Business Environment for

Small and Medium-Sized Enterprises (SME) in Egypt

and
SMEs’ Interaction with Government Agencies

2009 Survey on Corruption

Final Report
 The Center for International Private Enterprise (CIPE) strengthens democracy
around the globe through private enterprise and market-oriented reform. CIPE is
one of the four core institutes of the National Endowment for Democracy. Since
1983, CIPE has worked with business leaders, policymakers, and journalists to build
the civic institutions vital to a democratic society. CIPE’s key program areas include
anti-corruption, advocacy, business associations, corporate governance, democratic
governance, access to information, the informal sector and property rights, and women and youth.

For more information, contact:

Center for International Private Enterprise

1 El Fayoum St 1155 15th Street, NW, Suite 700

Off Cleopatra St. Washington, DC 20005
Floor 8, Suite 801 USA
Heliopolis, Cairo, ph: (202) 721-9200
Egypt fax: (202) 721-9250
ph: +20 2 2414-3282 www.cipe.org
fax: +20 2 2414-3295 cipe@cipe.org
www.cipe-arabia.org
e-mail: info@cipe-egypt.org

Contributors:

Center for International Private Enterprise:

John D. Sullivan, Ph.D.

Randa al Zoghbi
Gregory J. Simpson

Ahram Center for Political and Strategic Studies:

Dr. Gamal Abdel Gawad

Ahmed Nagy Kamha
Sobhi Ossaila

Center for International Private Enterprise 2 Egypt SME Survey

Business Environment for Small and Medium Sized Enterprises in Egypt and
SMEs’ Interaction with Government Agencies

Table of Contents

I. About the Survey 4

II. Program Advisory Council 5
III. General Comments on SMEs’ Interaction with 6
Government
IV. Business Environment in Different 20
Governorates in Egypt
V. Business Size 23
VI. Business Sector 26
VII. Research Methodology 30
VIII. Survey Demographics 31

Appendix A: Comments on the CIPE SME Survey by the 35

Federation of Economic Development
Associations (FEDA)

Appendix B: Survey Questions and Topline Results (available online in

English at www.cipe.org and in Arabic at www.cipe-
arabia.org)

Center for International Private Enterprise 3 Egypt SME Survey

I. About the Survey
Weak governance and insufficient transparency allow space for corruption to flourish. Insight
into where and how corruption occurs and which transactions are most prone to bribery can help
reformers know where to focus their efforts. The Center for International Private Enterprise (CIPE)’s
“Combating Corruption and Promoting Transparency” project is a comprehensive program of survey
research, training, and technical assistance intended to raise awareness of corruption in Egypt and
combat its corrosive effects on the economy and society.

As a part of this project, CIPE commissioned a survey of nearly 800 Egyptian small and
medium-sized enterprises (SMEs) about their experience with corruption in the course of doing
business. The survey was carried out by the Ahram Center for Political and Strategic Studies (ACPSS) in
association with CIPE and its partners the Federation of Economic Development Associations
(FEDA), the Egyptian Junior Business Association, and the Entrepreneurs Business Forum (EBF) –
which assisted ACPSS in reaching out to SMEs in these governorates to participate in the survey.

CIPE and its partners have drawn upon the survey results to design an advocacy program to
raise awareness of corruption and recommend specific policy changes to reduce the risk of corruption.

The “Combating Corruption and Promoting Transparency” project is led by an advisory council
of prominent Egyptian experts consisting of the project partner organizations listed above, as well as
other business associations, civil society organizations, multinational corporations, political parties, and
media outlets. Advisory council members were selected based on their demonstrated commitment to
political and economic reform in Egypt, experience and engagement in civil society, erudition, character,
and public credibility.

The project is made possible by a grant from the United States Agency for International
Development.

Center for International Private Enterprise 4 Egypt SME Survey

II. Program Advisory Council

Osama Murad, Co-Chair Chairman & CEO, Arab Finance Brokerage Co.
Abdul Motei Lotfi, Co-Chair Vice Chairman, Federation of Economic Development
Associations

Sayed Ali Assistant Chief Editor, Ahram Newspaper

Sherin Allam Chairperson, AWTAD (Business Women Association)
Ashgan Ateya Accountant
Ibrahim El Bahrawy Writer at Al Masry Al Youm newspaper & Professor at Ein Shams
University
Ashraf Gamal El Din Executive Director, Center for Responsible Business Conduct
Hany Aboul Fotouh Director, Policy & Corporate Affairs, and board secretary, CI
Capital Holding
Gamal Abdul Gawad Head, Opinion Poll Unit, Ahram Center for Strategic Studies
Soliman Gouda Journalist, Al Masry Al Youm and Assistant chief editor, Al Wafd
Saad Hagras Managing Editor, Alam Al Youm
Salama Hamza Former Chairman, Chamber of Leather Industries
Samir Hamza Partner, Helmy and Hamza Law Firm (Baker & Mckenzie)
Anan Helal Secretary General, Consumer Protection Agency
Hossam Hilal Managing Director, Grant Thornton Egypt
Amr Hilaly Board Member, Egyptian Junior Business Association
Ghada Hussain Managing Director, Horizon
Mohamed Mansour Vice President, Regional Compliance Officer for MENA, Siemens
Ghada Moussa Coordinator, Transparency and Integrity Council,
Ministry of Local Administration
Munir Fakhry Abdul Nour Chairman, Vitrac and Secretary General, Al Wafd Party
Mesbah Qotb Senior Business Reporter, Al Masry-Al Youm
Ahmed Ragab Head of Transparency Unit, Ministry of Investment
Zakareya Abd Al Rahman Chairman, Al Fayomi Co, and founder, Al Wasat Party
Abdul Ghaffar Shokr Vice President, Arab & African Research Center
Zeinab Tawfik Managing Director, Condor Shoe Industries
Fouad Thabet Chairman, Federation of Economic Development
Associations
Ihab Youssef Board Member, Egyptian Junior Business Association
Tarek Youssef Principal Partner, Grant Thornton Egypt; and Secretary General,
Egyptian Tax Professionals Association

