Draft Scope of Work - Iktisadna Activity_USAID Egypt.pdf

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Iktisadna - DRAFT Scope of Work

1. TITLE OF ACTIVITY

The title of this activity is – Iktisadna (Our Economy).

2. OBJECTIVE

The objective of this Activity is to improve the resilience of Egypt's economy by assisting concerned Government of Egypt (GOE) institutions to address selected macroeconomic challenges. The International Monetary Fund defines macroeconomic resilience as the ability of countries to withstand shocks (instantaneous resilience) and recover quickly towards potential growth (dynamic resilience). The more resilience to existential threats, including climate change, is integrated into Egypt’s macroeconomic framework, the more stable and stronger Egypt’s economy will become.

To achieve this objective, the Contract will provide technical services to relevant counterparts/stakeholders related to three main economic components: fiscal and monetary systems; external sector policies; and regulatory and structural economic policies.

As a result of this assistance, the Activity expects to achieve the following:

● Improved fiscal and monetary policies to better manage economic fluctuations and support price stability;

● Strengthened external policy framework to reduce balance of payment deficit shortages in selected accounts; and

● Improved regulatory and structural economic policies to foster broad base private sector-led development and attain sustainable economic growth.

The Contract will focus on supporting the GOE with its economic strategies, tools, and systems to improve its economic resilience and stability through improved capacities of concerned GOE authorities to adopt and implement business friendly and evidence-based policies. A key area is assisting the GOE to apply good governance principles (accountability, transparency, and efficiency) in macroeconomic decisions. Adaptation to and mitigation of climate change is a priority area across the three components for this contract.

The technical services under this Contract will address the imbalances in the economy that are negatively impacting the ability of enterprises to grow and become more competitive. The contract will ensure, through various tools and interventions, that the recommended reforms meet the needs of a private sector led economy.

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Theory of Change

IF the technical assistance provided builds the GOE capacity to issue and adopt effective macroeconomic fiscal and monetary policies, improve the external sector policy framework to yield more foreign exchange resources, and improve the regulatory and structural economic policies to encourage a private sector-led economy, THEN an improved resilient macroeconomic structure will be in place that can absorb external shocks and hence stabilize the economy.

3. BACKGROUND

This Section sets forth background information related to: a. CDCS; b. the TIPE agreement; c. the Problem Statement; and d. USAID’s Current and Prior Activities.

3.a USAID/Country Development Cooperation Strategy (CDCS)

This five-year USAID/CDCS takes a long-term “foundational” approach toward rebuilding and redefining the development partnership with the GOE and is expected to establish the pre-requisite conditions for success of this strategy as well as a follow-on five-year CDCS (2026- 2031). This CDCS fully aligns with the development priorities of the GOE under Egypt’s SDS Vision 2030 strategy. Thus, a notional ten-year time horizon allows USAID to support the necessary building blocks that will result in the development impacts and Sustainable Development Goals (SDGs) Egypt strives to accomplish over the next decade.

During this five-year CDCS, USAID expects to strengthen and support the Commitment and Capacity of the GOE to deepen key structural reforms as well as to increase the opportunities for inclusion of civil society, academia, the private sector, and citizens in the economy. This is Egypt’s first CDCS. USAID has made strategic choices to inform both our approach and programming to support the Goal of “A More Inclusive and Globally Competitive Economy for the Benefit of all Egyptians.”

This activity contributes to the Development Objective (DO 3) “inclusive Economic Development Accelerated”.

3.b USAID/Egypt’s Trade and Investment Promotion in Egypt (TIPE) Bilateral Agreement

One of USAID/Egypt’s main development objectives is to promote inclusive economic growth.

USAID and the GOE have a defined partnership in this area through the TIPE bilateral assistance agreement, through which the Iktisadna (Our Economy) activity will be funded. The purpose of TIPE agreement is “to promote inclusive economic growth and improve the competitiveness of the private sector in Egypt through the development of MSMEs, entrepreneurship, and workforce skills.” It is expected to create new jobs and generate additional income for Egyptian small business owners, laborers, and entrepreneurs, especially women and youth. TIPE has three sub-purposes: (1) MSME Development and Entrepreneurship Supported; (2) Technical Education and Vocational Training and Workforce Development Improved; and (3) Macroeconomic foundations for growth improved. This activity falls under Sub-purpose 3.

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3.c Problem Statement

Egypt is currently facing severe economic and macroeconomic challenges across multiple areas (i.e., fiscal and monetary policies, the external sector, and the real sector, as defined in section C.4.b.1), resulting in high inflation, ongoing pressure on its currency, and leading to mounting questions about the long-term sustainability of its public-debt-fueled economic growth model.

