This chapter analyses the research and development and innovation performance of Egypt’s business sector, highlighting key obstacles and policy challenges as well as opportunities to upgrade Egypt’s productive sector through the widespread diffusion of technologies and investments in innovation. It assesses the market and regulatory barriers to raise the innovation capacity of Egypt’s business sector and to strengthen Egypt’s dynamic start-up ecosystem and proposes strategies to foster a more innovative and competitive business environment.
OECD Reviews of Innovation Policy: Egypt 2026
Abstract
Research and development (R&D) activities within Egypt's business sector remain below potential: Business expenditure on R&D (BERD) is only 0.2% of gross domestic product (GDP) and 19% of gross domestic expenditure on R&D (GERD); the share of innovative firms (29%) lags OECD and regional peers; the number of researchers is limited; and patenting activity has stagnated.
Egypt’s innovation economy shows a dual structure: Egypt has one of the largest start-up ecosystems in the Middle East and North Africa (MENA) region, particularly in Fintech; in contrast, traditional large firms and small and medium-sized enterprises (SMEs) invest little in R&D, operate in low-tech sectors and face weak incentives to innovate.
Addressing structural barriers can help unlock innovation: Reducing informality and state’s footprint in the market environment, fostering a more level playing field, and strengthening competitive pressures across the economy could help create stronger incentives for private sector investment in R&D and innovation.
Need for further regulatory and administrative reform: Despite reforms such as the Golden License, Special Economic Zones (SEZs), particularly the SCZone, Investment Law changes, and customs digitalisation, businesses still face complex procedures, frequent changes to the tax system, and sector-specific regulatory rigidity, particularly outside Fintech.
Policy support remains dispersed across a range of programmes, with a stronger concentration on start-ups than on broader ecosystem coherence.: While co-ordination across ministries and evaluation mechanisms can be further strengthened, the establishment of the Ministerial Group on Entrepreneurship represents a constructive step that may help improve alignment and effectiveness as initiatives continue to develop.
Scope to further strengthen instruments to stimulate R&D investment: Introducing key policy tools for business innovation widely used in OECD Member countries, such as R&D tax incentives, matching grants, and demand-side measures like public procurement of innovation, could help encourage higher private sector investment in R&D. With the Startup Charter now specifying matching‑grant mechanisms and enhanced procurement access for startups, further progress in fostering innovation is anticipated.
Deep-tech and early-stage finance remain underserved: While Fintech thrives, deep-tech start-ups (i.e. based on formal R&D activities) face high risks, long development cycles, and a lack of targeted financial and regulatory support. Angel investment networks are underdeveloped and concentrated in Cairo, leaving regional gaps.
Recent reforms point in the right direction but require stronger implementation: Initiatives such as the Micro, Small and Medium-Sized Enterprises (MSME) Development Law No. 152/2020, a State Ownership Policy (SOP) to reduce the role of the state , the Egypt Startup Charter to, strengthening intellectual property (IP) systems, financial inclusion measures by the Central Bank of Egypt (CBE), and efforts to promote green and digital transitions are promising but remain at an early stage and need better co-ordination and scaling.
3.1.1. Egypt’s businesses invest very little in R&D
Although Egypt's gross domestic expenditure on R&D (GERD) has steadily increased over the past decade (see Figure 2.10 in Chapter 2), business investment remains very low. In 2022, BERD in Egypt was only 0.2%1 of GDP, below that of some emerging economies, such as South Africa (0.22%), and well below the OECD average of 2.01% (See Figure 3.1) Figure 3.2 further illustrates the disparity in the distribution of GERD across sectors. In Egypt, the business enterprise sector accounts for only 19% of GERD, while higher education (56%) and government (24%) sectors dominate. This is notably different from OECD Member countries, where the business sector contributes an average of 73.75% to GERD, or even other emerging countries like Argentina (39.40%).
As a percentage of GDP
Note: Data correspond to 2021 for Australia, Chile, Costa Rica and South Africa. Figures for Egypt may not be fully internationally comparable. For further information, see OECD (2025[1]) "OECD support towards STI statistical capability development in Egypt: Assessment and main recommendations".
Source: OECD calculations based on custom data provided by the Egyptian Science, Technology and Innovation Observatory (ESTIO), OECD, Main Science and Technology Indicators (database), www.oecd.org/sti/msti.htm (accessed on 9 September 2025) and UNESCO Institute for Statistics (UIS).