Center for International Private Enterprise 5 Egypt SME Survey

III. Geeneral Com
mments on
n SMEs’ In
nteraction
n with Govvernment
In Egypt,
E there is a gap betwween the expectations of business own ners in dealinng with
governmen nt offices andd their actual experience, though the gap
g is not con nsistent in teerms of whethher
expectationns exceeded oro fell short of
o reality. Fo
or example, 19 1 percent fo
ound dealing with govern nment
offices to be
b easy, whilee only 7 percent expectedd it to be easyy. By contrasst, 47 percen nt found theirr actual
experience to be difficuult, while onlyy 36 percent expected it to
t be difficult. This gap may
m reflect
distorted peerceptions, but
b it might alsoa reflect innconsistency in the perforrmance of go overnment offfices,
adding a levvel of unpreddictability to the process that is unfavvorable to doiing business..

Figure 1: How
H can you describe youry experieence when dealing
d with
h the govern nment agenccies
during thee establishm
ment processs? (very easyy; easy; norm
mal; difficullt; very difficcult) Was th
he
establishm
ment processs easier or more
m difficu
ult than you expected?

60% 55%

50% 47%

40% 36%
3
33%
30% Exp
pected
19% Actual
20%

10% 7%
1% 1%
0%
Easy Averaage D
Difficult DK / NA**

* DK/N
NA = ‘Don’t Know
K / No Answer’
A

Center for Internationaal Private Entterprise 6 Egyypt SME Surrvey

 Thee most pervaasive form off corruption isi bribes to government
g e
employees in
n offices engaaged in
the licensin
ng and operattional oversigght of busineess. Forty-tw
wo percent off businesses surveyed rep ported
having paidd bribes durin
ng the process of establisshing a businness. This perrcentage decrreases to 29 percent
p
during the operation off the businesss.

Figure 2: Were
W you obbliged to offfer illegal paayments or presents
p to: obtain the licenses
necessary for your business/operrate your bu usiness?

80%
8 7
71%
7
70%
6
60% 56%
5
50% 42
2%
4
40% Liceensing
29%
3
30% Operation
2
20%
1
10% 2% 0%
0%
Yes No
o DK / NA

In the
t conventio onal wisdomm in Egypt, paaying bribes isi consideredd to be pervaasive; howeveer, it is
not consisttent among all those who deal with go overnment offfices. ACPSSS examined the relationsship
between thhe predisposittions of thosse who deal with
w governm ment offices toward
t bribeery prior to th
heir
interaction with the govvernment andd whether orr not they eveentually paidd a bribe. Figuure 3 shows that
those who deal with govvernment offfices are classsified into foour categories that range between
b those who
did not anti
ticipate bribery before staarting the pro
ocess of estab
blishing a business (higheest percentage) and
those who entered the process
p willinng to pay (sm
mallest percen
ntage).

Figure 3: Were
W you prrepared to pay
p money or o offer presents when you
y set out to t establish your
enterprise? (I was preepared; I intended to resist; I was prepared
p to adapt to cirrcumstancess; I
never thouught about it
i before I sttarted the en
nterprise)

50% 41%
40% 36%
30%
20% 13
3%
7%
10% 3%
0%
W
Willing to pa
ay Wanted to resist Prepared to  Did not think  D
DK / NA
adapt about it 
beforehaand

Center for Internationaal Private Entterprise 7 Egyypt SME Surrvey

 Loo
oking at resppondents who o did pay bribbes, we see a wide variannce dependingg on their
inclination toward bribeery in advancce. The higheest percentagge was observved in those ready to adap pt to
hints and/oor pressure exerted
e by general officialls, followed by
b the catego ory of the cusstomers who did
not anticipaate bribery before startingg their business. The few
west instancess of paying brribes are amo
ong
those who were determ mined to resist bribery from m the outsett, as indicatedd in figure 4.

Figure 4: Were
W you prrepared to pay
p money or o offer presents when you
y set out to t establish your
enterprise? (I was preepared; I intended to resist; I was prepared
p to adapt to cirrcumstancess; I
never thouught about it
i before I sttarted the en
nterprise) (O
Of those whho did pay bribes
b [335]))

60%
49%
50%
40%
30% 26
6%
20% 13% 12%
10%
0%
Willing to pay Wanted to ressist Prepared to adaptt Did not th
hink about 
it befo
orehand

NOTE: Perrcentages basedd on a subset off the 797 total respondents haave the subset tootal noted in [bbrackets].

Center for Internationaal Private Entterprise 8 Egyypt SME Surrvey

 As shown in figgure 5, a largee majority off those who were
w ready to o pay bribes did
d pay bribees – 74
percent. Next
N were tho ose who weree willing to addapt to the situation: 58 percent
p of th
hose paid bribbes.
Surprisinglyy, the fewest instances off bribery weree among tho ose who did not
n anticipatee paying brib bes in
advance off the process. This category saw even fewer instancces of briberry at 27 perceent than thosse who
went into thhe process determined
d to
o resist payin
ng bribes – 399 percent of those
t eventuually did pay bribes.
b
This wouldd suggest thatt it is possible to avoid orr resist payingg bribes.

