Using an Agent or Distributor

Egyptian law concerning commercial agency agreements is among the most liberal in the Middle East.  The law is neutral concerning exclusivity, compensation is not required to cancel an agency, and there is no minimum notification period for cancellation.  There is no requirement that the agent authorize the import of the foreign principal's products into Egypt, nor that the importation take place through the agent.  Importers of any product must be separately registered, under another law.  Commercial agents must register the existence of their agency with the Ministry of Industry and Foreign Trade’s Commercial Registry Department, giving basic facts about the agreement, including the amount of commission to be received on sales.  The foreign firm itself faces no local registration requirement.  The commercial agency law is also neutral about dispute settlement procedures leaving this to the parties to decide, preferably in writing at the time of appointment of the agent, and in advance of a dispute and on the amount of commission due an agent.

Commission rates vary according to the type of product or service, volume of sales, and effort needed by the agent.  The larger the volume of sales, the smaller the commission.  For commodities such as rice, wheat, sugar, lumber or cotton, the commission ranges between 1-3%; for chemicals and foodstuffs 3-5%; for medical equipment, earthmoving equipment, office/business equipment, about 10%; and for expensive laboratory and scientific equipment, 15%.  For major projects such as a complete civil engineering project, the commission is typically 1-3%.  In tenders, the commission is calculated in the quoted bid.  If a bidder reduces the bid price, the agent typically is asked to share in the reduction.  Commission rates must be reported in bid packages for government tenders, with the government reserving the right to reduce any commission it deems extravagant.  Commission rates also must be noted in the Ministry of Industry and Foreign Trade’s Commercial Registry documents signed by the Egyptian agent.  Agent exclusivity is not required by law; the majority of U.S. firms have one or two Egyptian agents for different products, although a few have more.

Agencies can be split geographically and/or by product, although this is generally avoided in a country like Egypt, where activity is centralized around the capital city of Cairo.  If there is a geographic split, it is generally Alexandria with or without the Delta cities on one hand, and Cairo and the Nile valley on the other.  Agencies also can be split between private and public customers, with one agent specializing in tenders and another handling private sector customers.  Agents often appoint subagents to cover smaller cities.   

The U.S. Commercial Service offers the Gold Key and International Partner Search programs that are designed to assist U.S. companies identify local agents/distributors for their products.  For further information, U.S. business representatives should contact the nearest Department of Commerce Export Assistance Center in the United States or the Commerce Department's Trade Information Center at 1-800-USA-TRADE (1-800-872-8723) or click on http://www.export.gov

Recommended business networks in Egypt include the American Chamber of Commerce in Egypt with branch offices now in Alexandria and Washington, DC and various associations of Egyptian entrepreneurs including the Egyptian Businessmen's Association, the Alexandria Business Association, the Federation of Egyptian Industries, and the Egyptian Exporters Association. There are investor committees in the large industrial cities of Tenth of Ramadan, Sixth of October, Borg El Arab, and a chamber in Ismailia promoting projects in the Sinai. Please see the Contacts Section of this guide.

Establishing an Office

As in any other country, seek early legal counsel from one or more attorneys and tax counsel from a professional accounting/auditing firm. Lists of such firms are available on the Internet from the Commercial Service website in Egypt http://www.buyusa.gov/egypt/en/bsp.html?bsp_cat=80120000

A newcomer's biggest and never-ending challenge is to learn, preferably in advance, what laws affect him/her and how to cope with them.  Many of the laws reflect Egypt's socialist government of the 1950s-1970s and, if interpreted literally, do not favor private enterprise.  However, newer laws and the policy of today's government favor entrepreneurship and the free market economy.  Tension between political desire favoring entrepreneurs and bureaucratic reliance on old laws-on-the-books continues. 

The General Authority for Investments and Free Zones (GAFI) has set up a one-stop shop for registering companies.  In theory, this office is able to process all paperwork for setting up a business in Egypt and can do so in a manner of days.  Companies here report, however, that in reality, other delays often result in the process taking up to 6 months.

Franchising

Franchising has developed quite extensively in Egypt over a short time, especially in the fast-food sector. There are 40 international franchisees in Egypt at present, including 22 American food franchises, 3 non-American food franchises and 15 non-food franchisees with hundreds of individual outlets.

The Egyptian fast food market, dominated by American chains, has experienced notable expansion since it began in 1970, and market sources expect the growth to continue at an annual rate of 10-20% over the coming years.  The current food franchise market size is estimated at more than $300 million. Some of the popular chains include:  Chili’s, TGIF, Hard Rock Café, KFC, Little Caesars Pizza, McDonald’s, Pizza Hut, and Baskin Robbins. From seven operational chains in 1993, there are now 45 American franchises either operational or with imminent plans to open. 

During the 1990s, non-food sectors started to develop. Non-food franchises have a large market potential. Other American franchisors are actively planning to enter the Egyptian market, and opportunities exist for additional U.S. franchise development. A limited number of companies in the fields of hotel management, car rental, language education, health and fitness, electronics, and computer training are currently franchised in Egypt. 2005 saw the introduction of several retail clothing franchises around Egypt. 

Franchising has been proven to be a good mechanism for entrepreneurship and SMEs, and the concept has spread through numerous entrepreneur associations. However, the franchising mechanism, which was booming in the early 1990s in Egypt especially in the food sector, is now stagnate if not slowing down for various economic and socio –political reasons.