As a percentage of gross domestic expenditure on R&D
Note: Data correspond to 2021 for Australia, Chile, Costa Rica and South Africa. Figures for Egypt may not be fully internationally comparable. For further information, see OECD (2025[1]), "OECD support towards STI statistical capability development in Egypt: Assessment and main recommendations".
Source: OECD calculations based on custom data provided by ESTIO, OECD, Main Science and Technology Indicators (database), www.oecd.org/sti/msti.htm (accessed 16 September 2025) and UNESCO Institute for Statistics (UIS).
3.1.2. Egyptian firms’ R&D and innovation performance could be further strengthened
More needs to be done to allow Egyptian firms to introduce new or significantly improved products and business processes. According to data submitted by Egypt as part of the OECD Business Innovation Statistics data collection, 29% of Egyptian firms implemented an innovation over the 2018-20 period, compared to an OECD average of 50% (Figure 3.3). The National R&D and Innovation Survey in Egypt (2017-2019) also shows that firms investing in R&D activity are implementing innovation at a higher rate, underscoring the need to expand R&D investment.
Egyptian firms have yet to catch up with international benchmarks on both: product and process innovation. Table 3.1 shows that Egypt 16% of firms implemented product innovation, and 28% have implemented business process innovations, with room for improvement to catch up with the OECD median and emerging economies such as Argentina.
Furthermore, as discussed in Chapter 2, while Egyptian high- and medium-high-technology industries have expanded substantially in Egypt (driven primarily by the chemical sector, especially fertilisers), high-technology industries have yet to catch up with other emerging countries in terms of both export value and value added, relative to their share in total manufacturing exports (see Chapter 2, Figures 2.3 and 2.4). Collectively, these data point to a significant challenge and a pressing need for policies that stimulate innovation across all sectors and firm sizes.
As a percentage of firms within the scope of national innovation surveys
Note: Innovative firms are those reporting one or more innovations in the reference period. Indicators of business innovation may not be fully internationally comparable owing to methodological and other differences between countries. Data for Egypt refer to the 2017-19 period and cover firms with more than two employees instead of ten, as for most other countries. Please find the coverage information at https://www.oecd.org/en/data/datasets/business-innovation-statistics-and-indicators.html.
Source: OECD calculations based on custom data provided by ESTIO and OECD Survey of Business Innovation Statistics, https://www.oecd.org/sti/inno-stats.htm (accessed on 10 March 2026).
Note: Product innovation: the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics. Business Process innovation: the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Indicators of business innovation may not be fully internationally comparable owing to methodological and other differences between countries. Data for Egypt refer to the 2017-2019 period and cover firms with more than two employees instead of ten as for most other countries. Please find the coverage information at https://www.oecd.org/en/data/datasets/business-innovation-statistics-and-indicators.html.
Source: OECD calculations based on custom data provided by ESTIO and OECD Survey of Business Innovation Statistics, https://www.oecd.org/sti/inno-stats.htm (accessed on 10 March 2026).
3.1.3. There is room for improvement in researcher employment in the business sector
The number of researchers in Egypt’s business sector is relatively small, reflecting broader challenges in the country’s R&D landscape. In 2022, Egypt had approximately 188 researchers per million inhabitants (see Chapter 6), which corresponds to 0.6 business researchers per 1 000 in employment. This level is comparable to that of other emerging countries, such as South Africa (0.12). However, it still lags far behind most OECD Member countries, such as Korea (13.8), the Netherlands (7.9), and Türkiye (3.8) (Figure 3.4). This is consistent with the low share of BERD in GERD shown in Figure 2.2 and suggests that a substantial portion of Egypt’s R&D activities is concentrated within universities and research centres (see Chapter 6).
This shortage in the private sector is aggravated by brain drain (see Chapter 2), as many skilled researchers and professionals seek opportunities abroad. Unemployment rate among higher education graduates remains high at 15.7%, compared with 7.4% for the general population in 2022 (OECD, 2024[2]). To mitigate the risks associated with brain drain, the Egyptian government has launched several initiatives, including the JESOR Development Initiative by the Academy of Scientific Research and Technology (ASRT), which strengthens collaboration between Egyptian researchers abroad and those in domestic institutions in order to leverage diaspora expertise for addressing national development challenges (Government of Egypt, 2024[3]).
