ENTERING THE EGYPTIAN MARKET

Entering the Egyptian market can offer your business various new opportunities. Egypt’s vibrant and resilient economy welcomes foreign investment, while international companies see its strategic location as a potential launch pad for Global Expansion. The Arab Republic of Egypt is at the heart of the Middle East and North Africa (MENA) region, with ports on the Red Sea and the Mediterranean, opening the door to the Near East, southern Europe and farther into Africa. Egypt also controls the Suez Canal – a vital gateway for world trade linking the Med to the Red Sea and into the Arabian Gulf and the Indian Ocean and sea routes to the Far East.

Egypt is a significant economic force in the region with a membership in the Greater Arab Free Trade Area, the African Free Trade Zone and the Common Market for Eastern and Southern Africa. Globally, Egypt has a free trade agreement with the European Union (EU) and is a member of the United Nations, the International Monetary Fund, the World Bank and the World Trade Organisation. Egypt is a significant oil and gas producer, with large sectors in construction, architecture, engineering, health care and telecommunications and tourism. Investment also goes into chemicals, pharmaceuticals and renewable energy. Egypt’s population of 100 million and a workforce of around 30 million include a pool of well-educated, highly-trained and often multi-lingual professionals.

Starting a business in Egypt

Opening a business in any overseas territory brings issues, and entering the Egyptian market is no different. Moving staff worldwide means lengthy processes to obtain Visas and work permits. Once the employees are in place, who will handle their payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. Your business plan will have to deal with all these issues.

Egypt is increasingly open to foreign investment, but there are always considerations surrounding compliance with the relevant legislation. In Egypt, this revolves around the Companies Law, Investment Law and the Labour Law, which lays down the obligations of employers and the protected rights of their employees. There are other issues, too. Where will you find manufacturers, offices and distributors? There is a simple and effective alternative. By partnering with a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Egypt.

International companies moving into Egypt’s economy must set up a subsidiary to hire staff and run their payroll, with the typical choice being a limited liability company. This requires approval from the General Authority for Investment and Free Zones (GAFI) and is regulated by the Companies Law and Investment Law. Compliance includes the following:

  • Approval from the Commercial Registry for the unique company name and certificate of establishment from GAFI after incorporation.

  • Notarized Power of Attorney for all founders/ shareholders/ quota holders etc., along with proof of IDs, plus the Articles of Incorporation.

  • Verification the subsidiary’s legal advisor is qualified for Appeal Court level and that the Register of Accountants authorizes the auditor to audit company accounts

  • Register with the Tax Authority to receive the Employer Identification Number (EIN) and with the National Authority for Social Insurance.

  • An LLC must have an Egyptian manager, and there must be a minimum of two shareholders/founders/quota holders and a maximum of 50.

Expanding your business into Egypt

Cairo, the capital of Egypt, topped the Statista Global Business Cities in Africa report based on, apart from other factors, the level of city development and its economic strength. It is one of the most populated cities in the world, with 20 million people within the Cairo Metropolis. Alexandria is Egypt’s second largest but number one on the Mediterranean. Companies entering the Egyptian Market will find most expatriate business communities based in the two major cities, with many others in the tourism industries around the coastal towns, the Sinai and Luxor.

Cairo: Most people coming to Cairo wonder how it works with its mad traffic and lawless driving, noise levels, hawkers, and masses in the streets until the early hours – but it does! It has virtually no rain but always has plenty of water, and you can see the modern architecture alongside the 4,500-year-old Pyramids.

Free Zones: Some are government-run, and some are privately managed. There are nine within the public domain, usually around ports, airports, and land and sea borders, e.g., Nasr City in Cairo, Amrya (Alexandria), Suez, Port Said, Ismailia, 6th October City (Media Zone), Damietta, Shebeen Al Koum and Qeft. Most are varied in their industrial and financial projects, with incentives and opportunities to invest with lifetimes exemptions from sales, income tax, and import and export duties. The private zones are defined by their location and proximity to factors of production tending towards individual projects. Any company can apply, depending on certain factors, and they enjoy the same benefits and privileges as the Public Zones. Among the incentives are exemption from sales and customs tax and any other fees and paying only a 1% charge on goods in and out of the duty-free zone.

