Egypt Innovation Opportunities

by: Tatjana Guznajeva - Technopolis Group

Why should I read this document?

When confronted with the differences between your own market and the market of Egypt you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Egypt, will allow your company to innovate. Not only will operating in Egypt lead to new insights to be more successful in Egypt, you will most likely also pick up on ideas to be more successful in your home market.

This document provides a short overview of innovation aspects, business opportunities and challenges in Egypt. It will also give advice on best practices for starting and developing an innovative business venture, considering Egypt’s country context. May it help you to explore Egypt and lead you to innovation and success.

Opportunities and tips for innovation and doing business in Egypt

Egypt is a middle-income country, it has one of the most dynamic economies in North Africa and the Middle East. The population of Egypt is young (median age is 24.8 years) and rapidly growing (2.6% annually).
Egypt is endowed with natural resources, it is the largest oil producer and consumer in Africa. Oil and gas industries are most dynamic in Egypt. Consider doing business in traditional and renewable energy sectors, or trading oil and gas equipment, providing exploration, procurement and engineering services.
Convenient geographical location and existence of trade agreements allow Egypt to play an important role in international trade and be integrated into the global market. The country has a cooperation agreement with the EU that allows to export industrial goods to the EU duty-free, a special trade agreement with Morocco, Jordan and Tunisia, and Egypt is part of the Greater Arab Free Trade Area. Hence, there are many business opportunities in trade and logistics.
The Egyptian government is investing in modernisation of infrastructure. Considering Egypt’s trade role in the region, investments in the development of Suez Canal, ports, roads and railways could bring significant profits.
Cairo is a tech-hub of Egypt - it has a strong ICT sector, a growing e-commerce, large start-up community and 40% of population are Internet users. Consider Cairo for development of digital technologies.
Egypt experiences a high demand in hospitals, medical technologies and other healthcare facilities. Due to increasing urbanisation, the large cities, especially Cairo, have the greatest need for improved and more accessible healthcare.
Egypt’s agricultural sector faces serious challenges, such as climate change, urbanisation, demand for healthy food, scarcity of land and water resources. Efficiency-raising technologies, novel farming tools and marketing services are in demand in Egypt.
The number of primary school students grew by 40% since 2011. As a result, there is an acute shortage of primary education institutions. Moreover, considering lower quality of education in local schools and universities, the Egyptian middle class is willing to receive education in foreign education institutions or in their local branches.
Due to rapid population growth and severe housing shortage, there is a great business potential in the construction and real estate sectors.
To stimulate FDI, the Egyptian government passed the new investment law that guarantees the same protection of foreign investors as Egyptian nationals and offers several preferential conditions. Consider investing in special investment zones, such as CBC Egypt for Industrial Development, Polaris International Industrial Park, Pyramids Industrial Parks, Meet Ghamr, Al-Saf and others.
In recent years, consumers reduced spending on entertainment, apparel purchase, gas and electricity consumption. However, among the growing consumer sectors are food and electronics (computers, mobile phones, video products).

On Level 2 you can find information about innovation climate in Egypt, while Level 3 will tell you more about business activities in Egypt.

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Egypt.

Innovation ecosystem

Egypt has a relatively undeveloped ecosystem for innovation, in comparison to the EU, due to weaker R&D capabilities, a lack of needed infrastructure and human resources. In efforts to stimulate science, innovation and technology, the Egyptian government tries to strengthen cooperation with developed countries. Due to a 11.4 mln. EUR grant from the EU, Egypt has been supporting academia-industry collaboration and investing in Egypt’s integration into the European Research Area. Within the strategy “Decade for Science and Technology 2007-16”, the Egyptian government has been offering various programmes that encourage commercialisation of innovations, provide training and assist new business ventures in development of technologies, innovation and management capabilities. Nevertheless, the gross domestic expenditure on R&D in Egypt is very low – only 0.21% of GDP. Private companies in Egypt invest even a smaller share of income/profit on R&D, therefore public investment is the major driver of science and innovation in the country.

The governance of the public research system is strongly centralised, this limits its efficiency and opportunities for collaboration with the private sector. Most research activities are conducted by universities; the academia-industry collaboration is the main policy instrument to promote R&D activities in private companies. In 2011, the government opened the Zewai City of Science and Technology, which comprises universities, research centres and a technology park to stimulate scientific development and collaboration between the research community and private enterprises.

One of the major barriers for development of innovation and science is the lack of highly qualified labour force, as only 22% of employable people work in the science and technology sectors. The quality of education in Egypt is lower than in the EU, however, since 2007 the Egyptian government has been reforming the education system to become more responsive to requirements of a knowledge-based economy. Egypt still experiences skills shortages, particularly in technology, mathematics and engineering sectors. This undermines the development of science and innovation capacities. Since the number of working researchers is decreasing each year, the Egyptian government has been launching programmes aimed to attract highly qualified foreign and national researchers.