Numerous private companies are active in promoting awareness of the concept, including the Egyptian Franchise Development Association (EFDA). EFDA represents and serves the franchise industry in Egypt to encourage and promote the concept of investment through franchising, encourages training and quality control, and works to solve common problems in the industry.  Moreover, EFDA sponsors a local Franchise show every year in the spring or early summer.  Please contact the Commercial Service in Egypt for more details.

Egyptians have initiated franchising their own retail businesses to others, especially in the apparel industry. This trend indicates that the franchise concept is acceptable within the Egyptian cultural setting. Most of the franchises operating in Egypt are the result of Egyptian entrepreneurs approaching foreigners, rather than the result of a marketing effort by foreign firms.

Direct Marketing

Direct marketing in Egypt, such as catalog sales or television sales, tends to be problematic and is in its infancy.  This is due in part to the fact that use of credit cards and checking accounts drawn on foreign banks is not common in Egypt (although it is increasing).  In addition, mailing goods into Egypt faces the risks of mail theft, loss in the airport mail warehouse, and arbitrary and high customs duties.  Purchasing goods through the Internet is limited for the same reasons, although the Egyptian Government is interested in e-commerce and has passed e-commerce legislation and an e-signature law in 2004.

Joint Ventures/Licensing

Egyptian entrepreneurs often prefer to have a foreign partner in a joint venture in Egypt.  The foreigner supplies and ensures quality of the technology, as well as the cachet necessary to gain customer acceptance.  Foreign equity in joint ventures can be as low as a few percentage points, depending upon mutual agreement.  Egyptian Law No. 8, the Investment Incentives and Guarantees Law, allows foreign investors to own any amount, up to 100%, in projects in most sectors.

The details of joint venture or licensing agreements between Egyptians and their foreign partners are a matter of mutual agreement, defined by their contract, not by special law. Liberalized foreign exchange regulations since 1991 permit the free transfer abroad of profits and dividends.  Invested capital may be repatriated without prior approval of the government's investment authority, the General Authority for Investment and Free Zones (GAFI).

Technology licensing that does not involve "investment" in Egypt by the foreigner but that does involve using "process secrets" for manufacturing in Egypt must be approved by the Industrial Development Authority, affiliated to the Ministry of Industry & Foreign Trade.  Approval is not required for licensing agreements involving trademarks and technical know-how other than "process secrets."  A stiff withholding tax is levied on royalty payments unless a double taxation treaty exists.  There is a U.S.-Egyptian treaty for the avoidance of double taxation, which limits tax on royalty payments to 15% of the gross amount of such royalty.

Numerous government and private companies have licensing agreements with foreign firms under which royalties and other fees are freely transferred abroad pursuant to individual corporate agreements.  Examples of licensed production in Egypt include name-brand clothing, personal care products, kitchen utensils, pistols, laser alignment equipment, and military vehicles.  Service licenses include diving training, and franchised services including personal care and restaurants.

Inadequate patent protection has been so far the biggest barrier to licensing in Egypt despite the passage of a patent law, ratified by parliament in August 2003 (see Protecting Your Intellectual Property later in this chapter).

Some U.S. investors have looked to Egypt as an investment site in order to benefit from U.S. Government procurement preferences.  Under the U.S. Federal Acquisition Regulations (FAR), Egypt is a "designated country" (among many others) from which certain goods theoretically could be procured by the U.S. Government as if they were made in America.  However, this rule does not apply because the FAR requires such countries to sign the GATT/WTO Procurement Code, and Egypt has not done so yet.

Selling to the Government

In selling to the Government of Egypt (GOE), companies will need to deal directly with the client agency.  Egyptian procurement is conducted utilizing either national budgetary funds or aid funds from USAID, the Foreign Military Fund (FMF), or other donors.
 
In the case of USAID and FMF, information can be obtained on http://www.fedbizopps.gov/.While this site is comprehensive, it is very difficult to navigate to find specific projects in Egypt.  USAID and the Office of Military Cooperation are willing to answer questions about upcoming procurements directly by contacting the U.S. Embassy in Egypt.
 
Other donor-funded projects open to U.S. bidders are from the Government of Japan's United Overseas Development Assistance (ODA), or multilateral assistance from entities such as the World Bank, African Development Bank, or Arab and Islamic development funds.
 
The following information pertains to contracting directly with the GOE.  It is also relevant for donor-financed projects to the extent that Egyptian law applies to them. 

TENDERS LAW

The Tenders Law No. 89/1998 now governs GOE procurement by all civilian and military agencies (“ministries, departments, local government units, and public and general organizations”) unless they are excused from this law.  It has replaced the former Law 9 of 1983. The improvement is evident mainly in these areas:

(1)  No negotiation of bids after bid opening (“momarsa,” in Arabic). A tender may not be transferred into a momarsa.

(2)  No cancellation of an order without reason.  Moreover, rejected bids and awarded bids will contain the reasons on which the decision was based. 

(3)  Bid bonds will now be refunded immediately upon expiry of validity of tender.

