'Foreign Direct Investment in Egypt Essay\r'

' irrelevant be lay down investiture (FDI) is enthronisation directly into labor in a awkward by a club located in a nonher coun strain, either by buying a compe very(prenominal) in the intent country or by expanding operations of an real vexation in that country. Foreign direct enthrone workforcet is done for umpteen resolves including to take advantage of cheaper hire in the country, special investment privileges such(prenominal) as tax exemptions offered by the country as an inducing to gain tariff-free approach shot to the foodstuffs of the country or the region.\r\nIn the global puncivilnce today, we see some exploitation countries competing for foreign direct investment. FDI is said to be an of the essence(predicate) factor for spurring the development of a soil. Foreign direct investment (FDI) an authorized vehicle for scotch growth in emerging markets countries. Since 2006/2007, Egypt has become the hint attractor of over every digest(predicate) for eign direct investment (FDI) on the Afri arouse continent. Up till 2008, Egypt has attracted 56 foreign investment companies in the cloth welkin, employing 14,169 playacters with correspond investment re judge of $ 172. million, and measure production value of $ 370. 6 million.\r\nFurther much, Egyptian-Foreign joint venture companies totaled cl; employing 30,635 workers; with an investment of $ 515 million, and a total production value of 509. 4 million in 2008. Egypt has experienced hard political changes over the past two years. On February 11, 2011, President Hosni Mubarak’s 30-year rule came to an end to a lower tell intense popular pressure as hundreds of thousands of Egyptians converged on Tahrir Squ ar.\r\nTransition to egalitarian rule has been marked by advances and challenges. Egypt has seen several prime ministers and multiple cabinet changes since the revolution, and mevery investors obligate reported that the constant shuffle and interim tenure of pr edominatement officials have contri muchovered to a punishing business environment. nonetheless, in January 2012 Egypt seated its driveing s even ups elected in free and fair elections, and m both of the members have identified increasing foreign investment as a top priority for the government.\r\n eve though political uncertainty and economic downswing in Egypt , this Afri shtup country still bewilder a lot of opportunity to polish off boodle for foreign direct investor especially in material and app bel industry . Foreign Direct enthronement In Egypt Investing in Egyptian dress and Textiles Industry 2-Appargonl and Textile Industry Egypt is photographic plate to the more thanover fully vertically integrated textiles industry in the fondness tocopherol, with the entire production process â€from the tillage of like to the production of yarns, fabrics and ready-made garments â€carried step up main office(prenominal)ally.\r\nEgypt is the largest manufactur ing business in Africa and worldwide of long (LS) and extra-long basic (ELS) cotton, invoice for 50 percent of world production in 2008, it has built a brand reputation for its whole step of cotton. The do main plays an extremely central billet in the Egyptian sparing. It is the second largest producing orbit aft(prenominal) agro-industry and the first in terms of jobs accounting form30% of topical anaesthetic workplace in 2008. It accounts for 3% of the GDP, 30% of industrial output and just almost 13% of Non-Pet consumptionum exports in 2010 / 2011, check to the primordial Bank of Egypt.\r\nThere atomic telephone number 18 more than 6,700 textile- related to companies registered with the industrial Development Authority. The power player within the sector is readymade garments (RMG), worth 75% of the textile and garment industry. The RMG subsector produced more than 313million pieces in 2009, with global brands such as label & Spencer, GAP, Wal-Mart, Levi Stra uss, Target and Calvin Klein sourcing from and investing in Egypt. Of the 25% of the industry focused on textile production, home textiles constitute 12% of the industry, and cotton yarn 8%, while the remaining 5% is attri merelyed to early(a) cotton fabrics and textiles.\r\nThe studyity of spinning (50%), weaving (60%) and hemming (60%) capa urban center is own by the public sector while 90% of garmenting capacity is private. For the spinning and weaving industry, medium-to large-scale companies prevail the industry with a strong public sector presence in spinning and weaving. The government’s dodging is to boost exports to the European garment market by moving up the quality track down in garments, vertically integrating the garment production value chain (e. g. use local extra-long staple (ELS) cotton, improve design and patternmaking offering) and defending leadership in low-end garmenting by establishing strong brands at two(prenominal) country and supplier levels . Also on the agenda is restructuring the domestic textile industry by privatizing mills and supplement on low cost and provided labor in addition to large domestic supply of high-quality cotton. Currently, the main markets for the sector were EU countries with about 34% of total exports in 2010, Arab countries and USA with 16% and15% respectively, according to habitual Organization of Export and Import Council (GOEIC) 3- Country analysis\r\nAs one of the besotted to potent nations in the Middle East, Egypt has encountered compound success in transitioning from an economy driven by lifelike resources to one with a healthy amalgam of industry and services over the past 50 years. Although it has fortunately modify its economy, Egypt rest one of the poorest of its regional neighbors on the basis of per-capita income, and a succession of unstable governments have unexpended the nation with inconsistent political institutions, weakening social infrastructure, and a legacy of c orruption.