OECD Investment Policy Reviews: Egypt 2020

Chapter 7. Toward sustainable economic development through promoting and enabling responsible business conduct

Abstract

This chapter provides an overview of the responsible business conduct (RBC) landscape in Egypt, outlining steps taken by the government to promote and enable responsible business practices. It provides concrete examples of actions the government could take to facilitate implementation of RBC standards and foster trade and investment in key economic sectors. It proposes policy recommendations to further enhance the climate for RBC, with a view to improving economic and sustainability outcomes and supporting Egypt’s development objectives.

Summary and policy recommendations

Promoting and enabling responsible business conduct (RBC) is of central interest to policymakers wishing to attract quality investment and ensure that business activity in their countries contributes to broader value creation and sustainable development. RBC principles and standards set out an expectation that all businesses avoid and address negative impacts of their operations, while contributing to sustainable development where they operate.

RBC expectations are affirmed in international principles and standards and increasingly in legislation. Recent years have seen a proliferation of high-level statements, including by the G7 and G20, national legislation, economic instruments and industry initiatives on RBC. Policy action has focused on promoting the integration of RBC in core business operations, including also in how companies manage and deal with their supply chain. Any company that wishes to integrate in the global economy and participate in trade and investment must be aware of the fact that their buyers, clients, and partners may have various obligations when it comes to RBC. Broadly speaking, RBC is also an entry point for any company that wishes to contribute to the Sustainable Development Goals (SDGs) or to achieve specific economic and sustainability outcomes.

The notion that businesses should contribute to society is part of Egyptian business culture and is rooted in local traditions. A number of programmes and initiatives that aim to address societal challenges from a business perspective exist in Egypt. They have predominantly been based on philanthropy or social investments, but, in line with global trends, awareness of RBC in Egypt is evolving to align with the understanding that impacts on society and the environment are also a matter of core business operations.

The government has taken steps to support various initiatives and promote RBC. Egypt is an adherent to the OECD RBC instruments since 2007 and the establishment of a National Contact Point (NCP) on RBC is an important milestone in this endeavour. NCPs are agencies established by governments to promote the OECD Guidelines for Multinational Enterprises, and to handle cases as a non-judicial grievance mechanism. NCPs have a mandate to consider RBC issues and impacts in global supply chains and can receive cases from any individual or organisation with a legitimate interest in the matter. They are in that sense distinct from mechanisms existing in Egypt for the settlement and resolution of disputes that may arise between investors and the state, or among investors (See Chapter 3). Although the functioning of Egypt’s NCP has not been consistent over the years, the continued co-operation with the OECD in the context of a country programme aimed at enhancing the investment climate and participation in the OECD Working Party on RBC offers an opportunity to renew various commitments on RBC, engage in dialogue with peers, and benefit from international good practices on RBC.

The government has every interest in using the recent momentum on RBC in the country to promote a wide dissemination and implementation of internationally recognised RBC standards. This is especially true as a way to ensure that businesses conduct due diligence to identify, prevent, avoid and mitigate environmental and social risks which can have a significant impact on key economic sectors. For example, in the garment industry, which is a strategic industry in Egypt, RBC can be instrumental in building a reputation for quality and sustainability that is increasingly essential. In infrastructure projects, risk-based due diligence can contribute to minimising potential environmental and social impacts.

Implementing RBC standards requires broad engagement with businesses but also with all stakeholders, including relevant government ministries and agencies, NGOs and trade unions. The government can take strategic actions to create an enabling environment for all relevant stakeholders to contribute to the design and implementation of RBC standards. A particular opportunity exists to promote collaborative initiatives. The policy recommendations listed below address both opportunities on RBC in depth and in breadth.

Policy recommendations

• Engage with other NCPs in order to build the capacities of the Egyptian NCP. The NCP is an instrumental tool in the government policy toolbox that has so far been under-utilised. A well-functioning NCP can be instrumental for engagement with business and other stakeholders due to its unique non-judicial mandate and it can support the sound design and implementation of RBC-related policies.

• Undertake a voluntary NCP peer review by 2023. In line with calls from the international community and commitments made in June 2017 at the OECD Ministerial Council Meeting, Egypt is encouraged to undergo a voluntary peer review of its NCP. Peer reviews provide an important means to assess the practical aspects of NCP functioning and have been used by various government to assess opportunities for further improvements.

• Develop a National Action Plan on RBC, in line with international best practice and in wide consultation with stakeholders. A NAP process would be an opportunity to build multi-stakeholder support in key areas for Egypt’s development trajectory and in complex areas where action by one stakeholder would not be enough. A consultative and inclusive NAP process is an opportunity to strengthen knowledge about the linkages of various policy areas that address business practices in the country and help build the capacity of local industry to participate in global supply chains.

• Facilitate meaningful stakeholder engagement in the design and implementation of RBC policies and processes. Particular attention should be paid to ensuring meaningful engagement in the early stages of policy development. In the planning and implementation of state-led projects, such as infrastructure projects, it is particularly important to engage meaningfully with affected stakeholders.

• Support, enable and promote RBC due diligence among businesses. Egypt should explicitly support multi-stakeholder initiatives and promote broad dissemination and implementation of the OECD due diligence instruments. In particular, facilitating dialogue between various stakeholders in the garment sector and supporting application of the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector in Egyptian factories would help improve industrial relations and enhance competitiveness of the garment sector.

• Require the integration of RBC due diligence standards at all stages of infrastructure project life cycle, including in tendering and contracting processes. Potential contractors and suppliers should be explicitly asked to follow international standards on RBC such as the OECD Guidelines and UN Guiding Principles and to demonstrate that they do so.

Scope and importance of responsible business conduct

Responsible business conduct (RBC) principles and standards set out an expectation that businesses should avoid and address negative impacts of business activities, while contributing to sustainable development in countries where they operate. RBC is an integral part of a quality investment climate and, as such, is at the heart of the OECD Policy Framework for Investment underpinning this review. In recent years, RBC has been a priority policy area in the international economic agenda (Box 7.1).

Box 7.1. Rising expectations and demands on RBC

The financing needs for achieving the SDGs, as well as the essential role of the private sector as a driver of economic growth and job creation, have placed businesses at the centre of the global development agenda. UN member states have also committed to foster a well-functioning business sector and protect labour rights and environmental and health standards in accordance with relevant international standard (United Nations, 2015).

High-level commitments at G20 and G7 have also made it clear that RBC has become a priority in the international agenda. In September 2018, G20 Ministers of Labour and Employment committed to promote due diligence and transparency in global supply chains, and encouraged businesses to consider the 2018 OECD Due Diligence Guidance for Responsible Business Conduct (G20, 2018). In July 2017, G20 Leaders committed to foster the implementation of labour, social and environmental standards and human rights in line with internationally recognised frameworks, including the OECD Guidelines. The G20 Leaders' Declaration also expressed support for access to remedy and, where applicable, non-judicial grievance mechanisms, such as the NCPs, and underlined the responsibility of businesses to exercise due diligence (G20, 2017). In June 2015, G7 leaders pledged to lead by example to promote international labour, social and environmental standards in global supply chains; to encourage enterprises active or headquartered in the G7 to implement due diligence; and to strengthen access to remedy (G7, 2015).