Additionally, climate change is exacerbating existing challenges and placing new financial and non-financial demands on the GOE. For these and other reasons, USAID/Egypt estimates that Egypt has lower macroeconomic resilience than many other economies in the Middle East and North Africa region.

Egypt’s macroeconomic framework determinants: Over the past several years, COVID-19, Russia’s ongoing war in Ukraine, and rising global interest rates revealed Egypt’s continued vulnerability to external economic shocks. These external stressors, combined with long-standing domestic issues, have placed Egypt in an increasingly difficult economic position as reflected in the deterioration of many of its macroeconomic indicators.

The following bullets highlight the main factors pertaining to the macroeconomic situation.

● Level of Debt:

o Debt from both external and internal sources, has been used to respond to economic shocks and fund social and economic objectives. As a result, mounting debt and increased debt service costs from higher interest rates are now reducing space for the GOE and private sector firms alike to fund additional investment.

o Persistent cycles of budget deficits contribute directly to the public debt and often play a large role in Egypt’s exchange rate volatility. Egypt’s historically low domestic resource mobilization and accompanying budget deficits allow very little space for fiscal stimulus when external shocks hit.

o Increased public spending on infrastructure and other investments across sectors has fueled national debt and crowded out private investment.

o Together, the high spending and low tax revenues allow very little space to support the needs of a growing population, address new policy priorities such as climate change, or provide fiscal stimulus when external shocks hit.

● Monetary policies:

o Egypt’s interest rate policy primarily focuses on attracting foreign portfolio investments and incentivizing lending to the government through public bond sales while penalizing those seeking to make investments in private ventures.

Moreover, recent increases in interest rates place additional stress on an already overstretched government budget due to increasing interest payments over time.

o Global political and financial market developments have triggered large-scale portfolio outflows and Egypt’s total foreign currency buffers—including Tier 1 (“official reserve assets”) and Tier 2 (“other foreign currency assets”)— dropped abruptly from US$54.5 billion at end-February 2022 to US$42.1 billion at end-

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March 2022. They continued to decline during 2022 but have since partially recovered, reaching US$34.8 billion at end-June 2023.

o The spike in annual headline urban inflation, which reached 21.3 percent year-on-year in December 2022, and the exchange rate depreciations since March 2022, have led to a significant rise in the cost of domestic and imported inputs in the short term.

o Shortages of foreign currency and limited capabilities of the GOE to attract more foreign currency and diversify the sources, whether from FDI, free zones, diaspora make it difficult to stabilize economy.

● GOE capacities:

o Of particular concern for monetary and fiscal systems in Egypt is the continuous need for capacity building programs to compensate for high turnover in the Government Ministries. Macro-fiscal ministries and agencies struggle to offer salaries and benefits that are in line with other opportunities that mid-career and late-career professionals can obtain. Finding and testing creative ways to attract and retain talent within the GOE, as well as ways to automate and improve functions that are underutilized, are thus critical considerations.

● Climate Change:

o The GOE is seeking avenues to address climate change through its monetary-fiscal frameworks and national planning efforts. The challenges related to climate change are varied and across the whole GOE. Lack of resources, an inadequate regulatory framework, and poor coordination among the GOE agencies are key challenges for the implementation of its National Climate Change Strategy 2050, which advocates for delivering climate solutions in partnership with the private sector. To do so, the GOE will need to introduce innovative and diversified ways to finance climate adaptation and mitigation efforts while also funding existing priorities.

● Structural economic imbalances:

o State-owned enterprises receive preferential treatment thereby limiting opportunities for private sector firms to grow. Adding, the complex, unpredictable, and ambiguous policy environment have led to the deterioration of the private sector performance, especially the small and medium enterprises that constitute almost 80% of the economy.

● The recent regional event:

o The recent regional events in the Middle East and its unforeseen social and economic impacts on the Egyptian economy.

These factors demonstrate how close linkages among fiscal, monetary, structural, and external sector policies have aggravated the economic problems. In Egypt, like elsewhere, these linkages are complex and involve numerous government agencies and affiliated authorities as well as a wide range of private sector associations and firms.

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Notably, the GOE has undertaken several important steps to improve its macroeconomic stability in recent years. In 2016, the GOE launched its ambitious “Egypt Vision 2030” national strategy to modernize the country, achieve its United Nation Sustainable Development Goals, and tackle internal and external challenges. Subsequently, the government successfully completed a reform program supported by the International Monetary Fund’s Extended Fund Facility in 2016-2019.

Under this program, the GOE substantially reduced its fiscal deficit while maintaining critical social spending to reduce poverty. More recently, in December 2022, the GOE signed a new Extended Fund Facility with the IMF to shift to a flexible exchange rate regime, maintain fiscal discipline, and advance structural reforms to promote private sector growth and investment. Up till early 2024, the Egyptian authorities were still in discussions with the IMF about the fulfillment of the program and the request for additional tranche.