Per 1 000 employed
Note: Figures for Egypt may not be fully internationally comparable. For further information, see OECD (2025[1]), “OECD support towards STI statistical capability development in Egypt: Assessment and main recommendations”. The OECD concept and definition of researchers includes not only those responsible for research but also experimental development activities, such as engineers overseeing or contributing to R&D projects.
Source: OECD calculations based on custom data provided by ESTIO, OECD Main Science and Technology Indicators (database), www.oecd.org/sti/msti.htm and World Bank indicators https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?locations=EG (accessed on 12 September 2025).
3.1.4. Patenting activity is very low and has decreased in recent years
Patenting activity in Egypt has decreased over the past decade. Combined with the low share of innovative firms (Figure 3.3), this suggests a persistent challenge in translating R&D into commercially viable inventions that firms can adopt. Patent Cooperation Treaty (PCT) applications from Egypt have shown no growth, totalling only 1.6 per million inhabitants over the period 2020-2022, compared with Morocco (5.4) (Figure 3.5). Domestic patent filings show a similar pattern, and World Intellectual Property Organization (WIPO) data confirms that applications by Egyptian applicants both domestically and abroad have been declining since peaking in 2020 (Figure 3.6) (WIPO, 2025[4]). In contrast, trademark application class counts have quadrupled over the last ten years, partly reflecting the increasing share of value added by the service sector (OECD, UNIDO, UN ECA, UNCTAD, 2021[5]). Patent activity concentrates on medical technology and pharmaceuticals (Figure 3.6), consistent with research strengths (see Chapter 6), but also indicates a need to diversify R&D efforts into other high-tech fields.
Applications made during the three-year period per million inhabitants, by country of inventors
Note: PCT patents correspond to patents filed under the Patent Cooperation Treaty (PCT), at the international phase, that designate the European Patent Office (EPO) (from 1978 onwards). Fractional counts applied for patents with multiple inventors. Please note that due to the definition of PCT, patent families are incomplete starting from 2021.
Source: OECD calculations based on OECD STI Micro-data Lab: Intellectual Property Database, http://oe.cd/ipstats and United Nations (2024[6]), World Population Prospects 2024, https://www.un.org/development/desa/pd/world-population-prospects-2024 (accessed on 15 July 2025).
Addressing the current stagnation in patenting activity will require strengthening linkages between academia and industry. While the quantity and quality of scientific publications have improved significantly (see Chapter 2), these advances have not translated into higher patenting activity, indicating limited knowledge sharing between both parties and insufficient incentives for collaboration that hinder the commercialisation of research results. Another contributing factor is inadequate policy support for business R&D. Egypt has recently begun to strengthen proactive measures to stimulate business R&D in particular through SME and start-up development. In particular, the Egypt’s Narrative for Comprehensive Development emphasises supporting private-sector R&D and innovation through SME and start-up development programs, promoting public–private partnerships for knowledge transfer, and encouraging high-tech sector growth and technology adoption.
Nevertheless, more targeted measures such as tax incentives, innovation vouchers for SMEs or matching grants for technology-based start-ups, could further incentivise firms to invest in innovation.
Indexed to 2014 = 100
Note: Patent applications include both direct and via PCT national phase entries. Trademark applications include both direct and via Madrid system. Trademark applications are measured as class counts, that refer to the total number of goods and services classes specified in trademark applications. "Resident" refers to filings made by Egyptian applicants at their home office. The home office can be a national office and/or a regional office. The resident figures by origin may thus correspond to the sum of filings made at a national and a regional office. "Abroad" refers to filings made by Egyptian applicants in a foreign office.
Source: WIPO, IP Statistics Data Center (database), https://www3.wipo.int/ipstats/key-search/indicator (accessed on 16 July 2025).
Interviews with stakeholders revealed additional barriers, including low confidence in the Egyptian Patent Office, leading many entrepreneurs to file abroad. Operational challenges include limited examiner training, insufficient access to prior art databases and inadequately drafted applications (Egyptian Patent Office, n.d.[7]). While the Egyptian Patent Office has made significant efforts to enhance the quality of its examination processes, such as obtaining the ISO 9001:2015 certification (WIPO, 2023[8]), further efforts are needed to strengthen its capacity.