Figure 5: Were
W you prrepared to pay
p money or o offer presents when you
y set out to t establish your
enterprise? (I was preepared; I intended to resist; I was prepared
p to adapt to cirrcumstancess; I
never thouught about iti before I sttarted the en
nterprise) (%
% of respon
ndents in eacch category who
eventuallyy paid vs. did
d not pay)

100%
90% 26%
80% 42%
70% 6
61%
60% 73%
%
50%
40% 74% Did Not Paay
30% 58%
20% 3
39% Paid
10% 27%
%
0%
Willing to p
pay Wanted
d to resist Prepared to
o  Did nott think 
adapt abouut it 
beforeehand

Center for Internationaal Private Entterprise 9 Egyypt SME Surrvey

 Wee also see an increase
i overr time in the inclination toward, or wiillingness to engage
e in, brribery.

Figure 6: Were
W you prrepared to pay
p money or o offer presents when youy set out tot establish your
enterprise? [772] (I was preparedd; I intended d to resist; I was preparred to adapt to
circumstannces; I neveer thought about
a it befo
ore I started the enterprrise) (By datte of
establishm
ment)

100%
90% Did not thinkk 
D
80% 39% about it 
44% 42%
56% b
beforehand
70%
Prepared to 
P
60%
adapt
50%
40% 35% 39% 37% Wanted to 
W
30% 22% reesist
20%
18% 13% 15% 12% W
Willing to pay
y
10%
4% 8%
% 7% 9%
0%
1973‐1982
2 1983‐1992 19
993‐2002 2003‐2009

Center for Internationaal Private Entterprise 10 Egyypt SME Surrvey

 Figgure 7 shows that business owners wh ho did not pay bribes weree able to com mplete the prrocess
of registerin
ng a businesss in a time thhat is shorter than those who
w paid brib bes. They alsso obtained fewer
f
licenses to start their buusinesses. Th his could be because
b thosse who paid bribes
b receivved benefits other
o
than reduciing the numb ber of licensees or shorten
ning the registration proceess. For exam mple, those who
w
have paid bribes
b may haave lacked th he legal requirements to start a business, or they were
w hoping to
influence thhe governmeent employeee to interpret the laws andd regulations in their favo or. Clarifyingg laws
and regulattions and red ducing the disscretionary auuthority of government
g e
employees in
n implementin ng
them wouldd reduce opp portunities foor corruptionn.

Figure 7: How
H long did d it take yo ou to establiish your entterprise? Hoow many go overnment
departmen nts did you have
h to inteeract with? How
H many licenses
l or permits
p did you have to
o
obtain? (P
Paid [332] vss. did not paay [441])

8 6.8
7 5.8 5.7
6 5.0 5.2
5 4.5
4
3 Paaid
2 Did Not Pay
1
0
Avgg. time (mon
nths) Avvg. number o
of  Avgg. number o
of 
d
departments s permits

Center for Internationaal Private Entterprise 11 Egyypt SME Surrvey

 h to explaiin the results shown in figgure 8, that owners
Thiis may also help o who set
s out to esttablish
their busineess with the intention
i to resist
r paying bribes tend to finish the registration process in a
shorter perriod of time. It seems thaat the predispposition of business owneers toward bribes relates to a
large extentt to their kno
owledge and understandin ng of the law
ws and regulaations govern ning their type of
business (in
ncluding thosse governingg the registrattion process itself), and not
n only to th heir compliannce
with ethicall standards.

Figure 8: How
H long did d it take yo
ou to establiish your entterprise (in months)?
m [7776] (By
predisposiition to brib
bery)

6.6 6.5 6.5

6.4
6.2 6.1
6
5.8 5.6
5.6
5.4
5.2
5
pay
Willing to p W
Wanted to res
sist Prep
pared to adapt Did not think about it 
befforehand

It would
w seem, then, that brribery is not mandatory. It is possiblle to complette all of the various
v
elements of the processs of registratiion without paying
p bribes, and in a reeasonable am
mount of tim me. The
opportunitiies for corruuption exist in cases whenw businesss owners arre not fully conversant in the
registrationn process or the
t laws and regulations governing th heir industry,, or do not have
h the apprropriate
paperwork or informattion; or in caases when law ws and regullations are unnclear or con
ntradictory, and
a are
thus subjecct to governmment employeees’ discretioonary interpreetation.

Thee results are indicative

i thaat limiting co
orruption in government
g transactions may be achieved
through diffferent meanns, mainly:
• Pub blish proceduures of startinng businesses.
• Enccourage busiiness owners who want to o start busineess accordingg to publisheed procedures not
to pay
p bribes, kn nowing that this will not delay or com mplicate the process.
p
• Streeamline and keep updatedd proceduress regulating business.
b

Center for Internationaal Private Entterprise 12 Egyypt SME Surrvey

 Impportantly, thee results of th
he survey shoow that theree is a differen nce between different
governmen ntal agencies, as shown in n Figure 9. Th
he figure shoows that locall governments are the higghest
on the demmand side of corruption,
c f
followed by customs,
c induustrial safetyy, health, and environmen
nt,
taxes, electrricity, water, telecommun nication, bankks, and finallly the police.

