OECD CONFERENCE on Investment in MENA Istanbul, February 11-12, 2004

Part II – Role of FIAS, World Bank Group

Xavier Forneris, FIAS, World Bank Group (xforneris@ifc.org)

PROMOTING PRIVATE INVESTMENT:

WHAT CAN THE

WORLD BANK GROUP DO?

IBRD/IDA• Lending to Governments• Policy advice• Focus on poverty alleviation,

sustainable development, andprivate sector development,

MIGA• Guarantees against

Political Risk• Capacity Building for IPAs

The World Bank Group

IFC• Private Sector lending• Equity investments • Advisory services (SME,ICD)

FIAS• Specialized center for

Advice and TA onInvestment Policy &

Promotion

What is FIAS?The Foreign Investment Advisory ServiceA joint facility of the International Finance Corporation and the World BankAdvising Governments and IPAs on FDI Policy & Promotion

Services FIAS Provides

Advisory assistanceDiagnostic of the Investment ClimateRemoving Administrative Barriers (investor road map)Advice on the Tax system & Investment incentivesInvestment promotion (institution and strategy)Building linkagesLegal & regulatory environment – investment codes

New “products”: competition policy, CSR, logistics/value chain

Other activitiesResearch, conferences, seminars

FIAS Experience in the MENA Region

Experience in over 120 countries, over 15 years

In MENA, FIAS completed over 50 projects, the list of which is available on our web site (www.fias.net)

FIAS Modus Operandi

Client: a committed government ministry (economy, finance, planning…) or an investment promotion agency

Letter of requestContribution to costs (co-financing)

No conditionality, pure advice / TAClose collaboration with WBG/IMF

Let’s look at one popular FIAS product: Administrative Barriers

•Acquire Business Visa

• Register with Investment Promotion Agency

•Apply for Incentives

•Register Business

•Apply for Investor Permit

•Find Land

•Apply for Land

•Get Employer ID

•Get Import Permit

•Apply for Expatriate Work Permits

•Get Tax ID

•Apply for License

•Negotiate with Unions

•Repat

riate P

rofits

•Claim I

ncentiv

es •Export Goods•Renew Investor Permits

•Renew License

s

While Many Nations Have Implemented Macro Reforms…

Opening new sectors to FDI and private investors

Liberalizing foreign exchange

Creating a more stable macroeconomic environment

… Second-tier Policy & Regulatory Constraints Remain

Investors must spend substantial amount of time, money and energy to obtain the required permits, licenses, authorizations, etc.;Each of the required approvals involves multiple agencies, forms, steps, etc.;The process lacks transparency, and often depends on “who knows whom”;Government agencies face problems of overlapping, even conflicting roles

Symptoms of Administrative Barriers

Rigid, pervasive barriers between formal and informal sectorsLow realization rates for projects, high failure rateEmphasis on screening and restriction of entry as regulatory tools, rather than monitoring and enforcementCorruptionPoor government-private sector relations

Effects on Investment Climate

Increased business costs • Delays• Managerial time• Bribes

Uncertainty • Scares off prospective investors; distorts

project structures • Complexity means any business is always in

violation of some law or regulation• Businesses exposed to capricious enforcement

Effects on types of Investors

Foreign Investors• Loss of the “good” foreign investors so actively

promoted by the IPAs• Attraction of those who can “work the system”

Informal Sector• Raised hurdles for compliance• These costs are as important as taxes

Domestic Formal Private Sector• Bears brunt of regulations and taxes

Often, inappropriate Structures are at the root of the problem

Economic philosophies have changed, but bureaucracy hasn’tGovernments take control-oriented approachesPrivate sector is considered “guilty until proven innocent”Bureaucracies designed to prevent abuse - not to be efficientOpportunities for corruption

FIAS Road Map’s objective: Simplify & Streamline Investment Procedures

Identify key administrative barriers (cost, time)Design an Action Plan for their removal / simplificationIntroduce international best practicesPropose an approach to internalize the reform process

