371 Bank, Gov. Knowl. generation P112810 Egypt - Gender Assessment Update ESW Report FY10 213 Bank, Gov. Knowl. generation P113136 EGYPT - Programmatic PER ESW Policy Note FY10 641 Bank, Gov. Knowl. generation, Probl. solving P113228 EG Health and Population TA TA "How-To" Guidance FY10 175 Bank, Gov. Knowl. generation, Probl. solving P113558 Egypt: Competitiveness Note ESW Report FY10 86 Bank, Gov. Knowl. generation P113715 EG-Agriculture TA TA "How-To" Guidance FY10 206 Bank, Gov. Knowl. generation, Probl. solving P113930 EG-RTA Cyber-security Leg and Reg (Ph.2) FBS Institutional Development Plan FY10 90 Bank, Gov. Knowl. generation P114297 EG-TA for Dev. of WSS Strategy TA Institutional Development Plan FY10 169 Bank, Gov. Knowl. generation P117576 EG Measuring Foreign Direct Investments TA Model/Survey FY10 44 Bank, Gov. Knowl. generation P117621 EG-RTA Strategic Options Broadband (Ph.2 FBS Institutional Development Plan FY10 72 Bank, Gov. Knowl. generation, Probl. solving P118581 EGYPT - PER POLICY NOTES ESW Policy Note FY10 178 Bank, Gov. Knowl. generation P119276 EG Integrity and Transparency TA TA "How-To" Guidance FY10 104 Bank, Gov. Knowl. generation 48 Proj IID ESW/T Cost (AAA) A/FBS Output Type FY ($'000) Audience Objective P067244 EG-CDM TA for Egypt FBS "How-To" Guidance FY09 76 Bank, Gov. Knowl. generation, Probl. solving P096690 Egypt IFMCA ESW Report FY09 0 Bank, Gov. Knowl. generation P103750 EG RTA Info Tech Industry Dev Support FBS Client Document Review FY09 148 Bank, Gov. Knowl. generation, Probl. solving P104888 ESMAP: EG-Design of Load Mgt Program ESW Policy Note FY09 252 Bank, Gov. Knowl. generation P107068 EG-Energy Pricing Strategy TA "How-To" Guidance FY09 824 Bank, Gov. Knowl. generation, Probl. solving P107462 EG Poverty Policy Notes ESW Policy Note FY09 252 Bank, Gov. Knowl. generation, Probl.solving P107584 Dialogue on TVET TA Institutional Development Plan FY09 52 Bank, Gov. Knowl. generation P108292 Egypt Investment Climate Assessment 2009 ESW Report FY09 301 Bank, Gov. Knowl. generation P109073 EG: Capital Market Development ESW Report FY09 259 Bank, Gov. Knowl. generation P110330 EG Commercial Wind Development Framework TA "How-To" Guidance FY09 121 Bank, Gov. Knowl. generation, Probl. solving P112367 Egypt Country Policy Dialogue TA Client Document Review FY09 59 Bank, Gov. Knowl. generation P112682 Egypt-AML/CFT assessment ESW Report FY09 510 Bank, Gov. Knowl. generation P112699 Egypt - Macro Notes ESW Report FY09 204 Bank, Gov. Knowl. generation, Probl. solving P113461 EG MOCIT: Measuring FDI in ICT TA "How-To" Guidance FY09 66 Bank, Gov. Knowl. generation, Probl. solving P113780 EGYPT - Governance and Anti-Corruption TA "How-To" Guidance FY09 156 Bank, Gov. Knowl. generation P113932 EG: Cap Bldg in ICT - Econ and Stats TA Institutional