Defence and Security sector in Egypt

The commercial security sector is massively growing in Egypt and a significant increase in demand is expected over the next few years.

The Egyptian government hopes to dramatically increase the number of tourists within the next few years, which will require security upgrades of all the airports, seaports, shopping malls, hotels and tourist resorts. Large number of those projects are financed by foreign investors or international donors and then given to international contractors and local sub-contractors.

Market overview

On 25 January 2011, Egypt was rocked by an unprecedented popular uprising, which ultimately toppled President Hosni Mubarak, whose nearly 30-year rule was marked by political oppression, allegations of corruption and growing poverty. The Islamist Muslim Brotherhood won elections July 2012 but was ousted by popular mass protests and was backed by the army.

Late on 3rd July 2013 the head of the armed forces, General Abdul Fattah Al-Sisi, announced that the constitution had been suspended and that the Head of the Supreme Constitutional Court, Adly Mansour would oversee an interim period with a technocratic government until presidential and parliamentary elections are held. The new government of Prime Minister Hazem al-Beblawy was sworn in on Tuesday 16th of July, 2013 in front of interim President Adly Mansour.

Mr. Mansour issued a constitutional declaration outlining the different phases of the transitional period, starting by amending the 2012 constitution followed by parliamentary then presidential elections by 2014.

There will be a period of economic and political uncertainty until stability is restored. However, the fundamentals of the economy are still strong: a large population, a strategic geographical location, favourable demographics and a well-diversified economy.

Ernest & Young has placed Egypt as the second most attractive market in Africa for FDIs since 2003 in its annual report of promising markets with high potential for FDIs in Africa. Egypt is the focal point of around 10.5% of Africa’s FDI, given its unique geographical location & being a destination for sub-regional hubs.

Key Economic Indicators

  • Population: 83.6 million (May 2012)

  • Area: 1million km²

  • Capital City: Cairo

  • Official Language: Arabic

  • GDP per capita (ppp): US$6,500 (2011 year est.)

Egypt is a price-sensitive market; however, quality in this sector is recognised to be an important factor which cannot be ignored.

Most products in the field of fire protection and security are required to meet international standards. Approved standards in the local market include: NFPA, LPCB, EN54 and German Vds. As an estimate, the UK, Germany and Italy supply around 60% of the market share. Japan, France and the Far East supply around 20%. The US supplies about 20% (nongovernmental).

Buyers are generally government entities such as the Ministry of Interior, the Ministry of Defense, and the Intelligence Department.  There are three main end-users in this sector including government, industry, and commercial businesses. Within the governmental sector, the Ministry of Interior and Ministry of Defense maintain the highest purchasing capacity. The Ministry of Interior is divided into three main departments: National Security, Fire Department and the General Traffic Department. The Ministry of Defense encompasses the Armed Forces, Navy Forces, and Air Forces.

Secondly, the industrial sector includes oil & gas companies, chemical plants, manufacturing plants, ports and real estate contractors. According to the Ministry of Housing, Utilities & New Communities all these factories are required to install fire sensing and detection equipment, fire alarm systems and extinguishing equipment. The law states that “If a building is higher than 28 meters, it has to satisfy the conditions of the Fire Department”.

In March 2008, the Minister of Trade & Industry announced a decree enforcing owners of industrial buildings to apply HSE system according to the international specifications (18001). Also Insurance companies are now insisting on fitting fire alarm systems. They are offering companies a 60% premium if buildings are protected by fire protection systems.

In addition, all commercial entities are legally obliged to install safety products. Some of the main commercial entities include hotels, museums, banks, malls, hospitals, theaters, cinemas, operas, schools, universities, entertainment and conferencing facilities.

The market for security sensing and detection equipment is growing in Egypt, as both the Egyptian public and private sectors realize that such equipment enables them to combat security threats more effectively. As a result, prospects for future sales of the high quality UK safety and security products, particularly sensing and detection equipment, are positive.

Also greater emphasis on the legal requirements, coupled with the recent high-profile fire incidents, have driven demand in this field.

Although Egypt is a price sensitive market, quality is an important factor, particularly in the security arena. There are many foreign suppliers in this market from Japan, USA, UK, Germany, Italy and France, but there remains always room in the market for new entrants.

There is little domestic manufacturing in this field, and the UK is considered one of the most trustworthy and reliable manufacturers. Local companies prefer to deal with UK companies because of the high quality, technological advancement and the after sales services.

The Government of Egypt utilizes several different methods to procure security products depending on the place, security level required, and the availability of funding. Generally, smaller projects are handled through direct procurement orders. However, large sensitive projects usually require more supervision in the designing process with cooperation from specialists in the Ministry of Interior, Intelligence Departments, Ministry of Defense, and others. These procurements are handled using direct procurement or a bidding process or through issuing a request for quotation (RFQ).

Most big projects require internationally approved products. The local consultants are less prepared to sacrifice quality for price, providing opportunities for UK products over cheaper and lower quality imports from the Far East. A UK product will now be even more so highly regarded after the US decision to review the military aid to Egypt.

Defence Sector in Egypt:

Egypt boasts one of the most advanced defence industries in the Arab world, supported by a robust industrial complex, particularly in the production of vehicles. Egypt assembles a variety of trainer aircraft, alongside armoured fighting vehicles (AFVs), artillery pieces, surface-to-air missiles and M1A1 Abrams tanks. There are also 16 factories affiliated to the Ministry of Military Production, which produce military apparel.

