Omar Effendi

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25700
Company name	Omar Effendi S.A.E.
Country	Egypt
Sector	Wholesale and Retail Trade
Environmental category	B
Department	Global Manufacturing & Services
Status	Active

Date SPI disclosed	April 18, 2007
Projected board date	May 30, 2007
Previous Events	Invested: November 1, 2007 Signed: June 20, 2007 Approved: June 18, 2007

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Omar Effendi Stores Limited (Omar Effendi or the company) was established in 1856 and is Egypt’s largest department store with 82 branches and 68 warehouses. The company has been privatized by the Government of Egypt (GoE) through an international bidding process for 90 % of its shareholding. The GoE’s objective is to ensure the company’s viability under the stewardship of the new owners.

Anwal United Trading Company Limited of Saudi Arabia (Anwal) and its shareholders of Saudi Arabia (the joint sponsors) were successful in their bid to purchase the company. The purchase of 90% of the company was completed in February 2007. The GoE maintains a 10% minority ownership.

The company’s investment plans include refurbishment and infrastructure upgrade of the Omar Effendi chain of retail department stores.

Anticipated development impact of the project

The proposed IFC investment would significantly improve the standards in Egypt’s retail sector, which is still mainly characterized by outdated merchandising layouts in outlets in the main shopping areas. The project will:

- Promote SME and private sector development:

Omar Effendi’s increased sales levels will positively impact a wide range of local textiles and other general merchandise manufacturers and suppliers. The project will facilitate expansion and improvement of quality standards through better specification and designs, wider selection of products, and increased, steady demand.

- Upgrade business practices:

The successful turnaround of Omar Effendi’s operations will have a catalytic effect on developing and improving the quality of local suppliers and producers. The sponsor’s dual aim of increasing local sourcing while improving overall product quality standards will foster an improvement in their supplier’s quality which will enhance overall supplier improvement
- Provide with a wide range of good quality competitively priced merchandise:
By expanding its range of products ranging from apparel, footwear, health & beauty, home textiles and through economies of scale, Omar Effendi will build on its existing bargaining power with suppliers. This will enable the company to reduce prices which will in turn benefit consumers. Operating costs will reduce due to improved MIS systems that will allow management to track consumer preferences, improve inventory management while at the same time improving service quality. The increased selection will enhance consumer’s ability to use Omar Effendi as a “one-stop” shop which will result in time savings and increased consumer satisfaction.

- Improve employment quality:

By providing training in modern retail and marketing techniques, the Project will help improve the skills of middle management and shop floor staff, thereby improving their job satisfaction and making staff more employable. It will also encourage good labor practices consistent with international standards to ensure fair treatment, non-discrimination and equal opportunity of employees.

IFC's expected development contribution

- Fit With World Bank Group Strategy:

A key development objective of the GOE is the achievement of high and sustainable GDP growth along with poverty alleviation. To achieve this objective, the GOE plans to make better use of the private sector as a development agent. In the current CAS for Egypt, the World Bank Group proposes to help the GOE achieve its goals by aligning its support over the four year period of FY06-09 to three key strategic objectives:

- facilitating private sector development;
- enhancing the provision of public services; and
- promoting equity.

The proposed project, which supports the premier privatization of a large retail department store in Egypt, fits well with the World Bank Group's overall strategy of facilitating private sector development and support for privatization efforts in the country.

- IFC’s Role:

IFC will support the privatization and transformation of the company by providing long term finance and share the risks through a potential equity investment currently unavailable in Egypt. Given the high profile nature of the privatization, IFC has been selected by the Sponsors to play an important honest broker role between the GOE and the company’s new, foreign owners.

Environmental and social issues - Category B

This is a Category B project according to IFC’s Policy and Performance Standards on Social and Environmental Sustainability. This project type has limited potential for adverse social and environmental impacts, generally site-specific and readily addressed through risk mitigation measures.

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment may have impacts which must be managed in a manner consistent with the following Performance Standards:
- PS1: Social and Environmental Assessment and Management System- PS2: Labor and Working Conditions- PS3: Pollution Prevention and Abatement- PS4: Community Health Safety and Security

The key social and environmental issues in this project are the company’s capacity to manage social and environmental issues, and human resources management in light of anticipated personnel changes required in the future development of Omar Effendi, and fire safety provision in the anticipated store upgrade program. Other issues of concern are safety during refurbishment, disposal of wastes arising from refurbishment, air conditioning system refrigerant selection and energy efficiency of the stores.
The new management has committed to implementing a structured program to address any deficiencies in the areas identified which will be monitored via progress updates and site visits by IFC.

For more information, please see the Environmental and Social Review Summary.

IFC PROJECTS