Development Plan FY09 122 Bank, Gov. Knowl. generation P113934 EG: ENPO Finan Invest & Asset Mgmt TA Institutional Development Plan FY09 41 Bank, Gov. Knowl. generation P114066 GCMCG: Egypt III Country Assessment ESW Report FY09 113 Bank, Gov. Knowl. generation P088155 EG Child Labor Prevention Grant TA "How-To" Guidance FY08 163 Bank, Gov. Knowl. generation, Probl. solving P101219 Egypt Dev. Policy Review (DPR) ESW Report FY08 516 Bank, Gov. Knowl. generation P101867 EG RTA MOCIT Support FBS Client Document Review FY08 145 Bank, Gov. Knowl. generation, Probl. solving P102465 EG-Regulatory Reform & Governance TA "How-To" Guidance FY08 106 Bank, Gov. Knowl. generation, Probl. solving P102555 Egypt Health Technical Assistance TA "How-To" Guidance FY08 106 Bank, Gov. Knowl. generation P102748 EG-Affordable Housing and Subsidies ESW Policy Note FY08 45 Bank, Gov. Knowl. generation, Probl. solving P103749 EG RTA Egyptian National Post Org Suppt FBS Client Document Review FY08 287 Bank, Gov. Knowl. generation, Probl. solving P105095 CCGPP: Egypt SOE Assessment ESW Report FY08 202 Bank, Gov. Knowl. generation P105467 FIRST #343: Credit reporting strength TA "How-To" Guidance FY08 0 Bank, Gov. Knowl. generation P106517 EGYPT: CFAA ESW Report FY08 257 Bank, Gov. Knowl. generation P106520 Egypt ROSC Accounting and Auditing ESW Report FY08 198 Bank, Gov. Knowl. generation P107027 EG-Housing Sector Review ESW Policy Note FY08 150 Bank, Gov. Knowl. generation P107110 EG PER Policy Notes ESW Policy Note FY08 325 Bank, Gov. Knowl. generation, Probl. solving P107551 EG-Support to Public Private Partnership TA "How-To" Guidance FY08 182 Bank, Gov. Knowl. generation, Probl. solving P107705 Dialogue on Safety net TA "How-To" Guidance FY08 56 Bank, Gov. Knowl. generation, Probl. solving P107922 EG-International Youth Forum TA Knowl.-Sharing Forum FY08 13 Bank, Gov. Knowl. generation 49 Proj IID ESW/T Cost (AAA) A/FBS Output Type FY ($'000) Audience Objective P110524 Egypt Diabetes TA TA Knowl.-Sharing Forum FY08 67 Bank, Gov. Knowl. generation P110763 EG RTA MCIT Second Fixed-line License FBS "How-To" Guidance FY08 151 Bank, Gov. Knowl. generation, Probl. solving P080859 EG-Income, Environment & Health Linkages TA Institutional Development Plan FY07 308 Bank, Gov. Knowl. generation P089109 EG-Road Asset Management ESW Policy Note FY07 347 Bank, Gov. Knowl. generation P089765 EG Education Strategy Note ESW Policy Note FY07 260 Bank, Gov. Knowl. generation P092505 EG-Urban Sector Update ESW Policy Note FY07 244 Bank, Gov. Knowl. generation P093520 EG-Catalytic Role of Women in Environ TA Knowl.