Interview: Anis Aclimandos
Which sectors will provide the greatest opportunities for US investment in the coming years?
ANIS ACLIMANDOS: The oil and gas sector will remain the most interesting area in terms of US investment for the foreseeable future. That said, renewable energy, consumer goods and pharmaceuticals all offer considerable opportunities. It is a particularly promising market for the latter two sectors, given that Egypt has the largest population in MENA.
However, US companies should not limit their ambitions to the local market, but should also take into account the access Egypt offers to the Arab, African and European markets through the existing preferential trade agreements it has with these countries, as well as through its geographic proximity. Egypt’s young population is also a tremendous asset that is underutilised by US firms. Those that have hired and trained Egyptians are now using them in several countries. Such a large, capable workforce makes labour-intensive industries a very attractive proposition for companies that are interested in the market.
What are some of the biggest challenges faced by foreign companies entering the market in Egypt?
ACLIMANDOS: The biggest challenge facing new foreign companies is adapting to the pace and culture of the local market. For instance, permits and approval procedures are different and can take quite some time. As a result, the handsome profit margins that come with being an established, functional business are seldom quickly realised. Exit strategies and repatriation of earnings are also common concerns.
Accordingly, the new cabinet is actively adopting “out-of-the-box” strategies to deal with these issues and, combined with recent laws that were promulgated, is attempting to create a totally different business environment. Land allocation, infrastructure and ownership issues are also being revisited. The one-stop shop policy recently relaunched by the Ministry of Investment is expected to speed up the process of registration for new market entrants. That said, the slow and cumbersome legal procedures are not to be underestimated, and the only strategy for outside firms to overcome these challenges is to seek advice and representation from reputable local firms.
What can the private sector and the government do to support the growth of small and medium-sized enterprises (SMEs)?
ACLIMANDOS: The private sector cannot be competitive without ambitious SMEs. Being able to outsource all non-core activities gives a tremendous edge to large companies, particularly to exporters. As such, the government should aid the growth of SMEs by making long-term credit available to them. It could also reform the tax code so that it is friendlier for small producers and, in addition, facilitate the registration of land and other assets that give companies the necessary collateral needed for loans.
AmCham Egypt has been active in promoting the concept of supply chain expansion by large US companies to include local SME suppliers. This is a win-win formula that can reduce the cost of imported raw materials for the big firms, while encouraging capacity building among smaller entities.
What role have the Qualified Industrial Zones (QIZs) played in expanding US-Egypt trade?
ACLIMANDOS: The Egyptian QIZs differ from other zones in that the primary beneficiary, apart from the companies located within them, is Egyptian labour. QIZs have created many jobs. They have also led to substantial increases in exports and capacity within certain sectors, such as textiles. Having duty-free access to the US market means that those products which are ordinarily taxed heavily at the US border are most likely to succeed from QIZ involvement, due to the relative advantages afforded by these zones.
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