\r\nLong-term national competitiveness impart require a clear economic strategy and continuity of effort. Egyptian cotton is recognized globally for its unmatched quality, fueling a textile wad that has historically been an important component of the national economy. Bolstered by superb endowments and several advantageous related industries, the textile cluster faces new challenges as falling geomorphologic barriers to trade boost the intensity of global opposition Egypt is located strategically between the Mediterranean sea and Red Sea, at the joint of Africa and southwest Asia.\r\nB doing Sudan, Libya, and Israel, Egypt is home to the Nile, the longest river in the world. The nation’s rapid population growth from 23M citizens in 1960 to 83M today â€has change magnitude Egypt’s regional importance except to a fault deeply changed Egypt’s character. Egyptian urban plains have become some of the around crowded in the world, with Cairo itse lf recently laying claim to the designation of world’s clam up to densely-populated city. Agriculture is withal constrained; only 3% of the country’s total land mass was under farming in 2008 (AFDB, 2009). By 2010, Egypt was the fourth-largest economy in the Middle East.\r\nRecent economic performance has been positive, with 4. 75% one-year GDP growth from 2001 to 2010. Per capita GDP remains relatively low comp ared to regional peers. Egypt’s economy is diversified as compared to its largest regional neighbors, m some(prenominal) of which depend severely on commodity petroleum exports (Saudi Arabia, Iran, and the UAE). As of 2010, the largest sector in the economy was the manufacturing sector (16. 9%), followed by mining (14. 4%), and agriculture (14%). Exports are knockout in the hospitality and tourism, transport and logistics, and petroleum products clusters.\r\nEgypt’s shifting export product mix over the past 20 years is symptomatic of a br oader economic change â€from a singularly subjective resource-focused economy to one that is less factor driven. Egypt’s national competitiveness is aided by halcyon endowments and some positive microeconomic elements, ranking 63rd out of 138 countries in business sophistication and 26th in market size. But Egypt has been hamstrung by adverse macroeconomic conditions, ranking only 129th in macroeconomic environment, 133rd in labor-market efficiency. Egypt’s strongest competitive advantages lie in its natural endowments.\r\nThe country’s position at the crossroads of three continents has made it a historic calling hub, amplified by the construction of the Suez Canal in 1869. approximately 10% of the world’s maritime rule book has passed by dint of Egyptian waterways, and the poopal spawned a buirdly shipping and logistics cluster that facilitates export of hots like textiles. The Nile Delta, an area of northern Egypt where the Nile River spread s into distri scarcelyaries and drains into the Mediterranean Sea, has served as Egypt’s breadbox for over five millennia (Baines, 2011).\r\nTwenty years of redistributive economic policies have left Egypt with inefficient, low-quality social institutions â€the nation boasted a 29% illiteracy rate despite 96% enrollment in primary education. In an economy characterized by a high degree of modify planning, Egypt spent only3. 7% of its government budget on education and 6% on healthcare. Corruption and indifferent centralized economic planning constitute major challenge to Egyptian macroeconomic competitiveness. a- Background To traffic in Egypt\r\nEgypt has recently been through the most turbid of changes with a popular revolution, widely referred to as ‘ the Arab imprint’, sweeping away the decades long, semi-totalitarian rule of Hosny Mubarek and replacing it with…? magazine go out tell how successful the putative new, democratic institutions wil l be but despite all of this Egypt remains one of the fastest growing economies in the world and a country which m whatever economists auspicate will become increasingly successful and influential in the region.\r\nEgypt is, in a strange way, both a secular and a religious put in and it is worth bearing these two important strands in mind on any business take off to the country. It could be said that the Egyptian economy is ‘mixed’ in two vital, but differing ways. Firstly, many businesses were nationalized after independence, during the prolonged period of ‘Arab socialism’ which typified the Egyptian overture in the 1960’s and 1970’s.\r\nThe government still plays a vital role in setting both business and macro-economic agendas but the past couple of decades have seen the proliferation of larger-scale private companies which whitethorn be locally ( ordinarily family) own or joint-venture operations with overseas conglomerates. Secondly, c ompanies fall into the kinfolk of either Muslim or non- Moslem in penchant. Those companies which are Islamic in orientation will govern their approach to business through the strict rendering of classical Shari’a law which stirs on such varied issues as attitudes to borrowings, shareholder profile and HR policies.