Figure 9: In
I your dealling with thee following departmentts, in whichh ones do you have to paay
money or offer presen
nts? (Percenntage of eachh not requirring bribes)

90% 85% 80%

74
4% 78%
80% 71%
68%
70%
60% 53%
% 56% %
55%
5
51%
50% 39%
40%
30%
20%
10%
0%

Center for Internationaal Private Entterprise 13 Egyypt SME Surrvey

 In comparing
c th
he performan nce of these departments
d in the past and
a the preseent years to see
s the
improvemeent, results in ndicate that business
b own
ners perceivedd improvemeent in taxes, telecom, elecctricity,
and water. Meanwhile, business ow wners perceived deteriorattion in the peerformance of o the police and
local governnments, as reeflected in figgure 10. Whhile the policce departmen nt is the on th
he bottom off the
curve in recceiving bribees from SME Es, the public still see the police
p perforrmance as deeteriorating, for
f
other reaso
ons not relateed to corrupttion.

Figure 10: In each of the

t followinng cases, is the
t departm ment better or
o worse abo out asking for
f
bribes than
n three yearrs ago? (greatly improved; improveed; remained d the same: became wo orse;
became much
m worse) (local admiinistration; industrial safety departtment; envirronmental
departmen nt; police; health departtment; tax department;
d ; customs; banks;
b electrricity compaany;
water suppply; telephone companyy)

100% 1% 1%
% 1% 1% 1% 1%
1% 1% 1% 1%
0% 1%
1 1%
0%
9% 6%
%
13% 14% 12% 1
16% 14%
90% 16% 18% 19% 6%
16
10%

80% %
14%
25% 13%
13% 1
17%
70% 27%

60% 50%
57%
56% 9%
59
50% 56%

%
57% 54%
40% 50% 52% 4
48%
44%
30%

20%
32%
24% 25%
10% 21% 1%
21
13% %
13% 14% 13% 1
16%
11%
0%

Better Same Worsse Not Applicable DK / NA

Center for Internationaal Private Entterprise 14 Egyypt SME Surrvey

 Bussiness interaccts with the government
g n only in itts capacity ass a regulator but
not b also as a
customer. As a result ofo public proccurement, goovernment reemains Egypt’s largest consumer. Wh hen
asked abouut governmen nt procuremeent, respondeents were verry negative – only 20 perccent answereed that
governmen nt procuremeent is carried out in comppliance with the
t law. 33 peercent said laaws are not
respected, and
a 26 perceent cited weakk oversight mechanisms
m (see Figure 11).
1

Figure 11: How would d you assesss the implem

mentation of governmen nt tenders currently?
c (sstrictly
abiding too the rules an
nd laws; maanipulation occurs in th
he interpretaation of the laws to favoor
specific in
nterests; poo
or oversight by those immplementingg the laws; other)
o

40%
33
3%
35%
30% 26%
25% 20% 18%
20%
15%
10%
5% 2%
0%
Rules are stricctly  Lawss are  Po
oor oversightt Otheer D
DK / NA
followed interpreted to 
favor sspecific 
interrests

Center for Internationaal Private Entterprise 15 Egyypt SME Surrvey

 Askked about co orruption in government
g p
procurement t, 37 percent believe that bribes are paaid to
win governnment tenderrs, with an addditional 27 percent
p believving that the practice takees place to a
limited exteent (see Figure 12). Onlyy 9 percent believe that brribes do not take place att all.

Figure 12: To your knnowledge, arre bribes being paid to win government tenders? (To a grreat
extent; to a big extentt; to an extent; to a limiited extent; no money is paid at alll)

100%
22%
80% D
DK / NA
9%
5% N
No
60%
Liimited exten
nt
27%
To
o an extent
40%
A
Agree
20% 27% Sttrongly agree

10%
0%

Center for Internationaal Private Entterprise 16 Egyypt SME Surrvey

 However, it is essential
e to no ote the differrence in belieefs about corrruption in go
overnment
procuremen nt between business
b own ners who havve direct expeerience with government
g bids and thoose
who do nott (see Figure 13). The figgure shows th hat businessees with directt experience with procureement
view the prrocess more favorably
f thaan those withhout such exp perience. Th
his might sugggest that reallity is
not as bad as the stereo otype. It may also suggest that those with w a stake in n the processs currently arre less
likely to waant to criticize it. It is imp possible to know
k from thhe data.

Figure 13: To your knnowledge, arre bribes being paid to win government tenders? (To a grreat
extent; to a big extentt; to an extent; to a limiited extent; no money is paid at alll)
(Those with experience with tend ders [299] vss. without [3323])

60%
54%
%
50%
43%
39% 4
40%
40%
With procurement 
30% experiencce
20% Without procuremen
nt 
20% experiencce

10%
3%
0%
T
To a great ex
xtent To a liimited exten
nt Not aat all

Center for Internationaal Private Entterprise 17 Egyypt SME Surrvey

 In comparing
c private and puublic sectors as vendors for
f products and services;; business ow
wners
prefer dealiing with the private
p secto
or rather than
n public secto
or (see Figurees 14 and 15)).

Figure 14: Are you obliged to payy bribes to reeceive good

ds or servicees from the private
p secto
or /
from the public
p sectorr? (yes; no; sometimes))

100% 0% 0%
11%
90% DK
K / NA
80%
70%
No
ot applicablee
60%
86%
50% 79%
No
o
40%
30%
Sometimes
20%
10% 9%
4%
5% 2%
3% Yess
0%
Privaate Sector Public Secttor

Figure 15: Is the privaate sector orr the public//governmen nt sector bettter with reg
gard to the supply
s
of commodities and services?
s (prrivate sectorr; public secctor; no diffeerence)

DK / N
NA
No difference
N e 1%
6%

Public sector
5%

Privaate sector
88%

Center for Internationaal Private Entterprise 18 Egyypt SME Surrvey

 Whhen asked wh hy they believve governmen nt employees accept brib
bes, respondeents cited low
w
governmen
nt salaries, lacck of integrityy, and weak monitoring
m s
systems (see Figure 16).

