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  • Monday, 19 June 2023

The IFC and Egypt Share an Extended Relationship with Exceptional Partnerships to Stimulate Private Sector Investment

● The Transaction Advisory Services Agreement (TASA) is an important link in cooperation with the IFC to enable private sector engagement, attract investments and promote comprehensive, flexible and sustainable economic growth.

● The IFC has invested a total of $7 billion since its inception in Egypt, and $3.2 billion since 2018.

● The partnership with IFC has strengthened the implementation of one of the largest solar energy projects in the world, "Benban Solar Park" and contributed to strengthening the partnership between the government and private sectors in water desalination projects.

● More than 400 advisory operations were provided by the IFC to developing countries and implemented 64 agreements to enable the private sector.

The relationship between the Egyptian government and the International Finance Corporation (IFC) is part of the broader relationship with the World Bank Group (WBG). The WGB is one of the largest multilateral development partners that the Arab Republic of Egypt cooperates with to support and stimulate sustainable development efforts. The WBG, along with the IFC, follows the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), which supports low-income countries through highly concessional development financing, the Multilateral Investment Guarantee Agency (MIGA) and the International Center for Settlement of Investment Disputes (ICSID).

The IFC is the largest international institution focused on supporting and empowering the private sector in emerging markets through the direct investments it makes available, in addition to providing advice and technical support, as well as mobilizing additional investments from other entities and investors.

In conjunction with the agreement signed yesterday, according to which the IFC provides advisory services and technical support for the government offering program, the Ministry of International Cooperation reviews in the following report the most prominent stations and pillars of the close relationship with the IFC, and the efforts that were made to stimulate the private sector.

Accumulated Expertise

The Egyptian government chose the IFC, based on its experience over more than 30 years in the field of technical support and advisory services to governments around the world, to evaluate the various options for private sector investment, which support comprehensive economic development efforts. The IFC has provided its services in more than 64 deals and projects worldwide to enable the private sector, and provided more than 400 successful advisory operations worldwide, through which private investments of about $3 billion were implemented.

The WBG and the IFC have a set of diagnostic tools and studies that clarify the opportunities and prospects available in the country, and the role of the joint strategy with the group to support them. One of these tools is the Diagnostic Study of the Country Private Sector Diagnostic (CPSD).

In 2020, the IFC, in partnership with the Egyptian government, launched the CPSD which includes an analysis of challenges and highlighting opportunities for economic development, investment, and increased job creation led by the private sector in Egypt, leveling the playing field for the private sector as one of the four main areas that the diagnostic study noted as in need for reform.

Multiple Encounters

The Managing Director of the IFC Mr. Makhtar Diop, started his visit to Egypt with a meeting with the President of the Arab Republic of Egypt H.E. President Abdel Fattah El-Sisi,  in the presence of the Minister of International Cooperation and Governor of Egypt at the WBG H.E. Dr. Rania A. Al-Mashat, and the TASA  was signed at the Cabinet headquarters in the capital. The signing was witnessed by Prime Minister Dr. Mostafa Madbouly, and IFC officials where both parties reviewed the implementation plan of the technical support program agreement for the government offerings program, explaining ways of cooperation with the Egyptian government in structuring companies and assets that were announced to be offered by the Egyptian side in various sectors.

The new agreement maximizes the role of the private sector development in Egypt, and marks the start of activating the Country Partnership Framework (CPF) between Egypt and the WBG, which was approved by the Board of Directors of the World Bank last March and launched in May. Both share a common goal to enhance development efforts based on the country's priorities and objectives to expand the base of private sector participation and achieve comprehensive and sustainable recovery and growth.

The Development of the Relationship with the IFC

The relationship between Egypt and the IFC has developed significantly over the past years, based on the great efforts and mega development projects that are being implemented under the leadership of H.E. President Abdel Fattah El-Sisi in various sectors, which contributed to increasing the institution’s role in mobilizing and providing investments and technical support services. 

In order to enhance said efforts, the IFC prepares diagnostic reports that measure and restrict the role of the private sector. The latest of these is the CPSD report, prepared in 2020 in partnership with the government to analyze the challenges facing the private sector and highlight the development opportunities available to the private sector to enhance job creation and economic growth.

The total cumulative investments that the IFC has provided amounts to more than $7 billion, varying from $1.8 billion in the field of climate finance, investments related to solar energy, green bonds, green buildings, and more, in addition to $95 million in investments in financial technology, venture capital, private equity funds and startups, $340 million in investments in healthcare and pharmaceutical companies, $200 million in agribusiness, and $270 million in sustainable manufacturing. It is also important to note that the IFC has supported more than 5,500 women-owned companies and entrepreneurs in light of efforts to promote social inclusion and support equal opportunities across genders.

Since 2018, the IFC has injected and mobilized investments from other parties at a value of $3.2 billion in Egypt, in various priority development sectors, including $830 million in investments from 2023 to date. The institution aims to increase its investment portfolio in Egypt based on the efforts of ongoing government reforms to promote economic and structural reforms that stimulate private sector investment and launch a document on state ownership policy that aims to expand the base of private sector participation in various fields of development.

By the end of May 2023, the current portfolio of the IFC in Egypt is expected to have recorded about $1.4 billion, of which infrastructure and renewable energy projects account for 36%, followed by manufacturing at 20%, then agricultural business and financial services at 15% each.

Realistic Models that Showcase Private Sector Empowerment 

The IFC has a long history of partnership with the Egyptian government as well as the private sector, through stimulating investments, technical support and consulting. Among the most prominent partnerships implemented by the IFC in Egypt is its provision of technical support and consultations for the implementation of the first partnership between the government and private sectors in the sewage treatment plant in New Cairo, in addition to providing technical support in approving the electric feed tariff as well as contributing to mobilizing investments to implement the largest solar energy project in the world, the Benban solar energy project in Aswan, where institutions have mobilized investments of more than $650 million.

With regard to the ongoing portfolio of advisory services for the government and private sectors, it currently records about $33 million with the aim of enhancing competitiveness and inclusive economic growth. Most of the consulting portfolio is concentrated in the financial sector at 33%, manufacturing, agribusiness and services at 25%, partnership between the public and private sectors at 15%, and the application of environmental, social and governance standards at 11%.