As for climate change, in 2022, the GOE launched “Climate Change Strategy 2050.” The strategy is designed to integrate the various climate change dimensions into general planning of all sectors in the country. The strategy contains five key goals and sets directions to achieve each objective.

In addition, the GOE implemented governance reforms and undertook other concrete actions, such as issuing new “green” financial instruments and offering climate incentives to support targeted business activities.

With respect to the external sector, the GOE launched several initiatives and measures to increase sources of foreign exchange like the golden license for investors and several dollar-denominated banking products to attract more foreign currency into the economy. The Cabinet also launched the “let us think” initiative to provide additional solutions for increasing foreign exchange revenues in Egypt. This initiative presented around 40 papers from academia detailing innovative ideas on how to attract foreign currency.

Despite this progress and ongoing donor support on key reform areas, important gaps in Egypt's macroeconomic framework must still be addressed. Therefore, the GOE must develop and implement policies and practices to improve the country’s macroeconomic resilience, including on climate change issues, as the foundation for sustainable economic growth going forward.

3.d USAID Current and Prior Activities

Relevant prior and current USAID/Egypt Activities are discussed below.

Macro-Economic Stabilization and Reform (MESR): At the request of the GOE, the MESR activity supports Egypt’s ongoing economic reform by strengthening public financial management and public investment planning. In partnership with the Ministry of Finance, USAID provides training and capacity building to improve fiscal management, budgeting, and expenditure control, as well as to promote greater budget efficiency, transparency, and accountability. In partnership with the Ministry of Planning and Economic Development, USAID works to improve public investment planning, management, implementation, and monitoring to enhance the productivity of public capital assets and the efficiency and effectiveness of public services. The activity started in April 2018 and ends April 2024. The total estimated cost is $22.7 million.

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USAID’s Economic Governance Activity (EGA): The EGA supports GOE reforms to increase the efficiency, transparency, and accountability of public institutions and the civil service. Through the EGA, USAID partners with both the public and private sector to combat corruption, develop a more competitive economy, and create an enabling environment for public and private investment. USAID also supports the GOE’s digitalization plan to introduce advanced information technology applications in public service delivery systems. The activity started in August 2020 and is ending in August 2025. The total estimated cost is $40 million.

USAID’s Trade Reform and Development in Egypt (TRADE): The TRADE activity builds on decades of U.S. investments in Egyptian businesses and economic policy with the aim of substantially increasing Egyptian exports from small and medium enterprises. The TRADE activity focuses on six selected sectors: engineering products, food processing, home textiles, ready-made garments, chemicals, and building materials. Through the activity, USAID works with the GOE to improve the trade and investment policy environment and reduce barriers to trade. USAID also partners with business associations and export councils to strengthen the trade services ecosystem for small-and medium-sized exporters, as well as with private companies to help them access new international markets to increase export sales. The TRADE activity tackles many trade and investment-related issues to sustainably increase Egyptian exports and drive economic growth.

The activity started in April 2021 and ends in March 2026. The total estimated cost is $36.3 million.

Commercial Law Development Program (CLDP): For more than 40 years, USAID has worked in partnership with the Egyptian people and government to promote economic prosperity and create an environment that facilitates better trade relations between the United States and Egypt. Currently, through a grant to the U.S. Department of Commerce’s Commercial Law Development Program, USAID provides legal and trade related technical assistance to the GOE and Egyptian private sector. This program provides support in the areas of food safety, trade facilitation, customs valuation, trade engagement, and intellectual property rights. It aims at improving Egypt’s ability to meet the commitments of multilateral agreements in areas such as patent protection, government procurement, and competition policy. The activity started in September 2018 and ends in September 2023. The total estimated cost is $3.97 million.

Business Egypt: USAID’s Business Egypt project supports economic growth in Egypt through a multifaceted and holistic approach. First, Business Egypt supports entrepreneurs to launch and grow competitive, innovative, and revenue-generating businesses by strengthening the entrepreneurship ecosystem. Second, the project assists existing micro-, small-, and medium-sized enterprises (MSMEs) to adapt and grow through linkages to financing, investing, and sustainable buyer-driven value chains. Lastly, Business Egypt furthers the business enabling environment at the governorate and national levels by addressing MSME challenges in sector-specific value chains and strengthening connections to large anchor firms to ensure sustainability and growth. Business Egypt operates in the following sectors: Renewable Energy/Green Economy, Information and Communications Technology, Logistics, and Creative Industries, with additional sectors to be selected in the coming years. Gender, youth, private sector engagement, Page | 7 and digitalization are at the heart of Business Egypt’s work in each sector. The project started in November 2021 and ends in November 2026. The total estimated cost is $34.9 million.