-Sharing Forum FY07 90 Bank, Gov. Knowl. generation P095756 Egypt - Poverty Assessment Update ESW Report FY07 132 Bank, Gov. Knowl. generation P096440 EG:Enhancing Women Economic Participation TA "How-To" Guidance FY07 42 Bank, Gov. Knowl. generation, Probl. solving P097990 ESMAP: EG-Economic Cost of Gas ESW Report FY07 323 Bank, Gov. Knowl. generation P100558 EG-Investment Climate Assessment Follow-up ESW Policy Note FY07 146 Bank, Gov. Knowl. generation P101220 Egypt PER Notes ESW Policy Note FY07 148 Bank, Gov. Knowl. generation, Probl. solving P102491 Egypt Trade TA Institutional Development Plan FY07 107 Bank, Gov. Knowl. generatio P103751 EG RTA Natl Telecom Regulatory Auth'y FBS Client Document Review FY07 47 Bank, Gov. Knowl. generation, Probl. solving P104013 FSAP Update Egypt ESW Report FY07 291 Bank, Gov. Knowl. generation P105161 EG RTA Regulatory Reform, Gov'ce, Invest FBS "How-To" Guidance FY07 16 Bank, Gov. Knowl. generation, Probl. solving P105312 EG-Combined Cycle Workshop TA Knowl.-Sharing Forum FY07 34 Bank, Gov. Knowl. generation P105664 ESMAP Structuring of PPP in Natural Gas ESW Policy Note FY07 45 Bank, Gov. Knowl. generation P083795 Upper EG Challenges & Priorities for RD ESW Policy Note FY06 322 Bank, Gov. Knowl. generation, Probl. solving P089111 EG-Investment Climate Assessment ESW Report FY06 335 Bank, Gov. Knowl. generation P089140 CA: Alexandria (Egypt) CDS for Sust. Dev TA Institutional Development Plan FY06 230 Bank, Gov. Knowl. generatio P089670 Egypt - PSIA ESW Report FY06 298 Bank, Gov. Knowl. generation P095548 EG - Pension Reform TA Phase 2 ESW Report FY06 810 Bank, Gov. Knowl. generation P095753 EG - Public Expenditure Review ESW Report FY06 324 Bank, Gov. Knowl. generation P096067 EG-Public Land Management Strategy ESW Policy Note FY06 131 Bank, Gov. Knowl. generation P097200 EG-Access to Finance ESW Report FY06 252 Bank, Gov. Knowl. generation P098092 ESMAP: EG-Demand Mngt Workshop TA Knowl.-Sharing Forum FY06 74 Bank, Gov. Knowl. generation P098489 Egypt -- Gender Policy Forum TA Knowl.-Sharing Forum FY06 34 Bank, Gov. Knowl. generation, Probl. solving Ongoing P097251 EG-Assessment of Air Quality in Cairo ESW Policy Note FY12 200 Bank, Gov. Knowl. generation P107028 EG-Youth Study ESW Policy Note FY12 182 Bank, Gov. Knowl. generation P111534 EG-RTA Pension 2 FBS TA/EPD FY12 350 Bank, Gov. Knowl. generation P112378 Financial Development & Growth in Egypt ESW Report FY12 120 Bank, Gov. Knowl. generation P115896 EG-TA on Egypt Transport Regulations TA TA/IAR FY12 249 Bank, Gov. Knowl. generation 50 Proj ID ESW/T Cost (AAA) A/FBS Output Type FY ($'000) Audience Objective P117378 EG-Energy Sector TA TA/IAR FY12 191 Bank, Gov. Knowl. generation P117622 EG-RTA Measuring ICT Exports (Phase 2) FBS TA/IAR FY12 19 Bank, Gov. Knowl. generation, Probl. solving P117982 EG: RTA Market Development and Debt Mgmt FBS "How-To" Guidance FY12 414 Bank, Gov. Knowl. generation, Probl. solving P118497 EG Investment Climate Assessment Update TA TA/IAR FY12 174 Bank, Gov. Knowl. generation