This article covers the best practices and needs for reform in entrepreneurship policies in Egypt.
The Arab Republic of Egypt was among the top ten global Doing Business reformers in four of the seven years from 2003 to 2010. In Doing Business 2006, Egypt ranked 6th globally on reforms, and in 2007 it ranked 1st, after reforming in five out of ten areas that were studied, jumping 26 places in one year as reported in Doing Business 2008.
On March 29–30, 2010, Ministry of Investment reported that Small & Medium enterprises (SMEs) in Egypt account for about 75% of employment, 80% of GDP, yet contributed to only 4% of exports and 10% of fixed capital formation. And according to GAFI: 90% of registered companies have capital less than LE 10 million while 70% of registered companies have capital less than LE 1 million.
The GAFI one-stop shop is a good idea but the implementation needs to be improved, according to local experts. One stop shops can show results quickly when their officials have decision-making power. Since 2003, one-stop shops cut on average 5 procedures and more than halved delays in 24 countries. However, in Egypt, gains were not as dramatic, as the number of bureaucratic steps was still quite high.
Most reformers are bad marketers, according to Doing Business 2008. Advertising the changes can ensure that entrepreneurs know how much easier registration has become. Egypt's successful marketing campaign after tax reforms in 2005 is a good example to follow.
From single window concept, Egypt can bring it to the ultimate process which is online registration. Online registration is one of the most effective ways to speed the start-up process. Technology can create a unified database of business information to be shared across districts, governorates and government agencies. Egypt took the first step by certifying without delay that the company name is not already in use. The next step is to allow entrepreneurs to search for the company name online. The internet can also provide them with other information such as details on procedures, fee schedules and working hours of the relevant agencies. With some simple legislation to allow electronic signatures, the internet can be used to file business registrations. Making registration electronic cuts time—by more than 50% on average. Paper registration should remain available for those without internet access.
Governorates and other sectors of the government can follow the system in GAFI one stop shops for business start-ups. The reduction in procedures, time and cost are proof that the single window principle is effective in Egypt.
Random inspections offer opportunities for bribes, corruption and informal payments. The authorities lose out because they cannot systematically monitor the structural soundness of their buildings and businesses lose time and money every time they have to stop construction to pay off an inspector. Experiences from around the world show that statutory time limits are more effective when coupled with "silence is consent" rules. The latter keep bureaucrats on track and lessen the chances of lost or neglected permit applications and endless delay tactics. Countries with a system of risk-based inspections have fewer inspections than countries with random inspections. Countries with risk-based inspections do not compromise the general safety of their citizens. Instead of visiting the site at whim, inspectors stick to a schedule based on the completion of each construction phase.
In Assiut and the Ministry of Housing, Utilities and Urban Communities, the requirements to obtain a building permit are listed on their respective web sites. Other governorates can have the same system. Information about the procedures and process for obtaining a building permit helps businesses with their project planning, saving time and money. In Egypt, having forms online can save businesses at least one trip to the municipality—that can mean a whole afternoon not wasted in traffic.
Egypt, as reported in Doing Business 2008 report, ranked low on the ease of registering property in the world—101 out of 178 countries. In Cairo, registering property takes 193 days and costs 1.0% of property value. Each procedure can cause corruption and delays. Global data show that there is no need to have 7 separate procedures to register a property. The procedures related to obtaining the contract from the real estate registry, signing it, and picking up the new title could easily be combined. Egyptian cities can look for good practices within Egypt like in the case of Assiut where it takes 33 days only to register property; otherwise the country could look to Armenia, Croatia, Ghana and the Dominican Republic as recent examples of successful reforms.
Keeping records updated would cut the need for a new valuation and site inspection by the measurement department each time a property is transferred. Countries that transfer records from paper to electronic form benefit from shorter processing times. Going electronic makes it easier to identify errors and overlapping titles, improving title security. Electronic records would solve the numbering and filing problems in Assiut and provide a better organizational framework for Alexandria.
Encourage angel investors to play an active role in supporting early stage entrepreneurial ventures especially high growth start-ups.
Egypt ranked 132nd overall in the ease of closing a business, according to Doing Business 2010. In Egypt and Lebanon, the need for developing a framework for rescue and restructuring proceedings has been acknowledged by all parties involved in the assessment of the insolvency legislation. It has developed a mediation procedure, getting the debtor and his creditors more involved in the reorganization process through direct negotiations between them, keeping the level of involvement by courts and trustees at a minimum, and providing incentives (e.g., less penalties, easier settlement) for debtors who are aware that they can no longer pay their debts as a way of encouraging early action. Experience has not been very satisfactory until now, because of the banks' reluctance to co-operate and provide companies with an opportunity to restructure. A serious technical impediment to the framework enabling a greater number of enterprises to restructure in a timely fashion is the bankruptcy test or "cessation of payments" which, if proved before the court, triggers bankruptcy. Most often companies end up in court for liquidation, a process which can take between 3–16 years.
Formal education in Egypt consists of four stages. Two years of pre-school education are not compulsory in the country but are encouraged. Second is the basic education followed by secondary education, and lastly the tertiary level or post-secondary education. The importance of entrepreneurship education (EPE) and training has been recognized in the educational sector and efforts have been ongoing to establish EPE in the country, however the formal education curriculum at basic and secondary levels does not contain official content related to EPE. This was reflected in the 2008 Egypt's poor comparative standing relative to other GEM countries on the Assessment of Entrepreneurial Framework Conditions particularly in the presence of education and training system, Egypt ranked last place. Egypt has the second lowest rate for the percentage of the population (18-64) that has received any exposure to entrepreneurship in the education and training system. Only 7.5% of Egyptians reported ever having taken any courses on starting a business as part of school-based activity, or participating in related training after leaving the formal education system. Of the non-entrepreneurially-active population, adults who have never received start-up training were much less likely to perceive that they had the skills, knowledge, and experience to start a business than those who had. 80% of national experts agreed that the education system was one of the top three areas constraininge entrepreneurship in Egypt. The majority of experts did not believe that people in their countries generally possess the necessary know-how and experience to start-up and manage business, Egypt ranked 21st, placing it in the bottom third of GEM countries.,. The results of study by Organisation for Economic Co-operation and Development (OECD) and EU showed similar results, Egypt showed significant progress in implementing policies in all 10 Charter dimensions with the exception of education and training for entrepreneurship (Dimension 2).
|Economies||Ease of Doing Business 2009/10||Global Competitiveness Index 2010/11 (GCI)||Economic Freedom Score 2010||Prosperity Index 2010||Information and Communication Technology Index (ICT) 2009||Innovation System Index 2009||Human Development Index (HDI) Value 2010||Education and Human Resources Index 2009||Knowledge Economy Index (KEI) 2009||Press Freedom Index 2010|
|Syrian Arab Republic||144||97||49.4||83||4.43||3.17||0.589||3.10||3.09||173|
|United Arab Emirates||40||25||67.3||30||8.59||6.69||0.815||4.90||6.73||n/a|
|West Bank and Gaza||135||n/a||n/a||n/a||n/a||n/a||n/a||n/a||n/a||n/a|