\r\nBefore entering into business negotiations in Egypt it is important to do some homework on any potential touch modalitys. Is the order state-owned or private; is it Islamic or secular in approach? b- Egyptian Business Structures Many companies in Egypt operate according to Islamic, kind of than secular law and this impacts on a number of key areas of business structure and performance. oneness key issue is that, due to Islamic strictures on ward offing usury, the difference between companies and banks are less delimitate than in western economies.\r\nCompanies tend to be financed through a combination of equity capital and short-run loans where the le nders do not charge interest but take a share of hits or outragees (PLS loans. ) Thus all risks are divided equally amongst the shareholders and lenders. In addition, many companies have a religious Supervisory Board comprised of Islamic jurists whose role is to ensure that the company’s operations agree with the strictures of Shari’a law. Thus employees must be Muslims and work stops for the regulatory prayer sessions every day.\r\nFirms are anticipate to pass water reasonable, but not excessive, profit and managers have a social as comfortably as corporate responsibility †they are faceed to balance the interests of the company with the interests of society at large. None of the above applies to the workings of those firms that are non-Islamic in orientation ( commemorate that 10% of the Egyptian population are Coptic Christians) or joint-ventures with overseas organizations. c- Egyptian Management carriage Most Egyptian companies tend towards extremely class-conscious structures and this is reflected in the management style most much manifested within these companies.\r\nThe approach is very much described as ‘managing authority chew the fatatively’ which implies the need for discussion without any loss of perceived status or power. Thus Egyptian managers (who are on the whole men) will consult widely with colleagues but be expected to make the final, firm authoritative decision. This decision will rarely, if ever, be delegated to a subordinate †even if the subordinate is a member of the family. After a decision has been reached, subordinates are expected to follow it to the letter and dispute or criticism are not expected or appreciated.\r\nThus consultation has a ‘socializing’ sight within an organization, but questions have to be asked as to the true extent of its impact on any final decisions. Management is expected to be overcautious and not take too many risks †thusly decision-makin g can search extremely slow and awkward by US standards. It is also important to remember that religious considerations could form an important element in the final decision †something Western businessmen a great deal forget within the negotiating process. It is important to factor this into any negotiating stance. d- Egyptian Business Meetings\r\nAs in most of the Arab world, personal relationships are key to a successful coming together and good quality relationships can helper to cut through the tendency towards an likewise bureaucratic approach. Who you are and who you realize really matter and for that reason it is a good deal important to commove a local go-between who has ready-made take ons who can operate on your behalf ‘ (and local often means local to the city or town. ) Initial meetings can often seem very starchy to western businessmen and strike coffee, cake and lots of small talk †even when time is very short.\r\nDo not make the mistake of seeing these formalness as a waste of valuable time, as they form an entire part of the early relationship-building process. If time is not restricted, these formalities can start to eat away at the day and it is some quantify difficult to schedule more than one meeting per day. If concrete issues are discussed, it is prudent to ensure that specific actions are agreed upon and that individuals are tasked to perform them. If this is not done, things can very often drift and several months can elapse without any discernible progress being made.\r\nTime is very elastic and agreed start and finish times should not be relied upon. Patience is very necessary. It is not a good idea to arrange meetings on a Friday (or even Thursday) as these are the long time of rest. It is advisable to travel to Egypt on business with a good supply of gifts, which can be accustomed to key contacts. Gifts should be small and it is quite a good idea if they convey something of where you come from. Howeve r, when bounteous gifts be conscious of Muslim sensitivities and keep down the hobby: alcohol, pork, pigskin, perfumes with alcohol e- Egyptian Teams Working\r\nTeams revolve around a strong leader who usually allocates tasks rather than specific roles or functions. Individuals within the team expect direct access to and feedback from the leader. Thus teams tend to be more a grouping of individuals working severally towards a common objective. Many private companies are family-run and owned and family members would fill most management positions.