Special Economic Zones: The Suez Canal Zone stretches across 460 sq. km. and connects the Mediterranean and the Red Sea. It boasts four industrial sectors and six seaports and enjoys accessibility to 10% of the world’s sea-based trade. It forms part of the country’s sustainability strategy to attract Foreign Direct Investment to its flourishing manufacturing industry.

In the Pipeline: A new phase of innovation clusters for funded projects in the IT field is being promoted through the Information Technology Industry Development Agency (ITIDA), encouraging university and industry collaboration. Industrial Parks in line with Eco-development and sustainability in Egypt have received support from the United Nations Industrial Development Organization (UNIDO). Switzerland is also part of the Country Partnership Program to curb gas emissions and waste while encouraging investment and creating job opportunities.

Wherever you decide to plant your company’s feet on Egypt’s landscape, there are specific questions that need to be asked about what office facilities are available – whether small or large, shared or more substantial premises:

  • What government funding, grants, subsidies or tax benefits exist for start-ups and new companies?
  • Are the premises near wholesalers, manufacturers, and distributors … and do they need to be?
  • Are free trade zones, special economic zones, business hubs or clusters offering business space?
  • Are the local businesses active with no adjacent vacant premises?
  • Is the locality clean and suitable for mental health, providing services and accommodation for staff?
  • Will it make a good impression on clients with good transport links if you need to move goods?
  • Is it fit for purpose, within budget … but still has room for expansion?

Some Egyptian Facts

  • Capital – Cairo

  • Population – Around 100 million

  • Regions – The geographic areas are the Nile Valley and Delta, Western Desert, Eastern Desert and the Sinai Peninsula

  • Official language – Arabic

  • Economy – US$396.33 billion, 36th in the world (2021)

  • Leading sectors by GDP – Energy production, chemicals, steel, textiles, vehicles, consumer electronics, agriculture and tourism

  • Primary exports include – Petroleum and related products, raw cotton and yarn, textiles, mineral and chemical products, rice, citrus fruits

  • Leading imports include – Wheat, crude petroleum, vehicles, broadcasting equipment, refined petroleum

  • Main trading partners – China, Russia, US, Germany and United Arab Emirates, Italy, Saudi Arabia, India and Turkey

  • Government – Semi-presidential republic

  • Currency – Egyptian pound (EGP)

Advantages and Challenges when entering the Egyptian Market

Some advantages of entering the Egyptian market include the following:

  • Location: Strategically placed in the Middle East and North Africa (MENA) region, Mediterranean access to southern Europe and North Africa, controls Suez Canal, providing access to Red Sea, Arabian Gulf, Indian Ocean and the Far East

  • Incentives: The government announced ‘golden licenses’ for foreign investment in sectors such as electric cars, infrastructure and renewable energy

  • Workforce: Large pool of cost-effective labour, including predominantly young, well-educated, often multi-lingual, highly-trained individuals in the business and commercial sectors

  • Infrastructure: Planned investment in ports, roads and railways

Some challenges of entering the Egyptian market include:

  • Tourism: Heavily susceptible to outside influences, evidenced by Covid and the 2022 Russia-Ukraine conflict

  • Operating: According to Statista.com, Egypt scored 60.1 points on its ‘ease of doing business report for 2021, 114th out of 190 countries, although this represented an improvement over 2020

  • Bureaucracy: Contractual and legal grey areas; customs procedures; restrictions on foreign property ownership

  • Business culture: Making inroads can be harrowing as Egyptians often opt for doing business with those they know

LOOKING TO EXPAND INTO EGYPT?

For more information, download our free guide or get in touch with our consultants here