Figure 16: Why in you ur opinion do

d civil servaants accept illegal paym
ments or preesents? (the low
salary of th
he civil servvant; becausse they are greedy
g and have
h no connscience; no monitoring g and
oversight)

50%
44%
45%
40%
35%
29%
30% Low salaries
24%
25%
Greed / Lacck of Integritty
20%
Weak overssight
15%
Other
10%
5% 3% DK / NA
0%
0%
Low  Greed / 
G W
Weak  O
Other DK
K / NA
salaries Lack of  ovversight
In
ntegrity

Center for Internationaal Private Entterprise 19 Egyypt SME Surrvey

III. Bu
usiness Environm
E ment in Different
D G
Governor
rates in Egypt
E
Acrross the six governorates,
g , the average period of timme needed to he process of
o complete th
registering a business is 6.22 months. The proceess took longgest on averaage in Minia (10.16
( month hs) and
in Gharbeyya (9.45 montths); the shorrtest averagee registration time was in Port Said.

Figure 17: How long did

d it take you
y to establlish your en
nterprise? [7776] (By govvernorate)

Avg. Tim
me (Month
hs)
12.00
10.16
10.00 9
9.45

8.00
5.57 5.87
6.00
4.59
3.7
76
4.00

2.00

0.00
Cairo Alexandrria Port SSaid Ghaarbeya D
Dakaleya Minia

Theere is a relatio
onship betweeen the averaage period off time neededd to register a business an
nd the
number of offices that the t business needs to deaal with. The data suggestts, however, thatt the num mber of
offices is no
ot the only in ndicator of th
he duration of
o the processs, since in Port Said busiiness must viisit the
most officees, and yet thhe process is shorter than the other goovernorates inn the survey..

Figure 18: How manyy governmen nt departmeents did you

u have to intteract with during
d the
establishm
ment processs? [784] (Byy governoratte)

6.00 5.80
0 5.81
5.80 5.70
5.60
5.40
5.20 5.04 5.09
4.95
5.00
4.80
4.60
4.40
Cairo Alexandriia Port Said Ghaarbeya D
Dakaleya Minia

Center for Internationaal Private Entterprise 20 Egyypt SME Surrvey

 Loo oking at the number
n of licenses needeed to start a business,
b resp
pondents in Minia,
M Gharb beya
and Port Saaid cited the most licensees. These are also the threee governorattes in which businesses have
h to
deal with th
he most goveernmental deepartments. ThisT suggestss a strong relaationship bettween the nuumber
of departm
ments and the number of required
r licen
nses and the time neededd to time needded to establlish the
business. The
T exception n is Port Saidd governoratee, where the time needed to start a buusiness is sho
orter
than the avverage, but th
he number off licenses andd offices is hiigher.

Figure 19: How manyy licenses orr permits did

d you have to
t obtain to start your business?
b [7786]
(By governnorate)

6 5.57 5.4
43 5.51
4.68 4.89
5
4 3.76

3
2
1
0
C
Cairo Alexandria Port Said Gharbeya D
Dakaleya Minia

Surrprisingly, theere is an inveerse relationship between the time andd number of required offi fices
and paymen nt of bribes. In governorrates like Min nia and Gharrbeya, in whiich the licenssing process is
i
longer, insttances of bribbery are feweer. This mayy indicate that in the goveernorates with h a shorter
licensing prrocess, bribes are helpingg to speed up p the process..

Figure 20: Were you obliged

o to offfer illegal payments
p orr presents to
o obtain the licenses
necessary for your business? [7844] (‘Yes’ ansswers by govvernorate)

70%
58%
60%
50% 45% 46% 43%
%
4
40%
40%
30%
19%
20%
10%
0%
Cairo Alexandriia Port Said Gharbeya D
Dakaleya Minia

Center for Internationaal Private Entterprise 21 Egyypt SME Surrvey

 Thee varying insttances of bribery among governoratess raises the question
q of th
he predisposiition
of the owners in each governorate
g towards such h practice, as shown in Figgure 21. Acco ording to thee
responses, Cairo busineess owners arre more likelyy to pay bribes, whereas business
b own ners in Alexaandria
are more likkely to resist paying bribees. Business owners
o of Dakahleya are more likely tot adapt to th he
situation, whereas
w Gharrbeya businesss owners aree less likely to anticipate bribery
b in settting out to
establish a business.
b

Figure 21: Were you prepared

p p money or offer pressents when you set out to establish
to pay h your
enterprise? (I was preepared; I intended to resist; I was prepared
p to adapt to cirrcumstancess; I
never thou
ught about iti before I sttarted the en
nterprise) [7772] (By govvernorate)

70%
61%
60% 55%
54%

50%

8%39%
38 39% 41%
4
40% 37%
34%
32
2%
30% 28%
24%
19%
20% 16%
13% 13%
%11%
9%11%
10% 6% 6% 7%
4%
2%
0%
Willing to pay W
Wanted to re sist Prepared to adap
pt Did not think aboutt 
it befforehand

C
Cairo Alexxandria P
Port Said Gharbeya Dakaleya Dakaleya Minia

Center for Internationaal Private Entterprise 22 Egyypt SME Surrvey

IV. Bu
usiness Siize
Thee survey resuults show no difference beetween larger and smallerr businesses and their
experience with government departm ments, exceppt that as onee might expect, larger bussinesses requuire
more time to get licenseed and must deal with moore governmmental offices and obtain more
m licensess.