Women’s Economic and Social Empowerment Program (WESEP): The WESEP is designed to engage, leverage, and partner with the private sector as well as public social service initiatives to encourage women’s participation in the workforce; generate demand for financial services;

promote tailored, market-based solutions to women’s economic empowerment; and strengthen Gender-Based Violence (GBV) prevention and response such that women become more economically and socially resilient. The program interventions are designed to support women in priority governorates feeling safe, valued, and empowered at work; aware and able to embrace financial autonomy; and respected and free from violence in their homes, communities, and workplaces. The Program works closely with market-based partners to develop, lead, scale, sustain, and champion innovative solutions, recognizing the economic and social benefits of gender-inclusive, empowering policies and practices. The project started in 2022 and ends in 2027. The total estimated cost is $39,000,000.

4. SERVICES AND TASKS REQUIRED

The Contractor must provide the services and deliverables specified below. Services and deliverables shall be provided to achieve the objective set forth above, subject to the guidance and limitations specified herein. Specific services, activities, and deliverables required will be established in the annual work plans approved by the Contracting Officer’s Representative (COR) and, when necessary, through modifications to work plans specified in writing by the COR. Such technical direction must be consistent with all the terms and conditions of the Contract and the determinations of the Contracting Officer.

Accomplishment of the objective of this Contract will require the Contractor to both supply management and administrative services and technical services.

4.a Management and Administrative Services

The Contractor must provide all general management and administrative support necessary to perform the Contract. The services authorized include, but are not limited to:

● Overall management and administration of the Contract, including both expatriate and home office support and administrative services. The Contractor will provide both the key personnel specified in the Contract and additional personnel, long-term and short-term, necessary to meet recurring general management and administrative support needs under the Contract.

● The Contractor shall procure or lease necessary facilities, supplies, and services as necessary to perform the Contract Order.

● The Contractor shall provide the planning necessary for performance of the contract. As discussed in more detail elsewhere, approval of implementation and other plans are required.

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● Oversight, quality control, and general technical support of all services and deliverables provided pursuant to the Contract.

● Provide and assure the proper, efficient, and uniform use of modern management and administration, accounting practices, information technology (IT), communications, reporting, human resource management, property control, security, records, and other administrative processes and systems required under the Contract.

● Manage the overall reporting needs of the program as specified in the Contract and developed in work plans in conjunction with the COR.

4.b Technical Services

The objective of this Activity is to assist the Egyptian GOE to improve the resilience of the economy and macroeconomic framework. Generally, the Contractor is expected to support and build the capacities of target groups to formulate, implement, and enforce public policies that will engender a more competitive private sector led economy. The Contractor will also improve the GOE’s legislative processes and procedures to be more responsive to businesses and enhance public private dialogue.

4.b.1 Technical Services Focus Areas

The economic determinants are diverse and complex, and their mandates fall under several GOE key counterparts. Thus, this Activity is designed to be demand-driven, based on the GOE commitment and capacities, in support of USAID development objectives as they pertain to economic growth. Climate change issues are cross cutting among the three components and the contractor should consider climate interventions whenever applicable to the ultimate results of each component. The following are the focus areas of technical assistance (TA) that the contractor should work on:

i) Monetary and Fiscal Frameworks: This includes the key strategies, policies, and tools that can be used to influence economic activity and help stabilize the economy in a time of crisis or stimulate growth and the green economy. Illustrative TA areas include but are not limited to:

fiscal and monetary space, the new Unified Fiscal Law, risk management, green procurement, government budgeting and spending, debt management, risk mitigation, debt swap, tax administration, green GDP, or other relevant proposed areas. The main counterparts for this component are: The Ministry of Finance, The Ministry of Planning and Economic Development, and the Central Bank.

ii) External Sector: This includes strategies, policies, and tools that can be used by the GOE to improve external operations and transactions between residents of the country (private and public sector) and the rest of the world with the aim to reduce the balance of payment deficit and diversify sources of foreign exchange. Illustrative TA areas include but are not limited to: foreign direct investment, trade in services, diaspora engagement, trade and investment zones, and other relevant areas proposed. The main counterparts for this objective are: The Central Bank, The Ministry of Planning and Economic Development, The Ministry of Finance, General Authority for Investment and Free Zones (GAFI), and the Ministry of Trade and Industry.

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iii) Regulatory and Structural Policies: These are strategies, policies, and tools that can be used by the GOE to incentivize private businesses, across high priority sectors, to expand their operations and hence sustain economic growth and create more revenue and employment opportunities. Illustrative TA areas include but are not limited to: economic zones; industrial policy; digitalization; capital markets (including public and private markets); public-private dialogue; and issues affecting private sector growth. This focus area could tackle relevant transformational policy reforms that align with USAID’s sectoral focus areas, depending on GOE requests and USAID’s objectives.