RBC expectations are also reflected in domestic legislation. Several countries have passed laws to strengthen due diligence requirements to address supply chain and sustainability risks. The UK Modern Slavery Act, adopted in 2016, requires that commercial organisations prepare an annual statement and report on their due diligence processes to manage the risks of slavery and human trafficking within their operations and supply chains (UK, 2015). Australia passed a similar act on 29 November 2018, which includes expectations for the government itself to report on its own activities. In France, since 2017, the French Due Diligence law requires certain companies to develop and implement due diligence plans to identify and address risks related to human rights, fundamental freedoms, health and safety, and the environment (French Government, 2017). In the United States, the US Trade Facilitation and Trade Enforcement Act of 2015 repealed the exceptions to the prohibition on imports of goods mined, produced or manufactured in any foreign country by forced or indentured child labour, including child labour (US CBP, 2016 and 2018).

RBC is also increasingly referenced in various economic instruments, such as trade or co-operation agreements. For example, the EU commonly includes RBC in its Trade and Sustainable Development chapters. The EU Trade for All policy aims to respond to consumers’ concerns by reinforcing CSR initiatives and due diligence across supply chains (EC, 2015). The OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence encourages members, via their export credit agencies (ECAs), to promote the Guidelines, consider the outcomes of NCP cases when undertaking project reviews, as well as to give consideration to policy coherence with the Guidelines. The majority of ECAs of OECD member countries have incorporated reference to the Guidelines within their policies and actively promote the Guidelines as a tool for RBC. Some of them, such as Austria, Canada, the Netherlands and Slovenia, have reported that they have formal processes in place for considering any statement made public by their NCPs when undertaking project due diligence. In addition, some ECAs exchange information with their NCPs on specific instances. For example, the US ECA is a member of the US NCP Interagency Working Group and participates in regular Group meetings to discuss specific instances (OECD, 2017).

RBC means integrating and considering environmental and social issues within core business activities, including throughout the supply chain and business relationships. Although RBC is sometimes used interchangeably with corporate social responsibility (CSR), it is understood to be more comprehensive and integral to core business than what is traditionally considered CSR (mainly philanthropy). A key element of RBC is risk-based due diligence – a process through which businesses identify, prevent and mitigate their actual and potential negative impacts and account for how those impacts are addressed.

The main OECD instrument for promoting and enabling RBC is the OECD Guidelines for Multinational Enterprises (the Guidelines). The Guidelines are a part of the OECD Declaration on International Investment and Multinational Enterprises (the Declaration), a policy commitment to provide an open and transparent investment environment and to encourage the positive contribution businesses can make to economic and social progress. Egypt adhered to Declaration in 2007 and as such has committed to promote and implement the Guidelines.

The Guidelines are practical recommendations from governments to businesses on how to act responsibly. They cover all areas of business responsibility, including information disclosure, human rights, employment and labour, environment, anti-corruption, science and technology, competition, taxation and consumer interests. To support implementation of the Guidelines, the OECD has developed due diligence guidance which provide practical recommendations to businesses on how to identify and respond to risks of adverse impacts associated with particular products, regions, sectors or industries1.

Because of their breadth and scope, the Guidelines are relevant to a number of policy areas on RBC and are referenced in various OECD instruments including the Policy Framework for Investment, the G20/OECD Principles on Corporate Governance, the OECD Guidelines for State-owned Enterprises, the OECD Anti-bribery Convention, or the Recommendation of the Council on Principles for Private Sector Participation in Infrastructure. The Guidelines are also linked with other key international standards, notably the UN Guiding Principles on Business and Human Rights (UN Guiding Principles) and the fundamental International Labour Organisation (ILO) Conventions.

To date, 36 OECD members, as well as 12 additional economies – including Egypt, Jordan, Morocco and Tunisia – have adhered to the Guidelines. Governments that adhere make a binding commitment to implement them and encourage their use. The Guidelines have a unique implementation mechanism – the National Contact Points (NCPs) – which are agencies established by governments. Their mandate is twofold: to promote the Guidelines, and related due diligence guidance, and to handle cases (referred to as “specific instances”) as a non-judicial grievance mechanism. Adhering governments have an obligation to establish an NCP to further the effectiveness of the Guidelines.

Awareness and understanding of RBC is deepening in Egypt

The notion that businesses should behave ethically and contribute to the society is intrinsic in Egyptian business culture. One of the five pillars of Islam is Zakat, or an obligation of charity which is a common practice of organisations and individuals in Egypt where 90% of the population identify with the religion and many companies donate funds to charities. A corporate philanthropy concept, Awqaf, dates back to the 11^th century and is a charitable endowment under Islamic law which typically involves donating assets for religious or charitable purposes (Jamali, 2017).

Rooted in this culture and traditions, awareness of various aspects of RBC is not new in Egypt. While philanthropy and social investments tend to be the main form of engagement by businesses, understanding of RBC is gradually evolving towards a more comprehensive approach that looks at how core business operations affect society (El Shobargi, n.d; Kindornay et al., 2018). A 2016 analysis of the terminology used in various CSR events between 2007 and 2015 reveals an increased focus on issues that go beyond charity such as labour rights and environmental issues (UNDP, ECRC, 2016).

The evolution of various business initiatives align with that trend. For example, the Egyptian chapter of the UN Global Compact Network was launched in 2004, following the global launch of the network in 2000. An early initiative by the Egyptian Mansour Group and UNDP Egypt, the network counts 84 active members as of July 2019, which represents one of the highest participation levels in the region (UNGC, 2019). In 2008, UNDP, the government-initiated Industrial Modernization Centre (IMC) and the Egyptian Institute of Directors (EIoD) jointly launched the Egyptian Corporate Responsibility Center (ECRC), which was given a mandate to empower businesses to develop sustainable business models and to improve the national capacity to design, apply and monitor sustainable corporate social responsibility-related policies (ECRC, 2017). The Federation of Egyptian Industries (FEI), in cooperation with the ILO, also established a unit dedicated to CSR in 2015 to provide FEI members with expertise and technical assistance. The unit organised the first CSR matchmaking in April 2017, where the Cairo CSR Declaration was announced to showcase commitment to CSR and put forth principles for promoting CSR in Egypt (OECD, 2017c).

Egypt’s businesses have also been early adopters of initiatives in the financial sector, where attention has grown exponentially in recent years. In March 2010, the Egyptian Stock Exchange (EGX), in partnership with Standards and Poor’s, launched the S&P EGX ESG to track the performance of Egyptian companies listed on the Egyptian stock exchange that demonstrate leadership in environmental, social and corporate governance (ESG) issues (Hebatallah, 2017). In 2016, the EGX published a Model Guidance for Reporting on ESG performance and the SDGs, to help listed companies on EGX in integrating ESG information into effective capital market communication. The guidance recognises that many investment funds now seek investment in more sustained, socially and environmentally responsible listed companies (EGX, 2016). In January 2019, Egypt’s Financial Regulatory Authority joined the UN Global Compact, explicitly expressing support to the ten principles of the Compact with respect to human rights, labour, environment and anti-corruption (UNGC, 2019).

Despite these various initiatives, several studies have pointed out that there is significant opportunity to further link and integrate RBC within core business operations widely in the corporate culture. In addition, while the size and scale of initiatives related to RBC have increased, they are more widely prevalent within large businesses and multinational enterprises. As a result, understanding of RBC may vary among businesses, especially of different sizes, and between different stakeholders. In particular, meaningful engagement with local communities is an important aspect of RBC that has not been at the forefront of discussions (UNDP, ECRC, 2016; ILO, 2015).