Figure 22: How long did

d it take you
y to estab
blish your en
nterprise? [7776] (By sizee of businesss)

Avg. Tim
me (Month
hs)
10.00
7.66
8.00 6.93
6.00 5.54
5

4.00

2.00

0.00
1‐10 e
employees 11
1‐50 employeees 51+ emp
ployees

Figure 23: How manyy governmen

nt departmeents did you
u have to intteract with? [784] (By siize of
business)

100% 3% 4%
9%
%
90%
15%
% 28%
%
80%
40%
70%
60% 11+ depts.
50% 60%
% 7‐10 deptss.
40% 57%
% 4‐6 depts.
40%
30% 1‐3 depts.
20%
10% 24%
% 17%
12%
%
0%
1‐10 emp
ployees ployees
11‐50 emp 51+ employees

Center for Internationaal Private Entterprise 23 Egyypt SME Surrvey

Figure 24: How manyy licenses orr permits did
d you have to
t obtain to start your business?
b [7786]
(By size off business)

100% 1%
% 3% 4%
7%
%
90%
20%
80% 32%

70%
54%
%
60% 11+ licensess
50% 53% 7‐10 licensees
40%
40% 4‐6 licensess

30% 1‐3 licensess

20% 37%
%
10% 24% 25%

0%
1‐10 emp
ployees 11‐50 employees 5
51+ employe
ees

Theere is an indication that government

g e
employees givve preferentiial treatment to larger
businesses. Additionallyy, larger businnesses pay more
m bribes th
han smaller during
d the establishment period.
But interesttingly, this trrend does not continue in
n the operatio
on period (peerhaps becauuse larger
businesses have greater capacity to comply
c with regulations)..

Figure 25: Was the establishmentt process eaasier or moree difficult th

han you exp
pected? (Mu
uch
harder thaan expected;; harder than expected;; as expected
d; easier thaan expected
d; much easiier
than expeccted) [786] (‘Easier”
( an
nswers, by size of busin
ness)

14%
12%
%
12%
10% 8%
8%
6%
6
6%
4%
2%
0%
1‐10 em
mployees 11‐‐50 employeees 51+ employees

Center for Internationaal Private Entterprise 24 Egyypt SME Surrvey

Figure 26: Were you obliged
o to offfer illegal payments
p orr presents to
o: obtain thee licenses
necessary for your business [336]] / operate your
y business [231]? (‘YYes’ answerss, by size off
business)

60%
50%
50%
42% 43%
40%
3
32% 3
30%
30% 27%
2 Licensingg
20% Operation

10%

0%
1‐10 emplloyees 11‐50 emp
ployees 51+ emplo
oyees

Center for Internationaal Private Entterprise 25 Egyypt SME Surrvey

V. Bu
usiness Sector
Ressults for the industrial
i andd agriculturall sectors werre reported to
ogether, as buusinesses in the
t
agriculturall sector in thee sample did not exceed 1.8
1 percent. From the reesponses, we can see that
business in the sectors ofo industry and agriculturre face greateer difficulty with
w corruption than servvices
and trade.

Figure 27: How can you

y describee your experrience when n dealing with the goverrnment agen ncies
during thee establishm
ment processs? (very easyy; easy; norm
mal; difficultt; very difficcult) [783] (B
By
sector)

60% 56%

50% 46%
%
44%
39
9%
40%
34%

30%
23%
%
21% 19
9%
20% 17%

10%

0%
Eaasy Average Difficult

Industrry / Agricultu
ure Trad
de Servicces

Center for Internationaal Private Entterprise 26 Egyypt SME Surrvey

 As reflected in figure
f 28, it seems
s that th
his difficulty relates
r to thee increase in number
n of
governmen nt offices bussinesses owneers have to deal
d with. Businesses in th he trade and services secttors
deal with 4 to 6 offices to complete the establish hment of a buusiness; while those in th he industry annd
agriculture sectors deal with 7 to 10 offices. Thee same trend applies to th he number off licenses neeeded to
complete establishing a business. The T need to deal
d with morre governmen nt offices to obtain a license
leads to inccreased oppoortunity for bribery.
b

Figure 28: How manyy governmen

nt departmeents did you
u have to intteract with? [794] (By sector)

100% 4%
% 1% 2%
9% 9%
90%

80% 33%
%
70%
52%
60% 59%
% 11+ depts.
50% 7‐10 deptss.
40%
% 4‐6 depts.
40%
1‐3 depts.
30%

20% 38%
30%
%
10% 24%
%

0%
Industry / A
Agriculture Tradee Services

Center for Internationaal Private Entterprise 27 Egyypt SME Surrvey

Figure 29: How manyy licenses orr permits did
d you have to obtain to start your business?
b [7783]
(By sectorr)

100% 4%
% 1% 2%
9% 9%
90%
80% 33%
%
70%
52%
60% 59% 11+ licensess
50% 7‐10 licensees
40%
%
40% 4‐6 licensess
30% 1‐3 licensess

20% 38%
30%
10% 24%
%

0%
industry / aggriculture trade services

Center for Internationaal Private Entterprise 28 Egyypt SME Surrvey

 Figgure 30 shows that busineesses in the in
ndustrial and agricultural sectors pay more
m bribes during
d
the establishment period. This trend does not exxtend to the operation off the business, at which point
p
businesses in the trade sector
s tend to pay more bribes
b than th
hose in industry or servicces.

