Political instability, corruption and competitors’ practices in the informal sector are the three main challenges that faced Egyptian firms, according the latest report issued by the European Bank for Reconstruction and Development (EBRD).
“Corruption was the second most severe constraint … with its share being the highest in the southern and eastern Mediterranean (SEMED) region and well above the respective averages for the rest of the EBRD region,” the report said.
As for informal sectors, the report stated that approximately 40% of the companies surveyed pointed out that they have competed against unregistered firms. According to the report, the growth of the informal sector was a result of the bureaucratic system in Egypt, along with the unclear rules and insufficient legal protection.
“Estimates suggest that the informal sector constitutes around 40% of GDP and 66% of total non-agricultural employment in the private sector,” the report read.
The EBRD’s report indicated that firms are also challenged by unreliable supply of electricity, crime and difficult access to finance, as well as tax administration and transportation. Around 80% of the companies responded that they have experienced a power outage.
Power outages affect the total annual revenue of companies, which dropped by over 13% due to their continuity during the period of the report between June 2013 and February 2015. This figure is above the SEMED’s average of 7.7%, and above the average of the EBRD region of 5%.
“In particular, electricity issues were the second most severe constraint in Dakahliya, Gharbiya and Kafr El-Sheikh/Menoufiya/Beheira, while firms located in governorates along the Suez Canal complained about customs and trade regulations,” the report read.
The obstacles that face Egyptian firms vary according to their location, however. Companies near the Suez Canal area complain from customs and trade regulations, while around 60% of those in Daqahleya suggested their need for a loan and around 97.5% were credit-constrained.
The EBRD also conducted studies on Jordan, Morocco and Tunisia.
