1. INCREASING THE COMPETITIVENESS IN THE AFRICAN MIDDLE INCOME COUNTRIES:
STRENGTHENING THE INVESTMENT CLIMATE
Sahar Nasr
Senior Financial Economist
World Bank
Cairo, Egypt
March 11, 2008
Slide 1
Good Afternoon,
Before discussing the link between increasing competitiveness and strengthening the investment climate, lets first agree on what do we mean by competitiveness. However, it is not just a function of cost, but also quality.

2. What is Competitiveness?
Describes the overall performance of enterprises within a national business environment, particularly its level of productivity and its ability to export.
Productivity—magnitude and growth in value added (per unit input) of firms.
Ability of firms to operate efficiently in relation to others due to low cost or superior technology.
Function of quality not just cost
Depends on a host of factors that can be firm-specific; industry-specific or country-specific.
Slide 2
Describes the overall performance of enterprises within a national business environment, particularly its level of productivity and its ability to export.
A key feature of competitiveness is productivity, which refers to the magnitude and growth of value added for a given amount of inputs.
Ability of firms to operate efficiently in relation to others due to low cost or superior technology.
Function of quality not just cost.
Depends on a host of factors that can be firm-specific; industry-specific or country-specific.

3. Usually, sustained growth requires attaining manufacturing export competitiveness...
Slide 3
Looking at the experience of countries that have enjoyed sustained periods of high growth, we find that almost all of them have succeeded in achieving manufacturing export competitiveness.

4. …based on growing private investment.
Slide 4
We see in these countries, that private investments have played a critical role No where more than in East Asia.

5. What Affect Competitiveness? The Firm’s Business Environment
Trade policy
Entry/Exit
barriers
Macroeconomic
environment
Capital
markets
Labor
Land
Infrastructure
Access to
information
Protection of
property rights
Markets openness and liberalization
Firm
Investor
Slide 5
A firms’ business environment critically influences its competitiveness.
Of course, there are important factors internal to the firm. However, the set of the factors that are external to the firm are what we refer to as, the business environment or investment climate.
This involves, everything from the macro environment to the product market.
For example, land markets, entry & exit barriers, protection of property rights, trade policy, etc.
Product markets
Factor markets

6. Investment Climate Assessments
In many ways, the World Bank Group supports business environment reform to enhance competitiveness
Creating policy and institutional foundations for effective markets (property rights, land registration, collateral systems, corporate governance, financial market infrastructure).
Promoting open and competitive markets—opening up entry, access to finance for promising firms, deeper bankruptcy financial markets, and exit for failing firms).
Initiate reform agendas, through sharing of cross-country experience—what works and what does not.
Ensure effective coordination with development partners.
Diagnostics/
Formulation
Implementation
Policy Dialogue
Strategy
and
Solution
Policy-based
Loans
Doing Business
Design
Enterprise Surveys
Investment
Loans
Investment Climate Assessments
Slide 13
The World Bank Group uses its diagnostic and analytical tools to contribute to the design of country–specific strategies, and solutions.
Through a variety of means, it can also support the implementation of these strategies and solutions.
Grants and Trust Funds
Technical Assistance

7. Investment Climate Assessments
In many ways, the World Bank Group supports business environment reform to enhance competitiveness
Diagnostics/
Formulation
Implementation
Policy Dialogue
Strategy
and
Solution
Policy-based
Loans
Doing Business
Design
Enterprise Surveys
Investment
Loans
Investment Climate Assessments
Grants and Trust Funds
Technical Assistance

8. from entrepreneurs their key costs and constraints.
World Bank ICA work allows us to learn
from entrepreneurs their key costs and constraints.
Slide 6
When the bank does its diagnostic work, such as the Investment Climate Assessment, we look for the critical constraints that are impeding firm level competitiveness.
One of the things we look at is firms’ own evaluation of the environment in which they are operating.
Here in this figure, we see the order that MENA entrepreneurs, assign to various constraints.

9. from entrepreneurs their key costs and constraints.
World Bank ICA work allows us to learn
from entrepreneurs their key costs and constraints.
Similar survey data is collected and analyzed for African MIC’s
Slide 7
Similar work has been carried out throughout Africa.
As shown here in this slide from the Botswana ICA.

