the role of small manufacturing enterprises in sustainable regional development

289 Pages·2006·4.49 MB·English

THE ROLE OF SMALL MANUFACTURING ENTERPRISES IN
SUSTAINABLE REGIONAL DEVELOPMENT
Ismailia governorate as a case study in Egypt

Als Dissertation
zur Erlangung des akademischen Grades Doctor rerum naturalium (Dr. rer. nat.) im Fach
Raumentwicklung vorgelegt an der Fakultät Forst -, Geo-, Hydrowissenschaften der
Technischen Universität Dresden

Von
(B.Sc Dip.R. M.Sc.)
Abdulla Abdel Shafy Mansour Hefnawy
geboren am 12. Juli 1969 in Giza (Ägypten)

Unter der Betreung von
Bernhard Müller
Prof. Dr. rer. nat. Dr. rer. hort. habil. Dr. hc.
Lehrstuhl für Raumentwicklung

TECHNISCHE UNIVERSITÄT DRESDEN
2006

TABLE OF CONTENTS

- Table of contents--------------------------------------------------------------------------------- I
- List of Tables-------------------------------------------------------------------------------------- VI
- List of Figures------------------------------------------------------------------------------------ IX
- List of Maps--------------------------------------------------------------------------------------- XIII
- Abstract-------------------------------------------------------------------------------------------- XIV
- Zusammenfassung------------------------------------------------------------------------------- XX
- Acknowledgments------------------------------------------------------------------------------- XXV
- Versicherung-------------------------------------------------------------------------------------- XXVI

Chapter 1: Introduction---------------------------------------------------------------------------------- 1
1.1. Justification of the study (statement of the problem)------------------------------------ 2
1.2. Objectives----------------------------------------------------------------------------------------- 3
1.3. Research Questions----------------------------------------------------------------------------- 3
1.4. Hypothesis---------------------------------------------------------------------------------------- 4
1.5. Research methodology and data analysis-------------------------------------------------- 4
1.5.1. General approach------------------------------------------------------------------------ 4
1.5.2. Official data sources of SMEs in Egypt---------------------------------------------- 5
1.5.2.1. Population census------------------------------------------------------------------- 5
1.5.2.2. Local authority files---------------------------------------------------------------- 6
1.5.2.3. Social Fund for Development----------------------------------------------------- 6
1.5.2.4. Ministry of state of environmental affairs--------------------------------------- 7
1.5.3. Study area and SMEs types’ selection------------------------------------------------ 7
1.5.4. Sampling procedure---------------------------------------------------------------------- 13
1.5.5. Questionnaire design and survey method------------------------------------------- 17
1.5.5.1. Questionnaire design--------------------------------------------------------------- 17
1.5.5.2. Administering the questionnaire-------------------------------------------------- 18
1.5.6. Data analysis------------------------------------------------------------------------------- 19
1.5.7. Survey problems-------------------------------------------------------------------------- 20
1.5.7.1. Problems related to the data set--------------------------------------------------- 20
1.5.7.2. Problems related to the field work activities------------------------------------ 20
1.5.8. Institutional survey----------------------------------------------------------------------- 21
1.6 Organization of the thesis---------------------------------------------------------------------- 21

