Egyptian Minister of Investment Supports SMEs

Cairo, Egypt | February 15, 2008 by D-8 Secretariat

In a major step to encourage the initiation of small and medium-sized enterprises (SMEs) in Egypt, the Ministry of Investment has reduced the minimum capital requirement of limited liability companies from LE 1,000 to LE 200, as reported by media sources of Egypt.

The decree comes within the course of efforts exerted by the Ministry of Investment to facilitate establishment of SMEs, simplify their procedures and encourage small investors to join different fields of investment, the ministry said in a statement.

“The dependency on SMEs is crucial if the economy is to sustain its growth. We can not continue to depend on big businesses that are difficult to start [in terms of capital],” Ahmed Hassouna of the SME department at the General Authority for Investment and Free Zones (GAFI) told the newspaper.

Eighty percent of economic development in Egypt comes from SMEs, and they fill 75 percent of the nation’s employment needs. The decree helps many companies to perform their activities in an institutional approach that ensures sustainability, regularity of accounts and access to all services and facilities available to companies registered at GAFI, including project development, promotion and providing data on investment opportunities.

Coupled with Egypt’s new SME bourse (NileX Stock Exchange, which was established late last year) SMEs should have all the necessities to establish a registered and competent business.

“The final goal is to enable them to succeed and develop,” he said.

Moreover, reduction of capital requirement encourages SMEs to take the legal form of limited liability companies with a legally determined capital. It ensures that a company’s liabilities are not extended to the owners’ private money.

“By making the procedures easier and cheaper, company owners will prefer to enlist their businesses at GAFI, rather than operate them with no registration,” he said. Many SMEs are initiated with no registration or license, making it impossible to collect accurate data about the number of operating businesses and job opportunities available. Encouraging registration also gives SMEs the advantage of legally dealing with banks and financial institutions to obtain funding.

Many international banks have recognized the booming SME market in Egypt and consequently established tailored loan packages to aid them. “By using an institutional approach to book keeping, companies will be able to deal within the institutional legal form, market their products and attract new partners,” Hassouna said.

According to GAFI, several registered SMEs received interest from larger companies, which have resulted in successful mergers or the expansion of the SME into a larger company.

D-8 Secretary General, Dipo Alam, expressed his impression with the Egyptian initiatives, and said that other D-8 memberstates can learn much from Egyptian’s experience, and work and focus more on the roles of SME in their respective economies. Alam hopes that Egyptian private sectors will more active in D-8 intra-trade, since Egypt has already free trade agreement with Turkey, and soon has Preferential Trade Agreement (PTA), Visa Agreement, Custom Agreement, and other trade facilitation activities with other D-8 member states.

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