The government has committed to promote and enable RBC

Egypt’s 2015 Sustainable Development Strategy - Vision 2030 recognises the important role of the private sector in achieving the SDGs. The strategy notably aims to activate public private partnerships to support and stimulate innovation; encourage the private sector’s contribution to technical education development; and encourage civil society and private sector participation in preserving and protecting biodiversity (Government of Egypt, 2017a). This expectation is also reflected in legislation with the Investment Law of 2017 which underlines that all investments shall make a “[…] contribution to the comprehensive and sustainable development of the State”. Social objectives and protection of the environment are included in the principles expected to guide all investments, with tax incentives envisioned as a tool to promote these objectives. Art. 15 of the law states that a maximum of 10% of net profit can be dedicated in this regard. Such projects may comprise environmental protection, health care, technical education, social services, and other developmental initiatives (Government of Egypt, 2017b).

Egypt’s formal adherence to the Guidelines in 2007 and establishment of an NCP constitute important milestones in the promotion of RBC principles and standards in the country. Since then, the government supported several projects to promote RBC, such as annual CSR forums. Seven CSR forums were held between 2015 and 2018 to integrate efforts by the government, business community and civil society organisations to promote CSR in Egypt (Egypt CSR Forum, 2019). The last edition of the CSR Forum, held in April 2019, focused on the integration of sustainability considerations into core business strategies (Egypt CSR forum, 2019). In 2018, the Ministry of Investment and International Cooperation (MIIC) launched a contest to select the leading companies in the field of CSR. Companies are assessed based on environmental, social and governance criteria and compliance with international CSR standards. The winning companies receive incentives including visibility in the media and on governmental web portals, promotion in conferences, and the allocation of a liaison officer in an Investor Service Centre to provide dedicated support and facilitate administrative procedures (MIIC, 2018a).

Although the Egyptian NCP’s activity has been sporadic since 2008 (Section 7.4.3), the appointment, in 2019, of a contact person within MIIC, demonstrated renewed efforts to promote RBC in Egypt. Ensuring that an effectively functioning NCP is in place is essential to support wide dissemination of the Guidelines, engage with stakeholders on RBC, and strengthen accountability. The government has an opportunity to build on the progress made and develop a robust NCP in support of its commitment to foster a wide understanding and adoption of international RBC standards in the country.

Actively promoting and implementing RBC principles and standards can improve economic and sustainability outcomes and support Egypt’s development objectives

Building on the efforts already undertaken by the government to promote RBC, this section provides concrete examples where the government could foster implementation of RBC standards to support further trade and investment in key economic sectors and to ensure that the risk perceptions of foreign investors looking to invest in Egypt are well-founded.

Attracting investment, facilitating trade, and participating in the global economy

The impetus to promote RBC among Egyptian businesses is not only a social matter but also an economic one. Companies that want to participate in global supply chains must be aware of the global expectations on RBC. For example, in the UK, which was Egypt’s largest foreign direct investor in 2017 (See Chapter 1), it is a legal requirement for companies of a certain size as of 2015 to prepare an annual report on modern slavery and human trafficking, indicating the steps taken to ensure that modern slavery is not occurring in the companies’ supply chain or business operations (Box 7.1).

The EU, which is both Egypt’s largest import and export partner, has integrated RBC principles and standards in a number of policies, legislations and economic instruments. The EU Trade for All policy includes objectives to reinforce CSR initiatives and due diligence across the production chain (EC, 2015). EU Directive 2014/95/EU on non-financial disclosure requires that certain companies disclose non-financial and diversity information, and encourages businesses to rely on relevant frameworks such as the Guidelines to provide this information (European Parliament, 2014). Binding sustainability provisions have been included in all EU Free Trade Agreement negotiations since 2011 (Business Europe, 2017). In 2013, the EU and Egypt started discussions to widen the existing trade agreement through the completion of the Deep and Comprehensive Free Trade Agreement (Council of the Association between the EU and Egypt, 2017), which could increase GDP by 1.8% in Egypt, and an estimated increase of 25% for both imports and exports in the long run (European Commission, 2016). Any supplier to EU businesses that integrates internationally recognised RBC instruments like the OECD Guidelines will have a comparative advantage over those that do not as they can more easily address concerns about environmental, social, human rights or labour issues that may come up in the due diligence processes of MNEs when assessing country and supplier risks.

Furthermore, various studies have demonstrated that RBC enhances the financial performance of businesses that implement RBC principles and standards. Empirical evidence from a study led by the OECD on 6 500 companies showed that the “social score” – a measure of a company's capacity to generate trust and loyalty with its workforce, customers and society – had a highly-significant positive effect on companies’ return on equity and return on assets (OECD, 2017d). This business case is obvious when looking at Egyptian companies. Figure 7.1 shows a comparison between S&P EGX ESG with the EGX100, which shows that more responsible companies perform better. The EGX100 tracks the performance of 100 large companies in a variety of sectors, while the S&P EGX ESG index includes 30 companies leading on environmental and social criteria, from the pool of the EGX100 Egyptian companies screened annually (Hebatallah, 2017; EIOD, 2010)2.

Figure 7.1. Performance of the S&P EGX ESG vs EGX100

Source: OECD Secretariat based on data retrieved from the Egyptian Stock Exchange. http://www.egx.com.eg

Therefore, embedding RBC into Egypt’s business culture and facilitating businesses in meeting RBC expectations is important to ensure participation in global supply chains in the long term and to achieve sustainable economic growth. To support implementation of international RBC standards, the OECD has developed guidances for businesses on how to implement the recommendations of the Guidelines which provide practical recommendations to help businesses identify and respond to risks of adverse impacts associated with particular products, regions, sectors or industries. As an adherent to the Declaration, Egypt has committed to promote the use of these instruments. Translating these guidances, starting with the OECD Due Diligence Guidance for Responsible Business Conduct, and ensuring their wide dissemination can facilitate the integration of Egyptian firms in global supply chains and give them a competitive advantage.

Supporting collaborative initiatives for a sustainable textile supply chain

One sector where particular attention to promoting RBC would be useful is the garment industry, due to its importance in Egypt’s trade and investment portfolio. In 2017, the textile industry alone contributed 3% to the country’s GDP, and employed approximately one-third of the industrial workforce (with about one-half being women, higher than national average of 23% (Oxford Business Group, 2018a; ILO, 2017b; World Bank, 2018a). Textiles were the largest export commodity after mineral products, accounting for 12% of Egypt’s total exports (UN Comtrade, 2017). Egypt’s textile industry is vertically integrated, with the entire production process – from the cultivation of cotton to the production of yarns, fabrics and ready-made garments – carried out domestically (GAFI, 2019). RBC risks occur throughout this supply chain and the implementation of the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector can help to address them.

The guidance highlights that cotton harvesting often employs high rates of informal seasonal migrant workers and is exposed to risks of child labour (OECD, 2017e). In Egypt, cotton production has traditionally been a key industry, with its reputation of quality making it an international luxury standard (Oxford Business Group, 2016). Reports highlighting the presence of child labour in agriculture and in cotton production in particular have surfaced since the early 2000s. The National Child Labour Survey conducted in 2010 by the Egyptian Central Agency for Public Mobilisation and Statistics (CAPMAS) estimated that 9.3% of Egyptian children were engaged in child labour, nearly one third working in agriculture. According to the same survey, 89.3% of child labourers worked in hazardous conditions (CAPMAS, 2010). In 2001, the international NGO Human Rights Watch estimated that over 1 million children between the ages of 7 and 12 were working in cotton pest management, often forcibly and in hazardous conditions (HRW, 2001). In 2015, according to the UNESCO Institute of Statistics, 6.7% of children in the age group 5-14 were working overall, with 52% working in agriculture, including cotton production (Khatab et. al., 2019).