Figure 30: Were you obliged

o to offfer illegal payments
p orr presents to
o: obtain thee licenses
necessary to start you
ur business [781]
[ / operrate your business? [7922] (‘Yes’ ansswers, by sector)

50% 47%
4
45%
45%
40% 37%
34%
35%
30% 27%
24%
25%
20%
15%
10%
5%
0%
industry / agriculture trade servicces

Licensing Operattion

Center for Internationaal Private Entterprise 29 Egyypt SME Surrvey

VI. Research Methodology
The survey was conducted from April 21, 2009 to May 14, 2009. The sample consisted of 800
SMEs interviewed in six governorates, as follows:

• Cairo (250)
• Alexandria (150)
• Port Said (100)
• Gharbeya (100)
• Dakahleya (100)
• Minia (100)

In designing a nationally-representative sample, survey researchers can rely upon census data as
the basis for the sample. The lack of availability of, and access to, accurate data regarding a specific
sector such as SMEs necessitates a more innovative sample design.

The source for the sample in each governorate depended on the availability of data for that
governorate. The Yellow Pages for the Cairo and Alexandria governorates were used, as they include all
businesses in the governorate. Additionally, the Entrepreneurs Business Forum in Alexandria provided
substantial data for the Alexandria governorate. For the other governorates, we contacted business
associations for their membership lists. In all cases, one list was compiled for each governorate and a
random sample was built from that list.

The sample for the SME survey was based upon data from three main resources:

1. Lists of SMEs from CIPE, the Entrepreneurs Business Forum, and the Federation of Economic
Development Associations (FEDA);

2. Lists from business associations in Minia, Dakaleya, and Gharbeya;

3. The Cairo and Alexandria Yellow Pages.

In all cases the sample was constructed using a multi-staged stratified systematic random
sampling technique using the following procedures:

1. Differentiating between four sectors in the database: industry, trade, services, and agricultural
and agricultural production;

2. Assigning weight to businesses in each sector proportionate to the total number of businesses in
that sector according to the available data for each governorate;

3. Selection of samples using systematic random selection from the available data from each
governorate.

Center for International Private Enterprise 30 Egypt SME Survey

VII. Survey Demographics

Table 1 – Business Establishment Date

Percent

1952 and earlier 1.0

1953-1962 1.0
1963-1972 1.4
1973-1982 5.8

1983-1992 14.7
1993-2002 34.5

2003-2009 41.7

Total 100.0

Table 2 – Sector
Percent
Industry 18.6

Trade 46.7

Service 32.9
Agriculture and agricultural production 1.8

Total 100.0

Center for International Private Enterprise 31 Egypt SME Survey

 Table 3 – Number of Employees
Percent
1-5 32.5
6-10 23.9
11-25 22.9

26-50 11
51-100 5.2
More than 100 4.6
Total 100.0
Table 4 – Business Investment by Thousands of Egyptian Pounds
Percent
1-5 2.8
6-10 3.1
11-25 4.6

26-50 7.0
51-100 9.6
101-249 10.9
250 and more 61.9
Total 100.0

Table 5 – Geographic Reach of Business

Percent
Local within the governorate 32.1
Regional – more than one governorate 11.9
Egypt 37.7

International Market 18.2

Total 100.0

Center for International Private Enterprise 32 Egypt SME Survey

 Table 6 – Computer Usage
Percent
Yes 81.1
No 14.7
Sometimes 4.2

Total 100

Table 7 – Age of Business Owner

Percent
18-30 4.1

31-40 22.0
41-50 59.4

51-60 10.1

61 and older 4.5

Total 100.0

Table 8 – Gender of Business Owner

Percent

Male 96.0

Female 4.0

Total 100.0

Center for International Private Enterprise 33 Egypt SME Survey

 Table 9 – Education Level of Owner
Percent

Illiterate 1.8

Primary .3

Preparatory .8

Secondary 1.1

Institute 10.3

Bachelors (Tertiary) 82.7

Masters 1.6

PhD 1.4

Total 100.0

Center for International Private Enterprise 34 Egypt SME Survey

Appendix A: Comments on the CIPE SME Survey by the Federation of
Economic Development Associations (FEDA)

Center for International Private Enterprise 35 Egypt SME Survey

 Federation
n of Econommic Development Assocciations
9 Hassan
n Maamoun Street
S
Nasser City,
C Cairo, Egypt
E

Co
omments on
o the CIP
PE SME Survey
S by the
t Federaation of Economic
Deveelopment Associatio
A ons (FEDA
A)

Implicatio
ons of the Su
urvey Samplle

Esttablishment Daate: Approxim

mately 91 perrcent of the survey
s samplle was taken from enterprrises
established between 19883 and 2009.. Businesses//enterprises established
e in
n Egypt durin ng that
timeframeffrom 1983 to o 2007 faced several obstaacles when esstablishing thheir enterprisses, includingg
multiple auuthorizations and licensingg requiremennts.

However, the crreation of ‘onne stop shopp’ services in 2007 significcantly simpliffied the startup
process. Fo
or this reason
n, FEDA recommended removing
r maany of the en
nterprises estaablished betw ween
2007-2009 from the sam mple, therebyy reducing thhe number off enterprises established between
b 20033-2007
to represen
nt only 42 perrcent of the total
t sample size.

Secttor: The manuufacturing seector represen

nts 19 percen
nt of the survvey sample, which
w is
comparablee to the manuufacturing seector’s overalll percentage of GDP in Egypt.
E The trade
t and servvices
sector conttributes to 800 percent of the
t sample, however,
h whiich is more than
t its contrribution to th
he
GDP. Thuus the agricullture and agrii-industries are
a underreprresented in th he survey com mpared with h these
industries’ real
r contribuution to GDP P.

