How Corporate Corruption Hurt Egypt's Entrepreneurs

by Elmira Bayrasli, October 19, 2011

The moment Egypt toppled Mubarak was thrilling. Yet what has come after has been less so. Against a background of violence betwee Christian Copts and the military, a once-fertile climate for small business and foreign investment has turned arid. According to the Economist, Egyptian GDP has fallen, its stock market is hamstrung, manufacturing is in decline, and tourism has dissipated. The government now faces “an external-financing gap of about $11 billion in the second half of this year and the first half of next.”

Not all are pessimistic, however. Looking at Turkey, some believe that if Egypt’s government works to support the growth of small and medium businesses, it “could be Turkey in ten years.” Entrepreneurship, they say, as many in crisis situations do, is the answer. Yet it’s not just the government that will have to support them. Since the revolution, Egypt’s entrepreneurs found themselves the target of public ire and blame.

Hind and Nadia Wassef, the sisters behind Diwan Bookstore, are concerned about their country’s start-up landscape. Understandably, they are also worried about their own enterprise, which they founded in 2002 with one bookstore. Today, Diwan is a budding local brand with 10 shops throughout Egypt that celebrate Arab literature and culture.

“I’m sure the revolution looked lovely as it played out in the media, but its aftermath is the real test of success,” says Hind. The sisters say that Mubarak’s fall, followed by the arrest of several business figures on charges of corruption, has cast big business as the enemy, making it difficult to be an entrepreneur. “There is a sense that ‘we must take revenge on big business,’” says Hind. “The opposition against big business is so huge it has driven people into the perceived refuge of the all-encompassing father-state that will solve all of their problems.”

The sisters say that they’re not worried about Islamism or the social agendas of their leadership. “We’re not worried about who is going to be in power and what kinds of laws they’ll pass. The economic orientation of the leadership that is to come is what will affect the investment climate of the country,” they say.

Currently, it is not favorable. Foreign direct investment is down and consumers are staying at home. That has meant decreased sales for Diwan. “There is an increased interest in reading about politics,” says Hind, “but Diwan depends on recreation and disposable income.” Currently there is little appetite for either. “Consumption is linked to people’s perception of the country’s stability,” she attests. “If they feel secure enough, they browse in bookstores, dine out, window shop and gallery hop. But if there is unrest, people stay at home.”

Khaled Ismail, the founder of wireless technology company SySDSoft, hopes that the energy that motivated Egyptians out onto Tahrir Square will help solve the problem by “trickling down” into entrepreneurship. “We need more than a new ruler and a new regime,” he says.

Ismail believes that change should begin with the media, which he notes has fed the negative image of business overall. “Good business people create jobs and opportunity,” he says. “They are the role models the media should be talking about.” His own company is one such example; earlier this year, SySDSoft was acquired by Intel, which has opened Ismail’s operations, and therein Egyptian technology, to a global market.

Role models are something Egypt has historically lacked, says Ismail; it’s one of the reasons that Egyptian youths “don’t dream big.” Mentors and training are other crucial needs. Although many Egyptians who lack employment and educational opportunities start businesses, the majority fails. One of the reasons for that, he explains, is that everyone, understandably, is chasing profit. “But entrepreneurship is harder than that,” he says. Its success depends on the value that the product or service generates. “That may not happen for 2-3 years.”

The dividends of Egypt’s revolution may take longer. Elections have to be held. The constitution needs to be re-written. A new government must be formed. None can be done without the assurance of stability and prosperity. Entrepreneurs have a big role to play in Egypt’s future. How they contribute to Egypt's growth will be critical. How the country allows them to do so will be even more so.

--

Over the past two decades, Elmira has worked to support entrepreneurs in emerging markets at Endeavor, served as the Chief Spokesperson for the OSCE Mission to Bosnia and Herzegovina in Sarajevo and assisted former Secretary of State Madeleine K. Albright. She is a member of the Council on Foreign Relations, an advisory board member for the Turkish Women’s International Network and Turkish Philanthropy Funds and a mentor for the Unreasonable Institute. She now handles communication for Peace Dividend Trust, a social enterprise that tests and implements ideas to improve aid and peacekeeping, and writes a weekly column, Entreventures, on Forbes.com. She is currently writing a book on development and entrepreneurship.

 
Commentswith facebook
Commentswith Wamda
Sign in  to leave a comment
Not a member yet!
register now