AFRICAN DEVELOPMENT BANK ARAB REPUBLIC OF EGYPT LINE OF CREDIT TO THE NATIONAL BANK OF EGYPT (NBE) PROJECT COMPLETION REPORT INFRASTRUCTURE DEPARTMENT JUNE 2006 NORTH, EAST AND SOUTH TABLE OF CONTENTS CURRENCY EQUIVALENTS, ABBREVIATIONS, ANNEXES PROJECT MATRIX BASIC PROJECT DATA i - ii EXECUTIVE SUMMARY iii - v 1. INTRODUCTION 1 2. PROJECT OBJECTIVE AND FORMULATION 2 2.1 Sector Goal 2 2.2 Project Objective 2 2.3 Project Description 2 2.4 Project Formulation 2 3. PROJECT EXECUTION (ACTIVITIES/COMPONENTS) 3 3.1 Effectiveness and Start-Up 3 3.2 Modifications 3 3.3 Implementation Schedule 4 3.4 Reporting 4 3.5 Procurement 4 3.6 Financial Sources and Disbursements 4 4. PROJECT PERFORMANCE AND RESULTS 5 4.1 Overall Assessment 5 4.2 LOC’s Operating Results 6 4.3 Institutional Performance: The NBE 7 4.4 Loan Conditions and Covenants and their Fulfillment 12 5. SOCIAL ECONOMIC AND ENVIRONMENTAL IMPACT OF THE PROJECT 13 5.1 Social and Economic Impact 13 5.2 Environmental Impact 14 6. PROJECT SUSTAINABILITY 16 7. PERFORMANCE OF THE BANK AND THE BORROWER 16 7.1 Performance of the Bank 16 7.2 Performance of the Borrower and Executing Agency 16 8. OVERALL PERFORMANCE AND RATING 16 9. CONCLUSIONS, LESSONS LEARNED AND RECOMMENDATIONS 17 9.1 Conclusion 17 9.2 Lessons Learned 17 9.3 Recommendation 18 This Project Completion Report (PCR) has been prepared by Mr. Taiwo Adeniji, Chief Financial Analyst, ONIN.1 (Ext. 2351) and Mr. Rachid Ghozali, Consultant Financial Economist on the basis of a PCR preparation mission undertaken in January/February 2006. Any enquiries related to the report should be addressed to the author or to Mr. I. Lobe Ndoumbe, Manager, ONIN.1 (Ext.2163). CURRENCY EQUIVALENTS, ABBREVIATIONS AND ANNEXES Currency = Egyptian Pound (LE) Appraisal PCR (July 2002) (February 2006) 1 UA = LE 5.80797 LE 8.2749 1 US$ = LE 4.36538 LE 5.725 1UA = USD 1.33046 USD 1.43 TABLES Table No. Title Page No. 4.1 LOC Operations Results by Sector 6 4.2 NBE’s Loans by Customer Category (%) 8 4.3 Distribution of NBE Portfolio by Economic Sector 8 4.4 Structure of the Assets and Liabilities of NBE (2001-2005) 9 4.5 Funding and Liquidity Ratios of NBE (2002-2005) 10 4.6 NBE’s Profitability/Earnings Quality Ratios (2001-2005) 11 4.7 NBE’s Loan Quality Indicators (2000-2005) 11 BOXES No. Title Page No. Box 1 El Morshedy Company for Weaving and Spinning 6 Box 2 Egyptian Salts and Minerals Company (EMISAL) 15 ANNEXES Annex No. Title No. of Pages 1. Map of Egypt 1 2. NBE’s Current Organization Structure 1 3. NBE’s Historical Financial Statements 2 4. Performance Evaluation and Rating 2 5. List of Documents Consulted 1 ABBREVIATIONS ADB African Development Bank AIG American International Group, Inc. ALCO Asset and Liability Management Committee ATM Automatic Teller Machine BOOT Build Own Operate and Transfer BOT Build Operate and Transfer Bp Basis point (one hundredth of a percent) CBE Central Bank of Egypt CGC Credit Guarantee Company CIB Commercial International Bank CIDA Canadian International Development Agency CIIC Commercial International Investment Company CMA Capital Markets Authority EDBE Export Development Bank of Egypt EIB European Investment Bank ERSAP Economic Reform and Structural Adjustment Program EU European Union GDP Gross Domestic Product GNP Gross National Product IDBE Industrial Development Bank of Egypt IFC International Finance Corporation IMF International Monetary Fund IMP Industry Modernization Program LOC Line of Credit NBE National Bank of Egypt NGO Non-Governmental Organization NIB National Investment Bank NPLs Non-Performing Loans. ROA Returns on Assets ROE Return on Equity SMEs Small and Medium Enterprises TBs Treasury Bills USAID United States Agency for International Development USD United States Dollar PROJECT MATRIX COUNTRY : EGYPT PROJECT TITLE : LINE OF CREDIT TO NATIONAL BANK OF EGYPT PROJECT COMPLETION REPORT DATE OF SUMMARY : March 2006 NARATIVE VERIFIABLE MEANS OF ACTUAL ASSUMPTIONS DESCRIPTION INDICATOR VERIFICATION PERFORMANCE A. SECTOR GOAL 1.1 Contribution of the (Goal to Supergoal) A.1 Develop and expand industrial sector to 1.1 National Statistics 1.1 The industrial sector the industrial sector to GDP increases from yearbook achieved good 1.1 Enabling enable the sector to lead the present level of growth over the last environment for the economic growth, 19% over the next 1.2 Central Bank of four years, at an conduct of business by employment creation and five years Egypt’s Quarterly annual rate of 9.5%. the private sector is thus contribute to the and Monthly The sector’s provided through reform Government’s poverty 1.2 Contribution of the Economic Reviews. contribution to GDP programs. reduction objectives. sector to exports also remains at about increases over the 1.3 ADB/World Bank 19% 1.2 Government’s next five years Country Profiles 1.2 The estimate of job continuance of fiscal and monetary policies A.2 Enhance private creation by the 1.3 Significant new sector development by private sector over favorable to industrial and employment created tourism development. supporting small and the last four years is in the industrial medium enterprises. 