Investor

Employing Locating/Site Development

Operating

Functioning

Startup

Reporting

We Divide the Model into 4 Sections over 2 Phases

We segregate the 4 Categories Into 13 Processes (or more…)

Investor

Investor Visa

Acquire Incentives

Develop Site

Transfer Ownership

Find Land

Expatriate Work Permit

Environment

Pay Taxes

Register

Repatriate Profits

Export

Import

Hire Local Labour

L ’Investisseur

• devait préparer 23 dossiers différent ;• passer par 31 services de l ’administration (dont 6 plusieurs fois) ;• passer neuf a vingt-quatre mois pour finaliser ces procédures.

GuichetUnique

Notaire(Privé)

Centredes Impôts

Senegal: Le Parcours de l ’Investisseur

Agrément au Code des Investissements,Entreprise Franche

Elaboration des Statuts de Société

Registre du Commerce

Tribunal du

Commerce

NITI

Numéro Compte Contribuable

Aff

ilia

tion

Car

te

d’I

dent

ité

Adhésion

Demande de terrain

Dossier

Dossier/Permis de Construction

Avis Technique

Dem

ande

Dem

ande

Dem

ande

Carte

Importateur-

Exportateur

Déclaration du mouvement du

travailleur

Inspection Régionale du

Travail

Centre des Formalités des

Entreprises

Caisse de SécuritéSociale

IPRESMinistère de l ’Economie, Finance, Plan

Direction de l’Industrie

Organisation Africaine de la

PropriétéIntellectuel

Direction des Domaines

Cadastre

Service Régional de l’Urbanisme

Domaines

Protection Civile

Services d ’Hygiène

Présidence

Bureau des Etablissements

Classés

Sonatel Senelec ONAS/SDE Direction Commerce Extérieur

BREP/Douanes

Titre d

’exonération

DouanesInspection du TravailSGS

Statistiques du Travail

Centre des Impôts

Dossier de

Dédouanem

ent

Arrêté d’autorisation

Enregistrement des Statuts de Société

Enregistrement des Statuts

Déclaration de Conformité

Prévision et StatistiqueNINEA

Déc

lara

tion

d

’Ouv

ertu

re

Aff

ilia

tion

Ministère de l ’Intérieur

Déc

lara

tion

In

vest

isse

men

t E

tran

ger

Institution de Prévoyance

Maladie

Enr

egis

trem

ent P

ropr

iété

Inte

llect

uel

Direction de l’Industrie Attestation Industriel

Commission de Contrôle

Travaux Publics

Ministère de l’Environnement

Ministère de l’Industrie

IPRES

CSS

Attestation

de vérification

Each Process Is Analyzed on 4 Dimensions

What purpose(s) is the procedure intended to serve?How easy is it to go through the approval?How long does it take to process?How much does it cost?

METHODOLOGY and SCOPE

Documentation of all procedures, licenses, requirements

• Steps• Institutions involved• Delays• Costs

Assessment & RecommendationsWorkshop & DisseminationImplementation

Types of Constraints Encountered

Poor policy formulation• Investment codes and sectoral licensing

Policies reformed, procedures remain• Trade licenses

Poor procedures• Construction permits and approvals

Types of Constraints Encountered

Ineffective bureaucracies• Lack of capacity• Undermined by corruption• Lack of coordination, motivation

Systemic issues• Land• Public utilities

Implementation & Follow-Up

Requires:high-level Government commitmentactive private sector involvementoutside support

Can yield:more efficient Government agenciesreduced corruptionbetter public & private sector relations

Some typical results

Institutional approachesGhana: reduction of import clearance time from 2 weeks to 3 days

StreamliningTanzania reduction of delays in immigration permits from 6 months to 2 weeks

Capacity BuildingNew resources to registrars in Namibia and Uganda

Policy ReformGalvanized support for reform in Senegal (Investor Council)Significant regulatory changes in Jordan

Customer service approachesWindhoek investor’s window