Ensuring that Egypt’s cotton production is free of child labour and any form of modern slavery is paramount in all regards – including respecting Egyptian law, meeting international human rights standards and commitments, developing an educated workforce, and participating in global supply chains. The Egyptian government has already taken important steps to fight child labour. The National Action Plan for Combating the Worst Forms of Child Labour in Egypt and Supporting Family for 2018-2025 includes activities targeting businesses on how to detect, mitigate and end child labour in business and in supply chains (Box 7.2). The government should consider clustering participants by industry and tailoring activities to the specific risks associated with each sector. Basing such activities on internationally recognised RBC due diligence standards can help Egyptian businesses and suppliers communicate with their buyers according to the same language and expectations on how they are addressing these phenomena. Additionally, the guidance can be useful in terms of building capacity and common expectations on all relevant stakeholders

Setting and communicating clear expectations more broadly about what constitutes RBC is key to ensure the sustainability of Egypt’s cotton industry and maintain its reputation. In 2016, an announcement by the Cotton Egypt Association (CEA) that 90% of global supplies branded as Egyptian cotton were fake led to increased scrutiny on Egyptian sourced cotton by international retailers. That same year, Egypt’s cotton production hit a 100-year low as a result of loosened quality controls which eroded quality and trust in cotton producers. In response, the CEA started a programme aimed at licensing manufacturers through a comprehensive DNA analysis programme to certify authenticity and merit the use of the official Egyptian cotton logo. The government also made efforts to tighten quality assurance and crop testing, leading to a rebound in cotton production in 2017-18 (Oxford Business Group, 2018). In 2019, the CEA, in partnership with UNIDO and the Better Cotton Initiative, launched a pilot aimed at creating a sustainable supply chain supporting the welfare of cotton workers and the environment. This initiative aims to modernise the industry to meet modern customers’ expectations and cement the reputation of quality, integrity and sustainability of Egyptian cotton (Knitting Industry, 2019). The government could use this important momentum to encourage the industry to come together on RBC due diligence in quality assurance, training and licensing initiative. This could include supporting pilots and collaborative initiatives in sustainable cotton to build an ‘Egyptian cotton’ brand synonymous with responsible business practices as well as quality.

Box 7.2. Egypt’s actions for the elimination of child labour

Eliminating child labour and all forms of modern slavery has become a priority in many countries. In 2017, G20 leaders committed to eliminate child labour, forced labour, human trafficking and all forms of modern slavery by 2025, and endorsed the G20 Strategy to eradicate child labour, forced labour, human trafficking and modern slavery in the world of work (G20, 2018). In June 2018, Thailand ratified the Protocol of 2014 to the 1930 Forced Labour Convention, a legally-binding treaty that complements the Forced Labour Convention of 1930 by adding new elements such as a requirement that employers exercise due diligence to avoid forced labour in their business practices or supply chains (ILO, 2018-2019a). On 29 November 2018, Australia passed a Modern Slavery Act, which requires businesses based or operating in Australia to report annually on the risks of modern slavery in their operations and supply chains, as well as the actions they have taken to address those risks. The government itself is expected to report on its own activities. This law echoes earlier legislative developments in the UK, France, US and the EU related to modern slavery, transparency in global supply chains, and disclosure (Box 7.1).

Egypt has ratified 8 of 9 core international human rights instruments, including the Convention on the Rights of the Child, and all 8 ILO fundamental conventions, including the Worst Forms of Child Labour Convention (UN OHCHR, 2019). The government has participated in several programmes to tackle child labour, including a project implemented with the ILO between 2016 and 2018, focused on school feeding, expanded access to education (including for refugee Syrian children), and awareness raising events (ILO, 2017a). Egypt is currently participating in a regional four-year programme (2018-2022), in partnership with the ILO and the Netherlands to accelerate the elimination of child labour in supply chains in Africa. The Egypt chapter of the project focuses on eliminating child labour in the cotton, textile and ready-made garment supply chain (ILO, 2019b). In 2018, the Egyptian government adopted a National Action Plan for Combating the Worst Forms of Child Labour in Egypt and Supporting Family (2018-2025). The plan includes the organisation of child labour sessions for members of the federation and chambers of industry and employers on how to detect, mitigate and end child labour in business and in supply chains. The plan also includes activities to build the capacity of concerned entities (e.g, child labour department, labour inspectors, occupational health and safety inspectors, child labour focal points) and staff to ensure better identification, intervention and reporting of those issues (Government of Egypt, 2018).

Environmental and social risks also exist in midstream and downstream processes of the garment and footwear supply chain. For example, in garment manufacturing, strikes to protest working conditions have occurred in Egypt. Between 2006 and 2017, eight strikes were reported in the news that took place on issues related to market reforms and working conditions (Ah-Wahaidy, F., 2017), with the most recent one in 2017 gathering 6 000 workers demanding bonuses and payments of wages of a state-owned enterprise (Adham, 2017). Such issues are detrimental to workers, but also to businesses. Costs of production delays can be substantial for certain product categories and any delays due to, for example, labour unrests or environmental damage, contributes to those costs (OECD, 2014b).

Businesses in Egypt are well aware of this reality and some companies have taken action to improve working conditions in Egyptian garment factories. An Egyptian factory participating in a programme initiated by Levi Strauss to build a network of better-run factories reported that the programme had a 4 to 1 return on investment, largely because of interventions focused on women (Fry, 2017). Nevertheless, this view is not fully mainstream in the industry, although there has been improvement in recent years. For example, in 2017, Walt Disney Company instituted a ban on the production of its merchandise in Egypt, following a decline in Egypt’s Worldwide Governance Indicators and Egypt’s decision at that time not to join the ILO/IFC Better Work Programme. The ban was lifted shortly thereafter following Egypt’s commitment to participate in the programme (Egypt Independent, 2017).

The ILO/IFC Better Work Programme aims to improve working conditions and respect of labour rights for workers, and to boost the competitiveness of apparel businesses. It is currently active in 1 600 factories and employs more than 2.2 million workers in seven countries (Better Work, 2018b). Evidence from the programme shows that at country level, participation in the programme is associated with significant increases in apparel exports (World Bank, 2015). A pilot programme was implemented in Egypt between July 2017 and December 2018, at the request of the government following consultations with all industry stakeholders. The pilot engaged the government, manufacturers and their associations, all trade unions, international apparel brands and their suppliers. However, at the conclusion of the pilot, Better Work decided not to pursue a full Better Work programme, in part due to considerations relating to Egypt’s conformity in law and practice with international labour standards, as determined by the ILO’s supervisory bodies (Better Work, 2019). Better Work stated that conformity with international labour standards helps create an enabling environment for constructive engagement with social partners, which facilitates continual improvements in workplace compliance that are critical to the programme’s success. Better Work website stated that the ILO remains committed to constructive dialogue and engagement with Egypt towards the realisation of shared objectives and that Better Work will consider the implementation of a programme in Egypt in the future, should the enabling conditions permit (Better Work, 2019).

The government’s continued support of collaborative initiatives is critical, as well as efforts to create an enabling environment for such initiatives. Collaborative initiatives are particularly relevant when it comes to identifying and addressing complex and systemic risks that cannot be addressed by one actor alone. Collaboration can be beneficial in many aspects. For example, businesses and stakeholders can pool knowledge on sector risks and solutions in order to make due diligence more efficient for all. This can also facilitate cost sharing and savings. The government should use its convening role in order to assess where the gaps in the industry still exist and where the opportunities would be for its support. Experience from other governments in this regard can be useful. The Dutch government, for example, supported a multi-stakeholder initiative that led to a Covenant Agreement on Sustainable Garments, through which parties agree to conduct RBC due diligence in line with OECD RBC standards (SER, 2016).

