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SMEs' big push
Published in Al-Ahram Weekly on 03 - 03 - 2005

It takes more than matchmaking to develop the SME sector in Egypt, Sherine Nasr reports
Small and Medium-sized Enterprises (SMEs) are now widely touted as the force that can propel the global economy. A number of countries that have adopted this philosophy have managed, through long- term planning and the implementation of SME-friendly policies, to upgrade this vital sector.
"China and India, for example, are two countries which, according to the World Bank's estimate, will be leading the world's economy for the next 30 years. Both have a very strong SME sector which has enormously contributed to the growth of their economies," said Jan Sturrason, a Swedish expert at Price-Waterhouse Cooper.
Though it is far from realising its potential, the contribution of SMEs to the Egyptian economy can hardly be ignored.
Studies made by experts in the field show that SMEs in Egypt account for almost 98 per cent of the country's total economic activity. SMEs also provide about 80 per cent of total value added to the Egyptian economy.
"There are at least 1.6 million officially recorded private sector enterprises, apart from the agricultural sector. Jobs created by SMEs make up to two-thirds of Egypt's entire workforce," commented Ahmed El- Baradaai, chairman of Banque du Caire (BDC), one of the first financial institutions to provide small loans to SMEs in Egypt.
Last week, a gathering of 40 prominent SMEs representing at least 14 countries met their Egyptian counterparts in an attempt to open new export horizons for Egyptian enterprises. The gathering displayed a wide range of activities ranging from textiles, mining, medical equipment, energy, tourism, foodstuffs and IT. Organised by the Egyptian Businessmen's Association in collaboration with the International Christian Chamber of Commerce, headquartered in Belgium, the four-day conference, entitled "Commerce... Egypt's Highway" was accompanied with an exhibition displaying different products by the participating Egyptian enterprises.
"So far, we depend entirely on private relations to market our products abroad. Attending external fairs and exhibitions also helps substantially," said Hamdi Yassin, marketing manager of Stars of Export- Egypt, an agriculture produce company which mainly exports its organic products to the EU. Yassin underlined that the ultimate goal for participating in the event is to try to get acquainted with more partners from the EU. "We met a number of potential partners and exchanged information and contacts. However, the concrete result of these meetings can only be attained later," he said.
The lack of an umbrella under which the SME sector in Egypt can operate is but one of the many impediments facing this vital sector. Lack of long-term funding, marketing, the issue of competitiveness and pricing in the global market and the absence of a unified policy constitute major challenges to the sector's development.
In terms of policies, international experience in this field indicates that SME development policies must be consistent with the state's general economic policy framework. "Otherwise, this sector tends to drag the economy down or proves unresponsive to measures aimed at improving it," said Mohamed Abdel-Aziz, an SME development specialist.
One step taken in the right direction was the issuing of a Draft National Policy for Small and Medium Enterprise Development in June 1998.
The document was probably the first attempt at proposing such a national policy framework in response to a situation wherein, according to 1997 data, the country had more than 40 different SME projects sponsored by government agencies and organisation and donor agencies.
"Back then, the government found that $560 million was being invested in developing the sector in the absence of such a framework," said Abdel-Aziz who added that the policy was mainly focussed on increasing the competitiveness of SMEs so as to play a leading role in reforming the trade balance through exporting to international markets.
"Experience has proved that the sector is lacking in several competition requirements such as efficient management, skilled labour, advanced machinery, marketing systems in addition to the availability of suitable entries in reasonable prices," he said.
While far from being complete, it is believed that the Draft National Policy can constitute a good start for an efficient process of consultation, refinement and updating of a final document to be adopted by all parties.

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