The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) REPORT NO.: RES31433 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF EQUAL ACCESS AND SIMPLIFIED ENVIRONMENT FOR INVESTMENT (EASE) IN EGYPT APPROVED ON OCTOBER 2, 2015 TO THE ARAB REPUBLIC OF EGYPT FINANCE, COMPETITIVENESS AND INNOVATION MIDDLE EAST AND NORTH AFRICA Regional Vice President: Hafez M. H. Ghanem Country Director: Asad Alam Senior Global Practice Director: Ceyla Pazarbasioglu-Dutz Practice Manager/Manager: Jean Denis Pesme Task Team Leaders: Andrei Mikhnev, Maha Hussein The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) ABBREVIATIONS AND ACRONYMS CRM Customer Relationship Management ERRADA Egyptian Regulatory Reform and Development Activity GAFI General Authority for Investment and Free Zones IDA Industrial Development Agency ILAS Industrial Land Allocation System ISR Implementation Status and Results report MDA Ministries, Departments and Agencies MTR Mid-term review OSS One-Stop Shop PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P153487 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 02-Oct-2015 01-Jul-2018 Organizations Borrower Responsible Agency Ministry of International Cooperation and Egyptian Regulatory Reform and Development Activity Investment/General Authority for Investment,Industrial (ERRADA) Development Authority Project Development Objective (PDO) Original PDO To improve the regulatory environment for investors through simplified licensing and transparent industrial land allocation processes. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A1553 02-Oct-2015 29-Mar-2016 20-Apr-2016 01-Jul-2018 5.00 2.68 2.32 The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. A. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING The Restructuring Note proposes to extend the closing date of the Equal Access and Simplified Environment for Investment (EASE) Project (Grant no. TF0A1553) by twelve months, from July 1, 2018 to June 30, 2019; and (ii) revise the Results Framework indicators. This will be the first extension of closing date for this project and the extension was approved by the MENA Transition Fund Steering Committee on a no-objection basis on January 22, 2018. The EASE project is implemented by the General Authority for Investment and Free Zones (GAFI) and the Industrial Development Agency (IDA), including the work done through the Egyptian Regulatory Reform and Development Activity (ERRADA), and have an overarching objective of enhancing the regulatory environment for investors. The project was designed to meet this goal through specific reforms targeting the business regulatory environment, industrial licensing and industrial land allocation processes. At the legislative level, these reforms are being supported through the promulgation of a new Investment Law number 17 of 2017 and a new Industrial Licensing Law number 15 of 2017 that strengthen the mandates of GAFI and IDA in terms of administrating the investment services and land allocation. Despite a delayed start of the project implementation due to the process of establishing and staffing of two PIUs, the implementation of the project components accelerated during the last twelve months reaching disbursement of 54% of the grant proceeds in February 2017. 1- Project Status: a. Component One: Facilitating Accessible and Transparent Investor Services – GAFI In alignment with the project design, GAFI’s activities are focused on enhancing its services to become the national platform for business entry, licensing, and access to investor information centrally in Cairo and in its 6 OSS branches. GAFI has positively progressed in the activities outlined in the PAD and has focused the reform implementation in alignment with priorities set up in the new investment law. The Medium-Term Review (MTR) of the project held in October 2017, acknowledged the importance of the strengthened focus on activities related to business entry and investor access to information. Efforts on the licensing process progressed at a slower pace due to the delay in the issuance of the Executive regulations of the new investment law. b. Component Two: Industrial Sector Regulatory Reform – IDA In alignment with the project design, IDA’s activities are focused on industrial sector transformational reforms, namely industrial licensing and industrial land allocation. IDA has made significant progress in the industrial licensing space. The implementation of the new industrial licensing law and its executive regulations has also accelerated implementation of the work plan. However, activities under the industrial land allocation component The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) are progressing at a slower pace and there is a need to clarify and tighten the scope of activities under this component within the remaining timeline. c. Component Three: Capacity Building for Managing Regulatory Reform – ERRADA In alignment with the project design, ERRADA’s activities are designed to focus on building the ERRADA capacity to review the inventory of business formalities, and recommend their simplification through an established consultative mechanism. The passing of the new investment law, the new industrial licensing law, and their executive regulations did not alter the planned project activities, yet helped ERRADA be more demand-driven responding to IDA and GAFI’s requests. During the rest of the project lifetime, the work will be continued on building the ERRAD capacity and on ensuring the sustainability of reform efforts, including ERRADA’s capacity to develop and sustain an effective consultative mechanism on business regulations. 2- Rational for Restructuring: The project was rated “Moderately Satisfactory” in the latest Implementation Status and Results report (ISR) of November 2017. In addition to some delays in setting up the project implementation arrangements, some tasks had to be refocused due to the changes in legislations that took place since the start of the project. The new investment law and its executive regulations were issued in 2017, which required the remapping of the business registration process to prepare for the streamlined automation exercise. GAFI was obliged to stop the initial automation process, and redesign to incorporate the new procedures mandated under the new law. Additionally, the industrial licensing system in Egypt was entirely changed after the issuance of law number 15 of 2017 and hence, IDA delayed the process mapping and reengineering. Furthermore, after the issuance of law 83 of 2016 regulating land allocation, IDA roles and responsibilities in industrial land allocation was drastically changed. According to law 86, IDA became the sole agency responsible for the industrial land allocation. It is important to note that the executive regulations that are expected to regulate the process of land transfer and the allocation procedures are still not issued. Furthermore, it was seen that this task will entail longer time frame than what was originally dedicated. The design of the ILAS will require the issuance of the executive regulations. Therefore, the project implementation requires more time to complete the implementation of reforms and achieve planned objectives. 