Cluster-based Development for Job Creation & Poverty Reduction in EgyptTuesday, September 6th, 2016

Governmental Efforts for Boosting SMEs in Egypt- with Special Focus on Clusters

Contents

• Status-quo: SMEs & Clusters• SMEs Challenges• Needed System & Governmental Efforts• Specific Examples

Date:

Status-quo: SMEs & Clusters in Egypt

Status-quo: SMEs in Egypt

Food

Beverag

e

Tobacc

oTe

xtile

Wearing a

pparel

Leath

er and re

lated products

WoodPap

er

Printing a

nd reproducti

on of recorded m

edia

Coke an

d refined petro

leum products

Chemicals

Pharmace

uticals

Rubber

Other non-m

etallic

mineral products

Basic m

etals

Fabric

ated m

etal products

Computer, electr

onic and optical

products

Electr

ical e

quipment

Machinery

and equipment n

.e.c.

Motor vehicle

s

Other tran

sport equipment

Furnitu

re

Other man

ufacturin

g0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Large enterprises

Medium enterprises

Small enterprises

Very Small enterprises

Micro enterprises

4

Distribution of Firm Size Across Different Industries

Micro enterprises Very small enterprises Small Enterprises Medium Enterprises Large Enterprises0

200000

400000

600000

800000

1000000

1200000

Firm Size

Tota

l num

ber o

f wor

kers

in fi

rms

5

Status-quo: SMEs in Egypt

Distribution of Total Number of Workers Across Different Sizes

Status-quo: SMEs in Egypt

Missing Middle in Egypt Compared to Other Countries

UK

Japan

Spain

Italy

MENA

Egypt

Less than 10

10 - 99

100 - 499

More than 500

0 % 20 % 40 % 60 % 80 % 100 %

7

Status-quo: SMEs in Egypt

% Share of Small and Medium Enterprises in Country's Exports: Egypt in Comparison with Other Countries

Turkey Italy Spain South Africa Morocco Egypt

60

4944

3631

4

8

Status-quo: Clusters in Egypt (Broad Definition)

Organic clusters

Other types of firm

interlinkages

Government initiated clusters

Status-quo: Clusters in Egypt

• 145 organic clusters in Egypt (Source: SFD)

• Distributed across 25 governorates

• 79 % of organic clusters are informal

• Main Sectors: Agro-industry, Food, Wood, Leather, Textile, Chemicals, Metallurgical, Mining & Building products.

• No study quantifying non-organic clusters (Robeiki, Merghem, Mahala …etc)

• Handicrafts

• Other models (new)

Status-quo: Clusters in Egypt

Organic Clusters ” are defined as industrial interdependent concentrations, located in a geographical proximity, developed and/or expanded without government planning/intervention, producing similar or complementary products with distinct characteristics or competitive edge, having the experience or capacity to sell beyond their geographic boundaries, and with a minimum of 30 enterprises/employees

Date:

SMEs Challenges & Government Efforts

SMEs Challenges in Egypt

SMEs Challenges

Gov. lengthy complicated procedures

to start Difficulties in fund Raising

Access to credit

Scattered & competing initiativesLack of

technical & financial support

systems for SMEs facing

problems

Strong disconnect between

entrepreneurs and accelerator and incubation

programs

Lack of mentorship and support

at the ideation phase

Needed System & Government’s Efforts

SMEs Challenges

Gov. lengthy complicated procedures

to start Difficulties in Fund

Raising Access to

Credit

Scattered & Competing InitiativesLack of

Technical & Financial Support

Systems for SMEs facing

Problems

Strong disconnect between

Entrepreneurs and Accelerator and Incubation

Programs

Lack of Mentorship and Support

at the Ideation Phase

CBE Initiative+

New MSMEs Definition

General Adoption for

Unified Definition

+SMEs

Regulator and

Coordinating Body

Technology Platform

Simplification of Licensing

Procedures

New Definition Adopted by the CBE

Existing Firms New Established Firms

No. of Employees

Annual Sales Revenue

No. of Employees Paid-in Capital

Micro Enterprises Less than 10 Less than 1 mn EGP

Less than 10 Less than 50,000 EGP

Very Small Less than 200 1 mn to less than 10 mn EGP

Less than 200 50,000 – 5 mn EGP for industrial sector

50,000 – 3 mn EGP for other sectors

Small Less than 200 10 mn to less than 20 mn EGP

Less than 200

Medium Less than 200 20 mn to less than 100 mn EGP

Less than 200 5 mn – 10 mn EGP for industrial sector

3 mn – 5 mn EGP for other sectors

CBE Initiative

• Announced in January 2016

• Amount of finance devoted to SMEs to reach 20 % of each bank’s loan portfolio over the next four years. This amounts to a total of 200 billion EGP.

• Interest rate 5% for categories: very small and small

• Interest rate 7% for machine & equipment for medium sized, not to exceed 20 mn EGP and maximum maturity 10 years (agricultural and industrial firms only)

Date:

Specific Examples

Old ClustersDamietta

Abou Kabeer

Meet Ghamr

New Clusters “Qalyubia” (small industrial cluster linked to sector specific value chain)

30 acres

Toukh

Chemical Industries

50 acres

Kafr Shoukr

Food Industries

Your Job Next Your Home

Your Job Next Your Home

Your Job Next Your Home

Your Job Next Your Home

Your Job Next Your Home

Clusters have a lot of potential in Egypt that remain untapped …….