3.1.5. There is potential for the development of knowledge-intensive industries
Despite Egypt’s economic growth and efforts to diversify its economy [e.g. Egypt Vision 2030 (MPEDIC, 2023[9]),], the economy remains dominated by low knowledge-intensive sectors (see Chapter 2). Although the share of agriculture in GDP declined from 21% in 1980 to 11.5% in 2022 (OECD, UNIDO, UN ECA, UNCTAD, 2021[5]; 2024[2]), this remains higher than the average for the MENA region (8% in 2019). Performance in information and communication technology (ICT), finance, and social services lags peer economies (OECD, 2024[2]) (Figure 3.8). Egypt’s Narrative for Comprehensive Development Reforms for Growth, Jobs and Resilience further identifies the diversification of R&D efforts into high-tech and knowledge-intensive fields as a national priority.
A particularly notable issue is the underperformance within the social services sector, including healthcare. Patents and scientific publications in the medical and pharmaceutical field are strong (Figure 3.7); see Chapter 6), yet this research strength has not translated into improved societal outcomes (Figure 3.8). This mismatch implies significant potential to leverage research excellence in the life sciences to enhance the value added of Egypt’s healthcare-related services.
Note: PCT patents correspond to patents filed under the Patent Cooperation Treaty (PCT), at the international phase, that designate the EPO (from 1978 onwards). Fractional counts applied for patents with multiple inventors.
Source: OECD, OECD STI Micro-data Lab: Intellectual Property Database, http://oe.cd/ipstats (accessed on 15 July 2025).
Note: Comparator countries refer to Brazil, Bulgaria, Chile, China, Colombia, Costa Rica, Greece, India, Indonesia, Malaysia, Mexico, Morocco, South Africa, Thailand, Tunisia, Türkiye and Viet Nam.
Source: OECD (2024[2]), based on Ministry of Planning and Economic Development and International Cooperation.
Egypt’s innovation economy exhibits a notable duality. On one side, a vibrant start-up ecosystem has emerged, supported by targeted initiatives and growing private investment. On the other hand, a significant portion of established firms, including some informal enterprises and SOEs, show limited engagement with public research and relatively low investment in R&D and innovation. These firms have few incentives to innovate, as competitive pressures are limited and government support for upgrading their capabilities is scarce. This section examines the contrasting dynamics between start-ups and traditional businesses, setting the stage for the policy analysis to be discussed in the following section.
3.2.1. Egypt’s fast-developing start-up ecosystem
Egypt’s start-up ecosystem is one of the largest in the MENA region’s entrepreneurial scene
Egypt has emerged as one of the leading start-up hubs in the MENA region, despite the broader economic challenges the country faces. Although official data on venture capital investment are lacking, estimates indicate that Egypt led MENA countries in the number of deals (26%) and ranked third in venture capital funding in 2022, marking its fifth consecutive year of growth and reaching a record high of USD 517 million (OECD, 2025[10]; MAGNiTT, 2023[11]). Another estimate shows that Egypt's start-up investment declined in 2023 in line with global trends, both in terms of funding raised (USD 812 million in 2022 to USD 590 million in 2023) and the number of deals (131 deals in 2022 to 46 deals in 2023), but Egypt retained a prominent position in Africa (Disrupt Africa, 2023[12]; 2024[13]). Momentum resumed in the first five months of 2025, raising USD 330 million across 16 deals, representing 31% of Africa’s total and a 130% year-on-year increase (BusinessBeat24, 2025[14]). Venture capital inflows accelerated from 2020, complemented by alternative finance such as Rotating Saving and Credit Associations, crowdfunding, leasing and factoring (OECD, 2025[10]). While investment in African start-ups peaked at USD 3.2 billion in early 2022 and later declined, signs of recovery appeared in late 2024 (Africa: The Big Deal, 2025[15]).
Fintech dominates Egypt’s start-up scene, attracting 49.5% of total funding in 2022, including USD 150 million for MNT-Halan. Other active sectors include e-commerce, e-health, logistics and marketing (OECD, 2025[10]). Egypt is home of three unicorns (start-ups with market capitalisation exceeding USD 1 billion), two of which are in fintech: Fawry and MNT-Halan (Forbes Middle East, 2020[16]; 2023[17]) (see also Box 3.1). These successes highlight the potential of the Egyptian start-up ecosystem and can inspire further investment and entrepreneurial activity.
