Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
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 economic free zones or bonded warehouses to store goods and hire their own employees to sell door-to-door consumer goods. Most foreign firms, however, rely on Egyptian companies for wholesale and retail distribution. They ensure their effectiveness through staff training programs in Egypt and abroad. Foreign companies also train and support Egyptian staff via short-term programs, including through periodic visits by marketing specialists and technical support staff from company headquarters.
Many retailers of consumer goods tend to import their own supplies directly rather than pay high markups to wholesalers. 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.
The following stipulations relate to agents and importers:
- In the structure of sole proprietorship, the agent/importer must have Egyptian nationality. Fifty-one percent of the shares or quotas in partnerships, limited liability companies and joint stock companies should be owned by Egyptians. Additionally, import managers must be Egyptian.
- The agent must not be a civil servant or an employee of a public sector company (i.e., not moonlighting), nor a member of the House of Representatives;
- The agent must 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 House of Representatives with direct responsibility to the trade sector. However, 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 partial foreign ownership can market goods, including imported goods, in the following circumstances.
- 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..
- 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 2,000,000 (approximately USD 116,279).
- Joint Stock Company: Provided that at least 51 percent of the shares are offered to Egyptians upon formation, foreign shareholders ultimately can own up to 100 percent of the company, provided that a majority of the Board of Directors is Egyptian, the capital of the company is not less than LE 5,000,000 (approximately USD 314,000) and there are at least three shareholders. A distributorship company of this type may not import or act as a commercial agent unless it is 51 percent 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.