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Jams, red tape and graft obstruct business in Egypt

Jams, red tape and graft obstruct business in Egypt

Slack infrastructure investment leads to gridlock; State education fails to provide the right skills; Bribes necessary for success, say some managers.

January 27, 2011 2:35 by

A project manager shipping furnaces to his new pipe plant near Cairo received a surprise taste of the challenges to doing business in Egypt when he went to inspect the massive structures. “Somewhere along the way, the truck rolled over and nobody told us. They simply put the furnaces back on the trailer and brought them to the site with tree branches stuck in the frames,” said William McKee of Greater Cairo Foundries.

The furnaces survived the fall but had to be refurbished, pushing back the company’s schedule by several weeks.

“It was astonishing,” said McKee.

Lucrative business opportunities abound in the Arab world’s most populous country, but not for the faint-hearted.

Entrepreneurs willing to put up with Egypt’s snarled and dangerous roads say they struggle to find the talent they need in a creaking education system, face mounds of paperwork and must bribe bureaucrats to keep businesses afloat.

Egypt’s economy is seen expanding by 5.4 percent in the 2010-2011 fiscal year ending in June, according to economists polled by Reuters last month. The government says it can push growth to 7 percent in 2011-2012 and at least 8 percent the following year.

That outstrips an International Monetary Fund growth forecast for the Middle East and North Africa of 4.8 percent in calendar 2011. The IMF sees 6.5 percent growth this year across all emerging markets.

Economists say the government has had a helping hand from a recovery in global risk appetite after the economic downturn and some momentum in pushing through business-friendly reforms.

“There’s enormous liquidity here,” said Angus Blair, head of research at investment bank Beltone Financial in Cairo. “Egypt could be a major powerhouse of growth. But many other issues need to be addressed.”

The World Bank ranked Egypt the top global business reformer for 2006-2007 after the government halved business start times and slashed the minimum required capital, cut fees to register property and eased port and construction permit bureaucracy.

This helped the country weather the worst of the global downturn. The government aims for $10 billion of foreign direct investment in this fiscal year. It drew $7 billion in 2009.

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