Building sustainable infrastructure

Infrastructure is vital to economic development; it connects people to economic activity, lowers production and transaction costs for firms, and facilitates growth in a variety of sectors that serve global markets. The scaling-up of infrastructure investment has been identified as a priority by the G20 (G20, 2019). In Egypt, as mentioned in Chapter 8, estimated infrastructure investment needs by 2040 amount to an average of USD 675 billion, or 5% of GDP. There is now substantial evidence that without adequate consideration to environmental and social risks throughout infrastructure projects life-cycles, such projects are not likely to yield the intended economic or development outcomes, and at worst, could lead to negative impacts. A 2018 joint study by UN OHCHR and the Heinrich Boell Foundation showed that large transport projects in Africa, Asia, Latin America and elsewhere have been associated with serious and sometimes irreparable harm to people and the environment (UN OHCHR, 2018). Ensuring that RBC principles and standards are implemented across all steps of infrastructure life cycle can directly contribute to minimising potential negative impacts and can also foster RBC promotion across a number of key economic sectors in Egypt.

Addressing environmental and social risks associated with infrastructure projects through risk-based due diligence

In a context of broader reforms intended to achieve inclusive and sustainable economic growth, the government has initiated a number of mega-projects in diverse sectors such as agriculture, transport, housing, as well as solar and nuclear energy. This includes the building of over 4 000 km of new road, the expansion of the power capacity, and the building of twenty new cities, among which a New Administrative Capital 45 km east of Cairo in the desert (Box 8.2). In addition to improving access to services such as electricity, or water and sanitation, these projects are envisioned as a way to mobilise the private sector in the pursuit of development objectives, and create opportunities for Egyptian citizens (MIIC, 2018b).

Past experience has highlighted a number of environmental and social risks that may be associated with such projects. For example, the New Towns programme launched in the 1970s, which led to the creation of 23 new towns in underpopulated areas, has come at environmental cost. Water is an area of particular concern, as the irrigation needs for green areas, golf courses, as well as urban use including thousands of swimming pools requires pumping volumes from the Nile river to high elevations, where it cannot be recharged to the underground Nile Valley aquifers (Sims, 2014). Since the 1980s, the development of tourism facilities in coastal areas has also led to the deterioration of the coral reefs ecosystem, which in turn threatens the long-term sustainability of a sector largely reliant on its exceptional coasts, scuba diving and snorkelling activities (Sims, 2014).

Infrastructure projects often entail risks for local communities, notably in relation to land use and indigenous people’s rights. It is important that the government considers carefully the benefits of meaningful engagement. Many international investors that may invest in large projects will have obligations and expectations to meet either by their own governments or in the context of the implementation of international RBC expectations. In Egypt, for example, the construction of the Aswan High Dam between 1961 and 1964 led to displacements of Nubian communities that have been claiming a right to return for decades. The sale of land considered Nubian territory in 2016 in the context of the development of the Toshka project – a project to build a system of canals to carry water from Lake Nasser to reclaim half a million acres in the Sahara desert – revived these concerns (Mahmoud, 2018; Michaelson, 2017).

Avoiding and addressing risks of adverse impacts in infrastructure projects requires embedding RBC principles into all phases of infrastructure project planning and across the entire supply chain of infrastructure provision. OECD RBC standards provide practical guidance to carry out such a process. For example, the OECD Due Diligence Guidance for Responsible Business Conduct offers operational guidance on how to integrate stakeholder engagement into project planning; how to prioritise engagement with the most severely affected stakeholders; how and why to share decision-making with interested and affected parties; what does ongoing consultation and follow-through look like in practice, and other issues. These standards are relevant to all actors involved in infrastructure provision, including businesses – whether private or state-owned, local or foreign, as well as the government itself in its capacity of economic actor, for example in public procurement and tendering processes.

Safeguarding Egypt’s water security

Water demands associated with mega-projects are an important issue in a context where projections indicate that Egypt could fall below the threshold of absolute water scarcity as early as 20303 (FAO, 2016). While the government is aware of the necessity to manage water resources efficiently, as demonstrated by several national plans and strategies to ensure water balance, limited data are currently available on the impact of the new mega-projects on Egypt’s water system. It is important to consider the impact of multiple projects on water and how that relates to continued economic and sustainable development. For example, academic analyses conducted on two of Egypt’s land reclamation mega-projects, namely the El-Salam canal west of the Suez Canal and El-Sheikh Jaber east of the Suez Canal (Sinai project) and the El-Sheikh Zayed canal (Toshka project), showed that these projects would increase pressure on Egypt’s water system (Dawoud, Sallam, 2014) (Box 7.3). This question is relevant in the context of new development plans as well. For example, plans for building the New Administrative Capital anticipate the use of treated wastewater for the irrigation of the “Green River”, which is projected to be the largest park in the world, however, the resources to provide water for the new city and its expected 7 million residents are still to be defined (Farouk, 2019).

Box 7.3. Egypt water balance equation

Approximately 95% of Egypt’s annual renewable water resources comes from the Nile River, with the rest coming mostly from precipitation (3%) and ground water aquifers (1.5%) (Elsaeed, 2011; Sims, 2014). Out of the Nile average annual flow of 84 billion cubic metres (BCM) per year that reaches Lake Nasser, a share of 55.5 BCM per year is allocated to Egypt according to the 1959 Nile Water Agreement (Sims, 2014).

Egypt’s annual water demand is of approximately 77 BCM per year. Consumption is mainly for agriculture (62 BCM), while an additional 8 BCM (10%) is used as drinking water. The remaining demand (7.5 BCM) comes from industry (Elsaeed, 2011). The gap between water supply and demand creates a deficit estimated between 7 to 30 billion cubic meters annually, which is compensated by the recycling of drainage water (Rehab, 2018; Srour, 2018; Mohie El Din, Ahmed, 2016).

Efficient water resources management has long been a focus of the Egyptian government. Egypt prepared its first water policy in 1975, following the construction of the Aswan High Dam. Several national water strategies and plans have been developed since then, to safeguard Egypt’s water balance through various means (Dawoud, Sallam, 2014). The Water Resources Supply Management Vision for 2050 focuses notably on increasing sea water desalinisation for drinking water purposes in coastal areas, water reuse programmes, and increasing the efficiency of water conveyance and water use systems (Dawoud, Sallam, 2014). The National Water Resource Plan for 2017-2037 aims to improve the enabling environment for integrated water resource management; increase the availability of freshwater sources; improve water quality; and enhance the management of water use (Nicklin,Cornwell, 2018).

Ensuring water security in Egypt remains an important issue in a context where Egypt faces increased pressure on its water system. The construction of the Grand Ethiopia Renaissance Dam, started in 2011 and expected to be completed by 2022, has raised concerns amongst Egyptians that the dam could block the flow of the Blue Nile (Wirtschafter, 2019). Additional threats may come from the water requirements of some of the mega-projects initiated to propel Egypt’s development, such as the Toshka Project project, designed to pump approximately 5.5 BCM per year from Lake Nasser, i.e 10% of Egypt’s total allotment. Estimated water requirements for the Sinai or Al Salam Canal project are nearly 4.5 BCM of fresh Nile water yearly – 8% of the total available (Sims, 2014; Dawoud, Sallam, 2014). The development of a large number of mega-projects, including the reclamation of one and a half million acres of desert land, the establishing of 20 new cities, or the creation of a new industrial hub in Upper Egypt, will increase pressure on water resources. Finally, climate change could have a dramatic impact on Egypt’s water resources, with a diminution of Nile flows from 5% to 50% by 2025 according to some projections (Elsaeed, 2011).