Because of the nature, complexity, interlinkages, changing economic circumstances, and the dynamism of the various elements related to the macroeconomic framework, the exact counterparts, collaboration approaches with other implementing partners and donors, specific interventions, types of technical assistance and expected sub-results and related input, output, and outcome indicators must be proposed by the contractor upon the contract’s award (workplan). This will allow for better focused TA that caters to the actual needs of the GOE at the time of implementation.

Assisting the government to institutionalize appropriate tools, strategies, and policies to improve its macroeconomic resilience is the key objective of this activity. The Contractor is required to consider, to the maximum extent possible, the international best practices and the available evidence-based solutions in the design and implementation phases of any intervention.

4.b.2 Activity Components

By the end of the Activity, the Contractor is expected to attain the following three results:

● Improved fiscal and monetary policies to better manage economic fluctuations and support price stability;

● Strengthened external policy framework to reduce balance of payment deficit shortages in selected accounts; and

● Improved regulatory and structural economic policies to foster broad base private sector-led development and attain sustainable economic growth.

This will be achieved through, but not limited to:

(i) Technical assistance, capacity building, and training to relevant stakeholders and counterparts;

(ii) Procurement of key software and equipment that will help to achieve the Activity’s objectives;

(iii) Establishing PPD among counterparts and stakeholders; and

(iv) Grant funds for private sector partners, NGOs, or blended finance initiatives.

The contractor should proactively engage stakeholders to initiate and drive progress on interventions under the activity. In close collaboration with the USAID/Egypt COR, the contractor must engage stakeholders to introduce this activity and build relationships that will serve as a foundation for activity support and collaboration. These meetings will provide an opportunity for

Page | 10 early assessment of the current policy framework, national priorities and the existing technical assistance needs. It will also help to identify existing TA gaps relevant to the activity’s objectives and gauge the capacity and commitment of the GOE to undertake reforms, namely:

● Partner institutions and local stakeholders. The activity team must initiate contact with stakeholders within the GOE to introduce the project and familiarize the partners with activity objectives and seek TA realistic needs that fulfill the commitment and capacity pre-condition.

● Other donors and donor-funded projects. Working closely with USAID, the Contractor must begin coordination with other donors—including the IMF and the IFC, World Bank, and the European Union—to establish lines of communication, gain feedback on institutional champions and obstacles, and ensure activities align with the current state of donor support.

● USAID. The contractor should discuss policy reform areas that will need technical assistance and contribute to the overall objective of the contract.

● Private sector, academic institutions, think tanks, research institutions. The Contractor must reach out to national private sector associations, including those representing female entrepreneurs, to identify opportunities for public-private dialogue, connecting also with universities and think tanks to assess their interest and capacity to support analytical and training activities.

Based on these engagements, the Contractor will formulate a realistic comprehensive approach for achieving the three results considering international best practices successfully applied in countries with similar development contexts. Under each component, the Contractor must come up with focus areas, attributed interventions, relevant GOE partners, expected outcomes for each intervention, and relevant indicators for USAID approval.

Working with the counterparts on the institutionalization of policies and the following of good governance principles are key factors to achieve the contract objectives. For each expected result, the contractor is requested to suggest at least one outcome indicator. (Guidance about the indicators is detailed in Section E).

The contractor must present the different priority reform areas with evidence about its realism in context of the GOE reform plan, resources availability (human and financial, if necessary), and commitment and political will.

The following subsections will set forth the minimum tasks per component and the requirements for the Contractor.

4.b.2.i Component 1: Improved fiscal and monetary policies to better manage economic fluctuations and support price stability

Component 1 will improve the ability of the GOE to effectively pursue evidenced based policies and achieve sustainable development objectives through its borrowing and spending activities.

Many challenges to achieving this overarching goal exist, such as food and energy shocks, climate

Page | 11 change, pandemics, and regional conflicts. Well-designed and implemented strategies, policies, and analytical tools will help the GOE mitigate the impacts of adverse economic events and recover more quickly in their aftermath, thereby demonstrating improved economic governance.

Under this Component, technical assistance and training will build the GOE’s capacity to regulate economic activity through monetary and fiscal policies to increase economic stability and growth.

The contractor should propose areas related to fiscal and monetary policies where opportunities exist to partner with the GOE to achieve its goals and advance sustainable development objectives, including climate change objectives. The contractor must consider and build on successful initiatives, if they need additional resources, under the previous MESR activity and integrate all lessons learned included in MESR final evaluation report.

The following are the minimum services required under Component 1, (additional requirements will be specified in the annual work plans required under Section F.8.b):

● Support the GOE to enhance its Public Financial Management systems and processes related to budget planning and execution to increase fiscal space and allocative and operational efficiencies.