10. . . . . especially MSMEs, receive little financing
One of the main constraints identified in the Egypt ICA was Access to Finance
especially MSMEs, receive little financing
Percentage of firms currently with a loan from a financial institution 5 10 15 20 25 30 35 40
17.4 %
All
13 %
36 %
Small
and Micro
Large
Size does Matter. . .
Only 17.4% of firms have access to bank credit
MSMEs have more difficulty accessing credit: only 13% of MSMEs have access compared to 36% of large corporations
Banks do not provide much financing to MSMEs (only 12% of MSME that have a bank account also borrow from banks)
Slide 8
Within this analysis we go deeper into particular issues, such as access to finance, depending on countries needs and priorities.
For example, in Egypt, our diagnostic work revealed serious deficiencies in the provision of the finance, especially to SMEs.
Source: Egypt ICA

11. Can these countries compete on an equal footing without using all of their human resources?
Slide 9
Gender is another issue that is illuminated by this work, looking at the evidence for Africa and the Middle East, we could ask:
“Can these countries compete on an equal footing without using all of their human resources?”

12. Doingbusiness Indicators
Measures of business regulations and their enforcement across 178 countries.
Doing Business is a guide for evaluating regulations that directly impact economic growth, making cross-country comparisons, and identifying good practice reforms.
Regulations affecting 10 stages of a business’s life are measured: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
Slide 10
Another diagnostic tool that the Bank has been producing since 2003 is the Doing Business Indicators.
These influential indicators have encouraged countries to compete in improving various regulatory factors influencing competitiveness.

13. Doingbusiness Indicators
Regulation of Entry
Labor Regulations
Contract Enforcement
Credit Markets
Credit information
Bankruptcy
2004
Corporate Governance
Property registration
Updates of ‘04 topics
2005
Business Licensing
Taxation
Trade Infrastructure
Transport
Customs
Standards
Updates of ‘04 and ‘05
2006
Dealing with licenses
Employing workers
Protecting investors
Getting credit
Closing a business
Updates of ‘06 and ‘07
2007
Starting a business
2008
Slide 11
Year by year, these indicators are covering an increasing range of key features of country conditions
The Doing Business team is now working on creating new indicators on gender, corruption, and infrastructure.
Products: Report, academic papers, country summaries, website database

14. What does Doing Business 2008 say about the
business environment in Africa’s MIC countries ?
Slide 12
“Doing Business 2008” shows the broad range of performance of MIC in Africa.

15. Doing Business Sub-National
Measures the ways in which government regulations enhance business activity or restrain it at the sub national level.
Highlights good practices within the country that can be replicated easily in other cities.
Focuses on three Doing Business topics:
Starting a business
Dealing with licenses
Registering property
Deals with three Governorates:
Alexandria
Assiut
Cairo
Provides information on other Governorates’ reform efforts, including getting credit, protecting investors, paying taxes, and trading across borders.

16. EXAMPLE Financial Sector Development Policy Loan
WB and AfDB, along with other development partners supported the Government’s “Financial Sector Reform Program” (2004–2008)
Improve the soundness and efficiency of the financial sector through comprehensive structural and financial reform, to enhance financial intermediation.
Objectives
Reforming the Banking Sector (consolidation, privatization, mergers)
Restructuring the Insurance Sector (mergers, restructuring, privatization)
Deepening the Capital Market
Developing a Well-functioning Mortgage Market
Strengthening the Regulatory and Supervisory Authorities
Improving the Institutional Infrastructure (credit bureau, payments system, etc.)
Main Components of the Program
Slide 15
Egypt, provides one good example of the strong relationship the Bank has with some Middle Income Countries in the region.
Diagnostic work, including the FSAP provided a basis for an agenda for Financial Sector Reforms.
This led to a strong policy dialogue, and ultimately support the implementation of reforms through a Development Policy Loan, which was done in partnership with AfDB, USAID, and the EU.
Implementing Agencies
Ministry of Investment and Central Bank of Egypt (CBE)

17. Financial Sector Development Policy Loan

18. In what ways and areas, could WBG support your countries better?
Encourage Dialogue?
Technical Advise and Analytical Work?
Developing New Strategy?
Identifying Priority Areas of Reform?
Sharing of Cross-country Experience?
Providing New Products?
Other Delivery Mechanisms?
Slide 16
We recognize that countries have their own needs, to which the Bank should be able adjust.
In light of that, we would like to offer for the discussion period this questions:
“In what ways and areas, could WBG support your countries better?”
Encouraging dialogue?
Technical Advise and Analytical Work?
Developing New Strategy?
Identifying Priority Areas of Reform?
Sharing of Cross-country Experience?
Providing New Products?
Thank You!

19. Increasing the Competitiveness in the African Middle Income Countries:
Strengthening the Investment Climate
Thank you!
World Bank Financial Products and Services for Improving the Investment Climate