Changes to the MSME Development Age

On 8 November 2018, Prime Minister Decree No. 2370 of 2018 was issued amending the structure of the Micro, Small, and Medium Enterprise Development Agency (“MSMEDA”) such that it now falls under the Cabinet and is headed by the Prime Minister instead of the Minister of Trade and Industry (the “Decree”).[1] The new Decree redefines the agency as a fund and modifies the way it presents its budget and deposits its resources. MSMEDA’s board of trustees was merged into the board of directors, with an expansion of the role of the latter. Interestingly, the employees, assets and premises that were transferred to MSMEDA from bodies subordinate to the Ministry of Trade and Industry in 2017 were transferred back to the Ministry. The reasons behind some of these amendments remain unclear, as they seem to go back to an organizational structure similar to that of the repealed Social Development Fund. Said changes could potentially be aimed at strengthening MSMEDA’s decision-making process by moving the agency under the direct supervision of the Cabinet.

Background

In April 2017, the Prime Minister established MSMEDA as the new agency to replace the old Social Development Fund in acting as the overall coordinator of SME policies and activities in Egypt (“Decree 947/2017”).[2] Decree 947/2017 placed MSMEDA under the auspices of the Minister of Trade and Industry, and the agency also overtook the functions of the Centre for Modernizing Industry, the Council of Technology and Innovation Centres, and the Industrial Training Council. It is worth noting that MSMEDA’s predecessor, the Social Development Fund established in 1991, was originally subordinate to the Prime Minister until an amendment in 2015 delegated the competencies of the Prime Minister in this regard to the Minister of Trade and Industry.

The New Decree

The recently issued Decree introduces several changes to the definition, composition, and financial structure of MSMEDA.

• Definition

Under the new Decree, MSMEDA is defined as a “fund,” rather than an agency, and it falls under the auspices of the Cabinet, thus removing MSMEDA from the authority of the Ministry of Industry and Trade.

• Structural Changes

1. The Board of Directors

The new Decree reconstitutes the organizational structure of MSMEDA. It is no longer to have two separate boards, a Board of Trustees and a Board of Directors. Instead, both boards are conflated and the ensuing new Board of Directors now has expanded roles. MSMEDA’s Board of Directors is to now be chaired by the Prime Minister and to include the ministers of Social Solidarity; Investment and International Cooperation; Planning, Monitoring, and Administrative Reform; Finance; Local Development; Trade and Industry; and Youth and Sports in its membership. In addition, the Deputy Governor of the Central Bank of Egypt, who was not previously included in either boards, is also to be a board member. This diversification of the membership of the board is accompanied by a removal of the limit on the number of board members, which was previously set between five to 10 members (excluding the chairperson). The recent Decree also sets the number of members with relevant expertise at five, to be chosen by the Prime Minister. Furthermore, it specifies the deputy chairperson to be the most senior minister on the board rather than MSMEDA’s CEO. The new decree removed a provision which stated that the Board of Directors may create temporary committees from its members though the Board may still delegate some of its tasks to the chairperson or the CEO. As for the tasks and responsibilities of the restructured Board of Directors, the new Decree expands its purview. It transfers the tasks of the annulled Board of Trustees to the Board of Directors, such that the latter now has the authority to pass decisions “it deems necessary for the purposes of the agency,” including reviewing and developing the roles and responsibilities of all relevant ministries, government bodies, and initiatives operating in the SME sector. It also has the authority to not only develop but endorse public policies and strategies to develop the SME sector throughout Egypt’s economy in addition to overseeing their implementation, a task that was previously entrusted to the Board of Trustees. The Decree also assigns three additional tasks to the Board of Directors that were not previously included in Decree 947/2017. The board can now take “necessary measures” to overcome obstacles to MSMEDA’s work. It can also express opinion on draft laws and regulations connected to the agency’s work and the SME sector. Furthermore, it can adopt MSMEDA’s funding-gap-and-needs plan, approve the relevant procedures, and follow up on their implementation. Finally, the Decree removes awareness raising and marketing from the scope of the Board of Directors’ responsibilities.

2. The Chief Executive Officer (“CEO”)

The new Decree amends regulations related to the appointment and tasks of MSMEDA’s CEO. The Prime Minister is now to appoint the CEO for a renewable term of four years, rather than two. The CEO may have deputies who are also appointed by the Prime Minister for a renewable four-year term. The CEO’s responsibilities are tweaked by the recent Decree. For instance, the CEO now suggests, rather than partakes in developing, operational plans towards achieving MSMEDA’s strategy and monitoring their implementation thereafter.

3. Employee Transfers

Employees who were previously transferred from the Industrial Training Council to MSMEDA are to be transferred back to the Ministry of Trade and Industry. The same applies to the Council’s transferred assets and premises. Meanwhile, employees transferred to MSMEDA from the Industrial Modernization Centre are to be transferred back to the Centre.

• Financial Changes

Having been transferred to the Cabinet, MSMEDA now has a special independent budget which is to be prepared in accordance with the Egyptian Accounting Standards. Reference to MSMEDA as an economic public body has been removed, and so has the stipulation that the agency relies for its resources on designations from State budget, among other sources. Instead of depositing its resources at the CBE’s unified treasury account, MSMEDA now has a special CBE account. The agency’s fiscal year is also decoupled from the state’s fiscal year and is instead calibrated towards the Gregorian calendar.   [1] Prime Ministerial Decree No. 2370/2018 amending Prime Ministerial Decree No. 947/2017 establishing the Micro, Small, and Medium Enterprise Development Agency, Official Gazette, Issue No. 45 (cont.), 8 November 2018. [2] Prime Ministerial Decree No. 947/2017 establishing the Micro, Small, and Medium Enterprise Development Agency, Official Gazette, Issue No. 16 (bis) (a), 24 April 2017.