P122531 RTAPost-Strategy for Logistics (Ph.3) FBS TA/IAR FY12 129 Bank, Gov. Knowl. generation P122612 TA on Labor Market Reform in Egypt TA TA/EPD FY12 68 Bank, Gov. Knowl. generation P122909 Egypt - Reshaping Egypt geography ESW Policy Note FY12 200 Bank, Gov. Knowl. generation P124688 EG-Energy Efficiency Strategy (Phase2) ESW Policy Note FY12 120 Bank, Gov. Knowl. generation, Probl. solving P127432 EG Hackathon (Water and Transport) TA TA/EPD FY12 65 Bank, Gov. Knowl. generation P127912 Egypt Inequality Study ESW Policy Note FY12 100 Bank, Gov. Knowl. generation P128638 StAR - Egypt TA TA/IAR FY12 85 Bank, Gov. Knowl. generation P128773 Expanding Opportunities for Next Gen ESW Policy Note FY12 120 Bank, Gov. Knowl. generation P129136 EG-Stakeholder Mapping ESW EW/Not assigned FY12 0 Bank, Gov. Knowl. generation P109289 EG Measuring impact of Public Disclosure TA TA/IAR FY13 157 Bank, Gov. Knowl. generation P113912 EG-RTA Support to PPP (Phase 2) FBS TA/IAR FY13 352 Bank, Gov. Knowl. generation, Probl. solving P116299 EG- RTA Urban TA FBS TA/IAR FY13 37 Bank, Gov. Knowl. generation, Probl. solving P121712 EG-Cairo Congestion Study ESW Report FY13 240 Bank, Gov. Knowl. generation P122498 EG-Agriculture Sector TA TA "How-To" Guidance FY13 134 Bank, Gov. Knowl. generation, Probl. solving P122541 Egypt GAC/GPF Health - Phase II Outreach TA TA/EPD FY13 20 Bank, Gov. Knowl. generation P122576 EG-RTA Green ICT (Phase III) FBS TA/EPD FY13 113 Bank, Gov. Knowl. generation, Probl. solving P122824 Improving Equality of Opportunity TA TA/EPD FY13 47 Bank, Gov. Knowl. generation P122903 EG- Technical Assistance For CAPMAS TA TA/IAR FY13 63 Bank, Gov. Knowl. generation P125350 Joint WB-OECD Review - Quality Education ESW Report FY13 100 Bank, Gov. Knowl. generation P126551 EG Carbon Capture and Storage Tech. TA TA/IAR FY13 22 Bank, Gov. Knowl. generation P127017 EG-Bldg Platform Urban Upgrading GCR TA TA/IAR FY13 42 Bank, Gov. Knowl. generation P128352 Egypt Public Sector Governance TA TA TA/IAR FY13 32 Bank, Gov. Knowl. generation P129680 EG Energy Pricing and Subsidy TA TA/IAR FY13 3 Bank, Gov. Knowl. generation P130004 EG - Reproductive Health Rights TA TA/IAR FY13 2 Bank, Gov. Knowl. generation P130359 Egypt Jobs Study ESW EW/Not assigned FY13 0 Bank, Gov. Knowl. generation P130432 Egypt #10240 Financial Projection Model TA TA/IAR FY13 0 Bank, Gov. Knowl. generation 51 Annex 8: Egypt Trust Funds FY206-FY2012 (Amount in $K, as of April 21, 2012) Funds Project Net Funds Disb to O/S Available FY Grant Effectiv. End Disb. Fund No. Id. Description Grant Received date Commit Balance Disb Clos Date Date Date TF010340 P126551 EG Carbon Capture and Storage Tech. 300.0 300.0 79.6 182.9 37.5 79.6 01/08/2013 07/20/2011 05/08/2013 TF010480 P126339 EG Emergency Labor Intensive Investment 