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Why Expand to Egypt?

Egypt is home to one of the oldest cultures in the world. It is still attested today by some of the worlds most famous monuments such as the Giza pyramid complex and the Valley of the Kings. Egypt sits in the heart of the Middle East, and it has formed the crossroads of Arab culture for over millennia. Here, Mediterranean, African and Arab cultures met and influenced each other over centuries.

The Egyptians take great pride in their heritage and varied culture. Today the country has developed into a modern unified society, which continues to serve as a bridge between the European west and the Arab east. Covering an area of over one million square kilometres (four times the UK) and with a population of 78 million, Egypt is the largest Arab country in the world and it has a central role in the Middle East region, highlighted by the role of the Suez Canal, a 119 miles long water channel which hosts 7.5% of world sea trade. Approximately two-thirds of Europes oil passes through the canal.

The Suez Canal continues to be one of Egypts major sources of revenue. Moreover, thanks to a huge modernisation process, begun in the nineties and still a work in progress, Egypt has become one the fastest growing developing country in the world. A once stalled economy has been revived by reforms aimed at reducing the size of the public sector and at expanding the private sector. Registering, licensing or incorporating a business in Egypt has become easier. Recent boom years for the Egyptian economy and a generalised growth have improved the competitiveness of this country, creating a new market for foreign business. Many opportunities can be found in what has been called the Economic Tiger on the Nile. If you are thinking about expanding a business in Egypt consider also that the global downturn found Egypt better insulated than many.

Reform means that the regulatory burden of doing business in Egypt has been eased. According to reports published by IFC and the World Bank, Egypt is one of the top 10 economies that reformed their business regulations, providing credit bureau enhancements and improvements in the access to credit for foreign companies expanding a business in Egypt.

The country's private sector is dominated by a plethora of small businesses: 93% of the non-agricultural private sector employs one to four people. They lack marketing channels and they rarely have the time to look into how implement new approaches or technologies. The business opportunities for anyone who wants to set up a business in Egypt start here.

Egypt's employment has grown steadily in recent years, with 600,000 new entrants into the market each year. Despite high numbers of university graduates, skilled workers in most professions are in short supply and foreign companies frequently pay internationally competitive salaries to attract them. However, on average the cost of labour remains very low (around 15% of average UK wages). Millions of Egyptians continue to seek employment abroad.

Egypts growing economy is becoming much more diversified than in the past. It is a major oil and gas producer, with natural gas production increasing rapidly. Investment needs in power infrastructure remain substantial. Agriculture, although shrinking as a percentage of GDP, still employs almost 30% of the population. Egypt imports most of its meat, and all of its wood and grains. Make sure you have a clear and detailed idea of the market before starting a business in Egypt.

Attractions for UK business

After the 1954 Suez war, probably the greatest British foreign policy mistake of the history, relationships between UK and Egypt cooled off and from the seventies onwards, they have steadily improved. According to last year Egyptian Minister of Investments figures, UK is today the largest investor in Egypt.

Egypt has launched significant reforms to recharge its economy and attract foreign investors in the past years. Even Chinese companies, anxious to enter the African market, see Egypt as a key bridgehead and they are registering a business in Egypt. The country now wants to attract investors from a wide range of industries. A as result, there is a new feeling of confidence in the Egyptian business community and a particular interest for UK companies.

Business opportunities

Expanding a business in Egypt may be highly remunerative in the following sectors:

• Petroleum, power generation and transmission, and telecommunications information-technology sectors represent the most promising sectors in Egypt.

• Tourism, as the largest earner of foreign exchange and employer of more than 10% of Egyptian workers, also offers strong possibilities. Expansions in the Red Sea resorts provide increasing opportunities for exporters of hotel equipment and environmental management services. Tourism along the Red Sea coast continues to be a big draw and the government is pushing development along the Mediterranean coast as well. These opportunities are attracting project management expertise and quality building systems and equipment.

• Hi-tech technology sector, including: infrastructure, logistics, electronics, communication and information technology, construction, textiles, car components and chemicals.

• Education & Skills - The sector is in robust expansion, with high demand for schools, universities, international accreditation, technical schools, localization and foreign-language development, corporate training and postgraduate training programs. The government aims, in partnership with foreign investors, to add another 2,200 private schools for kindergarten through high school over the next four years. Some 40 million of Egypts population are under the age of 25. The government has plans to build more than 1,800 public schools throughout Egypt over the coming 15 years.

• Ports, railways and logistic - Despite a developed coverage of road and rail networks and significant development of port facilities, investment opportunities in Egypt abound. Some areas, such as Egypts rail network, are in need of significant infrastructural improvement. Other subsectors, including ports and dry ports, offer investment opportunities in value-added services alongside large development projects. All facets of the sector are approaching maximum capacity, with major capacity shortfalls forecast over the coming five to ten years.

• Renewable Energy - Egypt possesses an abundance of land, sunny weather and high wind speeds, making it a prime resource for three renewable energy sources: wind, solar and biomass. Although renewable energy is a relatively virgin market in Egypt, the countrys strategic location and the governments commitment to increasing its renewable energy output make it an attractive investment opportunity.

Other potentially interesting sectors for setting up a business in Egypt are:

• Agriculture (refrigerating units, packaging, tractors)

• Chemicals

• Environment

• Financial Services

• Fire and Security

• Healthcare

• Water & Wastewater

One can find potential investment areas by visiting the Egypt Ministry of Trade website. If you are planning to register a business in Egypt consider that there are currently public free zones in operation in the following locations: Alexandria, Damietta, East Port Said Port Zone, Ismalia, Koft, Media Production City, Nasr City, Port Said, Shebin el Kom and Suez.

Challenges

Egypt has the potential to be counted among the emerging markets poised to offer good returns for foreign investment. However, there could be significant downside risk to expanding a business in Egypt. A multiplicity of regulations and regulatory agencies, delays in clearing goods through customs, arbitrary decision-making, high market entry transaction costs and a generally unresponsive commercial court system can cause troubles. Corruption and fraud are of serious concern, which adds significant inefficiencies to commerce. Potential investors should check out the track record of would-be partners before incorporationg a business in EGypt or making a big commitment. As usual, the reality of the risk diminishes with the application of due diligence and thorough market research.

Before registering, licensing or expanding a business in Egypt, make sure you understand the basics about local business regulations and etiquette. For a general background on Egypt, visit the official website of the Government of Egypt.

If you are starting a business in Egypt, remember that Islam is practised by the majority of population and plays a vital role in all aspects of society, including business contexts. Closely linked to Islam is a fatalistic approach to life. It also influences the concept of time in Egypt and as a consequence business negotiations may take longer and should not be rushed.

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