Innovation sectors and technology

The Industrial Council for Technology and Innovation has launched several innovation centres to stimulate technology transfer and innovation of the industrial sector. Within the technology sector, robotics, 3D printing, IT and software, smart building and building information modelling are most developed in Egypt.

In efforts to address water scarcity and desertification of soil, the government has been investing in research and production of renewable energy. Hence, this sector is expected to develop higher innovation capacities. The ICT industry shows a speedy growth, the number of entrepreneurs and investors in this industry is increasing, therefore ICT-related technologies and innovation are expected to have a transformative effect on the economy.

Innovation culture and practices

The entrepreneurial spirit and risk-taking behaviour are not typical for Egyptian culture, due to lack of confidence in purchasing power of people, political instability and lack of access to financial resources. The Egyptian government seeks to develop an innovation culture by promoting science clubs, visits of children to museums, by building libraries and developing science-focused programmes.

Product engineering and development are not considered profitable for Egyptian entrepreneurs, as it involves too many risks. Instead, local businessmen tend to innovate by adapting foreign technologies and ideas to local markets and consumers. Technology transfers and commercialisation of ideas from Egyptian universities is uncommon, as local innovation is not considered to be of high quality. Most Egyptian companies prefer to start international collaboration with foreign companies to learn, develop novel ideas and improve export prospects.

Since entrepreneurs in Egypt often lack financial resources for starting a new venture, many businessmen approach family and friends for financial assistance. As a result, many companies are family-owned, and it is relatively difficult to persuade the older generation to invest in research, innovation and product development. The series of anti-governmental protests in the Middle East in 2011 (the so-called “Arab Spring”) have encouraged many expatriates to return to Egypt. As a result, the amount of investment for start-ups and research-based projects has increased.

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Egypt. In addition, you will find the list of websites, which provide some hands-on information.

What is the country known for?

Sectors

Textiles, chemicals, food processing, tourism, pharmaceuticals, petroleum, hydrocarbons, construction, cement, metals, light manufactures.

The service sector accounts for 55.7% of GDP in 2017, while industry and agriculture represent 33.1% and 11.9% respectively. Construction, telecommunication and financial services have the largest shares within the service sector.

Iconic products

Knitted or crocheted fabric, wood pulp, felt, yarn, meat, petroleum products and crude oil, explosives, pyrotechnics, gems, precious metals, electronic equipment, plastics, grains, sugarcane, tobacco, wool, soaps, glass.

How easy is it to do business in Egypt?

Based on the World Bank ranking:

	Egypt	EU average	Emerging markets average
Overall - ease of doing business	122	30	83

To do business in Egypt is more complex than in other emerging markets, on average. Despite that bureaucratic procedures for starting a business and dealing with construction permits are significantly easier in Egypt than in other developing countries, the country has several important barriers for entrepreneurs. High inflation, public debt, high unemployment rates and social inequalities pose serious challenges for economic development and stability in the country. The global economic crisis of 2008 and the “Arab Spring” strongly affected economic and fiscal policies, leading to decrease of foreign investment, trade, foreign tourism and remittances.

According to the survey of local entrepreneurs, conducted in 2013, political instability and inadequately educated workforce are major barriers for business development. Access to finance and inefficient bureaucratic processes related to property registration, payment of tax, contract enforcement and international trade are other significant obstacles for doing business in Egypt. The “Arab Spring” led to an increased economic role of the military and fragmentation of the old networks of big conglomerates. Hence, doing business in Egypt requires good market research, support from business community and connections with the local government.

Business trends in Egypt

The manufacturing sector in Egypt is expanding and becoming more diversified. However, high and smart technologies are rarely integrated into production. Large companies, especially foreign, are more likely to use novel technologies in production process, due to availability of resources and lower risks of bankruptcy.

Considering that 90% of population in Egypt is Muslim, the consumption of alcohol is very low. However, the market of soft drinks is growing. Local companies are actively collaborating with foreign companies in the markets of soft drinks (carbonated drinks, bottled water, juices) and dairy production.

The startup community in Egypt is rapidly growing, due to design and implementation of innovative ideas, an increasing number of business incubators/accelerators, availability of new funds. Most of new ventures are related to new product engineering, e-commerce, social media and creation of new venture capital funds. Joining a local business association might help you to start business in Egypt!

More hands-on info

Egypt Innovate (in 2017: http://egyptinnovate.com/en/page/about-us)
The Confederation of Egyptian European Business Associations (in 2018: http://www.ceeba.org)
Ministry of Communications and Information technology – Innovation (in 2017: http://www.mcit.gov.eg/Innovation?TSPD_101_R0=b118f15779eaef1c74cf8959a2...)
Egypt and the EU (in 2018: https://eeas.europa.eu/delegations/egypt_en/1156/Egypt%20and%20the%20EU)
Egyptian Businessmen’s Association (in 2018: http://www.eba.org.eg/Main/default.aspx#.W3Ga8S2Q1TY)
Egyptian Junior Business Association (in 2018: https://een.ec.europa.eu/about/branches/eg00241)

Bibliography

Level 1:

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Level 2:

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Level 3:

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