It is important in this context to consider the cumulative impact of multiple projects on the environment, including in particular on water security. Some cities around the world are already dealing with water scarcity impacts (see for example FT (2019) and Middle East Water Forum (2019). The private sector can play a significant role in supporting government efforts to preserve water.

Although the Law for the Environment provides that environmental impact assessments (EIA) must be conducted for projects with potential environmental impacts (EEAA, 2017), such assessments are made at project level and do not provide an analysis of the relevance and sustainability of allocating water resources to one project in relation to another. In addition, the focus of the assessment in relation to water tends to be on the potential impacts on water quality (e.g. pollution) while limited analysis is required with respect to quantity. No law currently defines or mandates strategic environmental assessment (SEA), which could provide a mechanism for integrating environmental considerations at policy, national plans and programme levels (Ezzat et al., 2017). While these aspects are relevant for the environment as a whole, considering the importance of water in Egypt’s national context, the government would benefit from developing a robust water data collection and management system, as well as centralising the project review approval process for projects with potentially significant water requirements, and requiring a systematic analysis of estimated water requirements in EIAs. SOEs and private sector participants should be asked to pay particular attention to water risks.

Using government leverage to foster wide implementation of RBC standards

The above section showcases that the impact on Egypt if environmental and social issues are not integrated in the infrastructure calculus could be quite significant. The government both as a policy-maker – for example, through land use and infrastructure planning – as well as an economic actor – notably through SOEs, tendering and public procurement processes – can lead by example in ensuring that environment and society are included in the risk assessments.

Governments are expected to lead by example on RBC, including in their own practices, i.e. as employers, business partners, through procurement and contracting practices, and in commercial activities, including activities of SOEs. The Guidelines apply to all businesses, regardless of their legal status, size, ownership structure or sector.

In Egypt, SOEs dominate infrastructure provision. In the energy sector, generation, transmission and distribution remains predominantly with the publicly-owned companies under the umbrella holding company, Egyptian Electricity Holding Company. Sectors such as water and transport are also largely publicly owned, with a few private concessions for example in ports and airports (GIF, 2018). A recent World Bank report identified weak SOE governance as one of the main constraints to the development of sustainable infrastructure that maximises private sector involvement (World Bank, 2018b). RBC expectations should be made clear in the context of SOE expectations. The importance of RBC in SOE activity is recognised in the 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises, which recommend making clear any expectations the state has in respect of RBC by SOEs, and further recommend extensive measures to report on foreseeable risks, including in the areas human rights, labour, the environment, and risks related to corruption and taxation (OECD, 2015b).

The government should establish and publicly disclose clear expectations on RBC in the context of infrastructure projects. RBC could also be an explicit requirement in tendering and contracting processes. Complexity and lack of transparency around financing and operations of infrastructure projects amplifies the risks that environmental and social issues will not only not be dealt with but perhaps even exacerbated due to the fact that efficient and meaningful risk-based due diligence may not be possible. For example, a 2016 analysis by SOMO, the coordinator of OECD Watch, of the involvement of foreign companies in the context of dredging of the new Suez Canal showed the risks of not adequately conducting risk-based due diligence and engaging meaningfully with affected stakeholders prior to the start of the project. The study highlighted the lack of engagement with villagers, the destruction of homes, and harmful impacts on biodiversity (SOMO, 2016).

The government can also play an important role in promoting RBC among Egyptian companies operating abroad. Encouraging RBC due diligence is an important element of promoting and enabling RBC and ensuring that environmental and social risks are adequately assessed and addressed. For example, several Egyptian businesses are involved in the building of a dam in Tanzania in the context of the Stiegler’s Gorge hydropower project (also known as Rufiji hydropower project). Located on the Rufiji River, the site for the proposed project is within the Selous Game Reserve, which was made a UNESCO World Heritage site in 1982. A study published by OECD Watch in 2019 highlighted a number of environmental and social risks associated with the project, including impacts on biodiversity, social disruption and potential displacements. The research also highlighted gaps in the assessment of the environmental and social impact of the dam (Hartmann, 2019). As Egyptian enterprises increase their investments abroad, it will be important for both their reputation but also the quality of their investment that RBC considerations are integrated as a matter of practice.

Deepening policy reform to enable RBC

Beyond RBC promotion and facilitation, it is important to also remove legal or regulatory obstacles for RBC. This not only requires creating an environment that encourages responsible behaviour and enables dialogues between relevant stakeholders, but also a policy environment that is clear and predictable and allows for mechanisms to ensure accountability when RBC expectations are not met. This section highlights areas where the government could focus its policy efforts to support the development of an enabling environment for RBC.

Meaningful stakeholder engagement is key for implementing RBC standards

A key component of what constitutes an enabling environment for RBC is one where meaningful stakeholder engagement and dialogue is a way of doing business. The Guidelines explicitly recommend that enterprises participate in private or multi-stakeholder initiatives and social dialogue on responsible supply chain management. Enterprises are also encouraged to co-operate with governments in developing and implementing policies and laws, and to consider the views of other stakeholders in society. Additionally, the OECD Policy Framework for Investment emphasises that greater participation of stakeholders in policy design and implementation leads to better targeted and more effective policies. Creating an environment where stakeholders are empowered to express their views and actively participate in policy design as well as consultations organised by businesses, the government or a group of stakeholders, is therefore essential for RBC.

Foreign investors, especially those for which implementing RBC standards is a legal obligation, may also have concerns about their ability to conduct risk-based due diligence when stakeholders cannot actively engage in the due diligence process. The OECD Due Diligence Guidance for Responsible Business Conduct lays out clear expectations that due diligence should be informed by meaningful engagement with stakeholders such as workers, workers’ representatives, trade unions (including global unions), community members, civil society organisations, investors and professional industry and trade associations. Meaningful stakeholder engagement is characterised by two-way communication, through which enterprise and stakeholders freely express opinions, share perspectives and listen to alternative viewpoints to reach a mutual understanding. The government can play an important role in supporting this process by ensuring that the legal and judicial framework empowers stakeholders to express their views and engage with businesses.

Egypt has ratified 64 ILO Conventions, including the eight fundamental ones (ILO, 2017c). The right to establish unions and federations is also protected by Article 76 of the 2014 Egyptian Constitution. However, the ILO has pointed out that in effect, the current legislative framework does not ensure full recognition of independent trade unions, which in the past had negative effects on industrial relations (OECD, 2017c; ILO, 2017d-e). In November 2017, a draft law (213/2017) was submitted to and approved by the parliament. Critics have argued that it effectively institutionalises the Egyptian Trade Union Federation as the sole union body for Egypt by setting membership thresholds that are too high for independent trade unions to meet (ITUC, 2017; Kindornay et al, 2018). Recently, Law No. 142 of 2019, which amended some provisions of the earlier Law, reduces the number of workers required to form independent trade unions from 150 to 50, and abolishes imprisonment penalties.

Concerns have also been raised about laws governing NGOs. The May 2017 Law on NGO, in particular, drew criticism for restricting NGO activities. The law notably introduced an administrative body including members of security services that could regulate all NGOs receiving foreign funding (U.S State Department, 2017). In 2017, the UN Office of the High Commissioner for Human Rights issued a statement citing that the law was “damaging for the enjoyment of human rights and leave rights defenders even more vulnerable to sanctions and reprisals than they already are” (UN OHCHR, 2017). In July 2019, Egypt’s Parliament approved a new NGO law that aims to address some of these concerns, and notably eliminates criminal penalties for non-compliance, and which executive regulations are yet to be released. It also allows NGOs to receive foreign funding, under the condition that the NGOs obtain approval from administrative authorities.  Some NGOs have noted that while the new law is widely considered to be an improvement from the 2017 NGO law, concerns still remain over restriction of activities and cooperating with foreign organisations or experts (see for example Amnesty, Access Now, HRW, 2019).

