The NPR ran a very interesting story today on the realities of doing business in Egypt from the perspective of several young entrepreneurs. NPR reporter visited Speed Send, a company co-founded by 33-year-old Ahmed El Sherif six years ago that sells office supplies online. When asked about the largest obstacles to starting his business, El Sherif named several problems common not just in Egypt, but many other developing countries, especially in the Middle East and North Africa (MENA):
- Scarcity of reliable market data that would help gauge the potential customer base, draft an accurate business plan, and conduct market research,
- Difficulties in obtaining bank loans by a start-up; banks only lend to profitable businesses,
- Lengthy procedures for registering a business; at the time Speed Send was founded, they took a few months,
- Disincentives to take risks by starting a new business: in Egypt, bankruptcies are published in the criminal pages of newspapers.
What is more, decades of governmental guarantees of employment lowered the entrepreneurial ambitions of the entire generations of new entrants into the labor force. But with the youth population burgeoning and public sector jobs more and more scarce, Egyptian government is no longer able to deliver what it promised. At the same time, these long-standing policies made starting a business seen largely as too risky and irresponsible by the society. Another young entrepreneur interviewed by the NPR, Amr El Abd (29), had this comment: “If I want to start a business and I go talk to my parents or my friends, they tell me, Amr, you’re crazy, go find a job.”
Such attitudes are very damaging to Egypt’s chances of addressing its pressing youth unemployment crisis. Creation of small- and medium-sized companies is a key factor for achieving dynamic economic growth, and scientific research suggests that people are most likely to start new ventures before they are 35. The majority of people in the MENA countries fit in this age category. But laws and policies in place discourage them from being entrepreneurial and creating opportunities for themselves in the private sector. Hence the region is missing out on potentially huge economic and social payoffs of having its youthful population productively employed.
Egypt is taking steps in the right direction and improving its standing in the World Bank’s global Doing Business ranking. But much more remains to be done. Despite some positive changes in formal laws, implementation remains a big challenge and many entrepreneurs feel that the government’s talk about promoting start-ups doesn’t really translate into action. And as long as being an entrepreneur is more of a social stigma than a badge of honor, it is hard to expect that the Egyptian economy will flourish and the employment situation will improve.
Published Date: March 06, 2008