VZCZCXYZ0012
RR RUEHWEB

DE RUEHEG #0820 1331458
ZNR UUUUU ZZH
R 131458Z MAY 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 2410
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS CAIRO 000820 
 
SIPDIS 
 
STATE FOR NEA/ELA 
 
E.O. 12958:  N/A 
TAGS: ECON EINV EFIN ETRD PGOV EG
SUBJECT:  EGYPT: TRADE MINISTER PROMOTES FRANCHISES 
 
¶1. (U) In his remarks at the opening of the Middle East and North 
Africa Franchise Show in Cairo, Minister of Trade Rachid Mohamed 
Rachid told the audience that developing the franchise market in 
Egypt was a priority for the Egyptian government. Referring to 
franchise investment as an economic "gateway for small investors and 
for youth," Rachid said that franchises are ideal for Egyptian 
businesses since they are often lower cost and require less start-up 
capital than stand alone businesses. 
 
¶2. (U) Rachid told the audience that the impact of the global 
economic crisis was not felt as strongly in the franchise arena 
since the risk is spread between the franchisor and franchisee. 
Franchises, he added, were a good way to introduce turnkey 
businesses to stimulate the domestic market-- a key priority of the 
GOE in the current economic situation. 
 
¶3. (U) Rachid commented that the expansion of franchises in Egypt 
was not a government initiative, but rather came from grassroots 
demand. However, he said, it is important for the GOE to support 
franchises in Egypt, and that the franchise system is deemed as a 
development tool for the local market. Rachid added that the GOE was 
working on a new franchise law that would build on international 
best-practices in the industry. Rachid has set up a panel of judges 
who are working to draft a new franchise law which would clarify 
many of the rights and responsibilities of franchisors and 
franchisees in Egypt. 
 
¶4. (U) At present, franchises are only dealt with obliquely through 
sections of commerce, copyright, and tax law.  Some experts suggest 
that formalizing legal protections, particularly for franchisees 
could lead to a large expansion of the franchise sector.  In 
February, the African Development Bank (AfDB) approved a US$40 
million loan for a franchising sector support program in Egypt. 
This program is aimed at encouraging franchising entrepreneurship 
and job creation by establishing structures to promote financing. 
The project will be administered in conjunction with Egypt's Social 
Fund for Development. 
 
¶5.  (U) In February, the GOE also asked the USG for technical 
assistance from the Commerce Department's Commerce Law Development 
Program to draft a new franchise law for Egypt.  USAID was not able 
to provide funding for the program, and so post worked with MEPI to 
fund a local MEPI small grant (less than $100K) for the United 
Group, an Egyptian legal firm, to help MTI draft the new 
legislation.  The GOE believes that encouraging investment by 
franchises will make an important contribution to their goal of 
modernizing Egypt's retail sector and providing employment 
opportunities.  MTI Deputy Minister Samiha Fawzy has argued that 
U.S. franchises can teach Egyptian workers important skills in the 
area of accounting, personnel management, inventory control and 
marketing.  The grant has not been signed but is in the final stages 
of financial review and should be announced in the very near term. 
 
SCOBEY