Chapter 2: Small and Micro-Manufacturing Enterprises (SMEs) in Egypt------------------ 24
2.1 Introduction--------------------------------------------------------------------------------------- 24
2.2 Small scale industries concept----------------------------------------------------------------- 25
2.2.1 Qualitative definition of SMEs------------------------------------------------------------ 25
2.2.2 Quantitative definition of SMEs---------------------------------------------------------- 27
2.2.3 Definition of SMEs in Egypt--------------------------------------------------------------- 30
2.2.4 Differences between SMEs and other scales of enterprises------------------------ 32
2.2.5 The patterns and characteristics of SMEs---------------------------------------------- 34
2.2.5.1 SMEs classification according to structure of organization------------------- 34
2.2.5.2 SMEs classification according to technology----------------------------------- 35
2.2.5.3 SMEs classification according to products pattern----------------------------- 36
2.2.5.4 SMEs classification according to the pattern of used raw-materials--------- 36
I
2.2.5.5 SMEs classification according to the continuity level-------------------------- 36
2.2.5.6 SMEs classification according to division of work between man and
machine---------------------------------------------------------------------------------------- 37
2.3 Strengths and weaknesses of small scale industries-------------------------------------------- 37
2.3.1 Small scale industries potentials---------------------------------------------------------- 38
2.3.2 Small scale industries problems---------------------------------------------------------- 39
2.3.2.1 Social problems facing SMEs----------------------------------------------------- 40
2.3.2.2 Economic problems facing SMEs------------------------------------------------- 41
2.3.2.3 Environmental problems facing SMEs------------------------------------------- 41
2.4 General overview of SMEs in the national economics in Egypt----------------------------- 42
2.4.1 The importance of the industry sector in the Egyptian national economy------ 43
2.4.2 Contribution of SMEs at the level of employees and enterprises in Egypt-- 44
2.4.3 History of evolution of the SMEs, in terms of manpower and enterprises
within the industry sector in Egypt and its implications---------------------------- 45
2.4.4 Distribution the types of SMEs according to the number of enterprises and
employees ---------------------------------------------------------------------------------- 50
2.5 Conclusion and results of the chapter ------------------------------------------------------------ 52

Chapter 3: SMEs and sustainable urban and regional development (Conceptual
approach)---------------------------------------------------------------------------------------------------- 55
3.1 Introduction-------------------------------------------------------------------------------------------- 55
3.2 The concept of sustainable development--------------------------------------------------------- 56
3.2.1 General ideas about sustainable development----------------------------------------- 57
3.2.2 Dimensions of sustainable development------------------------------------------------ 57
3.2.3 Sustainable urban and regional development----------------------------------------- 60
3.3 Sustainable regional development in Egypt----------------------------------------------------- 61
3.3.1 Evolution of environmental dimension------------------------------------------------- 61
3.3.2 Sustainable development in Egypt – general overview------------------------------ 62
3.3.3 A new approach to environmental sustainability------------------------------------- 65
3.3.4 Policies and legislatives directing the environment of SMEs----------------------- 67
3.3.5 Constraints SMEs face towards sustainable development in Egypt-------------- 70
3.4 SMEs and sustainable regional development---------------------------------------------------- 71
3.4.1 Characteristics of sustainable SMEs---------------------------------------------------- 72
3.4.2 Resource use by sustainable SMEs------------------------------------------------------- 73
3.4.3 Sustainability promoting SMEs---------------------------------------------------------- 73
3.4.4 The immaterial and material objectives of sustainable SMEs--------------------- 74
3.5 Conclusion and results of the chapter ------------------------------------------------------------ 75