50.0 0.0 0.0 0.0 0.0 0.0 10/15/2012 10/16/2011 02/15/2013 TF010675 P124683 EG-Participatory Farm-level Irrigation 247.5 247.5 20.7 42.8 184.0 20.7 09/05/2015 09/05/2011 01/05/2016 TF011012 P128638 StAR - Egypt 100.0 100.0 34.6 0.0 65.4 34.6 06/30/2012 07/01/2011 10/30/2012 TF011284 P090073 EG-Second Pollution Abatement 381.9 381.9 0.0 0.0 381.9 0.0 11/29/2013 11/30/2011 03/29/2014 TF011621 P130432 Egypt Financial Projection Model 178.2 178.2 11.0 15.2 152.1 11.0 12/30/2012 01/20/2012 04/30/2013 TF011701 P130359 Egypt Jobs Study 150.0 150.0 0.0 0.0 150.0 0.0 07/31/2012 01/16/2012 11/30/2012 TF056124 P098737 EG-Onyx Solid Waste Alexandria - Carbon 7,617.8 2,402.2 2,388.1 0.0 0.0 32.3 12/31/2015 02/19/2006 02/29/2016 TF057140 P115837 EG-Urban Transport Infrastructure Dev 720.0 720.0 424.8 0.0 295.2 227.0 05/26/2012 10/10/2007 11/26/2012 TF058320 P102807 EG-Avian and Human Influenza Control and 7,141.8 7,141.8 3,830.4 0.0 3,311.5 -7.6 06/30/2011 10/29/2007 12/31/2011 TF091074 P109289 EG Measuring impact of Public Disclosure 250.0 250.0 101.4 7.5 141.1 31.2 06/30/2012 10/16/2007 10/31/2012 TF092102 P110935 EG-Cairo Southern Zone Composting 1,253.2 0.0 0.0 0.0 0.0 0.0 12/31/2015 06/30/2008 08/31/2016 TF093929 P114295 EG-Mainstreaming Use of ICT - Irrigation 440.0 440.0 0.0 0.0 440.0 0.0 06/30/2013 11/15/2009 10/31/2013 TF094425 P114857 EG-M&E Systems for Decentralization 406.9 406.9 156.3 0.0 250.6 79.1 07/30/2012 09/21/2009 01/31/2013 TF095224 P113416 EG-Wind Power Development 490.0 490.0 255.3 0.0 234.7 109.4 06/30/2012 01/04/2010 12/30/2012 TF095225 P113416 EG-Wind Power Development 10.5 10.5 10.0 0.0 0.5 -0.4 06/30/2012 10/01/2009 10/30/2012 TFO95515 P094311 EG Integrated Sanitation & Sewerage Infr. 80.0 80.0 48.1 0.0 31.9 45.8 06/30/2014 08/05/2010 10/31/2014 TF095516 P094311 EG Integrated Sanitation & Sewerage Infr. 2,911.2 2,911.2 0.0 0.0 2,911.2 0.0 06/30/2014 08/05/2010 12/31/2014 TF095830 P119401 Egypt Employment for Marginalized Youth 2,850.0 2,850.0 200.0 0.0 2,650.0 0.0 02/08/2014 04/01/2010 08/08/2014 TF095831 P119401 Egypt Employment for Marginalized Youth 150.0 150.0 130.1 0.0 19.9 26.4 02/28/2014 02/08/2010 06/08/2014 TF095965 P119805 EG - Sanitation 9,000.0 5,584.7 1,016.5 0.0 4,568.1 1,016.5 12/31/2013 07/28/2010 06/30/2014 TF095969 P094311 EG Integrated Sanitation & Sewerage Infr. 174.2 174.2 147.4 3.4 23.4 37.7 12/31/2013 01/11/2010 04/30/2014 TF096365 P095925 EG:GEF Alexandria CZM /Lake Mariout 7,150.0 7,150.0 400.0 0.0 6,750.0 0.0 06/30/2015 06/10/2010 12/31/2015 TF096553 P119483 EG-Vehicle Scrapping and Recycling Prgrm 2,659.5 664.9 645.1 0.0 0.0 0.0 12/31/2013 07/12/2010 06/30/2014 TF096554 P119483 EG-Vehicle Scrapping and Recycling Prgrm 2,659.5 664.9 639.4 0.0 0.0 0.0 12/31/2014 07/12/2010 08/31/2015 TF096731 P112209 Egypt GAC - Health Pets 350.0 102.0 29.4 65.4 