● Support the GOE to expand its access to sustainable funding sources by developing new, or expanding the use of existing, financing tools and instruments such as green bonds and Islamic Sukuk.

● Support the GOE to integrate and address climate change in its fiscal and monetary policies through areas such as green budgeting, carbon credits, and sustainable public procurements.

● Support the GOE to improve data quality (i.e., accuracy, completeness, reliability, relevance, and timeliness) and data analysis-including climate change data- and to integrate data and information across monetary and fiscal policy making units to improve policy coordination.

4.b.2.ii Component 2: Strengthened external policy framework to reduce balance of payment deficit shortages in selected accounts

Component 2 will help the GOE expand its focus beyond traditional fiscal and monetary tools and develop additional approaches to strengthen its external position. As a net importer with large investment needs, Egypt is particularly vulnerable to external shocks. Moreover, Egypt is particularly exposed to sectors and risks associated with high volatility such as global food and energy commodities, international travel and tourism, and global interest rates. Under this Component, technical assistance and training will build the GOE’s capacity to develop strategies, policies, and programs to reduce risks related to its large balance of payments deficit. The contractor should propose areas related to expanding Egypt’s sources of foreign exchange where opportunities exist to partner with the GOE to achieve its goals and advance sustainable development objectives.

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The following are the minimum services required for Component 2, (additional requirements will be specified in the annual work plans required under Section F.8.b):

● Support the GOE to attract and retain high-quality Foreign Direct Investment, especially for the green economy. The OECD definition for high quality FDI is in this Link.

● Support the GOE to grow its trade in services as a sector with high potential to increase foreign exchange inflows.

● Support the GOE to cultivate and better leverage the use of potential alternative sources of foreign exchange such as remittances and diaspora investment.

4.b.2.iii Component 3: Improved regulatory and structural economic policies to foster broad base private sector-led development and attain sustainable economic growth

Component 3 will advance reforms and regulatory improvements that have systemic impacts on the Egyptian economy and promote long-term private sector development. This will help minimize output disruptions when negative events occur and allow the Egyptian economy to recover more quickly from them. Achieving this goal will require additional policy flexibility on the part of the GOE. It will also require other measures aimed at nurturing key sectors and enhancing financial options available to private sector firms so they can scale up and make investments that boost innovation and address future needs, such as those related to climate change. Additionally, it will demand an increase in the public and private sectors’ awareness of and participation in climate change adaptation policy and action. Under this Component, technical assistance and training will build the GOE’s capacity to drive structural reforms and improve the business enabling environment to foster private sector development. Targeted grant funding can be used to support nonprofit organizations such as think tanks or research institutions and private sector firms that can catalyze broad impacts for the wider economy. The contractor should propose areas related to economic reforms that align with USAID’s strategic focus areas for economic growth, and new ways of encouraging the growth of the private sector in partnership with the GOE and other public, nonprofit, or private entities and organizations.

The following are the minimum services required for Component 3, (additional requirements will be specified in the annual work plans required under Section F.8.b):

● Institutionalize Public Private Dialogue among the GOE, private sector, and other relevant actors to facilitate more and better communication and improved laws, policies, regulations, and other programs to foster private sector development.

● Comprehensively review the Digital Ecosystem Country Assessment (DECA) commissioned by USAID/Egypt, including key recommendations that can advance the objectives of this Contract. The Contractor should develop relevant potential reform areas, key counterparts, and expected results, and how they would contribute to the contract objectives.

https://www.oecd.org/investment/FDI-Qualities-Indicators-Highlights.pdf

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● Support the GOE to develop and implement industrial policies and programs targeting high-value sectors with comparative advantages such as those related to climate change, manufacturing, tourism, and Information Communications Technology.

● Support the GOE, private sector, and other relevant actors to advance the ability of capital markets in Egypt to fund the government and private companies at scale.

● Support the GOE, private sector, and other relevant actors to de-risk investments through blended finance approaches which mobilize capital and catalyze broad economic, social, and environmental results.

5. OPERATING CONSTRAINTS AND GUIDANCE

The following operational guidance is critical for the successful and sustainable implementation of this Activity and should be applied to all services and deliverables specified in the Contract.

5.a Private Sector Engagement

The private sector is an inextricable stakeholder in driving and sustaining outcomes. Today, the private sector is playing an unprecedented role in creating and shaping opportunities that improve the lives of the people and communities USAID supports. USAID issued the PSE Policy as a first step within a larger cultural and operational transformation to expand its engagement with the private sector to achieve outcomes of shared interest across the Agency.

The contractor should exert maximum efforts to leverage available financial and non-financial resources through private sector stakeholders to achieve the activity’s target results and objectives. Although the main focus of the activity is macroeconomic stabilization, which is in theory a government role, the private sector has a key role to play in informing and advocating for policies, regulation, and other measures that promote private sector-led growth. Leveraging private sector resources for developmental objectives is another venue for private sector partnership in this contract.

