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Document of The World Bank Group FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No.: 94554-EG INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY Public Disclosure Authorized COUNTRY PARTNERSHIP FRAMEWORK FOR THE ARAB REPUBLIC OF EGYPT FOR THE PERIOD FY 2015-2019 NOVEMBER 20, 2015 Public Disclosure Authorized Egypt Country Management Unit Middle East and North Africa Region The International Finance Corporation The Multilateral Investment Guarantee Agency Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. The date of the last Interim Strategy Note (ISN) was June 30, 2012 CURRENCY EQUIVALENTS (Exchange Rate as of November 4, 2015) Currency Unit = Egyptian Pound (LE) US$1= 8.0 LE FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement KfW German Government Owned AfDB African Development Bank Development Bank (Kreditanstalt für ASA Advisory Services and Analytics Wiederaufbau) CAPMAS Central Agency for Public LE Egyptian Pound Mobilization and Statistics (National LPG Liquefied Petroleum Gas Statistics Agency) MENA Middle East and North Africa CAS Country Assistance Strategy MFI Microfinance Institutions CBE Central Bank of Egypt MIGA Multilateral Investment Guarantee CLR Completion and Learning Review Agency CPF Country Partnership Framework MOF Ministry of Finance CPFCR Country Partnership Framework MSME Medium and Small-Scale and Micro- Completion Report Enterprises DPF Development Policy Financing MWe Megawatts electricity DPG Development Policy Group OECD Organization for Economic EEHC Egypt Electricity Holding Company Cooperation and Development EGPC Egyptian General Petroleum PFM/PIM Public Financial/Investment Corporation Management EIB European Investment Bank PforR Program-for-Results EU European Union PPIAF Public- Private Infrastructure Advisory FDI Foreign Direct Investment Facility GCC Gulf Cooperation Council PPP Public-Private Partnerships GDP Gross Domestic Product PSD Private Sector Development GOE Government of Egypt SCD Systematic Country Diagnostic HIECS Household Income Expenditure and SHF Social Housing Fund Consumption Surveys SME Small and Medium Enterprises IBRD International Bank for Reconstruction SOE State Owned Enterprise and Development SSN Social Safety Net IDA International Development Association TA Technical Assistance IEG Independent Evaluation Group UAE United Arab Emirates IFAD International Fund for Agricultural UNDP United Nations Development Development Programme IFC International Finance Corporation USAID United States Agency for International IMF International Monetary Fund Development ISN Interim Strategy Note WBG World Bank Group WUA Water Users Association IBRD IFC MIGA Vice President: Hafez M. H. Ghanem Dimitris Tsitsiragos Karin Finkelston Director: Asad Alam Mouayed Makhlouf Ravi Vish Task Team Leader: Poonam Gupta Nada Shousha Paul Barbour ACKNOWELDGEMENTS The World Bank Group greatly appreciates the close collaboration of the Egyptian authorities, development partners, business groups, academia, civil society and other stakeholders in the preparation of this Country Partnership Framework. The strategy is the result of a team effort that relied on knowledge, experience, and guidance from non-Governmental partners across Egypt and individuals across the World Bank Group. The CPF was led by Poonam Gupta (MNCA3), Nada Shousha (CMEEC), and Persephone Economou and Paul Barbour (MIGA). Aliya Husain (MNCA3) prepared the Completion Report of Bank Group assistance during the period FY06-FY14; Husam Abudagga (MNC03) and Eman Wahby (MNAEC) were responsible for organizing WBG consultations for the CPF. The CPF comprised a core team consisting of Aliya Husain (MNCA3), Husam Abudagga (MNC03), Wael Afifi (CBCCE), Guido Rurangwa (MNCA3), and Asma Al-Hanshali (MNCYE), Gustavo Demarco (MNC03), Victoria Gyllerup (GWADR), Rapti A. Goonesekere (CBCCF), Luke Haggarty (CBCRM), Lorraine James (EACNQ), Dahlia Khalifa (GTCDR), Ahmed Kouchouk (GMFDR), Nehal El Kouesny (MNAEC), Bala Menon (MNC03), Bushra Ghulam Mohammad (CBCCE), Joshua McLellan Newell (MNADE), Rami Okascha (MNCA3), Bryanne Tait (CASEE), and Dalia Wahba (CNGS9). We also wish to thank the following people for their contributions: Maissa Abdalla (MNAEC); Alaa Abdel-Hamed (GHNDR); Laila Abdelkader (GFMDR); Dina Abu-Ghaida (GEDDR); Oyebimpe Adepoju (GENDR); Edouard Al-Dahdah (GGODR); Ipek Alkan (EACIQ); Waleed Alsuraih (GEEDR); Amira Hussein Aly Aboulkheir (GTCDR); George Anayiotos; Sara Al Nashar(GMFDR); Nabila Assaf (GTCDR); Karim Badr (GFMDR); Olivier Le Ber (GTIDR); Benoit Blarel (GENDR); Charles Cormier (GEEDR); Malak Draz (CASMP); Yasser