Amid a growing landscape of promising start-ups, Egypt is home to three unicorn companies, as outlined below.
Fawry
Fawry is a leading provider of e-payment and digital finance solutions since 2008, offering a wide range of services for individuals and businesses. For individual consumers, it provides the “myfawry” app for electronic payments and the “yellowcard”, a prepaid card enabling transactions for those without bank accounts or credit card and also deposit and withdraw cash through over 350 000 Fawry point-of-sale terminals. For businesses, Fawry offers “Fawry FMCG” for business-to-business (B2B) online ordering and cashless payments, “Fawry Accept” for multi-channel payment acceptance, and microfinance services for SMEs. The company has grown significantly, serving 52.9 million users and processing 5.5 million transactions daily. In 2020, it became Egypt's first fintech unicorn.
MNT-Halan
MNT-Halan, founded in 2017, provides digital banking and payment services targeting individuals and SMEs with limited financial access. Its offerings include; microfinance loans up to EGP 200 000 (Egyptian pounds) for individuals and up to EGP 5 000 000 for SMEs; nano-loans of up to EGP 2 000; the Buy Now, Pay Later option, which allows individuals to make online purchases up to a limit of EGP 200 000 and pay in instalments over 36 months; and a digital wallet and virtual card services. The company raised USD 120 million in 2021 and USD 400 million in 2023, achieving unicorn status in 2023. In 2024, it acquired of Tam Finans, a Turkish financial institution with an artificial intelligence (AI) software R&D division, signalling a strategic expansion in the Turkish market.
Swvl
Swvl, established in 2017, offers technology-driven mobility solutions. Initially launched its B2C ridesharing in Cairo, it expanded across Egypt, Middle East, Africa, and Asia, offering an alternative to unreliable public transportation systems in those areas. In 2019, Swvl relocated its headquarters to Dubai and went public through a Special Purpose Acquisition Company in 2021, achieving a valuation of USD 1.5 billion and becoming the first MENA unicorn listed on Nasdaq. However, the company's stock price rapidly declined by early 2023. Swvl has since shifted to B2B and business-to-government (B2G) sectors, providing mass transportation solutions to businesses, schools, and government entities.
In addition to these unicorns, Egypt hosts numerous successful start-ups mainly in Fintech, e-commerce, healthtech, proptech, logistics and mobility and edtech (Startupblink, 2025[18]).
Source: Fawry (2026[19]), MNT-Halan (2024[20]; 2024[21]), SWVL (n.d.[22]; 2022[23]), and Swiss Arab Entrepreneurs Platform (2023[24]).
The geographical concentration of start-up activity is notable, with over 90% of Egypt’s start-ups based in Cairo (Disrupt Africa, 2021[25]), which advanced from the 71-80 range to the 41-50 in the emerging ecosystem ranking in the Global Startup Ecosystem Report between 2022 and 2024 (Startup Genome, 2023[26]; 2024[27]).
Despite the growth in start-up finance, the deep-tech sector (i.e. start-ups based on R&D) in Egypt is still underdeveloped, with limited funding (Entlaq Holding, 2024[28]). Given that patent rights typically protect the core technologies of deep-tech activities, the insufficient R&D support for deep-tech is evident from the stagnation in the number of patent applications (see Figure 3.5). Deep-tech start-ups face higher risks and longer development timelines, deterring many investors. Stakeholder interviews highlighted the need to improve the sustainability and scalability of start-ups and focus on unique and IP‑anchored digital technologies that enable market differentiation. Another investor mentioned that exit strategies often involve mergers and acquisitions by large private equity or strategic firms (domestic or foreign), while initial public offerings are less common due to regulatory requirements, such as listing requirements for profitability. This could lead start-ups that wish to go public before achieving profitability to consider other jurisdictions such as Delaware or the Netherlands. Preferred exit strategies vary by start-up’s environment and management approach, but restrictive regulatory requirements limit options, suggesting a need to relax them.