5.b Collaborating, Learning, and Adapting

The contractor must establish an adaptive programming framework to foster the regular review of activities and the political and institutional will for key reforms. The framework will identify key indicators for risks and opportunities and outline a standard review of activities, their intended impact, and progress to date. The adaptive programming framework will allow the team to objectively review what is working, determine where there is momentum, and identify where new approaches may be necessary. CLA objectives include:

● Generate Knowledge. The contractor must generate new knowledge and evidence around learning questions identified together with USAID and other stakeholders, as well as questions that emerge during implementation. In filling these knowledge and evidence

Page | 14 gaps, the contractor must provide reporting, data, analysis, and gather partners for inclusive reviews of the activity’s objective and results.

● Share Knowledge. The contractor must increase knowledge sharing with stakeholders, local organizations, the GOE, sectoral experts, donors, regional and international organizations, and others to encourage more widespread learning across teams, mechanisms, and sectors. The contractor must work together within a learning network to share information with implementing partners of other USAID activities, such as local stakeholders and other development partners. The contractor must convene forums to share knowledge and use existing forums within Egypt.

● Incorporate Agile and Adaptive Processes. The contractor must develop adaptive management and implementation processes and must include an adaptive management plan within the annual work plans to allow course corrections to respond to unintended effects, changing/emerging realities, and priorities. Together with USAID, the contractor’s activity work plan, quarterly reports, and periodic progress review meetings must provide a forum for an adaptive approach to change course based on lessons learned and the evolving country context.

● The contractor must prioritize activities together with the COR during work planning and review the prioritization during the quarterly reporting period. If circumstances arise, the contractor may and should alter activity designs with approval from the COR to accommodate the window of opportunity, if the reprogramming (i) falls within the scope of work of this contract and (ii) does not cause the USG to incur additional costs. In both cases, unless otherwise directed by the CO.

5.c Sustainability

USAID recognizes the critical importance of sustainability in development cooperation with host countries. Sustainability is fundamental to the localization initiative for the Implementation and Procurement Reform (IPR) objectives. For the IPR objective of increasing the use of host country systems and government-to-government implementation arrangements, project sustainability can often be closely related to the host partner government managing the activities and participating in funding leading to continuation of achievement of project results and systems after the project is concluded.

Sustainability is achieved when host country partners and beneficiaries are empowered to take ownership of development processes, including financing, and maintain project results and impacts beyond the life of the USAID project. It involves a multi-faceted set of issues including economic, financial, social soundness, cultural, institutional capacity, political economy, technical/sectoral, and environmental.

The contractor should consider, to the maximum extent possible, sustainability aspects of the interventions with the different counterparts and stakeholders in the design and implementation phases of activities and initiatives. The buy-in and commitment of the host country beneficiaries to undertake and sustain the activities, whenever applicable, is key in this respect.

A sustainability plan is the proposed tool for monitoring the progress of these activities toward

Page | 15 the desired expected sustainable results. The sustainability plan will indicate the long-term vision and all necessary milestones to be achieved by the key stakeholders and counterparts. The contractor must communicate all financial implications for sustaining the activity results for concerned counterparts.

Assistance may be given to stakeholders and counterparts to implement their part of the sustainability plan. Whenever possible, the contractor must integrate the sustainability element for all main tasks of the contract. In developing the sustainability plan, the contractor must take into consideration that stakeholders under the three activity components--government officials, business associations, etc.--differ in decision-making processes, available financial resources, governing rules and regulations, and political pressures.

5.d Gender Integration

Egypt’s ranking for economic opportunity in the World Economic Forum’s 2021 Global Gender Gap is low (129 out of 156 countries), largely due to women’s low participation in the labor force and in management and firm ownership. The McKinsey Global Institute estimates that if Egypt were able to work towards parity in labor force participation, hours worked, and the sector mix of employment at the best rate of progress among MENA countries, it would add an estimated 16 percent to its gross domestic product (GDP) by 2025 (equal to an overall gain of USD71B or USD761 per person). The preliminary gender analyses showed gaps such as the high unemployment rate of women (24%) compared to men (4%-6%).

In Egypt, like other developing countries, macroeconomic policy is often thought of as “gender-neutral.” But in theory, broad-based economic policies—such as fiscal, monetary or trade policies—have different impacts on women and men. They matter for gender equality because they shape the overall economic environment for realizing women’s rights by affecting opportunities for paid employment, resources for policies aimed at reducing inequalities, and the demand for women’s unpaid labor. Macroeconomic decisions may also bring about economic crises, with women and men bearing different costs of negative shocks.