El-Gammal (GSPDR); Hazem El-Wassimy (GTCDR); Muneer Ferozie (CASMP); Thomas Gratowski (MNCA3); Sherif Hamdy (GTCDR); Leonard Hessling (GGO17); Ann-Sofie Jespersen (OPSRE); Amira Kazem (GEDDR); Piers Merrick (MNADE); Sarah Andrei Mikhnev (GTCDR); Felix Neugebauer (MNCO3); Africa Olojoba (GENDR); Harry Patrinos (GEDDR); Luis Prada (GGODR); Xavier Reille (CFGA3); Alaa Sarhan (GENDR); Maria Sarraf (GENDR); Andreas Schliessler (GTIDR); Steven Schonberger (GWADR); Maria Vagliasindi (MNC05); Caroline Van den Berg (GWADR); Manuel Vargas (GGODR); Hisham Waly (GGODR); Tatiana Weber (MNC03); Caitlin Whittemore (MNADE); and Sylvia Zulu (CASDR). We are also deeply grateful to our peer reviewer, Dr. Ziad Bahaa-Eldin, Founder and Member of the Board of Directors of the Ahmed Bahaa-Eldin Cultural Foundation and Senior Counsel of Hashem & Partners, a business law firm, and to Ms. Laurie Effron, consultant, to the CPF team. ARAB REPUBLIC OF EGYPT FY2015-2019 Country Partnership Framework TABLE OF CONTENTS EXECUTIVE SUMMARY ..................................................................................................................... i I. INTRODUCTION .......................................................................................................................... 1 II. REGIONAL CONTEXT AND WBG ROLE ........................................................................... 1 III. COUNTRY CONTEXT AND DEVELOPMENT AGENDA .............................................. 2 A. Social and Political Context ....................................................................................................... 2 B. Economic Developments ............................................................................................................ 2 C. Poverty Profile ............................................................................................................................. 5 D. Development Challenges to Eliminating Extreme Poverty and Boosting Shared Prosperity .................................................................................................................................... 6 IV. THE GOVERNMENT’S STRATEGY ................................................................................... 15 V. WORLD BANK GROUP PROPOSED PARTNERSHIP STRATEGY ......................... 18 A. Lessons from CAS Completion and Learning Review (CLR), Independent Evaluations, and Stakeholder Consultations ............................................................................................... 18 B. Stakeholder Consultations ........................................................................................................ 19 C. Overview of World Bank Group Strategy ............................................................................. 20 D. Implementing the Country Partnership Framework ............................................................. 40 VI. MANAGING RISKS TO THE CPF PROGRAM ...........................................................44 ANNEXES Annex 1: CPF Results Framework......................................................................................................... 47 Annex 2: Completion and Learning Review ........................................................................................ 66 Annex 3: Donor Activities .................................................................................................................... 102 Annex 4: Selected Indicators for Bank Portfolio Performance and Management ......................... 105 Annex 5: Egypt Operations Portfolio (IBRD/IDA and Grants) ....................................................... 106 Annex 6: Statement of IFC’s Held and Disbursed Portfolio ............................................................ 107 Annex 7: SCD priorities and WBG proposed interventions under the CPF .................................. 108 TABLES Table 1: Selected macroeconomic indicators, actual and projected, 2006 – 2019 ............................ 3 Table 2: WBG Pillars and proposed lending interventions ................................................................ 21 Table 3: WBG Pillars and Proposed Bank Analytic and Advisory Services, FY16-17 ................. 21 Table 4: Egypt Portfolio at a glance, FY09-FY15 ............................................................................... 42 Table 5: Systematic Operations Risk-Rating Tool (SORT) ............................................................... 44 BOXES Box 1: WBG strategy: Shifts from past support ................................................................................. 22 Box 2: A Simple Framework for Improved Governance