3- Recommendation: The team confirms that the project objectives are still relevant and achievable, and recommends the extension to be approved. The performance of both PIUs are satisfactory. The implementation schedule, taking into account the proposed extension, has been discussed with the PIUs and actions agreed upon. There are no outstanding audits – all previous audits received were found acceptable. The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) B. DESCRIPTION OF PROPOSED CHANGES To ensure the completion of the project activities and the achievement of the PDO, it was proposed to extend to the project timeline for twelve months till June 30, 2019. Only four areas would be affected by the proposed restructuring: 1- Change in Results Framework The results framework was reviewed during the MTR mission to reflect better the nature of the implemented reforms and expected results; specifically: a. PDO Indicator 1 measuring the licensing process was broken down into two to reflect the separate streamlined processes; b. Intermediate indicators measuring the progress in the automation process and the number of businesses registration online were updated. c. A few remaining indicators were reworded to match more precisely the scope of work. 2- Change in Loan Closing Date The extension of the project implementation for 12 months triggered the extension of the loan closing date accordingly. 3- Change in Disbursement Estimates The disbursement estimates were amended to reflect the change in the loan closing date and expected disbursements in the FY19. 4- Change in Implementation Schedule The implementation schedule has been discussed with the PIUs to reflect the project extension. The updated procurement plans will be updated on STEP once the restructuring note is approved. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. I. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Average number of days to comply with the licensing processes Unit of Measure: Days Indicator Type: Custom Baseline Actual (Current) End Target Action Value 324.00 45.00 33.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 Number of days to comply with the Industrial Licesning process (High Risk) Unit of Measure: Days Indicator Type: Custom Breakdown The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Baseline Actual (Current) End Target Action Value 640.00 75.00 60.00 New Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 Number of days to comply with the Business Licensing process Unit of Measure: Days Indicator Type: Custom Breakdown Baseline Actual (Current) End Target Action Value 8.00 14.00 6.00 New Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 Number of land allocation requests processed through the reformed land allocation system Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 2000.00 No Change Date 01-Jul-2015 16-Sep-2016 01-Dec-2018 Intermediate Indicators IO_IND_TABLE GAFI - Mapping/Simplification of Entry procedures completed Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 GAFI - CRM Platform Operational in OSS Branches Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 5.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 GAFI - Number of Online Business Registrations The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 New Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 GAFI - Sector licensing requirements consolidated/ published on GAFI Portal Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 479.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 GAFI - Capacity Building workshops for GAFI OSS staff completed Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 15.00 15.00 Revised Date 01-Jul-2015 31-Jan-2018 30-Jun-2019 IDA - Implementataion of reformed licensing processes completed Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 IDA - Risk based approach for industrial technical evaluation applied Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 IDA - Industrial Licensing System deployed in IDA branches Unit of Measure: Number Indicator Type: Custom The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Baseline Actual (Current) End Target Action Value 0.00 0.00 15.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 IDA - Online Industrial Land Allocation system deployed Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No No Yes Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 IDA - Industrial Developer Land Allocation framework designed and deployed Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes Revised Date 01-Jul-2015 31-Oct-2017 08-Dec-2018 IDA - Capacity building workshops for IDA branches staff completed Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 10.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 ERRADA - Number of Laws/ Regulations commented on Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 6.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 ERRADA - Private Sector consultation on regulatory reform mechanism applied Unit of Measure: Number Indicator Type: Custom The World Bank Equal Access and Simplified Environment for Investment (EASE) in Egypt (P153487) Baseline Actual (Current) End Target Action Value 0.00 0.00 5.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 ERRADA - Capacity building workshops for ERRADA staff completed Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 5.00 Revised Date 01-Jul-2015 31-Oct-2017 30-Jun-2019 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A1553 Effective 01-Jul-2018 30-Jun-2019 30-Oct-2019 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2016 0.00 0.00 2017 0.00 1,500,000.00 2018 0.00 1,600,000.00 2019 0.00 1,600,000.00 2020 0.00 300,000.00 2021 0.00 0.00 Note to Task Teams: End of system generated content, document is editable from here.