Tackling corruption

Tackling corruption is another important component of building this enabling environment. The Guidelines emphasise that bribery and corruption discourage investment and distort international competitive conditions. In particular, the diversion of funds through corrupt practices undermines attempts by citizens to achieve higher levels of economic, social and environmental welfare, and it impedes efforts to reduce poverty. Both businesses and governments have a role to play in addressing corruption. For example, the Guidelines specify that enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage, and should also resist solicitation of bribes and extortion. Governments also have a responsibility to ensure that a legal and regulatory framework is in place and enforced to deter corruption. They can also lead by example by observing the highest integrity standards in their own actions as economic actors.

Tackling corruption has been high on the political agenda in Egypt. Vision 2030 also has a strong focus on strengthening reform and good governance in the civil service to combat corruption and promote transparency and integrity. According to Transparency International, a number of institutional reforms, as well as deepened co-operation with international organisations, have strengthened the country’s anti-corruption framework (Transparency International, 2015a). Several government agencies share responsibility for addressing corruption in Egypt, including the Administrative Control Authority (ACA), which has jurisdiction over state administrative bodies, SOEs, public associations and institutions, private companies undertaking public work, and organisations to which the state contributes in any form (IBP, 2018). In 2017, the Egyptian parliament adopted amendments to the law governing the work of ACA. The amendments included transferring the subordination of the ACA to the President, appointing the head of the ACA by the president following the parliament’s approval and recognising the authority as a state body with technical, financial and administrative independence. The amendments also introduced the creation of several bodies to fight and prevent corruption including creating a specialised national academy to build the capacity of ACA staff (Al Wahaidy, 2018).

The Egyptian criminal code criminalises active and passive abuse of power including facilitating payments and bribes. In 2013, Egypt adopted a Conflict of Interest Law targeting senior public officials. In 2014, the government adopted an anti-corruption strategy for 2014-18, developed by the National Coordinating Committee for Combating Corruption (NCCCC) and implemented by a technical committee headed by the Administrative Control Authority (Al Wahaidy, 2018). The strategy was updated in December 2018 for the period 2019-22 (MENA, 2018). Egypt ratified the UN convention against Corruption in 2005 (UNTC, 2019) but is not party to the OECD Convention on Bribery of Foreign Public Officials in International Business Transactions. Egypt has also joined a number of international initiatives and projects to combat corruption including the MENA-OECD Task Force on Anti-Bribery, the OECD Good Governance for Development in Arab Countries Initiative, the Arab Anti-Corruption and Integrity Network and the UNDP-POGAR project to support the Ministry of Investment in the fight against corruption (FEMISE, 2017). In 2017, Egypt signed a memorandum of understanding with UNODC to combat corruption in Egypt (UNODC, 2017).

In practice, however, several studies point to a gap between a relatively strong legislative framework and the implementation of the law (FEMISE, 2017). In 2018, Egypt ranked 105^th out of 180 countries in perceived corruption (Transparency International, 2018). According to the 2016 World Bank Enterprise Survey for Egypt, 68% of firms surveyed identified corruption as a major constraint to doing business (World Bank, 2016). The 2017-18 World Economic Forum Global Competitiveness Index reports that corruption is the third most problematic factor for doing business, after political instability and inflation (WEF, 2018).

One area where future reforms could focus is on strengthening the involvement of the private sector and civil society in the implementation and monitoring of efforts to promote integrity. This could involve raising awareness on the risk of corruption, encouraging the reporting of misconduct, and ensuring access to remedy when corruption occurs. A 2015 report by Transparency International identified a gap in the protection of whistle-blowers in Egypt. Although a draft Witnesses and Whistle-blowers Protection law was proposed in 2013, no dedicated law exists yet to regulate whistle-blowing. In addition, potential whistle-blowers face challenges and fear retaliation, which hinders reporting instances of corruption (Transparency International, 2015b). The government could consider introducing legislation to provide protection to whistle-blowers. Encouraging the public to monitor, detect and report misconduct, and creating a safe space for civil society organisations to play the role of watchdogs, could increase accountability and enhance integrity and transparency in both the public and private sector.

The government would also benefit from strengthening its anti-corruption efforts in the public sector. Areas such as public procurement, customs administration and land administration are especially vulnerable to risks of corruption in Egypt (GAN Integrity, 2019). Cases relating to land administration have involved high-ranking officials accused of accepting bribes against land licences (GAN Integrity, 2019; Egypt Today, 2018a-b). The issue has also been raised by businesses in recent surveys. For example, the 2016 World Bank Enterprise surveys indicated that 28% of firms surveyed expected to give gifts to get a construction permit, 26% expected to give gifts to get a water connection, and 19% expected to give gifts to public officials to “get things done” (World Bank, 2016). A 2017 survey by Transparency International indicated that 40-50% of respondents reported paying a bribe when they came into contact with a public service in the last 12 months prior to when the survey took place (Transparency International, 2017).

The government has indicated to the OECD that several of its recent initiatives in the context of implementation of Egypt Vision 2030 have been envisioned in response to the above challenges, notably the adoption of the Civil Service Law 81 in 2016; the Investment Law in 2017; Prevention of Conflict of Interest Law and the law broadening the mandate of the Administrative Control Authority to include corruption prevention in the public sector; establishment of the National Anti-corruption Academy to conduct training and raise awareness on for civil servants on anti-corruption and transparency and integrity in the delivery of public services; as well as programme for the automation of public service delivery; establishment of Investment Service Centres and others to enhance the efficiency and transparency of service provision to investors.

Strengthening Egypt’s NCP

NCPs have a mandate to further the effectiveness of the Guidelines by undertaking promotional activities, handling inquiries, and contributing to the resolution of issues that arise relating to the implementation of the Guidelines by businesses in specific instances. Several mechanisms for settlement and resolution of disputes exist in Egypt, as discussed in Chapter 3. These mechanisms provide an alternative to judicial courts and private arbitration centres when disputes arise between investors and the state, or among investors. NCPs are complementary to these mechanisms and represent at present the only state-based non-judicial grievance mechanism with a mandate to consider RBC issues and impacts in global supply chains. Any individual or organisation with a legitimate interest in the matter can submit a case to an NCP regarding a company, operating in or from the country of the NCP, which has not observed the Guidelines.

Operating with this global mandate, NCPs offer and, with the agreement of the parties involved, facilitate access to consensual and non-adversarial means, such as conciliation or mediation, to resolve issues that arise if the Guidelines are not observed – called specific instances. NCPs also have an important promotion and stakeholder engagement function. They are expected to develop and maintain relations with representatives of the business community, worker organisations and other interested parties that are able to contribute to the effective functioning of the Guidelines. NCPs are expected to make the Guidelines known and available by appropriate means, to raise awareness about them and their implementation procedures, including also with prospective investors (outward and inward).

