Making Investment Reforms Succeed


Launch of the Second Phase of the MENA-OECD Investment Programme
Second Ministerial Meeting

Opening Remarks by Angel Gurría, OECD Secretary-General

Cairo, Egypt, 28 November 2007
Your Excellencies, Ladies and Gentlemen:

I am particularly honoured to welcome you as the co-host of the second Ministerial meeting of the MENA-OECD Investment Programme. Let me first thank and congratulate Dr. Ahmed Nazif, Prime Minister of Egypt, for hosting this event; as well as Dr. Mahmoud Mohieldin, Minister of Investment, for providing outstanding support to the Programme.

With this second Ministerial meeting, we are closing the first phase of the MENA-OECD Investment Programme, and launching the second phase, which will operate from 2008 until 2010. Over the past years, the MENA-OECD Investment Programme has helped underpin the far-reaching reform effort in your countries, helping improve the business and investment climate, and the effects are already beginning to show.

The regional economy has been growing steadily: after increasing by 5.9 per cent in 2004 and 2005, regional GDP grew at a solid 6.2 per cent in 2006; with some economies experiencing double-digit growth.

To put this economic dynamism into perspective, growth in the MENA region in 2006 was double the average growth rate of the OECD countries. Last year, MENA regional exports reached more than 700 billion US dollars and foreign direct investment inflows increased more than fourfold in the last three years, amounting to 59 billion.  Profiting from these trends, unemployment has gone down from 14.3 per cent in 2000 to 10.8 per cent in 2005.
The MENA region is and will continue to be one of the turbines of globalisation, as it adopts the policies needed. With the contribution of the MENA-OECD Investment Programme, and with continued high revenues from non-renewable energy resources, we are confident that other countries in the region will also benefit from increased investment inflows – following a policy of diversification. This will position the MENA region as a key actor in the global economy.

This growing importance is part of a major rebalancing of economic power. In 2006, emerging economies accounted for more than half of global output, 43 per cent of global exports, 70 per cent of international reserves and more than half of global energy consumption.  This is a new world indeed.

The OECD is acknowledging these transformations and responding to them by adapting and becoming more global, more inclusive, and therefore more relevant.

Since I became Secretary-General of the OECD, my staff and I have been working hard, based on a clear mandate, to transform the OECD into a hub of dialogue on global issues.

We are broadening our perspective; we are becoming more plural. We are slowly turning into an effective articulator between OECD Members and non-members. At the same time, we are consolidating our role as a major source of policy solutions and international agreements to address key global challenges such as innovation and intellectual capital, poverty and inequality, climate change and international migration.

The growing collaboration with our MENA partners is a reflection of this effort and the increased sensitivity to the problems of non-member countries. The Investment Programme, one of the two pillars of our MENA-OECD Initiative on Good Governance and Investment for Development, is a concrete and innovative instrument to share OECD experience and know-how with other economies to consolidate their market reform efforts.

The Investment Programme is also an example of a new approach to international co-operation; one that provides policy advice through peer dialogue and review, and exchange of expertise between governments.

Let me share with you some of the major achievements of this important Programme so far.

In its first two years, the Programme has made important progress in assessing developments in the regulatory environment, including key challenges in investment policy, investment facilitation, taxation, financial sector development, corporate governance and women’s entrepreneurship.

Work at the national level has focused on establishing time-bound targets for improving the investment environment and most MENA governments have developed National Investment Reform Agendas to achieve these targets.

The Programme has also developed a wide network of government experts in its five Working Groups which met in three rounds of meetings since 2005 and established supporting Taskforces.

The opening of Regional Centres in coordination with the Programme has played an important role in transmitting good practices throughout the region. Bahrain has created a regional Centre for Investment; the United Arab Emirates a regional Institute for Corporate Governance; Egypt has announced the opening of a regional Centre for Public Management and Tax Policy, for which an ambitious work programme has been developed. 
All these activities have led to measurable outputs. I would like to highlight three of them:

1. Investment liberalisation: A number of MENA countries have liberalised their investment laws. For instance, the United Arab Emirates and Jordan, after consultations with the MENA-OECD Investment Programme, have drafted investment laws which lower sectoral restrictions for investment.

2. Corporate governance: This issue has been receiving increasing attention in the MENA region; particularly since the inception of the Hawkamah institute in the United Arab Emirates. The Programme actively co-operates with the Hawkamah institute in order to evaluate MENA countries practices in this area and provides assistance in designing corporate governance codes for private and state owned enterprises.

3. Last but not least, taxation: Corporate tax rates have been reduced in a number of MENA countries. In parallel, tax systems have been simplified to increase compliance and reduce remaining confusion over various taxes applicable to commercial entities. In Syria, the corporate tax system was reformed in 2005; in Egypt, the investment legislation was also simplified and tax rates were reduced from 42% to 20%. In the Egyptian case, this measure has been seen as a success given that the tax collection rates have actually improved. Jordan is currently giving consideration to a similar exercise.

During its coming second phase (2008-2010), the MENA-OECD Investment Programme will continue providing benefits for the region and will have an increased emphasis on country ownership. This will be done through strengthened and institutionalised regional networks, like the existing regional centres.

It will enhance co-operation with the OECD, but also with our partners such as the World Bank or the European Commission, the Arab League, UNIDO, the IFC and the Islamic Development Bank. The second phase will work with countries to achieve reform through evaluation of needs, definition of priorities and support in implementation. We named this approach the Business Climate Development Strategy (BCDS). It was developed together with the MENA Steering Group and our partners from the World Bank Group.

Finally, the second phase will mobilise input by the private sector and civil society and stress the business case for transparency and corporate responsibility. All of these measures will complement the other pillar of our engagement in the region: the Good Governance for Development in Arab Countries Initiative. We must make simultaneous progress on both tracks. I would like to express my appreciation to the MENA and OECD countries which have so generously provided financial and in-kind contributions to support this important work.

Ladies and Gentlemen:

The MENA-OECD Investment Programme is a mutually reinforcing initiative; a unique win-win experience indeed. Working with the MENA countries to support their economies with a stable economic and institutional structure – benefiting from an exchange of experiences with OECD countries – will contribute significantly to bring prosperity and equity to this important region.

At the same time, it will help the OECD in becoming more global and gaining insights on the different paths of economic and human progress. It will also support our efforts to achieve a globalisation process that is more inclusive.
Let me conclude by emphasizing that this next phase of implementing reforms will demand a great deal of political skill and communication. Change is sometimes painful and there is always resistance from the parts of the society who benefit from the status quo. To overcome obstacles to change, we need to better demonstrate the benefits of investment as an engine for growth and job creation and make sure that these benefits are spread to larger portions of the population.

This requires an active communications strategy, transparency of the reform process and stakeholder participation. It also requires courage and leadership. If today’s conference sends out strong messages for progress to a multitude of stakeholders, and if it contributes to the positive image of the region, it will have fulfilled its purpose.

For no economic policy or reform should lose sight of its ultimate objective: to foster economic growth and transform it into widespread social progress.

My staff and I very much look forward to work with you in accomplishing this important objective.

I wish you all a productive and interesting Ministerial Meeting.

Shukran – Thank you very much.


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