Chapter 4: SMEs effects on regional development of a region----------------------------------- 79
4.1 Introduction-------------------------------------------------------------------------------------------- 79
4.2 SMEs and chains of value – added---------------------------------------------------------------- 79
4.2.1 Chain of value – added definitions------------------------------------------------------ 79
4.2.2 The added value at the enterprise level------------------------------------------------ 80
4.2.3 The relationship analysis between the employees and the owners---------------- 85
4.2.4 Analysis of indicator: pattern of used raw-materials-------------------------------- 87
4.2.5 Transport facilities used in transporting raw materials----------------------------- 88
4.2.6 Patterns of marketing the end product------------------------------------------------- 91
II
4.2.7 Availability of markets for final products---------------------------------------------- 93
4.2.8 Marketing frequency of end products--------------------------------------------------- 94
4.2.9 Summary-------------------------------------------------------------------------------------- 96
4.3 SMEs and job opportunities------------------------------------------------------------------------ 97
4.3.1 Introduction---------------------------------------------------------------------------------- 97
4.3.2 Status of the SMEs in general at the level of Ismailia governorate--------------- 98
4.3.3 Contribution of SMEs in terms of labour and enterprises at the level of
Ismailia---------------------------------------------------------------------------------------- 99
4.3.4 The evolution of SMEs' contribution in terms of employment and
establishments------------------------------------------------------------------------------- 102
4.3.4.1 Food enterprises-------------------------------------------------------------------- 102
4.3.4.2 Furniture and wood enterprises--------------------------------------------------- 104
4.3.4.3 Clothes and textile enterprises--------------------------------------------------- 106
4.3.4.4 Metal enterprises------------------------------------------------------------------- 108
4.3.5 SMEs and job opportunities – field survey results----------------------------------- 109
4.3.5.1 SMEs and the date of the commencement of the activity and the annual
growth rate--------------------------------------------------------------------------- 110
4.3.5.2 Previous job immediately before starting the current business-------------- 112
-Source of experience in SMEs--------------------------------------------------- 113
4.3.5.3 Number of employees in SMEs-------------------------------------------------- 113
4.3.5.4 Problems SMEs face in the study area------------------------------------------- 114
4.3.6 Summary------------------------------------------------------------------------------------- 116
4.4 Way of life and living standard of employees in SMEs--------------------------------------- 117
4.4.1 The net profits of the enterprises in the study area---------------------------------- 118
4.4.2 SMEs and suitable incomes for their employees ---------------------------------------- 119
4.4.2.1 The monthly wages of the employees in SMEs at the study area----------- 120
4.4.2.2 Relationship between the employees wages and the problems which the
enterprise suffers from------------------------------------------------------------- 122
4.4.2.3 Relationship between the social insurance given for employees and the
added value of SMEs-------------------------------------------------------------- 123
4.4.3 The effect of the SMEs on the way of life of their employees --------------------- 125
4.4.3.1 Social characteristics of employees in SMEs---------------------------------- 125
4.4.3.2 Accommodation characteristics of SMEs' employees ------------------------ 129
4.4.3.3 Economic characteristics of SMEs' employees -------------------------------- 131
4.4.4 Summary------------------------------------------------------------------------------------- 134
4.5 Conclusion and results of the chapter------------------------------------------------------------ 137

Chapter 5: Constraints regarding the SMEs contribution to sustainable regional
development------------------------------------------------------------------------------------------------ 139
5.1 Introduction-------------------------------------------------------------------------------------------- 139
5.2 Economic constraints SMEs face towards sustainability------------------------------------- 140
5.2.1 The effects of invested capital upon SMEs sustainability--------------------------- 140
5.2.1.1 Relationship between the operating capital and the added value of the
enterprise---------------------------------------------------------------------------- 143
5.2.1.2 Relationship between the enterprise capital and the problems it sustains--- 145
5.2.1.3 Relationship between the invested capital of the enterprise and the rate of
marketing the end product--------------------------------------------------------- 145
III
5.2.1.4 Relationship between the enterprise capital and the available markets------ 146
5.2.2 Relationship between the used facilities of marketing and frequency of
marketing the end products-------------------------------------------------------------- 147
5.2.3 Relationship between marketing frequency of the end product and the
problems SMEs face------------------------------------------------------------------------ 149
5.2.4 Summary-------------------------------------------------------------------------------------- 155
5.3 Social constraints SMEs face towards sustainability------------------------------------------ 160
5.3.1 Relationship between the level of employees ' education and SME 160
sustainability-
5.3.2 Relationship between the professional qualification for employees and SMEs 161
sustainability---------------------------------------------------------------------------------
5.3.3 Relationship between the existing work' safety conditions of and SMEs 163
sustainability--------------------------------------------------------------------------------- 166
5.3.4 The relation between social insurance of employees and SMEs sustainability- 170
5.3.5 Summary-------------------------------------------------------------------------------------- 172
5.4 Environmental constraints SMEs face towards sustainability------------------------------ 172
5.4.1 SMEs and energy consumption in the productive process------------------------- 176
5.4.2 SMEs - pattern of used raw materials--------------------------------------------------- 177
5.4.3 Small industries – the wastes volume resulted from industry---------------------- 182
5.4.4 Treatment methods of solid wastes and their impact on environment----------- 183
5.4.5 Treatment methods of liquid wastes and their effect on environment------------ 185
5.4.6 Small industry – possible negative ecological effects--------------------------------- 186
5.4.6.1 Wood Industries Sector---------------------------------------------------------- 188
5.4.6.2 Metal industries sector-------------------------------------------------------------- 189
5.4.6.3 Foods and agricultural industries sector------------------------------------------ 191
5.4.6.4 Textile and clothes sector------------------------------------------------------ 192
5.4.7 Summary-------------------------------------------------------------------------------------- 194
5.5 Conclusion and results of the chapter ------------------------------------------------------------