\r\nThus, the most obvious team grouping in a typical private company would be family- point but even this would be fairly hierarchical in nature. f- Egyptian Communication Styles As in most of the Arabic world, great deal stand quite close to one an early(a) when communicating and many other cultures whitethorn feel that their personal space has been invaded. When this close proximity is coupled with strong same-sex tenderness contact and large amounts of tactility, many overseas business people can feel extremely un soft. When attempting to build good relationships it is important that these differences in approach to body salutey do not become a barrier. Arabic conversation can be very high-flown with much use of flowery language and flattery. This is a protocol of the language and is expected.\r\nDo not interpret this approach as insincerity or a tactic. Try to express yourself in a alike(p) fashion †especially when establishing relationships. It whitethorn sometimes place that Egyptians are shouting at each other and in the throes of a very heated, acrimonious argument. recollect that emotion is used to convey conviction and that an overly reserved approach could be misconstrued as separation or even lack of interest. Egyptians are imperial of their country and Egyptian achievements (both ancient and modern. ) Egypt’s standing(a) in the world, its history and local sport are all positive to pics of conversation.\r\nHowever it is best to avoid discussing political issues or enquiring about female relatives of business acquaintances. When dealing with government officials, it is important to learn the titles of any contacts as titles are of considerable importance, denoting hierarchy and status. Do not address government officials in a familiar way unless specifically requested to do so. g- Women in Business in Egypt Women play a much less significant role in business life than in the West but are more active than in the disjunction States such as Saudi Arabia.\r\nMost aged(a) business people are men, but it may be possible to meet a precedential female employee. There would tend to be more women in orotund positions in joint-ventures, family businesses and companies owned by Coptic Christians. When dealing with women in business in Egypt keep a respectful, professional distance and do not try to ask personal questions. h- Egyptian Dress Code Appropriate dress in Egy pt is both conservative and modest. Standard dress for men would be trousers, jacket, and shirt and tie in formal business meetings. Women should dress modestly, wearing long sleeves. Skirts hould be of a reasonable length (not too short). Do not wear native attire, as this major power be considered offensive.\r\nTop 20 bakshishs For Doing Business In Egypt utmost 1. It is important to research any company before approaching it in order to catch whether it is state-owned or private and secular or Islamic in orientation. Tip 2. When doing business with an Islamic oriented organization, do not overlook the potential impact of religious issues on any decision- making process. Tip 3. Business is driven by relationships and therefore a great deal of resource and time should be allocated to the development of key contacts. Tip 4. Who you are and who you know are important issues in Egypt; therefore it can be difficult to break into business without access to the right initial contacts .\r\nTip 5. In order to help develop the all-important initial contacts it is often necessary to appoint a go-between who can arrange meetings and act as a bridge deck into the culture. Tip 6. It may be necessary to appoint a number of different go-betweens who know the locality (i. e. one for Cairo and one for Alexandria). Tip 7. Egyptian companies tend to be hierarchical and power usually rests in the hands of a small number of key senior managers who make all the major decisions.\r\nTip 8. Managers tend to give direct operating instructions and subordinates are not expected to show initiative. If something is not specifically requested, it may not get done. Tip 9. Meetings can involve sitting in entourage with unknown people who are simultaneously meeting your contact. In effect, several meetings may take place at the same time. Tip 10. Initial meetings can be very time-consuming and appear to deliver very little in terms of concrete returns. Tip 11. Time is very flexible and meetings may start very late (if at all) and last for many hours.\r\nIt is difficult to schedule a serial of meetings on the same day. Tip 12. Meetings may start with coffee and a great deal of non-business related small talk. Do not try to mission this process Tip 13. It is important to offer bountiful compliments to your host †and be prepared to set about them in return. Tip 14. Do not try to do anything on Thursday or Friday and avoid key issues during the month of Ramadan. Tip 15. People may stand much closer to you than you are comfortable with. Try not to back away as this can seem stand-offish. Tip 16. Levels of eye contact are very strong and strong eye ontact denotes sincerity and trustworthiness.\r\nTip 17. Avoid touching anybody with your left hand or pointing feet at people as both of these are seen as extremely rude behaviour. Tip 18. Do not comment on the political situation in the Middle East or make any adverse comments about the influence of Islam. Tip 19. Women are less prominent in business than in the West but play a more prominent role than in some other Middle easterly countries (i. e. Saudi). Tip 20. Dress conservatively, but very smartly. You will be judged partly on your appearance.\r\n'