“Dubai Trap”?Egyptian entrepreneurs flock to Dubai in search of success

Four years after setting up his first company in Egypt, Sameh el-Nabawy moved his software company’s administrative headquarters to Dubai last December. He decided to make this move in search of a more flexible business environment. This will allow unlimited dollar transactions through banks, removing the tax burden that Egypt had to comply with.

The El-Nabawy company offers a wide range of digital services to its customers via the Internet, including website design, management and programming, management of marketing campaigns and promotion of products for businesses. This field has grown significantly over the last few years. According to an official statement, the information technology market achieved his 16.4% growth, making him one of Egypt’s fastest growing sectors during the financial year ended June last year.

This sector is one of the lucrative and income generating sectors in Egypt’s foreign currency through funding and financing rounds where these companies sometimes win millions of dollars. According to Minister of Communications and Information Technology Amr Talaat, in this one year he made over $500 million.

A few years after setting up the company in Egypt, Mr. Elnabawi moved the headquarters of his software company to Dubai, seeking a flexible business environment so he could trade dollars without restrictions and get rid of Egyptian tax burdens. Did.

But this promising market, which receives dozens of programmers and innovators every day, faces many obstacles and challenges. One such challenge is that the infrastructure is almost entirely dependent on trading “hard” currencies. This will be a challenge for all Egyptian business sectors in 2022 and is likely to continue, given Egypt’s declining dollar resources. Borrowing capacity is declining.

The crisis has forced the Central Bank of Egypt and the Government’s Economic Party to restrict credit card withdrawals and dollar payments in favor of foreign actors, and to encourage entrepreneurs, especially in the programming and internet-based services sector. House came to establish the company’s headquarters abroad. Country.

In this report, Entrepreneurs and Professionals will explore the challenges created by the shortage of dollars in Egyptian banks and the excellent facilities provided to attract talent, especially entrepreneurs and programmers to the Saudi and UAE markets. about the increase in migration of and an entrepreneur.

months of hesitation

Despite setting up the company last April, el-Nabawy made the decision to move his company’s operations to the UAE in hopes of improving economic conditions and a solution to the dollar remittance crisis. I waited several months. I ran into a dead end and couldn’t find a way to complete the steps. He told Raseef22, “I’ve waited a long time for the situation to improve, but unfortunately it hasn’t, and I don’t expect it to improve in the near future.

El-Nabawy explained that he has not completely liquidated the Egyptian company but has continued to let its Egyptian employees and programmers work remotely until “some time-consuming procedures have been completed.” increase.

Restrictions on dollar trading aren’t the only reason El Nabawi moved his firm to Dubai. Because his new steps will help “reduce the tax burden.” Egypt imposes a tax of up to 26% on corporate profits, but the UAE government does not tax entities operating in the free zone unless profits exceed his 500,000 dirhams. , they get facilitation in return. ”

This promising market welcomes dozens of innovators every day, but faces many obstacles, including its infrastructure being almost entirely dependent on trading “hard” currencies.Egypt’s borrowing capacity

What is the reason for this Egyptian entrepreneur’s “migration”?

Hisham Abdel Ghaffar, founder of the MENA Gross Venture Capital Fund, said the recent rise in the exit rate of startups from the Egyptian market and the phenomenon of setting up headquarters outside Egypt to facilitate the movement of funds from abroad. We are monitoring the increase in On the one hand, the appeal of the legislative environment.

As Abdel Ghaffar explains to Raseef22: ”

Most banks operating in Egypt have lowered limits on credit and debit card withdrawals and purchases from 50% to over 90%, and limits on cash withdrawals for some types of cards from ATMs outside Egypt on a monthly basis. Reduced to just $100, from $500 for a regular card to $250 instead of $750 depending on the card category (Classic – Gold – Platinum … etc) and $500 instead of $1,500 for some banks decreases to Those same limits have made him weaker in dollars this week as Egypt started a new downward move in the pound on Wednesday 4 January.

The central bank believes it has imposed these restrictions on dollar withdrawals using credit cards outside Egypt because it has monitored a series of illegal activities related to the foreign exchange market. According to Law, and Attempts to Achieve Quick Profits Through Illicit Means, the central bank “recorded withdrawals of up to $55 million in a single day, compared to the average recorded at this time last year. Almost five times as many withdrawals.” Instructions issued by the bank after the decision.

“In the past, Egypt was a cheap and low-cost country for many businesses, but rising costs, coupled with the difficulty of transferring money through banks and the tax regime that applies, has made it difficult for Egyptian entrepreneurs to work. We are not encouraged to open offices in other countries with our headquarters here to facilitate work and make things easier,” Abdel Ghaffar explains.

Mahmoud Al-Masri, an entrepreneur and business development consultant in the tech startup sector, told Raseef22: Marketers, not just businesses. ”

Al-Masry explained that Egyptian entrepreneurs “constantly go to companies operating in the consulting field to help them face operational problems and financing obstacles,” and that in recent months, Noting that it has witnessed an “unprecedented migration campaign” to set up companies outside Egypt, these companies are obliged to pay monthly and yearly subscriptions in hard currency in exchange for technology infrastructure services and credits. With limited card withdrawals, activity is hampered, thus avoiding the dollar withdrawal crisis.

He noted that Egyptian companies typically rely on the UAE market, which is the most attractive for investment in the Arab region, and it takes less than 10 days to set up a new company with “exceptional advantages.” The UAE government does not.While imposing an income tax on companies in the free zone, Egyptian entrepreneurs struggle with legal restrictions.”In Egypt, it takes three months just to renew the license of an existing company.” There are cases.

How has the United Arab Emirates attracted startups?

Over the past few years, the UAE has been successful in attracting venture capital to the country and is well equipped in terms of incorporation and taxation. Starting a tech startup costs just $3,200 a year, which seems modest compared to the cost of setting up a new company.

According to the United Arab Emirates Ministry of Economy, the wealthy Gulf nations have prepared a “modern investment climate” for investors, set policies to facilitate and accelerate the formation of companies through electronic platforms, and amended the Companies Act. increased its appeal by issuing This earned him a high position in the Ease of Doing Business Index (EODB), which ranked him 16th in the world and Egypt his 114th. This reflects the UAE’s superiority in business procedures and flexibility provided by the business units of the two countries. .

A comparison of Egypt, the United Arab Emirates and Saudi Arabia stands out for the number of fast-growing startups each country is incubating. According to a report published by the Dubai Digital Economy Chamber, the UAE ranked first with 229 fast-growing start-ups, followed by Cairo with 76 and Riyadh with 72.

The Dubai International Chamber of Commerce still aims to bring 300 startups into the digital economy, including 25-30 Egyptian startups. This means that the Egyptian market is likely to lose fast-growing companies that generate successful dollar revenues in Egypt. I need it urgently.

A report from the United Arab Emirates government shows that startups seeking funding are moving beyond their own borders. Dubai was able to attract eight of his 26 fast-growing companies in the Middle East and Africa, followed by Saudi Arabia with his seven and Egypt with his four.

Illustrating this, the list includes Egyptian companies that started their business in Egypt, gained commercial prominence, and then moved to Dubai in search of funding and rapid growth. Enables mass transportation. Listed on the US Nasdaq Stock Exchange through the Dubai Portal. Another such company is Vezeeta, a platform for online doctor appointments and drug purchases.

Additionally, the UAE has recently started to attract programmers, allocating 100,000 golden residency permits and visas for entrepreneurs and business owners for startups and companies specializing in the programming field.