Chapter 6: Potentials regarding the SMEs contribution to sustainable regional
development------------------------------------------------------------------------------------------------ 198
6.1 Introduction-------------------------------------------------------------------------------------------- 198
6.2 SMEs' ability to provide raw materials----------------------------------------------------------- 198
6.2.1 Wood that can be manufactured from Date Palm Leaves' Midrib (DPLM)---- 199
6.2.2 Wood manufactured from parts resulting from pruning fruit trees-------------- 204
6.2.3 Wood trees planted on the water of treated sanitary drainage-------------------- 206
6.2.4 Reusing solid waste resulting from production process----------------------------- 207
6.2.5 Summary-------------------------------------------------------------------------------------- 208
6.3 SMEs' ability to exploit work through industrial system------------------------------------- 209
6.3.1 Clusters and networks - concepts and definitions------------------------------------ 209
6.3.2 The SMEs' desire to work through industrial clusters------------------------------ 212
6.3.3 The available potential of the industrial zone in Ismailia Governorate---------- 213
6.3.4 Industrial clusters in the SMEs in the study area------------------------------------- 214
6.3.5 Summary--------------------------------------------------------------------------------------------- 215
6.4 Conclusion and results of the chapter ------------------------------------------------------------ 217

IV
Chapter 7: Conclusion and recommendations----------------------------------------------------- 220
7.1 Introduction-------------------------------------------------------------------------------------------- 220
7.2 General research findings------------------------------------------------------------------------- 221
7.2.1 Regarding the first question--------------------------------------------------------------- 221
7.2.2 Regarding the second question----------------------------------------------------------- 224
7.2.3 Regarding the third question-------------------------------------------------------------- 228
7.3 Proposed recommendations------------------------------------------------------------------------- 230

BIBLIOGRAPHY------------------------------------------------------------------------------------ 234
Appendixes-------------------------------------------------------------------------------------------------- 241
A 1.1 Questionnaire for entrepreneurs---------------------------------------------------------------- 241
A 1.2 Questionnaire for employees -------------------------------------------------------------------- 247
A 2.1 The comparison among selected countries in terms of definition of SMEs------------- 251
A 3.1 Brief summary of the major laws related to SMEs------------------------------------------ 252
A 5.1: The products of SMEs in the study area according to the type of industry----------- 254
A 6.1: Some photos for Wood trees project planted on the water of treated sanitary
drainage in the study area------------------------------------------------------------------------------- 259

V
LIST OF TABLES

Table (1.1): The distribution of population according to the economic activities 1996 –
Comparison between Egypt and Ismailia governorate------------------------- 11

Table (1.2): Distribution of the employees and the enterprises according to various sizes
of industry sector in Ismailia 2002-------------------------------------------- 12

Table (1.3): Distribution of the enterprises and the employees according to the kind of
SMEs in Ismailia governorate 2002------------------------------------------------- 13

Table (1.4): Sample size for ±3%, ±5%, ±7% and ±10% Precision Levels Where
Confidence Level is 95%-------------------------------------------------------------- 14