Many Egyptian entrepreneurs would like to start a business, but not necessarily to innovate
As highlighted in the OECD SME and Entrepreneurship Policy in Egypt (2025[10]), while there is evidence that in Egypt there are strong entrepreneurial intentions, further efforts could help turn these intentions into actual entrepreneurial activity. Some 47% of Egyptian adults expect to start a business within three years, 61% see good opportunities to start a business, and 68% consider it easy to do so. However, only 6.6% engaged in total early-stage entrepreneurial activity in 2022, far below comparable economies such as Tunisia (17%). Business sustainability needs further enhancement, with an established business ownership rate of 2.6%, well below the 6.6% early-stage activity rate.
Innovation is not a primary focus for many of these potential entrepreneurs. Only 1% of entrepreneurs introduce products or services new to their area or country, one of the lowest among comparator countries (e.g. Tunisia: 3.5%) (Global Entrepreneurship Monitor, 2023[29]). Global expansion is also not a frequent consideration, with less than 2% expecting to generate more than 25% of revenue from foreign countries (compared to Tunisia at 7%). Opportunity-based entrepreneurship is strong, with 59% wanting “to make a difference in the world” and 71% seeking “build great wealth or very high income” (compared to Tunisia at 31% and 57%, respectively). However, needs-driven motives still dominate, since 85% want “to earn a living because jobs are scarce”. Social attitudes are supportive; 78% believe successful entrepreneurs receive a high status, and 71% view entrepreneurship as a desirable career choice, both above the global average.
Improving access to high-level training programmes, such as entrepreneurship courses in universities, vocational training programmes and industry workshops, could help bridge this gap. The Egyptian government has launched several initiatives, such as EgyptInnovate, an online innovation hub initiated by the Information Technology Industry Development Agency (ITIDA). The platform provides an integrated learning and development environment that offers specialized training content, innovation tools, mentorship programs, and virtual simulation experiences for venture building (EgyptInnovate, n.d.[30]). Another notable initiative is the “Be Ready” initiative by the Ministry of Higher Education and Scientific Research to provides university students and recent graduates with career readiness, digital and innovation skills to improve their employability. Building on this foundation, the second phase “1 Million Qualified Innovators” is currently underway, with partners including the United Nations Development Programme (UNDP), the Islamic World Educational, Scientific, and Cultural Organization (ICESCO), and the Mohammed bin Rashid Al Maktoum Knowledge Foundation (MBRF) (Be Ready, n.d.[31]; UNDP, 2025[32]). This programme aims to equip one million young people with future-oriented skills and link them to employment, building on the success of the Future Skills Academy, which has supported nearly 10 000 learners across the Arab states and delivered over 115 000 learning hours. Strengthening such initiatives is essential to create a more capable entrepreneurial community, driving innovation and economic growth through integrated talent development that links education, research and innovation, research agendas that better reflect industry needs, and efforts to broaden innovation‑capacity programmes to include the workforce of traditional firms as well as start‑ups (see also Chapter 4).
3.2.2. Traditional businesses and their innovation challenges
SMEs face barriers to innovation
SMEs form the backbone of Egypt's economy but face significant barriers to innovation. As highlighted in the OECD SME and Entrepreneurship Policy in Egypt (2025[10]), accounting for 99.7% of all 3.7 million business establishments in 2017 (CAPMAS, 2018[33]). Most of SMEs operate in the retail sector (58.4%), followed by manufacturing (13.9%). Within manufacturing, 79% of SMEs are concentrated in low-tech industries such as food, beverage, and textiles, where R&D activities are typically limited.
A defining feature of Egypt’s business sector is the high prevalence of informal enterprises. The OECD SME and Entrepreneurship Policy in Egypt (2025[10]) also outlined that although informal enterprises account for 53% of establishments (CAPMAS, 2018[33]) and 32% of Egypt’s GDP in 2018 (Elgin et al., 2021[34]), and provide employment opportunities (OECD, 2021[35]), they generally invest low in skills, training and technology, and their limited access to finance further constrains innovation activity. Widespread informality also creates an uneven playing field, as informal enterprises often avoid tax and regulatory obligations, increasing compliance costs for formal SMEs and reducing the government’s fiscal capacity to invest in the infrastructure and facilities needed for SME and entrepreneurship development.