The law has not changed the following features:

(1)  Open competition with publication for at least 30 days;

(2)  15% price preference for Egyptian bidders.  There is one exception, however. 
Ministry of Defense tenders are treated differently due to the Reciprocal Defense Procurement Memorandum of Understanding. This rule allows Egyptian companies to compete as U.S. companies on DOD procurements and U.S. companies to compete for MOD tenders as Egyptian companies.  If a U.S. company is competing with an Egyptian company on an MOD procurement, regardless of funding source, they must be treated the same.  If an Egyptian company receives a 15% price preference, so does the U.S. company.  Not all DOD procurement committees are aware of this requirement.  In the event of a dispute, please contact the U.S. Embassy’s Office of Military Cooperation to inform them of MOD non-compliance with this provision of the Memorandum of Understanding;

(3) A two-phase decision-making process: a bid-opening committee that convenes a public session to which all bidders are invited and bid prices are read aloud; and a decision-making (settlement) committee that reviews the technical bids and either makes a decision or, if the value is over $50,000, recommends a decision to the minister concerned;

(4) Bid bonds of one or two (generally two) percent and a performance bond by the winning firm of (generally) 5%.  Preference is given to Egyptian public sector companies and Egyptian cooperatives, both of which are exempted from the bonding requirements, provided they do the work themselves and do not request an advance payment;

(5) Fraud, bribery ("either personally or through a third party, directly or indirectly"), or bankruptcy by the contracting party annuls the contract and allows any outstanding bid or performance bond to be confiscated;

(6) Sole-source decisions are permitted in special instances: monopoly sources of supply; goods whose import is monopolized; specialized products or services; and goods and services needed urgently;

(7) Advance payments are permitted, against a letter of guarantee.  U.S. standby letters of credit (which can be insured for political risk by the U.S. Overseas Private Investment Corporation) are acceptable in Egypt.

Practical Problems of the Tenders Law

There is no time limit for the decision-making committees to meet, make, or announce their decision.  If a bidder withdraws its bid prior to bid opening, it forfeits the bid bond.  Bidders often are "held hostage" to a government agency that stalls the bid opening for varied reasons, including running out of funds for the project.  Costs of extending bid bonds are borne by the bidders.  If a winning firm withdraws from a project before beginning or completing a project, its performance bond similarly will be confiscated.  This has happened when a client has delayed start-up because of budget shortfalls, expecting the contractor/supplier to carry the burden of maintaining the performance bond.

Government agencies often delay giving the "final acceptance" of goods or works projects.  This holds up final payment and final retirement of the performance bond.  There are no time limits for making payment from the date of acceptance of a bid, nor any provision for implied or automatic acceptance of a supplied good or service.  The client must explicitly acknowledge “final acceptance” before the contractor can receive final payment and retire the performance bond.

If award decisions are delayed beyond the validity date specified by a bidder, extra costs incurred by the delay cannot routinely be passed on.  If the client adds new requirements to an ongoing contract, any extra monies requested by the supplier/contractor must be endorsed by a special "price study committee" which sometimes takes years to approve.  In the meantime, of course, the supplier/contractor is expected to fulfill the revised contract without delay or complaint.

The Tenders Law makes no reference to dispute resolution, which therefore must be negotiated prior to contract signing.  Arbitration in Egypt or abroad (the latter can include foreign law and foreign arbitral procedures) is preferred to the court system, although enforcement of arbitral awards is not assured because the losing party can appeal Egyptian or foreign arbitral decisions in Egyptian courts.  If no specific dispute settlement procedure is mentioned, any future dispute with a government party will go to the government's Council of State.  This is a government agency that both reviews the constitutionality of proposed laws and regulations and functions as a court for all non-criminal matters to which the government is a party.  If the government party does not honor an arbitration decision, the tenders law does not permit the winning party to use the arbitration settlement documents to settle claims with other government entities (customs, tax, social insurance, etc.).

There is no provision allowing the supplier to delay work if payments are delayed.  There is no provision to reduce the performance bond progressively according to the rate of completion of the work. 

For Letters of Credit/Guarantee offered as a performance bond, it is advisable to have separate L/Cs for each procured commodity or distinct order, in order to avoid delaying the entire shipment if there is a dispute over one item.  The Tenders Law has increased the ceiling on direct orders to LE 50,000 (approximately $8,700).

In the Tenders Law, tenders and bids are not to be transformed into “momarsa” unless otherwise explicitly mentioned in the tender advertisement.  Maintenance and after-sales technical service is to be given significant consideration in deciding and evaluating offers.  The job is to be given to the lowest bidder only if the requirements for technical and maintenance support are fulfilled.

Amendments to Dispute Settlement Law 27 of 1994 regarding contracts between public enterprises and private (domestic and international) sector suppliers allow both parties to agree to appoint any accepted legal body.  In the past, the only body overseeing disputes with public enterprises was the State Council, which was taking years in some cases to settle disputes.  Parliament approved these amendments in May 1997.

In July 2006, the Tenders Law was amended to allow state property to be sold by direct agreement in cases where a public auction would be impractical.  In September 2006, the executive regulations of the Tenders Law were also amended, to streamline contracts procedures.  The changes shorten the period required for announcing tenders and evaluating bids; lower charges for tender documents; oblige clients to hold pre-bid meetings to clarify items in tenders; and include model contract terms clearly establishing rights and obligations of contractors.  The amendments allow small-and medium-sized enterprises to acquire tender documents at cost, in order to help such firms win business.  An amendment to the Tenders Law was issued in May 2006, requiring the contracting governmental entity to change the agreement value with the contractor, pursuant to the increase or decrease in cost, which took place after the date determined for opening the technical envelopes or after the date of concluding the agreement.  The amendments also require the contracting entity to disburse to the contractor advance payments for work-in progress.  The amendment also stipulates compensating contractors for price fluctuations that might occur during the first year of the contract. 

