Comparison and Contrast of the Egyptian and India’s Business Environments
Governments can create rules and regulations, which govern the way businesses, operate and compete against each other. The governments often make changes to the rules and regulations, forcing the businesses to alter the way they operate. Thus government through its economic policy and legal changes influence businesses operations within a country. Economic and policy frameworks vary from country to country.
The revolution that occurred in Egypt in 2011 placed the country in a social and political reconstruction. The revolution caused a lot of economic disruptions, with a majority of the population still having difficult time gaining access to economic opportunities. The unrest, followed by the revolution caused a lot of disruptions in the tourism, banking retail and trade sectors of the country’s economy.
Historically, the government of Egypt created interventions that limited the opportunities for entrepreneurs to start businesses in the country. The current business environment in Egypt is undergoing structural changes. According to (The World Bank, 2013), a survey that was conducted among the firms that operate in lower Egypt reveal that almost 30% of the firms point that the need to have permits and licenses, which are necessary for formal operations, is one of the major obstacles they face. Moreover, survey carried by the World Bank Investment Climate Survey in 2012, revealed that close to 46% of firms pointed that the process of obtaining licenses and permits in Egypt by firms were too complex. The individuals under survey pointed that the many requirements that were necessary for business operations would result in more taxation and government inspections.
In developed nations like U.K, U.S and Germany, the private sector plays huge role in the national economy. Many sectors of the economy of these governments have been given to the private sector. In U.S for example, many state agencies are being privatized, revealing general trust and believe in the huge role that the private sector plays towards the national economy. However, in Egypt, there is general mistrust by the government towards the private sector. The World Bank surveys of 2011 and 2012 revealed that among the lists that pose great constraints for doing business in Egypt are uncompetitive practices, informal payments and lack of regulatory uncertainty.
Moreover, the Egyptian government exercise stringent and complex regulations on the imports and export business within the country. Paper is biggest hurdle when doing business across the borders in Egypt. A firm or and individual is required to submit 8 & 10 documents for export and imports respectively. This offers a stark contrast for developed countries such as France, where only two documents are required for the whole processes of imports and export business.
According to (U.K Department for Internal Trade, 2015), there are a number of planned investment reforms in Egypt, which include the introduction of VAT, simplification of bankruptcy proceedings, amendments to capital market laws, land management framework and company law. The country’s VAT rate stands at 10%, corporate tax at 22.5% and the mineral exploration activities are taxed at 40.55%.
The Indian economy differs with that of Egypt in terms of the overall GDP and the nature of government regulations of business through its economic policies. According to (Schuman, 2014), the government in India exercises the control of business through economic planning, industrial policy, industrial licensing, labor laws and regulation of foreign trade. Moreover, the political stability in India offer a conducive business environment for the local and foreign investors, unlike Egypt, where the Asian uprising has seen the country plunge in reconstruction owing to the economic impacts of the political unrest witnessed in the country.
Economic planning in India was started by the government in 1951 and its major aim is to offer regulation of the private sector participation in business activities and improve the activities of the government towards the underdeveloped areas of the country (Schuman, 2014). The government planning has been able to achieve social justice. However, in Egypt, the lack of trust between the government and the private sector has seen unequal distribution of wealth, where majority of people still struggle for business opportunities. Although India is not a developed nation, the regulatory framework of the private sector has not worked to stifle their participation in the country’s economy, like in Egypt.
The regulations in the imports and exports sector in Egypt differ from that in India in two perspectives. Although the Indian government exercises regulation of its import and export activities, the Imports and Exports Act of 1947 has been amended from time to time to empower the government and control the exports and imports in the interest of the public. However, the stringent paperwork in the Egyptian export and import business not only discourages participation in the import and export trade, but is against the public interest of easy and fast access to the import and export business.
Although India has often been criticized for having complex regulatory framework, however, according to (Amritt Inc, 2016), the regulatory framework in the country is much simpler than that in the United States. Moreover, the ease of doing business in India ranks higher than that in Egypt according to the World Bank report. Unlike Egypt where regulations differ from city to city and determined by the governors, in India, the regulatory framework is consistent across the country.
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