Adherents to the Declaration, have a legal obligation to establish an NCP and to make available human and financial resources so that the NCP can effectively fulfil its responsibilities. Adhering governments have flexibility in how they structure their NCP, but all NCPs must be given adequate resources to fulfil their functions. The NCP structure must enable the NCP to deal with the broad range of issues covered by the Guidelines, develop and maintain relations with stakeholders and operate in an impartial manner. When establishing their NCPs, governments are also expected to ensure that they can operate in accordance with the core criteria of visibility, accessibility, transparency and accountability.4 When handling specific instances, NCPs should observe the principles of impartiality, predictability, equitability and compatibility with the Guidelines.5

Egypt adhered to the Declaration in 2007 and established an NCP located in the Ministry of Investment, assisted by a multi-stakeholder Advisory Committee (OECD, 2008). Between 2008 and 2011, the Egyptian NCP established a website that featured the Guidelines in both English and Arabic, adopted rules of procedures for handling specific instances, and undertook promotional activities such as reaching out to major MNEs and asking all enterprises to adhere to the Guidelines (OECD, 2009-10). After a period of interruption, Egypt reported having reactivated its NCP in 2013 (OECD, 2013). In that same year, the Egyptian NCP supported the US NCP in handling a specific instance requested by the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Association, which alleged that Mondelez International had breached the human rights and employment and industrial relations provisions of the Guidelines in Tunisia and Egypt. However, Mondelez stated that it would not participate in the mediation offered by the NCP, and the specific instance was closed (OECD, 2014a). No NCP activity was reported Egypt in 2014-16. During those years, Egypt did not attend the annual meetings of the NCPs in Paris or report to the OECD Investment Committee and did not appear to have an NCP contact or website in place (OECD, 2014a-16). The Egyptian NCP was not represented at the NCP meetings of the OECD in Paris in June and November 2017.

Between 2016 and 2018, the OECD Secretary General issued three letters to the Minister of Investment and International Cooperation to remind Egypt of the commitments associated with adherence to the Guidelines and request that the Egyptian government report to the OECD Secretariat on concrete actions taken regarding the NCP. In response, the Minister of Investment and International Cooperation reiterated Egypt’s commitment to set up an NCP and implement the Guidelines, and reported on steps taken toward the establishment of an NCP in two letters addressed to the OECD Secretary General in December 2017 and January 2018. These steps included a national consultation meeting and capacity-building exercise held in November 2017, during which representatives of the Egyptian government and the OECD discussed the next steps for moving forward with the NCP. The NCPs of France and Morocco participated in this event. In addition, the MIIC designated three members to take part in the NCP in 2017. This structure was revised and a new contact person appointed in January 2018, in the context of a broader institutional restructuring of the MIIC.

A new NCP head was appointed in 2019. In September 2019, the proposed composition of the NCP was a Coordinator/Focal Point from the Ministry of Investment and International Cooperation, senior representatives from GAFI, Ministry of Trade and Industry, and the Ministry of Justice. In 2019, Egypt reported to the OECD on the Egyptian NCP’s activities for 2018. The NCP did not undertake or participate in any promotional activities in 2018 but it did adopt a plan for promotional activities in 2019. A webpage providing general information about the NCP as well as contact information to reach the NCP was created in 2019. However, the webpage does not provide detailed information on, for example, promotional activities and rules of procedures for specific instances. Making this information public would be important to ensure that the NCP operates in accordance with the core criteria. At present, the NCP does not have any rules of procedures in place, making it challenging for stakeholders to understand what the specific instance procedure entails in practice. The NCP participated in the June 2019 meeting of the Network of NCPs in Paris and shared recent updates, such as the ongoing review process of the ministerial decree setting up the NCP. The team leader of the NCP was also Egypt’s delegate to the March 2019 WPRBC meeting.

In 2018, the government requested the OECD’s assistance to facilitate the pairing of the Egyptian NCP with a suitable NCP, under a project implemented in partnership with the World Bank and aimed at enhancing the investment climate. These developments are positive and could greatly contribute to reinforcing the Egyptian NCP. Egypt should continue its efforts to strengthen its NCP. The government could, for example, consider a peer review evaluation of the NCP, which is an important means to highlight both strengths and improvements, and could facilitate the development of an action plan for strengthening the Egyptian NCP. To ensure that the NCP can fulfil its mandate effectively, the government is encouraged ensure that it has adequate human and financial resources, meets its reporting obligations and participates at relevant meetings at the OECD.

Developing a National Action Plan on RBC

Policy coherence is crucial to ensure sound policy design and implementation. This is recognised in the Policy Framework for Investment, which encourages governments to co-operate internally as well as externally with foreign governments and stakeholders to ensure coherence and support of policies relevant to RBC. Such co-operation should involve all relevant stakeholders, including among government agencies, companies, worker associations, professional associations, employer associations, civil society, and local communities.

Despite important commitments made toward RBC, Egypt has not yet developed an overarching framework defining clear actions, timelines and responsibilities for the promotion and implementation of RBC standards. In line with international good practice, Egypt could consider working with stakeholders to develop a National Action Plan (NAP) on RBC, based on the Guidelines. The UN Human Rights Council and the UN Working Group on Business and Human Rights have called on governments to develop, enact and update NAPs to disseminate and implement the UN Guiding Principles on Business Human Rights. A number of OECD governments, notably the United States, have decided to broaden these efforts and include all RBC issues, based on the Guidelines, in their NAPs. To date, 20 countries, all adherents to the Declaration have already produced a NAP, and 21 more are in the process of developing or have committed to developing one. Developing a NAP is an effective way to prioritise actions for the implementation of RBC standards, support policy coherence and reinforce coordination of efforts related to RBC within the government.

The process of developing a NAP would also be a good way for the government to engage with stakeholders and the wider public on a range of issues related to RBC, to promote the Guidelines, as well as policy coherence and alignment on RBC. As indicated in the Guidance on National Action Plans for Business and Human Rights developed by the UN Working Group on Business and Human Rights, NAPs need to be developed in inclusive and transparent processes, taking into account the views of relevant stakeholders in the development and update of the NAP.

In Egypt, overcoming potential barriers related to the complexity of the institutional framework will be of particular importance to ensure successful development and implementation of the NAP. This notably requires having a clear structure in place, with designated leadership and a format for cross-departmental collaboration and stakeholder engagement (UNWG, 2016). The NCP for the OECD Guidelines, in coordination with relevant government and other stakeholders, could lead the process. The process of developing the NAP would also be an opportunity for the government to understand and eventually remove barriers that influence RBC uptake by businesses, as well as to facilitate collective initiatives, in the government’s role as a convener, to promote RBC among industry and other stakeholders.

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Notes

← 1.  OECD RBC Due Diligence instruments are: the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas minerals, the OECD-FAO Guidance on Responsible Agricultural Supply Chains extractive industries, the Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector, the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector and the OECD Due Diligence Guidance for Responsible Business Conduct

← 2.  The Egyptian stock exchange tracks 8 indices, namely the EGX30, EGX50 EWI, EGX20 Capped, EGX70, EGX100, the Banks Sector Index, the Nile Index and the S&P EGX ESG. The rationale for comparing the S&P EGX ESG with the EGX100 is that it is includes a broader range of companies, both in terms of sector and size. The EGX100 combines constituents of the EGX30 and EGX70. In addition, the list of current constituents indicated that as of today, all the 30 constituents of the S&P EGX ESG are also constituents of the EGX100. Therefore, the S&P EGX ESG as it stands today could be understood as a selection of the 30 best performing companies in terms of ESG among the 100 companies listed in the EGX100. By comparison, the ESG30 can be understood as the top 30 companies by liquidity and activity among the 100 listed in the EGX100.

← 3.  The threshold of absolute water scarcity corresponds to 500 m3 of renewable water sources per capita and per year (FAO, 2016).

← 4.  OECD Guidelines 2011, II. Implementation Procedures to the OECD Guidelines for Multinational Enterprises. Procedural Guidance: I. National Contact Points.

← 5.  OECD Guidelines 2011, Commentary on the Implementation Procedures to the OECD Guidelines for Multinational Enterprises. Paragraph 9.