Although Egypt lacks a substantial armaments design industry, it remains the most prolific manufacturer of military equipment among Arab states. It should be noted that military expenditure and defence budgets within Egypt are difficult to calculate owing to the lack of information available.

The main trends in terms of defence spending and procurement remain intact. While the military is likely to remain key player in whatever policy emerges in Egypt, it will have the ability, the willpower for defence spending to remain high.

The long-standing procurement program, which is substantially funded, through the US Foreign Military Financing (FMF) program, might continue. The US is now reviewing and considering cutting off American aid (typically $1.5-2.0bn annually, mainly for the military) to Egypt. It is the 2nd largest recipient of US military aid behind Israel, sales which in its turn amounts to around $4bn. The multinational presence in Egypt largely takes form of US JVs and Foreign Military Sales (FMS) contracts. However, Egypt also sources from EU suppliers including the UK. It is worth mentioning that defence and security equipment exported from the UK requires an export licence and will be examined by BIS very closely. Some equipment need licences, especially if there are any human rights implications; if there were any, licensing is likely to be refused. Companies looking to supply licensable equipment must obtain Form 680 approval before commencing any marketing.

Key opportunities

The market for fire and security sector is growing tremendously with all the on-going construction, touristic development and the focus on cyber security. There is also high demand for this sector in banks, museums, new airport terminals, many institutions and governmental buildings. Other sectors creating demand are big marine ships, petroleum and petro-gas projects, power and sanitary drainage stations and the national railway.

There is little, if any, domestic manufacture in this field, and the UK is considered one of the most trustworthy and reliable manufacturers in the Egyptian market.

Key Opportunities are:

  • Fire detection: alarms, smoke detectors, control panels and manual break glass

  • Fire fighting: foam, water or gas (each type is used according to the nature of the building).

  • Pumps, pipes, valves and some electronic devices are used

  • Border control and security is increasingly important. Products ranging from walk-through metal detectors to physical security controls

  • Banks and other corporations are especially concerned about access control and information security technology. Biometrics solutions or hologram imprints for ID and credit cards are in high demand

  • While the Egyptian armed forces are the largest in the region at approximately 865,500 personnel, much of the equipment used is out-of date. There is a drive to modernise the Egyptian armed forces

  • E-voting system

  • System integrators will be a high focal point by corporations in the Egyptian market, especially banks.

  • IP cameras with certain specifications to be used in Oil & Gas & construction sites, tailored to endure high temperature.

Latest export opportunities – Security

Latest export opportunities – Defence

Latest export opportunities – Egypt

Getting into the market

  • Egypt is an attractive market that can offer major business opportunities to informed traders and investors. Trade and investment between the UK and Egypt is promising. However it is not always an easy market. A successful entry into Egypt will be determined by the quality of the information and advice upon which the decision to enter is based. Continued success is also dependent upon the ability to navigate the laws and practices of Egypt.

  • The Egyptian market requires careful study and a sustained sales effort. There is strong competition from other exporting countries. Price and credit terms are a deciding factor when obtaining contracts, though quality is increasingly important. Back-up servicing facilities and the supply of spare parts is also important.

  • Having a local partner can be vital to successful penetration of this market. There are several reasons for this. Firstly, given the continuing bureaucracy, a local partner can shepherd the foreign business through the delays and obstacles. Secondly, foreign companies require a local agent to bid for government tenders. Thirdly, as the Egyptian market becomes more sophisticated there is a growing demand for after sales service, which a local agent can convincingly provide.

  • In general, British products and services are very highly regarded in Egypt for their quality. The main obstacle facing the growth of British involvement in the Egyptian market is that British products have a reputation as being expensive compared to some foreign products, though this has lessened slightly over the past year as exchange rate fluctuations have been in favour of UK exporters.

  • British companies wishing to develop their business in the Egyptian market are advised to undertake as much market research and planning as possible in the UK.

  • The best way to enter a new market is to explore the available opportunities in the market covering the sector of the exporters’ business. Then, it is recommended to have a quick market overview through a market research.

  • An assessment of some opportunities and the likelihood of the success of the product can then be considered.

  • A suitable local partner who has the knowledge and experience of the local market and potential clients can represent the British Business.

  • Local agents and distributors are best positioned to deal with both public and private sector concerns because of their local market knowledge and contacts. Most agents can also coordinate all aspects of a transaction with the buyer, including after-sales service. By appointing a good reputable agent, UK companies would be able to participate in large tenders for mega projects in the market. There are a large number of major and diverse new construction projects which are expected to create more opportunities for the fire protection and security systems and thus opportunities for UK companies.

  • Large number of those projects are financed by foreign investors or international donors and then given to international contractors and local subcontractors. The share of those projects include high real estate, tourist and leisure developments, infrastructure projects, international banks, schools and universities and the build up of modern network of 16 airports, ports and railways. Current projects include: The Grand Egyptian Museum, new airport terminals in Cairo, Sharm El Sheikh and Hurgada, petroleum and petro—gas projects, pharmacology projects and big marine ships.

More about doing business in Egypt

Contacts

Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).

To commission research or for general advice about the market, get in touch with our specialists based overseas – or contact your local international trade team.

Contact your local international trade team

UKTI Events

UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.

Latest events – Defence & Security

Major Events

MEFSEC (Fire, Safety and Security Exhibition – Middle East and Africa)

Venue: Cairo International Convention Center

Date: 1 – 4 December 2013

Website address: http://www.mefsec-middleeast.com/

Useful links

More about OMIS and other UKTI services for exporters

Export Control

Sectors: Defence & Security
Countries: Egypt
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