With new government policies and regulations in place to support entrepreneurship and investment, there has never been a better time for Chinese investors in Egypt.
Egypt is open for investment. The country’s economy is on the mend, but requires the unleashing of entrepreneurs’ potential to fully flourish. Small business is the engine of growth for the Egyptian economy, making up an astonishing 80 percent of Egypt’s gross domestic product and accounting for 75 percent of exports. While many small producers are still concentrated in traditional businesses such as farming, furniture manufacturing, tailors and restaurants, the growth of the internet and deeper integration into the global economy are providing new opportunities; especially in technology and consumer products.
The government recognizes it is essential to introduce policies and regulations to build the overall infrastructure to support entrepreneurship. In addition, as the government takes steps to reduce the bureaucratic burden on start-ups and new businesses, it will provide additional opportunities for foreign firms seeking opportunities in this fast-growing marketplace. Why Egypt? It has a strong entrepreneurial ecosystem combined with educated, tech-savvy young population. The country is one of the most wired in the Middle East and North Africa (MENA) and the government has made promotion of small and medium sized enterprises one of its top economic priorities. It is actively recruiting investment from overseas, particularly with China. The two counties have now established a “strategic relationship” to improve political ties and China has declared that Egypt is an investment target under President Xi Jinping’s One Belt, One Road initiative. The Egyptian market is open for business. Here are six things to know:
Ease of market entry: In April, the Prime Minister established a federal agency specifically responsible for the development of small and medium enterprises. This agency’s mission is to provide services to help streamline the approval process for establishment and guide firm’s through the application stages. It has brought together government services into one agency to better support opening small businesses. Making market entry smoother will give Egypt a competitive edge in the MENA region and attract new firms.
Growing opportunities for international businesses: Egypt’s new investment law allows for easier repatriation of profits, access to foreign exchange and introduces tax cuts to promote the private sector. In some cases, international businesses may not need to pay taxes for the first five years. In addition, new sectors are being opened to foreign investment, including technology and the service industry; sectors where China thrives. These are all making Egypt a more welcoming environment for foreign firms, with FDI rising 26 percent in the fiscal year from July 2016 – June 2017.
Capital for entrepreneurs is more readily available – and growing: Egyptian banks have been directed to ensure that their loan portfolios include at least 20 percent dedicated to SEMs by 2020. In addition, the Egyptian Social Fund for Development and the World Bank launched a $300 million program to promote small business development in Egypt. And the European Investment Bank (EIB) has provided a $20 million loan to finance SMES.
A growing consumer base: The market in Egypt is seeing increased demand for products and services. The tech sector, for example is booming. It contributed almost 3.5 percent of GDP in the first quarter 2017 alone, up from just 3 percent a year previously. In recognition of this growth, Google recently established a Mobile Application Launchpad to incubate successful mobile application developers in Egypt.
Economic stability: the economy is growing which, combined with political stability, makes Egypt one of the more appealing investment opportunities in the MENA region. The government is implementing a reform agenda which includes lifting long-standing economic subsidies and opening new sectors to create many new opportunities for the private sector. These new opportunities are in areas attractive to Chinese companies and will allow for the greatest mutually beneficial development: sustainable energy, technology goods and services, infrastructure and automobiles.
Encouraging to foreign business: Egyptians are welcoming of foreign companies given their long history of trade and commerce. And Chinese might find the rituals of tea drinking and discussion familiar as an important part of building the trust necessary to be successful in the market, although the slower pace can be frustrating at times. Egypt’s ancient and maze-like bureaucracy can also rival China’s. But navigating it requires the same skills of persistence and patience.
Ambassador Yasser Elnaggar is a career diplomat with more than 25 years of experience in foreign policy, national security, business, trade and investment, who has served around the world for the Arab Republic of Egypt. Currently, Ambassador Elnaggar is Chairman and Chief Executive Officer of the Chemical Industries Holding Company (CIHC) in Egypt. He has previously served as Principal Deputy Minister of Planning, Monitoring and Administrative Reform and Principal Deputy Minister of Investment.