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Al-Ahram Weekly 6 - 12 July 2000 Issue No. 489 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 6 - 12 July 2000 Issue No. 489
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| Published in Cairo by AL-AHRAM established in 1875 |
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Small and medium enterprises (SMEs) are potentially powerful engines of growth. Shaimaa Labib and Sherine Nasr look at two initiatives
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There is growing awareness that strong small and medium sized enterprises (SMEs) facilitate economic vibrancy. Last week, Egyptian entrepreneurs gathered in Cairo to participate in a seminar on the Italian SME experience. The seminar was held under the auspices of the Italian Trade Centre, the Italian Embassy and the Egyptian Ministry of Economy and Foreign Trade. More than 50 Egyptian entrepreneurs participated."The Italian experience in the field of SMEs is a success story that could be very useful to us," said Minister of Economy and Foreign Trade Youssef Boutros Ghali. In Italy, SMEs contribute around 96 per cent of the GNP and produce about 70 per cent of exports. Ghali hopes that Italian technical assistance to Egyptian SMEs will help open up new avenues of foreign trade.
The Italian Embassy's economic and commercial counsellor, Filippo Scammacca del Murgo, believes that the inroads made by Italian SMEs into foreign markets can be reproduced by Egyptian entrepreneurs. He said that the Italian Trade Centre in Cairo is working closely with Egypt on establishing greater trade links between Italian and Egyptian firms. Much of this activity is specifically focused on SMEs. Filippo Lanciotti, director of the Italian Trade Centre explained, "Our aim is to promote Egyptian exports to the Italian market as well as to inform businessmen from both sides about available investment opportunities."
Participants in the seminar reviewed the various financial and non-financial services offered by the Italian government. Of particular interest was SIMEST, an Italian financial institution that promotes the development of Italian business abroad. Ruggero Manciati, SIMEST chairman explained the history of his organisation. "SIMEST," he said, "was created in 1991 as a joint stock company controlled by the Italian Ministry of Foreign Trade." The purpose of the organisation, he explained, is to support Italian entrepreneurs approach foreign markets on a globally competitive basis. In 1998, the Italian government passed a law that greatly expanded SIMEST responsibilities. The organisation was given the power to assist entrepreneurs buy up to 25 per cent of the capital stock in foreign companies. It also began to actively assist SMEs gain access to the international banking sector. In 1999, SIMEST began to directly manage a state fund that is specifically designed to support international ventures. Manciati explained that SIMEST currently assists and advises SMEs "on all the requirements for investing abroad."
Manciati said, "We have also designed a market penetration programme that is intended to assist Italian companies in establishing businesses in non-EU countries by means of permanent branch offices abroad." The SIMEST chairman also remarked on the organisation's efforts regarding the formation of global sales and customer service networks and outlined its advertising and market research services.
At the moment, the Federation of Egyptian Industries is engaged in negotiations with the Italians regarding the possibility of establishing financial links with SIMEST. The objective is to provide Egyptian SMEs with access to SIMEST services and resources. One immediate benefit of expanding trade under the auspices of SIMEST is that Egyptian SMEs would be able to obtain insurance coverage through SACE, an official Italian export credit agency. At the seminar, Vincenzo D'Elia, SACE underwriting division director, explained that this would "provide SMEs with insurance covering economic, commercial and foreign exchange risks in order to facilitate their operations in foreign markets."
Another point of interest to Egyptian SMEs was a joint initiative launched in 1998 by the Italian government and the Egyptian General Authority for Investment and Free Zones (GAFI). Formed under the auspices of the United Nations Industrial Development Organisation, an Italian Investment Promotion Unit (IIPU) was established to provide technical and financial assistance to Egyptian SMEs. As with SIMEST services, IIPU credit has been made available for the specific purpose of developing bilateral economic activity. The programme facilitates the extension of loans, through the Egyptian banking system, for the acquisition of Italian equipment, technical training, industrial patents and licenses.
Given the fact that Italy is already a lucrative market for the Egyptian economy, the Italian Trade Centre seminar should provide Egyptian entrepreneurs with much food for thought. Currently, Italy is ranked third in terms of commercial trade with Egypt, after the US and Germany. Excluding the oil sector, Italian investment in Egypt last year amounted to $105 million. This was an increase of 63 per cent over the 1998 figure. The Egyptian entrepreneurs who attended the seminar are no doubt carefully looking over their notes.
No petty business
THE UNITED STATES Agency for International Development (USAID) recently provided a LE14 million grant to the Qena Business Association for Small Business Development. The funding will finance credit and other services for small and "micro" entrepreneurs in the governorate. This grant is part of the Small and Emerging Business (SEB) programme, launched recently by USAID in collaboration with the Egyptian government. The project is being implemented through the Credit Guarantee Corporation (CGC)."Twelve villages in Qena governorate have been selected to carry out the project. Small and micro entrepreneurs in these areas will have access to funds at favourable terms," said Ahmed Abdel-Salam, chairman of the CGC.
With USAID assistance, CGC has developed a comprehensive management structure that will allow the corporation to channel financial and technical assistance to small scale enterprises nationwide. The corporate plan is to act through development organisations that are actively engaged on the ground. These organisations, located in rural and disadvantaged areas, will be able to access the USAID assistance through CGC auspices. The target organisations include non-governmental organizations (NGOs), banks and community development associations. Within the plan of action, Upper Egypt is a particular area of concern.
According to Abdel-Salam, the USAID grant will be given to the CGC to be held in trust. The corporation will use the money to act as a mediator between lending institutions and prospective clients. "Banks will be able to lend borrowers without a guarantee because we will work as guarantor. The grant will not to be used for just any purpose. It will encourage banks to pump more funds into the market in the form of loans to small and micro entrepreneurs," said Abdel-Salam.
Guaranteed loans will range from LE1000 to LE10,000 according to the size of the project. The repayment period will range anywhere from six months to two years at an interest rate of 16 per cent. Abdel-Salam explained that although agricultural activities are to be excluded from consideration, "loans will be extended to every other economic activity be it commercial, industrial or service related." Furthermore, Abdel-Salam stated, "there are no special terms the borrower must meet before he is granted the loan. The only requirement is to pay back the installments on time."
The corporation has already extended help to other business associations in the same fashion. "Through our help, the Alexandria Businessmen Association managed to extend some 150,000 loans to small enterprises in the governorate. The reimbursement rate was 99 percent," Abdel-Salam said.
According to Adel Labib, governor of Qena, the project is expected to provide 30,000 job opportunities. "We hope that the project will expand to other disadvantaged villages in Qena where unemployment rates are among the highest," he said.
Similar agreements are being finalized with business associations in Minya, Beni Suef, Sohag and Aswan.
