CAIRO: The European Commission approved Tuesday a program worth €22 million to improve living conditions in rural Egyptian districts by supporting the development of agricultural small and medium enterprises (SMEs).
“There are three pillars for this program, and the idea is to provide help for SMEs in rural areas in Egypt,” said Gerhard Krause, head of the economic section for the European Union Delegation to Egypt.
“SMEs provide most of the jobs and trade, they are responsible for a lot of job creation, but they have been struggling, not just in Egypt but in other Mediterranean countries as well,” Krause told Daily News Egypt.
The project will officially begin after Egypt establishes its first democratic government in the second quarter of 2012, “with the first farmers benefitting in the second half of 2012,” according to a European Commission statement.
The program strives to provide access to “finance for farmers and increase productivity in selected value-chains such as the dairy and aquaculture sector with the aim of improving farmers’ living conditions.”
By helping SMEs find alternative methods to fund their idea as well as current businesses, the new commission plans to set up regulations and standards for businesses that can apply for funding.
“Collateral requirements are so high in banks, small businesses can’t live up to these expectations and they can’t benefit from financing, we would like to have a fund that takes over their guarantees,” said Krause.
Support from the commission will not just be monetary, the program will also provide training and capacity building to improve “farmers’ business planning skills and enhance the understanding of local banks dealing with agricultural SMEs.”
Even without funding, Krause believes that there are steps that the government can take to help make markets more accessible for small and medium businesses and ensure that their rights as small enterprises are secured.
“Fostering SMEs is important; not only from finance side, but easing the regulations for SMEs to develop from the government side is important,” said Krause.
Moreover, the project follows up on the principles of the financial Investment and Sector Cooperation (FISC), a rural component program that ended with a positive evaluation in 2010.
“The reason behind the program is that we had a commission for the neighborhood in May this year and we met the Ministry of Cooperation and International Planning; in this meeting we discussed what the commission should do with remaining part of 2011 envelope,” he said.
Fayza Aboul Naga, Egypt’s minister of international planning, mentioned to the commission that it is important to help SMEs as they’ve have been struggling, yet they are some of the largest income generators and job creators.
“Our promise was that we would do our best to come up with an idea to help in this area,” Krause added. “We proposed the idea to Mrs. Fayza in July, and we got the agreement from the ministry.”
The European Delegation to Egypt is currently in the process of launching several feasibility studies that will specify how the project will be set up, including how many jobs it is expected to provide or save, and details describing what kind of results the program would like to achieve.
“We don’t know yet how many jobs it will create, but after two months time, in early 2012, we will understand more,” said Krause.
EU exports to Egypt in 2010 totaled €14.8 billion while imports from Egypt came in at €7.2 billion.
The commission spent €40 million in 2007-2010 in reforms in areas of democracy, human rights and justice. In areas of competitiveness and productivity of the economy, €220 million were spent. While in sustainability of development and better management of human and natural resources, €298 were spent.
In late October, officials from the European Bank for Reconstruction and Development convened in Cairo to discuss potential projects that could help Egypt during the critical transition phase after the uprising.
Officials decided that Egypt’s economy, which has been battered over the past nine months, will need to focus on boosting SME’s as well as providing new housing developments, in order to speed up recovery.
Heading the discussions at the time regarding SMEs, Magda Kandil, executive director of the Egyptian Center for Economic Studies, stated that financing SMEs is very important as they are “still facing the same problems that they faced before the uprising.”
Kandil also suggested that establishing a pool fund at banks specifically for SMEs would be beneficial.
The European Union’s cooperation with Egypt is regulated under the European Neighborhood Policy Instrument that has set up an envelope of €449 million to be used in development in Egypt over the period of 2011-2013.
“In 2011, a total of €122 million were committed to Egypt to assist in the areas of energy, social housing, trade enhancement and support to agricultural SMEs,” the commission said in an official statement.
Goals under this multi-annual blueprint are based on three principles: to support political reform, human rights and judiciary in Egypt, support of economic reforms, and support of sustainable development.