225,000 p.a. less sector over the next than the GRE’s job five years creation target of 1.4 Increased access of 600,000 p.a. SMEs to investment 1.3 By providing long- capital. term foreign loans to SMEs, the LOC made a good contribution to increasing the access of SMEs to investment capital. B. PROJECT 1.1 The LOC financed OBJECTIVE 1.1 The number and 1.1 NBE’s project 76 SME subprojects 1.1 NBE would continue The project aims at types of subprojects implementation in tourism, to strengthen its assisting the financed under the progress reports industrial, services project evaluation development of the line of credit. and social sectors. capacities in order to industrial and tourism 1.2 ADB’s Supervision Both new and effectively industries in Egypt by Reports. expansion projects implement the line providing financial were financed. of credit. 1.3 NBE’s annual resources to NBE for on 1.2 The subprojects are audited accounts and lending as medium- and economically viable, reports. long-term loans to viable and all are operating investment projects, with satisfactorily with special focus on SMEs. good loan repayment performances. C. PROJECT OUTPUTS 1.1 Up to 100 industrial 1.1 NBE’s project 1.1 Only 76 subprojects 1.1 Sustained demand 1. Financial resources and tourism projects implementation were financed, less for NBE’s financial provided to viable financed under the progress reports. than the 100 products. investment proposals line of credit. 1.2 ADB’s Monitoring projected at leading to the setting and supervision appraisal. 1.2 Subprojects well up or expansion of 1.2 More than 1000 new reports. 1.2 The subprojects prepared, industrial and sustainable jobs 1.3 NBE’s annual achieved higher implemented and tourism businesses. created by the sub- report. development impact managed. projects. 1.4 Borrower’s and 2. Viable sub-projects, than estimated at ADB’s project in industrial and appraisal. The completion reports. tourism sectors subprojects together which comply with created/sustained environmental 10,015 jobs, against standards. 1,000 estimated at appraisal, due to their labor-intensive nature. D. ACTIVITIES Drawdowns on the Line Sub-projects’ preparation, 1.1 Loan & Guarantee 1.1 Subprojects were 1.2 Bank conditions of of credit of US$ 140 Agreements signed well prepared by loan effectiveness appraisal and million. approval by NBE. with the Bank. NBE, and approved fulfilled in time by NBE 1.2 Loan Disbursement by ADB. 1.2 Borrower adheres to Sub-projects review and records. 1.2 NBE fulfilled agreed conditions for the approval by ADB. 1.3 External audit ADB’s loan implementation of the reports. Disbursement approved conditions promptly, LOC. 1.4 ADB monitoring and effected by and the LOC was and supervision ADB. fully disbursed. reports Monitoring of sub- 1.3 LOC was well projects monitored through regular supervision missions by ADB. i BASIC PROJECT DATA 1. Loan Number : 2000120000104 2. Borrower : National Bank of Egypt (NBE) 3. Guarantor : Central Bank of Egypt (CBE) 4. Executing Agency : National Bank of Egypt (NBE) A. LOAN 1. Amount: USD 140 million 2. Interest Rate Type: 6 months US $ LIBOR plus a lending spread of 55 basis points 3. Commitment Charge 0.50% per annum 4. Repayment Period 14 years 5. Grace Period 4 years 6. Loan Negotiation Date 3 to 4 September 2002 7. Loan Approval Date 23 October 2002 8. Loan Signature Date 27 March 2003 9. Date of Entry into Force 22 May 2003 B. PROJECT DATA Appraisal Estimate Actual 1. Total Cost: USD 140 million USD 140 million 2. Date of First Disbursement March 2003 27 May 2003 3. Date of Last Disbursement December 2005 30 December 2004 4. Commencement of Project March 2003 May 2003 Implementation Activities 5. Completion of Project Implementation December 31 December Activities 2005 2004 C. PERFORMANCE INDICATORS 1. Cost Overrun/Underrun N/A 2. Time Overrun/Underrun Nil - Slippage on Effectiveness 2 months - Slippage on Completion Date (12 months) - Slippage on Last Disbursement (12 months) - No of Extensions of Last Disbursement Date Nil 3. Project Implementation Status Completed 4. Institutional Performance Satisfactory 5. Contractor Performance N/A 6. Project Economic Performance Satisfactory 7. Number of Subprojects 76 ii D. MISSIONS Type No of Composition Man-days Persons Identification 2 Financial Analyst, Country Economist 20 Preparation 2 Financial Analysts 20 Appraisal 4 Financial Analysts (2), Treasury Officer, 40 Legal Counsel Launching 2 Financial Analyst, Legal Counsel 10 Supervision (Oct 1 Financial Analyst, 7 2003) Supervision 1 Internal Auditor 7 (December 2003) Supervision 3 Division Manager, Financial Analyst, 30 (May/June 2004) and Disbursement officer PCR (Jan.