The new laws correct some of the most serious flaws in Egypt’s current government procurement procedures. Egypt is also now playing a positive role in international discussions of procurement practices, including those of the World Trade Organization. You may also engage the staff of the Commercial Service in Egypt, as well as the Advocacy Center at the US Department of Commerce in Washington, DC to advocate on your behalf for projects and in disputes. Please note that if you have retained legal counsel and began legal proceedings, the US Government cannot interfere.

Other Practical Considerations in Selling to the Government

Poorly written specifications may force bidders to guess what the customer wants.  U.S. firms must stay in close touch with client agencies to minimize doubts and uncertainties.
Do not assume the "best" is desired, since superior features may not be understood or the price may be too high.  The law is silent about who writes tender specifications and neither encourages nor discourages hiring of consultants to do so.  Foreign firms that are trusted by government officials often voluntarily propose tender specifications to prospective bidders, which gives them a chance to determine the specifications.  In the decision-making committee, the technical representative (typically an engineer) must concur in the award decision.  Such persons have much influence.

Government entities expect performance bonds to cover the full warranty period for the product or work in question, and drawdowns proportional to work completed are not usual.  U.S. suppliers, by contrast, generally want performance bonds limited to safe delivery and/or set-up. Therein lie grounds for much misunderstanding and complaints over alleged delays in releasing performance bonds.

Influence peddling in procurement decisions is a much-discussed phenomenon.  What is certain is that decision-makers must feel comfortable with a supplier.  They will not select a low-bidder unknown to them.  Personal friendships and frequent visits to decision-makers by foreign principals and their local representatives are important marketing factors.  While “sweetheart deals” are known to take place, many Egyptian sources affirm that the majority of decisions are openly competitive and straightforward.  While the decision-making process may seem opaque, details of bids are readily obtainable through informal channels.

Distribution and Sales Channels

Foreign firms can sell directly within Egypt if they are registered to make direct sales.  Many do so as part of a manufacturing or assembly operation in Egypt.  A few foreign firms use free zones or bonded warehouses to store goods and hire their own employees to sell door-to-door consumer goods, such as vacuum cleaners.
 
Most foreign firms, however, rely on Egyptian companies for wholesale and retail distribution, ensuring their effectiveness through staff training programs in Egypt and abroad, supplying short-term home office personnel to work with the Egyptian firm, and making regular visits by marketing and technical support staff.  Although the concept of "marketing", as compared to simply selling, or waiting for the customer to find and come to you, is new to Egypt and weakly practiced, there are a growing number of good Egyptian marketing firms who know how to market the products in which they specialize.
 
Egyptian commercial agents are required for foreign firms to bid on most civilian government tenders.  By contrast, commercial agents cannot be used to bid on military tenders, although use of Egyptian "consultants" may be allowed if the arrangement is properly structured.  Commercial agents are optional when bidding on tenders issued by the petroleum companies, when selling to the private sector, or when selling under USAID-financed programs.
 
There are many choices for distributors, dealers, and agents in Egypt.  There are a few firms with modern management, including "profit center" staff responsible for success in specialized departments.  There are more traditional "general trader" type companies, some of which have developed a certain specialization (e.g.: lumber, building products, canned goods, fresh and frozen meats), and some of which handle "everything."  Also, there are smaller firms specializing in only a few product lines or only a handful of foreign suppliers.

According to Egyptian Customs authorities and the Ministry of Industry & Foreign Trade, in 2005 (the latest statistics available) Egypt had 5,300 registered importers, 9,450 exporters, 4,170 commercial agents representing 105,800 foreign firms, and 3,700 factories licensed to import components.  Most of these firms are privately owned, but the government sector includes some 279 separate companies affiliated with 16 holding companies; nearly 30 military factories that also make civilian products; and 1,500 companies owned by one of the 26 provincial authorities (governorates).
 
Many retailers of consumer goods tend to import their own needs directly rather than pay high markups to wholesalers - sometimes a suitcase or trunk load at a time.  A corollary is that many Egyptians prefer getting quotes directly from the overseas supplier rather than from the local agent on the theory that the price will be better.  This habit suggests that U.S. principals be sensitive to the role and presumed cost of their Egyptian agents.  One way to strengthen that role is to refer customer inquiries back to the Egyptian agent or to a regional representative outside Egypt. 
 
Only registered commercial agents can work on government tenders.  Often such persons have retired from the government agency to which they are now specialized in selling.  This system is especially common among persons selling to the military, security, and police agencies.  In the extreme, some of these people literally operate out of their homes and have neither office nor staff, but they can be effective.
 
In Egypt, as elsewhere, the artistry of appointing a representative requires a blend of many concerns and decisions.  Will your product line be prominently featured by the prospective agent, or will it just be added to a dusty shelf along with many other product lines?  Is his influence with government decision-makers generational and therefore subject to decline as the years pass?  Does he have children or trusted staff being groomed for responsibility?

