Which factors determine the upgrading of small and medium-size enterprises (SMEs): The case of Egypt
Egypt's exports still reach only a low level and are comparatively little diversified. Thanks to rising energy prices, they increased recently to 33% of GDP. However, natural gas, petroleum derivatives and other raw materials account for more than 70 per cent of the exports, while only 20 per cent are manufacturing products. And the bulk of manufacturing export goods are produced by a small number of big companies – including the subsidiaries of foreign companies in Egypt and a few large domestic firms, some of which have been promoted explicitly as national champions during the last couple of years. The aim of the country working group was to identify how growth could be generated and how the economy should be diversified.
Project Lead:
Markus Loewe
Project Team:
Nicole Rippin
Participants of the 47th Postgraduate Training Course:
Annegret Altpeter
Lisa Borbein
Marc Chantelauze
Maximilian Kern
Elisabeth Niendorf
Time frame:
2011 - 2012
/
completed
Co-operation Partner:
The Egyptian Center for Economic Studies (ECES)
- Malak Reda (ECES)
- Iman Al-Ayouti (ECES)
Project description
Egypt's exports still reach only a low level and are comparatively little diversified. Thanks to rising energy prices, they increased recently to 33% of GDP. However, natural gas, petroleum derivatives and other raw materials account for more than 70 per cent of the exports, while only 20 per cent are manufacturing products. And the bulk of manufacturing export goods are produced by a small number of big companies – including the subsidiaries of foreign companies in Egypt and a few large domestic firms, some of which have been promoted explicitly as national champions during the last couple of years.
This is not least because there are simply only very few large firms in the country. Less than 0.1% of all enterprises employ more than 100 employees, while 99 % of all enterprises have only 10 employees or less. And only a small portion of today’s large firms roots in an SMEs, which has grown over time; most have been established as a large company (by national criteria) right at the start by a foreign or a wealthy domestic investor.
The last Egyptian cabinet that governed under Mubarak before the revolution has established several private sector development programmes each, however, focusing on just one segment of enterprises. But they are not at all co-ordinated, and none of them is accompanying and caring for enterprises that graduate from one class to another: from the class of SMEs to medium size companies or from the class of medium size companies to the category of large companies that are able to conquer export markets by themselves.
The country working group therefore analysed three interdependent questions:
Why is there no such programme in Egypt that helps small and medium companies to graduate?
What would such a programme have to do?
Why are so few Egyptian SMEs graduating by themselves?
All analysts agree that the success of political transformation in Egypt depends primarily on the country’s socio-economic development.