Based on extensive analysis and literature by key international organizations like the World Bank, UN women, and others, there are many gaps that can be tackled to promote gender equality and inclusivity in the Egyptian macroeconomic framework. UN Women has produced a policy brief on the importance of macroeconomic policy on gender equality Here.

Gender integration has always been a priority for all USAID programs. The 2023 GENDER EQUALITY AND WOMEN’S EMPOWERMENT POLICY highlights the main objectives and sectors for women’s empowerment.

The contractor must review relevant studies and analysis conducted by the GOE, international organizations, and experiences of other countries to submit a gender strategy for the project to be approved by USAID, as part of the work plan. The contractor should, to the maximum extent applicable and possible, integrate a gender lens during the implementation phase across the three components of the activity.

https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/Library/Publications/2015/UNwomen-PolicyBrief04-MacroeconomicPolicyMattersForGenderEquality-en.pdf http://www.usaid.gov/sites/default/files/2023-03/2023_Gender%20Policy_508.pdf http://www.usaid.gov/sites/default/files/2023-03/2023_Gender%20Policy_508.pdf

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A review of successful experiences in other countries promoting women in relevant and applicable sectors, including policy formulation and implementation, must be used to better inform implementation. Specific activities must ensure the adequate representation of females in all activities and at all staff levels. Whenever possible, relevant, and applicable, activities must include clear targets for female participation. Gender analyses must take account of the presence and impact not only of cultural considerations, but also occupational and hierarchical segregation of men and women in the organizations and institutions involved in the programming.

5.e Climate Change

Climate change disrupts economic stability. The USAID Climate Change Strategy calls for “sustainable and equitable climate actions that should be locally led, owned, and implemented.”

It considers partnership with the private sector “to expand the scale, impact, and sustainability of our programs.” USAID considers “key tools including, research and technology, to absorb carbon, reduce disaster risk, support livelihoods, and improve food and water security.”

This Strategy is built on several foundational principles, which will be incorporated into all planning and activities, whenever applicable:

● Locally Led Development. Sustainable and equitable climate actions should be locally led, owned, and implemented and be tailored and context appropriate.

● Equity and Inclusion. USAID will center its actions in the context of the diverse communities in which we work and will engage local, marginalized, and underrepresented groups as agents of change.

● Private-Sector Engagement. USAID will partner with the private sector to expand the scale, impact, and sustainability of our programs.

● Nature-Based Solutions. USAID will elevate nature-based solutions as key tools to absorb carbon, reduce disaster risk, support livelihoods, and improve food and water security.

● Evidence, Technology, and Innovation. USAID will support the rigorous research, technology, and development needed to identify and deploy effective climate solutions, including those locally known and developed.

The contractor should consider all these principles when designing and implementing any climate change related interventions. The contractor should work closely and deliberately with the concerned counterparts/stakeholders under the three results to identify priority technical assistance gaps to be tackled during the life of the activity. The contractor must develop a robust plan to advance the GOE’s climate agenda, with clear expected results and how the proposed interventions would contribute to these results, for USAID approval. In theory, the contractor will support the government “to reduce greenhouse gas emissions, adapt to climate impacts, and build resilience to climate change.” For this reason, it is important to mobilize public and private finance for climate adaptation and mitigation.

https://www.usaid.gov/policy/climate-strategy

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5.f Localization

USAID defines localization as the set of internal reforms, actions, and behavior changes that we are undertaking to ensure our work puts local actors in the lead, strengthens local systems, and is responsive to local communities.

https://www.usaid.gov/sites/default/files/2023-03/USAID-AA-Strategy-Report.pdf

Informed by over a decade of experience, USAID is undertaking four lines of effort:

1. Adapting our policies and programs to foster locally led development that is tied to each country’s unique political, social, cultural, economic, and environmental conditions, including through local systems practice and local capacity strengthening;

2. Shifting power to local actors, including, with an inclusive development lens, those from marginalized and underrepresented groups, and promoting space for them to influence and exercise leadership over priority setting, activity design and implementation, and measuring and evaluating results;

3. Channeling a larger portion of funding directly to local partners while ensuring accountability for the appropriate use of funds and achievement of development and humanitarian results; and

4. Serving as a global advocate and thought leader, using our convening power, partnerships, voice, and other tools of development diplomacy to catalyze a broader shift toward locally led development.

The contractor should consider the localization priorities set by USAID during design and implementation of activities.

5.g Impact on Jobs in the United States

USAID’s Automated Directives System (ADS) Chapter 225 prohibits those activities with a high risk of substantial injury to U.S. producers or to potential relocation of U.S. jobs. While the Iktisadna (Our Economy) is unlikely to have any adverse impact on US producers or jobs, the contractor must monitor activity implementation to ensure compliance with SEC.