Egyptian law requires that all commercial agents and importers have Egyptian nationality.  If it is a company, the chairman and all members of the board must be Egyptian, and it must be 100% Egyptian-owned.  Agents also must have resided continuously in Egypt for at least five years with specified exceptions for expatriate Egyptians having an overseas work permit; be certified by a local chamber of commerce or professional association; not be a civil servant or worker in a public sector company (i.e., not moonlighting), nor a member of the People's Assembly; not be a "first grade relative" (i.e., a member of the immediate family, or uncle, aunt, niece, or nephew) of a civil servant of the rank of Director General or higher, or of a member of the People's Assembly.  This prohibition against agents with family members in government is rarely enforced.  Public sector firms can be agents, as can private firms and individuals.
Distributor-type companies with any foreign ownership can market goods, including imported goods, in the following circumstances (although they cannot handle the import operation, per se):
 
(1) General Partnership Companies, or Limited Partnership Companies:  In these types of companies, there may be a foreign partner, provided that the Egyptian partner(s) have at least 51% of the capital and the general manager or head of the company is an Egyptian national.  In these instances, such a distributorship company cannot be an "importer" nor act as commercial agent unless it is 100% Egyptian owned and managed.
 
(2) Limited Liability Company:  A foreign partner in this type of distributorship company faces no limit on the percentage of ownership, provided that at least one manager of the company is an Egyptian national (there can be one or more managers depending upon the articles of incorporation), there are at least two shareholders or partners, and the capital of the company is not less than LE 50,000 (approximately $8,700).  A distributorship company of this type also cannot be an "importer", nor act as commercial agent.

3) Joint Stock Company:  Provided that at least 49% of the shares are offered to Egyptians upon formation, foreign shareholders ultimately can own up to 100% of the company, provided that a majority of the board of directors are Egyptians, the capital of the company is not less than LE 250,000, and there are at least three shareholders.  Again, a distributorship company of this type may not import or act as a commercial agent unless it is 100% Egyptian owned and managed.  
 
Foreign firms that form a distributorship as mentioned above often permit the Egyptian partners to form a separate company to act as "importer" or agent.  The latter delivers the goods to the distributorship company for marketing within Egypt.

Products enter Egypt through the main ports of Alexandria, Dekheila, Damietta, Port-Said, and the comparatively new port of Ain Sokhna.  Goods are then cleared by the importer or end-user and are stored in the main distribution centers located in Alexandria and Cairo.  From there, well-organized distribution companies with networks covering the entire country will distribute to wholesalers and retailers.

Selling Factors/Techniques

Egyptians with whom an American will deal in business are often trilingual (English-French-Arabic), well-traveled individuals who pride themselves on ferreting out good deals at decent prices.  Mid-level government officials with whom a foreigner may deal may be less sophisticated and less well traveled, but no less able to negotiate.

Cairo is the cultural capital of the Arab world.  Thousands of affluent Arab tourists and investors travel to Cairo often throughout the year, enjoying the cinema, theater, television, live performances, and relaxed lifestyle not generally available in some other Middle East countries.  Many of these persons have second or vacation homes and apartments in Egypt, as well as factories and real estate investments.  Foreign suppliers/marketers are beginning to take advantage of Egypt as a locale from which to market to its audience of wealthy Arab visitors.
 
Some 18 million of the estimated 78.8 million Egyptians live in the greater Cairo metropolitan area. Seven million live in Alexandria permanently, and its population increases by 50% in the summer as vacationers flood in.  Numerous important secondary cities offer market opportunities for agricultural, industrial, and consumer goods in the Delta (Tanta, Damietta, Mansoura, Mehalla el Kubra, Damanhour, Benha, Zagazig); along the Suez Canal (Port Said, Ismailia, and Suez); and along the Nile south to Upper Egypt (Assiut, Minia, Sohag, Qena, Luxor, Aswan).

Negotiations for a sale, whether with a government agency or a private individual, will be bound by certain unspoken Egyptian cultural requirements.  One is that there is no final best price that cannot be reduced further by negotiating.  A corollary is that only a neophyte would offer one's best price, or anything close to it, early in negotiations.  Government employees are judged on their ability to squeeze the final penny from the lowest bidder.  This happens repeatedly, at every level of decision-making, and is the Egyptian version of the "Dutch auction", called in Arabic "momarsa".  Momarsas have been popular because they give Egyptian officials the appearance of trying to get the best deal for Egypt, and they reduce charges of cronyism.
 
Momarsas, however, are viewed by companies subjected to them as potentially unfair, without clear rules or procedures, and a violation of Tenders Law No. 8's mandate to negotiate with the lowest qualified bidder only.  The U.S. Embassy and some business groups, including the U.S.-Egypt Business Council, have urged the government to ban "momarsas."  A recent positive development is that the practice of "momarsas" has now been prohibited in the Public Tender new tenders law (Law 89 of 1998), approved in May 8, 1998, and enacted, effective June 9, 1998 (see Pricing, later in this chapter).

A marketing problem in Cairo is that it is often difficult to establish who offers what for sale and where to find them.  The city is splayed across the Nile about 15 kilometers (9 miles) in diameter, with several distinct marketing districts that are an hour apart in normally heavy traffic.  Yellow pages and the like are not available to the average consumer.  As a result, people may only find a product they want by attending a trade show or fair, as it is too hard to find the single or handful of outlets maintained by official agents, distributors and dealers. A growing number of trade directories and commercial directories including "Kompass - Egypt" have eased the problem of identifying existing companies.

