Private sector feasibility study project (PSFSP) 263-0112 : project assistance completion report (PACR)

Performance of the original implementing agency, the Government of Egypt's General Authority for the Investment and Free Zone (GAFI), was inconsistent, hampered by a cumbersome application review and approval process and general bureaucratic inertia. As a result, in 12/88 project implementation was assumed by the Egypt/U.S. Joint Business Council, which established the United States Investment Promotion Office (USIPO). Despite Egypt's difficult investment environment, USIPO increased the usage and effectiveness of the project until its PACD in 9/91. USIPO's small but private sector oriented staff, more experienced in serving U.S. businesses, were a critical factor in enabling USIPO to improve the range and quality of support services to serious U.S. investors. USIPO's general marketing of the project was only marginally better than GAFI's, but its follow-up with interested American companies made a significant difference. Even though GOE rules and regulations were still a disincentive for U.S. businesses, USIPO was able to complete 12 feasibility studies, 19 reconnaissance visits, and 6 investment promotion activities during its 18-month tenure, vs. GAFI's 10 sector profiles, 25 feasibility studies, 20 reconnaissance visits, and 5 approved projects in 9 1/2 years. The project teaches four lessons. (1) The GOE's economic policies, procedures for foreign investment, and expected return on investment are the most important factors affecting foreign investors' decisions. (2) Financial incentives such as cost sharing for feasibility studies and reconnaissance visits were useful to U.S. executives, but not critical to a decision to invest. They were appreciated more by smaller and medium size firms than by large ones. (3) A GOE entity is not the preferred vehicle for promoting U.S. investment in Egypt. (4) Project management took too much GOE, USIPO, and USAID staff time. Future projects should be bureaucratically leaner.