CAIRO: Essam Serry is an entrepreneur. A British educated Egyptian with masters degrees in computer science and education, he returned to Egypt several years ago in order to pursue several business initiatives in his home country.
Since then, he has opened his own import-export business, a food distribution company, and a development group that does investment marketing and consulting. But Serry says that these three are just the tip of the iceberg – he claims he has hundreds more business plans that he has attempted to implement, and failed.
“I have a cupboard just full of business plans, he said, the frustration clearly audible in his voice. “Five hundred business plans at least. Filling water bottles, chartered jet planes, tourist developments on the Red Sea. I see holes in the market everywhere. But the system makes it impossible to pursue these. I’ve tried. I’m lucky that three have worked.
Of course, Serry is just one voice in Egypt’s large and growing business community -but his disillusionment with the system is not only palpable, but is indicative of a more widespread mentality that seems to have ingrained itself in the minds of young entrepreneurs.
Indeed, the business environment in Egypt has never been one of the country’s bragging points, with a massive bureaucracy, a bloated public sector, and a strong socialist ideology – all relics of the Nasser era – that have prohibited even the most driven entrepreneurs from entering Egypt’s under-saturated market.
In the last 10 years the government has recognized this problem and started to implement initiatives to amend the system, but the changes have been occurring slowly and it is becoming clear that it will take even longer for the effects to be felt.
Nermine Abulata is an economist and assistant to the minister at the Ministry of Trade and Investment. She insisted that the ministry was committed to revamping the country’s business systems and structures so as to make the environment more efficient and open to private enterprises.
“We want to be facilitators, not regulators, she told Daily News Egypt. “It’s a whole system that we are currently in the process of changing.
A graduate of the American Univeristy in Cairo, Abulata has been working at the Ministry for 15 years. She said that in her time there she has seen a complete transformation in the approach of the government towards private business.
“Fifteen years ago, the IMF and World Bank faced resistance from the government as they tried to push reforms, she said. “Now all the ministries are speaking the same language. They are coordinating and there is a clear mission that everyone believes in. Of course we face lots of problems – there are long-standing and prevailing problems -but now there is a willingness to tackle them.
She said that the Ministry has been implementing and developing a number of targeted programs aimed at improving the business environment.
Its initiatives are generally divided according to the kind of businesses they are targeting – with approximately equal efforts going into encouraging foreign investments from large multi-nationals and in improving conditions for small and medium-sized enterprises (SMEs).
Serry himself admitted that “things are changing very slowly, but he still managed to cite a slew of systemic problems that prevent small enterprises from entering the market.
He said that one of the biggest problems is simple access to finance. “You need LE 1 million before you can even get a loan. If I have a million Egyptian pounds already, why would I need to go to a bank for a loan?
He also said that many banks require businesses to be up and running for three years before they will release capital. The result, he said, is that the only people capable of getting loans are those operating large, preexisting corporations.
Ziad Abou Al Nasr is a young entrepreneur attempting to start his own business. But his efforts over the last year and a half have been met with very little success. He says that finding the startup capital has been the number one factor prohibiting him from moving his project forward.
“The greatest obstacle to starting a business here is getting the money for it, he told Daily New Egypt. “There are thousands of gaps in the Egyptian market waiting for entrepreneurs to fill but getting the finances is impossible.
Sa’eed Hady is the CEO of a meat importing business passed in Port Said. He echoed Serry’s remarks about the difficulty of getting access to start-up capital.
“You need money to start a business, he told Daily News Egypt. He said this was true not only because of the difficulty of getting a loan but also because of the way in which bribery has been built into the system.
“You need to be able to pay people off, he said. “There’s no way to do that if you’re poor. It doesn’t matter how smart you are. If you don’t have a minister in your bag there’s no way to get anything done.
Hady said that through a combination of favors and bribes he manages to run his meat importing business successfully and fairly efficiently.
Serry also recognized the importance of connections in becoming a successful businessman. His advice to anyone starting a new business: “Forget about making profit at first – spend the first two or three years just making contacts.
He explained that many of the problems with the financial and administrative systems can be traced back to flaws in the judicial process.
Without an effective arbitration mechanism, there is no way to quickly and effectively settle business disputes. “The legal system is just rubbish, he said, “from getting a license, to registering a company, to anything.
The problem, he explains, is that if a contract is broken the dispute could take up to five years to make its way through the legal system. Banks don’t trust entrepreneurs seeking to take out loans, and because there’s no system to guarantee that they’ll be paid back, they demand a certain amount of collateral before they release any money.
“Everyone is protecting themselves because there is no system to protect them, he said.
But Abulata says that the Ministry is working to change all of this. She says that there have been efforts to coordinate with the Ministry of Justice to make arbitration mechanisms more effective.
She said that the Ministry had also established and revamped several institutions (the Industrial Development Authority, the Industrial Modernization Center, the Social Fund for Development, and the National Bank of Egypt) specifically to allow for the granting of loans to small entrepreneurs.
There are also training and assistance programs through these institutions that seek to assist business developers as they implement their projects.
But either these changes have not been extensive enough, or they have not yet had time to have a significant effect.
In 2006 the World Bank published its annual “Ease of Doing Business Report, which painted a picture of the Egyptian business environment that was much closer to the version described by Serry than that laid out by Abulata.
Out of 175 countries considered, Egypt ranked 165 – a ranking which put it last in the Middle East, behind countries like Iraq, Libya, and Iran. The report was discouraging: in Egypt it takes 19 days to register a business, 263 days to obtain a building license, 536 hours to pay taxes, 1,010 days to enforce a contract, and 4.2 years to close a business.
Abulata said that the Ministry was “shocked when it received the ranking, which is an important tool used by international corporations to make decisions as to where to invest.
“Many of the decrees and reforms that we’ve made were not included in their calculations, she said. “It was very unfair of the World Bank not to recognize these reforms. We recognize that things haven’t always been good in the country, but recently there have been real changes.
She was confident that, following a number of meetings with World Bank officials responsible for collecting data for the index,
the 2007 rankings would be very different. “This year it will reflect the positive changes, she said.
But Serry was adamant when he said that changes in systems and policies would not be enough to substantially improve the business environment in Egypt.
“It takes lots of time for changes to filter, he said. “You can’t just change the policies. It’s a problem with the mentality. Better laws and a better system – it isn’t enough.
He thinks the general Egyptian mentality towards profit-making enterprises are at the core of the most enduring problems. He explains it as a partial holdover from the Nasser era, a mindset in which all citizens are provided for by the government and everyone works following a set, predetermined procedure – “an employee mentality, he says.
“Until the whole generation grows old and there is a new generation that hasn’t been trained like their grandfathers, you won’t see any serious changes in the business environment.
Surprisingly, Serry’s sentiment is shared by one of the topmost officials in the Ministry of Trade and Industry, Dr. Samiha Fawzy, the First Assistant to the Minister.
When asked what she considered to be the biggest problem in the Egyptian business environment she immediately responded: “the mindset.
“It’s a problem with the mindset of all the people, she told Daily News Egypt. “You can give people a degree or change a policy, but it is so hard to change the mindset. It starts with education, and we’re trying hard to improve this in Egypt as well. But we need to change the mindset of everyone – potential entrepreneurs, government workers, consumers, everyone.
Both she and Serry agree that this problem is really a generational one, and that no amount of reforms would be able to speed along the necessary turnover from the older to the younger generation.
And yet Serry still thinks the government isn’t doing enough. In the end, he said, it’s not about making a few amendments here and there. It’s about full, systemic change.
“We need someone with the strength and courage to make big changes, he said. “There are so many places to improve – they could make peoples lives so much easier.