The Commercial Service in Egypt publishes a Directory of U.S. Businesses in Egypt.  The directory lists U.S. companies with offices and representatives in Egypt, as well as the Egyptian representatives and agents.  To obtain a copy, please send an inquiry to Cairo.Office.Box@N0SPAM.mail.doc.gov

E-Business

The issuance of Law 15/2004 regulating the use of E-signature and announcing the establishment of the Information Technology Industry Development Agency (ITIDA), was a major important step toward the development of E-business.  ITIDA is a government entity with the objective of paving the way for the diffusion of the e-government and e- business services in Egypt.  

The Ministry of State for Administrative Development is another entity that boosts E-government services.  Its role is to set cooperation dynamics with other ministries and governmental agencies.  The aim is to develop and re-engineer governmental services, and to automate office (paper) work cycles.  The Ministry’s role is also to make governmental services, telephone services (fixed and mobile lines) and service centers available through the Internet.  The Ministry has launched the Government Portal to provide access to 23 services online (such as driving licenses, birth certificates, etc.) to reach a total of 29 services now available.  Telecom Egypt (TE), the incumbent operator, was the first public-owned entity that made an online billing system available for its clients.

E-Business websites:
http://www.otlobward.com/
http://www.otlob.com/
http://www.agrifoodegypt.com/
http://www.motoregypt.com/

Telecom Egypt:
http://www.telecomegypt.com.eg/

Real Estate Website:
http://www.realestateegypt.com/
http://www.egypthome.com/
http://www.betna.com/coldwellbanker/nu/eng/index.asp
http://www.e-dar.com/
http://www.eltamir.com/

Government Websites:
http://www.itida.gov.eg/
http://www.egypt.gov.eg/english
http://www.alhokoma.gov.eg

Trade Promotion and Advertising

Strategically placed newspaper and magazine advertisements are good marketing tools in Egypt.  Egyptians read newspapers voraciously, and all literate people will see or hear advertisements placed in the widely circulating Al Ahram daily. Television is watched by all Egyptians, and advertisements reach and influence wide audiences.  TV advertising has continued to increase in sophistication and prominence.  The emergence of three privately owned television stations has created a new forum for advertisements in addition to the advancements on the public stations.  Advertising agencies have begun to host entire programs, focusing on celebrity appearances for marketing purposes.  While these programs had traditionally been shown only during Ramadan, they have recently begun to air year-round.  Two partially privatized pop radio stations have also been created and already have captured a large part of the youth market.  Stations now broadcast with advertisements.  Radio Cairo and three other stations are allowed to air advertisements and, in the month of Ramadan, rates increase tremendously.

Other forms of advertisement in Egypt consist of roadside billboards, flashing neon signs on building roofs, building walls completely painted with advertising signs, "junk mail" advertisements, faxed advertisements, and messenger/courier-delivered direct mail campaigns. Flyers/stickers plaster Cairo's walls and lampposts just as in the United States.  Street peddlers and hawkers shout the praises and prices of consumer products they offer for sale. 
 
Trade promotion is becoming more sophisticated.  Trade shows are frequent, aimed either at targeted business audiences or the general public; several take place each month at one or more of the downtown hotels or the Cairo International Conference Center (CICC).  Most of these shows consist exclusively of Egyptian distributors/dealers/agents of foreign suppliers, or local manufacturers - not because they purposely exclude foreigners but because of poor marketing and last-minute preparations.  A few Egyptian trade show organizers are now organizing professional shows and are working to attract international business participation.

The annual Cairo International Trade Fair, held in the spring of every year, is the historical centerpiece of Egyptian trade promotion events.  It has evolved from its beginnings as a "required" government annual event to today's version of a county fair aimed at consumer purchasers.  U.S. firms offering consumer products as diverse as office and business equipment, telephone credit cards, courier services, saunas and swimming pools, satellite dishes, educational toys, car care products, lawn furniture, recreational equipment, mobile phones, and satellite telecommunications have found success at this consumer extravaganza.

For a listing of trade events and fairs in Egypt, please visit the CS Egypt website at: http://www.buyusa.gov/egypt/en/tradeevents.html

SELECTED MEDIA LIST
 
DAILY NEWSPAPERS

Al Ahram:  (circulation 750,000 Sunday - Thursday, 1,000,000 Friday)
---Egypt's most prestigious daily and most prosperous of the country's five largest publishing houses.  In addition to publishing, the company has interests in many business services including computerization, billing services, and ID card services.
 
Al Akhbar:  (circulation 780,000)
---More informal news (crime, human interest) than Al Ahram.  Simpler language.  Harshly antagonistic toward U.S. policies.
 
Al Gomhouriya:  (circulation 200,000)
--- Less influential news coverage but with more local and sports news than other dailies.
 
Al Wafd:  (circulation 180,000)
---Mouthpiece of the New Wafd Opposition Party.  Leading opposition paper, but much smaller and limited in coverage and scope than the major pro-Government dailies above.
 
Egyptian Gazette:  (circulation 4,000)
---The English-language daily.  Part of the Gomhouriya publishing house.  Caters almost exclusively to foreigners living in Egypt and tourists.
 
WEEKLY NEWSPAPERS AND MAGAZINES
 
Akhbar al Yom newspaper:  (circulation 950,000)
---Saturday edition of Al Akhbar with many special interest sections, particularly women's and sports.
 