Labbor: Approximmately 33 perrcent of the enterprises

e suurveyed in th
his sample em
mploy betweeen 1-5
workers. Thhese enterpriises are SMEEs which are managed by a single or feew individuaals. However,, this
percentage is not repressentative of the
t Egyptian economy as a whole, wh here 98 perceent of enterprrises
employ 1-55 workers. Thherefore, FED DA believes this sample should have included a much
m larger sample
of SMEs.

Cappital: Egyptian
n Law No. 141/2004 deffines micro-eenterprises acccording to amount
a of caapital
and numbeer of employeees. Businesses with capiital from 1,0000-50,000 Eggyptian poun nds (LE), classsified
as micro-ennterprises, am
mounted to 18
1 percent off the survey sample.
s Howwever, micro--enterprises are
a
also definedd as employing between 1-5
1 workers, and businesses employin ng 1-5 emplooyees make up 33
percent of the sample. Therefore, FEDA
F believves there is a contradiction
n in the sampple makeup, which
may not reppresent micro enterprisess accurately.

Scoppe of Enterprisse: This studyy concludes th

hat 82 percen
nt of small enterprise pro oduction in Egypt
E
provides seervices or prooducts to thee local market. However, this does not necessarily mean that th he
remaining 18
1 percent fo ocus only on foreign markkets. Insteadd, it is possiblle that these small businesses

Center for Internationaal Private Entterprise 36 Egyypt SME Surrvey

are also import and trade agencies. FEDA believes that no less than 95 percent of small enterprise
production in Egypt is geared toward the local market and 5 percent to external markets, which more or
less corresponds with the survey results. FEDA also believes that it is important to define the external
market and questions whether the import of foreign products should be included in this definition.

Technology: 81 percent of the sample uses a computer in their business activities. However, the
study did not define which applications and software they use and for what purposes they use this
technology for.

Age: Four percent of surveyed business owners are between the ages of 18-30 years. This
percentage does not reflect Egypt’s actual demographic situation, as the youth, unable to find jobs, have
mostly resorted to self-employment in the last 15 years. Today, business owners between the ages of 18-
30 represent more than 60 percent of the labor force in Egypt.

Gender and Education: Females represented 4 percent of the sample. In FEDA’s opinion, this
percentage reflects Egypt’s actual economic situation – female business owners or partners do not
exceed this percentage. The survey sample’s education level also reflects Egypt’s current situation, in
FEDA’s opinion.

Interaction between the Private Sector and Government

FEDA agrees with the study’s findings, which show that the most prevalent form of corruption
for business owners is the illegal payment of money to public officials working in either government
administration offices or in local councils.

FEDA disagrees with the study’s findings that 43 percent of the survey sample paid bribes
during the business’s “startup phase” and only 29 percent of the sample paid bribes to operation and
licensing bodies. This percentage would seem to contradict Egypt’s actual situation because there are
three times more operation government bodies than startup agencies.

FEDA agrees with the study’s conclusion that there is good reason to assume that paying bribes
to public servants depends mainly on the individual’s inclination to engage in corrupt practices.

FEDA agrees completely with the study’s findings that some citizens pay bribes to not only
expedite authorizations and licenses, but to also receive an unmerited license or permit. Such corrupt
practices create a lack of oversight by government authorities, who overlook the many necessary
requirements to start a business in Egypt. This study emphasizes that current laws and regulations are
unclear, inapplicable, and impede Egypt’s transformation into a free economy.

Ambiguous laws and regulations allow authorities to exploit their positions to obtain bribes.
Both FEDA and this study agree that combating corruption should be implemented through various
approaches, including the removal of ambiguous laws and regulations governing businesses and their
activities.

FEDA agrees that any citizen who demands his legal rights from, and does not offer illegal
payments to, government bodies, will complete a transaction in a shorter time and face fewer
bureaucratic obstacles than one who does not demand his legal rights and opts to pay a bribe.

Center for International Private Enterprise 37 Egypt SME Survey

 FEDA agrees with the study’s findings suggesting the following recommendations to minimize
corrupt practices during government transactions:

• Publish all information relating to the startup and licensing of all businesses. FEDA has
made the passage of an “Access to Information Law” as a top priority.
• Review and update existing regulations pertaining to business licensing.

FEDA agrees with the study’s conclusion that business owners are expected to pay bribes to
governmental authorities most often at the local council level. However, FEDA does not believe that
banks and telephone companies should rank second and third, respectively, in terms of these practices.
Instead FEDA believes that electricity companies and the police should be considered the second and
third most common institutions to engage in corrupt practices, respectively, as they also accept non-
cash payments.

The study concludes that about 47 percent of business owners said they paid bribes to receive
government tenders, while 42 percent said that this happens to a limited degree. These results are
consistent with FEDA’s study in 2005 which concluded that 50 percent of manufacturing and service
business owners pay bribes to win bids and tenders.

Business Environment in Different Governorates:

The survey demonstrates that the business startup period is shorter in the Port Said governorate
than in any other Egyptian governorate. FEDA believes that this is because businesses in Port Said are
more inclined to pay higher bribes to government officials.

FEDA agrees with the study’s observation that paying bribes is one method of overcoming
bureaucratic obstacles. The ability of entrepreneurs to start a business in a timely fashion is highly
dependent upon corrupt practices in all Egyptian governorates.

Center for International Private Enterprise 38 Egypt SME Survey