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Big efforts for small industries
Published in Al-Ahram Weekly on 02 - 07 - 2009

Government bodies concerned with small enterprises joined forces with international agencies to give the SMEs sector in Egypt a boost
In times of economic crises, it is wise to go small. Sherine Nasr reports on Egypt's latest moves to provide technical and financial support to the small and medium-sized enterprises (SMEs) sector.
A major stride in the right direction was taken on 24 June as the General Authority for Investment and Free Zones (GAFI) signed protocols with the Social Fund for Development (SFD), the Arab Gulf Programme for United Nations Development Organisations (AGFUND) and the United Nations Industrial and Development Organisation (UNIDO).
The three protocols are aimed at providing concrete support to the SMEs sector in Egypt at various levels.
"It is time for national, regional and international efforts targeting SMEs in Egypt to coordinate, in order to boost this sector," said Assem Ragab, chairman of GAFI, who added that small investors are vulnerable, in need of financial and technical support, as they lack training and markets. "But they are also persistent and self-employed. Supporting this sector will be the shortest route towards reaching the goal of unemployment reduction," Ragab added.
By virtue of the first protocol, GAFI will join forces with the SFD, the main governmental body servicing the SMEs sector in Egypt. Both entities will act jointly towards a better penetration within the sector to provide a variety of integrated services. Notably, some 850,000 SMEs are working under the SFD. The number of clients dealing with the fund has exceeded 2.2 million. Other SFD partners include banks, NGOs and universities.
In 2004, the SFD has established a number of investment clusters that work as a one stop shop to provide significant logistics services to small industries. Now that the SFD and GAFI have started to act as partners, SFD's services will be incorporated into GAFI's one stop shop to provide small and micro enterprises a full package of integrated and upgraded services.
Earlier, administrative costs for establishing and running a small business under the SFD have been reduced to the minimum. According to Hani Seif El-Nasr, chairman of the SFD, a LE50,000 project used to cost at least LE8,500 in administrative fees. "This is why it was easier for these small entities to turn to the informal sector. But this is not the case any more. Administrative costs are now minimal. This is one sure way to increase this sector's involvement into the formal economy," said Seif El-Nasr.
With the technical support of AGFUND, Egypt will be able to establish the legal framework to set the rules for investment in the small and micro enterprises. AGFUND is a non-profit regional development institution concerned with the support of sustainable human development efforts targeting the neediest in the developing countries.
According to Ragab, establishing one legal entity to be responsible for defining the criteria for financing micro, small and medium-sized enterprises will help encourage more investment in this sector. "Potential investment into the SMEs sector is estimated at $2 billion, mostly coming from Arab countries and East Asian countries," he said.
In the meantime, the UNIDO's Investment and Technology Promotion Office's (ITPO) in Bahrain with its broad experience in promoting joint industrial investment opportunities will set a best practice model to be duplicated in Egypt.
Economic experts have often referred to the SMEs sector as the backbone of the Egyptian economy. The sector contributes at least 35 per cent of the nation's GDP and is considered as one of the major new jobs originators.
GAFI recently launched its Small and Medium Investment (SMI) strategy to encourage investment as a means to employment. "We have come to realise that small investors are the cornerstone for creating more jobs and rejuvenating investment," said Samir Radwan, board member of GAFI who added that with reference to the Japanese and Malaysian experience in the field, SMEs contribution to the GDP is planned to rise to 40 per cent by 2015 and 50 per cent by 2030. "The labour force in this sector will reach 13 million in 2015, which represents 43 per cent of the country's total workforce estimated at 38.6 million," said Radwan.
The latest initiatives have been hailed by economic experts as a breakthrough in the SMEs industry in Egypt. "People have often wondered why sustainable development efforts are seldom felt by the public. The answer is a lack of coordination," said professor of economics and Shura Council member Yomn El-Hamaqi, who underlined that national bodies dealing with SMEs in Egypt have often worked in isolated islands and seldom joined efforts for concrete results.
"By coordinating their efforts now, more beneficiaries will be targeted and more specialised and integrated services will be offered. Egypt will also be able to draw on other countries' experience in the field," said El-Hamaqi. "Nevertheless, the major determining factor of success for these initiatives is follow-up. Otherwise, the signed protocols will not survive beyond the singing ceremony."


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