Akher Saa magazine:  (circulation 50,000)
---Current events, sports, economics, history, arts, cinema, and theater.
 
Rose al Youssef:  (circulation 50,000)
---Political magazine with human-interest stories.
 
Al Ahram Weekly:  (circulation 20,000)
---English-language weekly newspaper from the Al Ahram publishing house.  Read by foreigners and the Egyptian elite. 
 
Al Ahram Hebdo:  (circulation 15,000)
---French-language weekly from the Al Ahram publishing house.
 
Al Ahram Al Arabi:  (circulation 5,000)
---General interest news magazine from the Al Ahram publishing house.
 
Al Mussawar:  (circulation 50,000)
---Launched in 1924, one of Egypt's oldest publications.  Well-respected news coverage and political and social commentary.

October:  (circulation 25,000)
---Popular general interest magazine.
 
Sabah El Kheir:  (circulation 20,000)
---Youth-oriented magazine from Rose al Youssef.
 
Nosf al Donia weekly magazine:  (circulation 45,000)
---Women's issues.
 
Hawa'a weekly magazine:  (circulation 50,000)
---Egypt's original women's magazine, first published in 1892.
 
Al Kawakeb:  (circulation 30,000)
---Egypt's cultural magazine, specializing in cinema, theater, radio and television.

ECONOMIC PUBLICATIONS
 
Al Ahram Al Iktisadi weekly magazine:  (circulation 10,000)
---Egypt's leading economic magazine, modeled after the British "Economist", is read by academics and government economic officials and has numerous readers outside Egypt.
 
Al Alam Al Yom daily newspaper:  (circulation 25,000 in Egypt, 30,000 in Saudi Arabia).
---Economic, commercial and Arab affairs.
 
Business Monthly:  (circulation 8,500)
---English-language magazine published by American Chamber of Commerce in Egypt.
 
Egypt Today and Business Today:  (circulation 17,000)
---Glossy English-language magazines related to social/business life in Egypt published by International Business Associates.
 
Middle East Times:  (circulation 4,400)
---English language weekly, part of the Washington Times group, edited in Cyprus and printed in Athens.

Pricing

Egypt traditionally is a price-sensitive market, where quality often takes second place to cost.  This mentality is slowly changing.  One important example of that change is the Public Tender Law 89 of 1998 which requires compliance with terms, conditions and specifications of the tender, as well as a comparative consideration of technical and financial aspects in arriving at an award decision.  Prior to the law, however, government tender rules had essentially required that the low bid win, regardless of quality.  American firms sometimes had not understood this aspect of bidding and would mistakenly quote "better value" than was required by tender specifications.  This approach was ineffective and generally produced losing bids.  Many companies would bid strictly to the specifications, then, as an alternative, would provide a second, optional, value-based bid.
 
In the tender process, specifications are often unclear and poorly written, which allows for a wide divergence in interpretation by bidders as to just what the tender requires.  Elaborate bid proposals often fail, passed over for cheaper, practical alternatives.  U.S. firms that succeed in Egypt tailor their products to customers' specific needs.
 
Exceptions to the generalization that "price sells" are sales financed by USAID and other foreign/international donors such as the African Development Bank.  When funds are provided by these donors, Egyptian decision-makers can afford (and the foreign donors often require) quality, efficiency, and endurance considerations to weigh heavily in buying decisions.  Another exception is consumer goods: people will pay for quality if they perceive it.  However, the same affluent Egyptians who may buy a Mercedes car will tend to outfit their new factories with used equipment if they can cheaply transport a "complete" factory from abroad. 

Sales Service/Customer Support

U.S. sellers should aim to create and support a sales/service network in Egypt by training their distributors and dealers.  Firms that sell directly to government agencies need to do the same - ensure training of the workforce using the product or it will fail through ignorance of proper maintenance and the foreign supplier will be blamed for poor quality.  Total Quality Management (TQM) interest has skyrocketed among producers in recent years with a number of them now working toward ISO 9000 certification. 

Protecting Your Intellectual Property

Egypt is a signatory to the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, the Berne Copyright Convention, the Paris Convention for Protection of Industrial Property of 1883, the Madrid Agreement Concerning the International Registration of Marks 1954, and the Nice Agreement Concerning the International classification of goods and services, the Stockholm Act of 1967, the Hague Agreement, the Geneva Act 1999 and the Trademark Law Treaty. 
In recent years, Egypt has made some progress in strengthening its IPR regime through improvements in its domestic legal framework and enforcement capabilities.  In May 2002, Egypt enacted a new comprehensive IPR law (Law 82 of 2002) that met certain key TRIPS requirements, including providing data exclusivity and exclusive marketing rights and enacting a patent mailbox.  The law also addressed IPR protection in areas such as patents, copyrights (with enhanced protection for sound and motion-picture recordings and computer software), trademarks, plant varieties, industrial design, and integrated circuit layout design.

Although the law has certain shortcomings, its passage demonstrated a marked improvement in the major facets of Egypt's IPR regime.  In July 2003, implementing regulations for the patent, trademark, and botanical variety provisions of the law were issued.  Egypt also ratified the WIPO Patent Cooperation Treaty in 2003. 

