Backing small business

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by Ahmed El-Mahdi:

A new business strategy in the form of a Ministry of Entrepreneurs could inject new life into the national economyEstablishing a bank to be owned by the new Ministry of Entrepreneurs … Enforcing the country by law to buy 10 per cent of the products … Connecting the new ministry with the Ministry of Technical Education.. These are the main demands the private sector is makingThe proposed new Ministry of Entrepreneurs will provide “technical, financial and marketing support” to small-and medium-sized business projects to help provide job opportunities for young people in Egypt, where unemployment stands at nearly 13 per cent.The Egyptian business society has welcomed President Abdel-Fattah El-Sisi’s comments on his intention to set up a new ministry for small entrepreneurs. They are demanding that the ministry be established without delay, but have declared that the president’s decision has come a bit late in the day in view of the fact that the national economy badly needs to revive the  small enterprise sector, which represents no less than 70 per cent of the industrial sector as a whole.Law no 141 of 2004 has not yet come into force, a number of businessmen told The Middle East Observer.

This law obliged the government to buy 10 per cent of the products of small entrepreneurs, and to manage the conditions of informal entrepreneurs to attract them into being part of the formal economy. It also calls for setting up a new bank with an interest rate of no more than 5 per cent, the business society adds, pointing out that this bank has to be owned by the ministry which is concerned with entrepreneurs’ issues and provides feasibility studies to young business people.The problems facing the Egyptian economy were the main reason for Sisi’s decision to set up a new Ministry for Entrepreneurs following the failure of the different government bodies to deal with this sector, which represents such a large percentage of industry, Nader Abdel-Hadi, chairman of the small enterprises modernisation association in Alexandria, says.

According to statistics from 2006 the total number of small enterprises amounted to 2.4 million, while the total estimated number for the current year is 2.7 million projects, meaning that this important sector is growing somewhat rapidly and different ways of thinking are needed from the ones formerly used to deal with mega protects, Abdel-Hadi says, pointing out that the average investment value of these projects is LE6bn.He says many of these projects have real importance in terms of economic development, as they could greatly contribute to turning the economic wheel. In the field of plastic recycling, for example, there are only three large projects, but lots of similar small projects turn over hefty annual profits.

“The president doesn’t save any effort by taking a decision in the interest of the national economy,” Abdel-Hadi says. He says establishing such a ministry, which they have been demanding since 2006, will remove all the obstacles that have prevented these small enterprises, more than half of which are operating under the radar, from joining the formal sector.The government should follow a policy to attract these projects into the formal sector, he says.

The government should also provide a wide range of services such as marketing and development, in addition to implementing law no 141.Regarding the license crisis, he said that it was the government who created the crisis, and it had to solve it.

“The government has to take into consideration that small entrepreneurs have done the most they could do to start up a new project and be a part of the production process,” he added.Professor Bahgat al-Dahesh, chairman of the small industries committee in the engineering industries chamber at the Egyptian Industries Federation, said the decision to establish a ministry for small entrepreneurs was good, but agreed that it was too late and should have been enacted sooner.

He says the local industry is suffering from the agreements which have harmed the private sector in Egypt, including the Euro-One agreement, which allows European sellers to enter the Egyptian market without any customers. On the other hand, local manufacturers are still heavily dependant on imported components for productionMost large projects depended on small industries, Dahesh added, meaning that if the production costs of the small industries were high, this would increase the total cost of the final product, which is why a good many businessmen with large investments bail out of the local market.

For instance, the engineering sector imports production components worth about $60bn per year, while they could be manufactured at home to avoid spending hard currency.

A moment’s meditation was enough to remember that Chinese products used to be recognised from their bad quality, he said.

“But if you look at China now, you see a very developed country which attracts the biggest multinational corporations in the world.” And these big projects in developed countries are built on 90 per cent of the output of small enterprises, he says.

The new ministry should focus on experimental research which connects the manufacturers with academics, Dahesh says. “If we proceed by developing research, our products will have the lion’s share in foreign markets because of the cheap cost of labour compared with other countries, as well as our fantastic geographical location which allows investors to head to any country. This will certainly have a good impact on our national economy.”

Dahesh is also calling for the necessity of a bank to give loans with simple interest rates of no more than 5 per cent to small and medium-sized enterprises, but on the condition that the bank should be owned by the new Ministry of Entrepreneurs and receive foreign grants and financial support.

The new ministry that the president says he intends to set up will be a pillar of the prospected industrial revival, says Ali Hamza of the Investors’ Syndicate of Assiut. He says Upper Egypt will be the main beneficiary of the ministry, because this part of Egypt has a huge number of small projects and this will pave the way for real industrial growth.

He says small enterprises are the best in terms of providing job opportunities, and that they maintain the craft industries which have largely been eliminated, particularly in Upper Egypt. He says the government should provide feasibility studies for young people, and is calling for the new ministry to be connected to the Ministry of Technical Education to guarantee that new graduates are able to bear responsibility and run their businesses successfully.

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