Table (1.5): The distribution of the samples (Enterprises and employees ) according to
type of SMEs and selected locations------------------------------------------------ 15

Table (2.1): The definition of SMEs according to the European Commission ---------------- 28

Table (2.2): Definitions of small scale industries according to some governmental
organization in Egypt------------------------------------------------------------------ 31

Table (2.3): The difference between SMEs and other sizes of enterprises---------------------- 33

Table (2.4): Distribution of the employees and the enterprises at the national level
according to various sizes by industry sector in Egypt 2002------------------- 43

Table (2.5): Distribution of the employees and the enterprises according to various
classes by major economic sectors in Egypt 2002-------------------------------- 44

Table (2.6): Distribution of the employees and the enterprises according to various sizes
by industrial sector in Egypt 2002--------------------------------------------------- 45

Table (2.7): Distribution the enterprises and employees according to the kind of SMEs in
Egypt 2002-------------------------------------------------------------------- 52

Table (4.1): The environmental regulations of SMEs according to their pollution degree-- 68

Table (4.2): Presents special environmental conditions of SMEs according to the type of
industry and its pollution degree---------------------------------------------------- 69

Table (4.3): Summary of the major financial and non financial constraints affecting
SMEs towards sustainable development in Egypt------------------------------- 71

Table (4.1): Classification of SMEs according to annual net- profit per EGP----------------- 82

VI
Table (4.2): SMEs classification according to the percentage of the net- profits for the
invested capital-------------------------------------------------------------------------- 83

Table (4.3): SMEs classification according to the achieved added value per EGP----------- 86

Table (4.5): SMEs classification according the kind of used transportation facilities for
raw-material----------------------------------------------------------------------------- 89

Table (4.6): SMEs Classification according to the marketing pattern of the final
products------------------------------------------------------------------------------------- 92

Table (4.7): Distribution of SMEs according to the availability of markets for final
products and kind of SMEs----------------------------------------------------------- 93

Table (4.8): SMEs classification according to marketing frequency of end products-------- 95

Table (4.9): Distribution of the employees and the enterprises according to various sizes
by industry sector in Ismailia 2002------------------------------------------- 100

Table (4.10): Distribution of the enterprises and employees according to the kind of
SMEs in Ismailia 2002----------------------------------------------------------------- 101

Table (4.11): Developing the enterprises and the employees in the industry sector,
according to the size and the kind of enterprise in Ismailia governorate
(1976 – 2002)----------------------------------------------------------------------------- 105

Table (4.12): Annual growth rate of SMEs in the study area according to industry kind-- 110

Table (4.13): The problems which face the SMEs at the study area according to the kind
of the Industry--------------------------------------------------------------------------- 115

Table (4.14): Relative distribution for SMEs according to the various classes of wages of
the first class employees and the kind of industry--------------------------------- 120
-

Table (4.15): Relative distribution for the enterprises according to the various classes of
wages of the second class employees and kind of industry----------------------- 120
-

Table (4.16): Relative distribution for the enterprises according to the various classes of
wages of the third class employees and kind of industry------------------------- 121
-

Table (4. 17): The relationship between problems facing enterprises in the study area
and wages levels of employees , results of field survey 2003 – Ismailia
governorate in Egypt------------------------------------------------------------------- 123

VII
Table (4.18): The relationship between capability of SMEs' employees to save money
and their work in other activities beside SMEs------------------------------------- 132

Table (5.1): Distribution of enterprises according to average of invested capital and size
of employees and kind of SMEs------------------------------------------------------- 142

Table (5.2): Distribution of enterprises according to availability of cash flow per month
and class of achieved added value--------------------------------------------------- 144

Table (6.1): Assessment of the wood of DPLM compared with the beech and the spruce
wood--------------------------------------------------------------------------------------- 201

Table (6.2): Estimation of the products of annual pruning of fruit trees in Ismailia –
Egypt-------------------------------------------------------------------------------------- 206

VIII