From April 2001 until December 2003, the Government of Egypt did not approve any generic copies of internationally protected pharmaceuticals.  Since then, however, the Minister of Health has approved local copies of pharmaceuticals, in violation of Egypt's international property protection obligations.  The international property protection problem appeared to worsen in late 2004 when the Egyptian Ministry of Health apparently embarked on the approval of a significant number of copies of pharmaceutical products for marketing in Egypt.  As a result, the office of the United States Trade Representative (USTR) in 2004 elevated Egypt from the "Watch List" to the "Priority Watch List" (where it had been until 2003) during its annual "Special 301" IPR review.  The Embassy has been alerted of recent cases that confirm that the problem continues in 2006.

A modern, computerized Egyptian Patent Office operating under the authority of the Ministry of Higher Education and State for Scientific Research processes patent applications and grants patent protection.  The government has significantly improved the quality and transparency of Egypt's trademark and industrial design registration system.  In preparation for the new WTO patent regime, in effect as of January 1, 2005, the Ministry began hiring new technical examination staff in 2003. 

The International Intellectual Property Alliance 2006’s Special Report estimated the level of copyright piracy as steady in Egypt at 65% for 2004 and 64% in 2005.  False licensing, where a local unauthorized distributor receives and is permitted to rely upon Ministry of Culture approval to distribute pirated software, music, and films, remains a problem and undermines copyright protection in Egypt.  The Egyptian government, however, took steps to revoke such approvals for well-known pirates.

The following paragraphs summarize the law's provisions on different types of IPR:

Patents:  The law increases the protection period for a patent term to 20 years, and for pharmaceuticals includes provisions on data exclusivity and exclusive marketing rights which had been adopted by Prime Ministerial decree in 2000.  Egypt has elected to be treated as a Developing Country for pharmaceuticals and chemicals under the TRIPS Agreement.  As of January 1, 2005, Egypt has been required to be in full compliance with its TRIPS patent obligations.  Although Egypt's patent law is in effect, there are some 4,000 patents in its "mailbox," which its patent authorities began to review in 2005.

Copyrights:  The new law offers copyright protection to artistic and literary works, computer programs, and audio-visual works.  Books and computer programs are provided protection for the author's lifetime plus 50 years.  Sound recordings are granted 50 years protection from the recording date.  The specified penalty for copyright violations is a fine of LE 5,000-10,000 per infringement or a prison term of not less than one month, or both.   The implementing regulations for copyrights have not yet been issued.

Trademarks:  The new IPR law offers trademark protection of ten years, in accordance with the Trademark Law Treaty.  Penalties have increased to a maximum of 20,000 Egyptian pounds or imprisonment of not less than one month, or both.

Semiconductor Chip Layout Design:  The new law incorporates a chapter for protecting semiconductor chip layout design.  Previously there was no legislation protecting semiconductor chip layout design, although Egypt had signed the Washington Semiconductor Convention.

In recent years the United States has provided significant assistance through USAID-funded projects to Egypt in order to establish and strengthen the Government of Egypt’s IPR-related institutions.  A modern computerized Patent Office is now capable of processing and ensuring the protection of patent applications, and the quality and transparency of the trademark and industrial design registration system has been significantly improved.  The Government of Egypt has also taken steps to ensure the authorized use of legitimate business software by civilian government departments. 
Although progress has been made, further steps must be taken to strengthen protection of copyrighted material and confidential test data.  High copyright-piracy levels continue to affect many categories of intellectual property, particularly book publishing, entertainment software, music recordings, and motion pictures.  Infringement of trademark, textile design and industrial designs also remains problematic.

For more information, please see Egypt’s Intellectual Property Unit in the General Secretariat of the League of Arab States

Due Diligence

Due diligence is part of the array of services the Commercial Service provides for the benefit of U.S. business.  It is recommended that U.S. firms avail themselves of the International Company Profile (ICP) service before signing an agency agreement with a local concern, choosing a local partner to bid jointly on a major project, or doing business for the first time with a local company.  ICPs are prepared at the request of U.S. firms and provide financial and background data on Egyptian companies.  U.S. firms can request an ICP through their local U.S. Export Assistance Centers.  

Local Professional Services

Local service providers and professional associations can be viewed on the U.S. Commercial Service in Egypt’s webpage at: http://www.buyusa.gov/egypt/en/bsp.html or at the American Chamber of Commerce in Egypt: http://www.amcham.org.eg/

 

Web Resources

Commercial Service in Egypt: http://www.buyusa.gov/egypt/en/
U.S. Embassy:  http://usembassy.egnet.net
USAID:  http://www.usaid-eg.org/
American Chamber of Commerce in Egypt:  http://www.amcham.org.eg
Federal Business Opportunities:  http://www.fedbizopps.gov/
Egyptian Government Web Portal:  http://www.egypt.gov.eg/english/
Kompass Company Search:  http://www1.kompass.com/kinl/index.php
Egyptian Businessmen's Association:  http://www.eba.org.eg/
Alexandria Business Association:  http://www.aba.org.eg/
Federation of Egyptian Industries:  http://www.fei.org.eg/
Egyptian Exporters Association:  http://www.expo.link.org/
Egypt’s Intellectual Property Unit:  http://www.mitd.gov.eg/IP/index.htm
Information Technology Industry Development Agency:  http://www.itida.gov.eg/
General Authority for Investment and Free Zones:  http://gafi.gov.eg/
Egyptian Franchise Development Association:  http://www.efda.org.eg/