7.3 0.0 10/31/2012 04/12/2010 02/28/2013 TF096819 P120537 PPIAF: EG-PSP in Solid Waste Sector 250.0 250.0 160.7 49.9 39.4 52.3 09/30/2012 04/14/2010 01/31/2013 TF096929 P113416 EG-Wind Power Development 250.0 100.0 0.0 0.0 100.0 0.0 12/31/2015 08/14/2011 06/30/2016 Fund No. Project Description Net Funds Funds O/S Available FY Grant Effectiv. End Disb. 52 Id. Grant Received Disb to Commit Balance Disb Clos Date Date Date date TF096930 P113416 EG-Wind Power Development 149,750.0 400.0 0.0 0.0 774.4 0.0 12/31/2015 08/14/2011 06/30/2016 TF097031 P121712 EG-Cairo Congestion Study 240.0 240.0 76.2 137.2 26.6 49.9 06/30/2012 09/01/2010 10/31/2012 TF097149 P117745 EG-Farm-level Irrigation Modernization 253.0 253.0 99.9 151.5 1.6 99.9 04/30/2012 06/10/2010 06/30/2012 TF097641 P121606 Microfmance Entrepreneurship in Poor Co 75.0 75.0 73.8 0.0 1.2 61.7 03/31/2012 06/15/2010 07/31/2012 TF097694 P113416 EG-Wind Power Development 85.0 67.0 3.7 0.0 63.4 3.7 12/30/2015 08/24/2010 04/30/2016 TF097704 P121606 Microfmance Entrepreneurship in Poor Co 200.0 200.0 120.0 75.0 5.0 0.0 06/30/2012 08/22/2010 10/30/2012 TF097797 P127358 5M Migration Mgt. Initiative Phase FY12 400.0 400.0 53.2 77.3 269.5 47.2 06/30/2012 11/01/2010 10/30/2012 TF097798 P122824 Improving Equality of Opportunity 400.0 400.0 33.4 43.1 323.5 22.2 10/30/2012 11/02/2010 02/28/2013 TF097823 P116230 EG: Sustainable POPs Mngt 100.0 100.0 0.0 0.0 100.0 0.0 06/15/2012 06/15/2011 12/15/2012 TF097871 P121712 EG-Cairo Congestion Study 70.0 70.0 42.8 0.0 27.2 3.5 06/30/2012 10/01/2010 10/30/2012 TF098199 P124683 EG-Participatory Farm-level Irrigation 2,750.3 2,750.3 0.0 0.0 2,750.3 0.0 09/05/2015 09/05/2011 03/05/2016 TF098328 P109289 EG Measuring impact of Public Disclosure 87.5 87.5 86.6 0.0 0.8 27.9 11/29/2011 11/30/2010 03/29/2012 TF098364 P124688 EG-Energy Efficiency Strategy (Phase2) 140.0 113.6 65.5 0.0 48.1 35.1 11/30/2012 11/15/2010 12/31/2012 TF098526 P122903 EG- Technical Assistance For CAPMAS 230.9 230.9 37.0 1.7 192.1 13.0 03/19/2012 12/09/2010 07/19/2012 TF099523 P124940 EG-Strengthening Capacity of SIOIRAFI 247.5 247.5 50.0 0.0 197.5 50.0 08/03/2014 08/03/2011 02/03/2015 TF099975 P127017 EG-Bldg Platform Urban Upgrading GCR 75.0 75.0 43.4 22.9 8.7 43.4 06/30/2012 07/01/2011 10/30/2012 Total 203,326.3 39,610.5 11,514.4 875.8 27,535.5 2,253.1 53 Annex 9. IFC Investment Operations Program Egypt, Arab Rep: IFC Investment Operations Program 2009 2010 2011 2012* Original Commitments IFC & Participants 237.7 314.5 221.4 394.0 IFC's Own Accounts only 237.7 314.5 155.4 269.0 Original Commitments by Sector (%) IFC Account only Agriculture & Forestry 8% Chemicals 38% 30.2% 64.5% Collective Investment Vehicles 8.4% 8% Education Services 6.6% 3.8% Finance & Insurance 82.8% 7.2% 53.4% Nonmetallic Mineral Product Manufacturing 38.2% Pulp & Paper 2.2% 16.4% Total 100% 100% 100% 68% Original Commitments by Investment Instrument (%)- IFC Account only Equity** 91.2% 91.2% 6.4% 16.5% Guarantee 6.6% 0.9% 1.9% 0% Loan 2.2% 7.9% 91.7% 51.8% Total 100% 100% 100% 68% *commitments as of end-March 2012 **includes Quasi-loan & quasi-equity 54 Annex 10. IFC Operations Current Portfolio Statement of IFC's Committed and Outstanding Portfolio As of 3/31/2012 In USD Million Commitment Institution COMMITTED DISBURSED OUTSTANDING Fiscal Year Short Name Loan Equity QE+ QL GT/RM Participant LN ET QE + QL GT/RM Out - IFC Participant ADL 0 87.79 0 0 0 0 87.79 0 0 87.79 0.00 2012 AUB Egypt 0 25.67 0 0 0 0 25.67 0 0 25.67 0.00 2004 Alexandria Fiber 3.00 0 0 0 0 3.00 0 0 0 3.00 0.00 2009 Bank Alexandria 0 196.67 0 0 0 0 196.67 0 0 196.67 0.00 2009 Beltone Egypt 0 10.00 0 0 0 0 1.02 0 0 1.02 0.00 2012 CIRA 0 0 15.00 0 0 0 0 0 0 0 0.00 2006 CmrclIntlBank 0 11.76 0 0 0 0 11.52 0 0 11.52 0.00 2009 Credit Agricole 0 0 0 14.69 0 0 0 0 0 0 0.00 2004 DP World Sokbna 7.00 0 0 0 0 7.00 0 0 0 7.00 0.00 2007 Dar Al Fouad 0 0.14 0 0 0 0 0.14 0 0 0.14 0.00 2012 EFC Egypt 190.00 0 0 0 118.75 190.00 0 0 0 190.00 118.75 2011 EFG Hermes 80.00 6.82 0 0 0 0 6.82 0 0 6.82 0.00 2011 EIPET Sokhna 35.00 0 0 0 0 23.80 0 0 0 23.80 0.00 2007 EMRC 0 3.53 0 0 0 0 3.53 0 0 3.53 0.00 2007 ESHC 17.00 0 0 0 0 0 0 0 0 0 0.00 2005 Egypt Factors 0 3.00 0 0 0 0 1.60 0 0 1.60 0.00 2012 Galaxy 20.00 0 0 0 0 18.00 0 0 0 18.00 0.00 2006 Gippsland 0 3.51 0 0 0 0 0 0 0 0 0.00 2009 IPI 26.65 0 0 0 0 26.65 0 0 0 26.65 0.00 2010 MENA JI Fund 0 25.00 0 0 0 0 3.89 0 0 3.89 0.00 Magrabi Egypt 15.00 0 0 0 0 15.00 0 0 0 15.00 0.00 2007 Misr Compressor 6.80 0.00 0 0 0 6.80 0.00 0 0 6.80 0.00 2011 Motaheda 15.50 9.87 0 0 0 0 9.44 0 0 9.44 0.00 2008 New Al-Salama 13.33 0 0 0 0 13.33 0 0 0 13.33 0.00 2008 Nile Suez 8.00 0 0 0 0 8.00 0 0 0 8.00 0.00 2007 Omar Effendi 30.00 0.00 0 0 0 30.00 0.00 0 0 30.00 0.00 2012 Orascom Const... 0 49.85 0 0 0 0 49.85 0 0 49.85 0.00 2006 Orix Leasing EGT 0.80 0.53 0 0 0 0.80 0.53 0 0 1.33 0.00 2010 Orient Ltd 0 85.00 0 0 0 0 0 0 0 0 0.00 2010 Sphinx Egypt 0 11.50 0 0 0 0 1.94 0 0 1.94 0.00 2010 Wadi Group 34.83 0 0 0 0 22.33 0 0 0 22.33 0.00 Total Portfolio 502.92 530.64 15.00 14.69 118.75 364.71 400.39 0 0 765.11 118.75 55 IBRD 33400R ARAB REPUBLIC OF EGYPT 0 SELECTED CITIES AND TOWNS o GOVERNORATE CAPITALS ® NATIONAL CAPITAL GOVERNORATES IN NILE DELTA: OF EGYPT 1 KAFR EL SHEIKH 8 MENOLFIYA RIVERS 2 DAMIETTA 9 SHARGYAH MAIN ROADS 3 PORT SAID 10 QALUUBYA 4 ALEXANDRIA 11 ISMAIL/A RAILROADS 5 BEHEIRA 12 CAIRO 6 GHARBIYA 13 GIZA GOVERNORATE BOUNDARIES 7 DAGAHUYA - - INTERNATIONAL BOUNDARIES 25°E 30°E 5°E WEST BANK DTO terran AND GAZA 7 salom --- --- ------ Marsa Matruh Kar | 2.Damnietta Libyan\Plateau Alexandria. 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