Innovation challenges and data gaps in SOEs
SOEs play a significant role in Egypt’s economy, shaping the competitive landscape. Since SOEs in Egypt are governed under different legal frameworks, it is difficult to develop a comprehensive overview of the SOE landscape. The 2024 State-Owned Companies Report analysed 709 companies (Government of Egypt, 2024[36]), whereas the 2025 report covered 569 companies (Government of Egypt, 2025[37]). Moreover, estimates suggest there are more than 1 000 SOEs in Egypt (World Bank, 2024[38]). An International Monetary Fund (IMF) report similarly indicates that the government has equity interests in at least 950 enterprises, along with stakes in approximately 645 joint ventures (International Monetary Fund, Middle East and Central Asia Dept., 2025[39]). From an employment perspective, SOEs in Egypt account for nearly 4% of total formal employment, a share significantly higher than Morocco and Jordan (1%) and Tunisia (2%) (OECD, 2025[10]; IMF, 2021[40]). Moreover, 72% of SOEs in Egypt operate in competitive sectors, a proportion that exceeds that of Morocco, Jordan, and Tunisia (World Bank, 2024[41]). The public sector’s output, at almost 20% of the non-financial corporate sector in 2021, is higher than in OECD Member countries with comparable data (OECD, 2024[2]).
Regarding their performance, the latest report indicates that, of the 561 entities covered, 364 recorded profits, 78 incurred losses, 14 reported neither profit nor loss, and 105 are still in the process of finalising their financial statements. A substantial share of profitable firms is those with capital exceeding EGP 500 million, accounting for 161 of the 364 companies reporting positive results (Government of Egypt, 2025[37]). Conversely, there is a notable lack of indicators for comparing R&D and innovation performance between SOEs and private businesses. This data gap hinders effective policymaking and assessment of the innovation landscape across different types of enterprises.
Competitive pressures in the Egyptian market need to be strengthened to provide stronger incentives for firms to innovate
International experience shows that competitive markets encourage innovation to attract more customers, while uncompetitive markets allow firms to rely on legacy products and avoid investing in process upgrades. Egypt’s low levels of R&D and innovation expenditures suggest that its institutional and market environment does not make innovation essential for survival and growth.
One reason is the lack of competition. Many firms, especially in the traditional commerce and manufacturing sectors, face little pressure to innovate as they serve Egypt’s large consumer base of 110 million population (United Nations, 2024[6]), about 40% of whom belong to the middle-income class or higher (United Nations Economic and Social Commission for Western Asia, 2023[42]). The market is often divided among a small number of large firms, and new entrants face significant barriers. During the OECD review team's fieldwork in Egypt, business-sector interviewees reported regulatory hurdles and resistance from incumbents, along with lengthy approval processes, which discourage potential innovators.
The presence of SOEs may further contribute to an uneven playing field in Egypt. SOEs traditionally benefited from preferential access to labour, capital and land, as well as exemptions from taxes and fees, disadvantaging POEs, particularly SMEs (OECD, 2025[10]). Interviewees also noted that these advantages reduce private-sector incentives to innovate. The government has removed the preferential tax treatment through Law 159 of 2023 and initiated efforts to reduce the state’s footprint in the market, which could help address these distortions (also see Section 3.3.1 below).
Legal uncertainty at the intersection of competition and IP law adds to the challenge. Clear rules are needed to balance IP protection with competition, including definitions of when the exercise of IP rights becomes anti-competitive. Establishing guidelines and raising awareness could reduce ambiguity and support both innovation and fair competition.
Addressing regulatory and administrative challenges can help foster business innovation
According to the OECD Economic Survey on Egypt (2024[2]), Egypt remains the fourth most restrictive market within a comparator group (Brazil, Bulgaria, Chile, China, Colombia, Costa Rica, Greece, India, Indonesia, Malaysia, Mexico, Morocco, South Africa, Thailand, Tunisia, Türkiye and Viet Nam). According to an IMF report (International Monetary Fund. Middle East and Central Asia Dept., 2026[43]), Egypt’s business environment continues to face challenges stemming from overlapping regulations, discretionary licensing, and opaque administrative procedures. These constraints are recognised within the government’s reform narrative, particularly in the Narrative for Comprehensive Development Reforms for Growth, Jobs and Resilience, and ongoing structural reforms (see Section 3.3.1 below) are being pursued to improve the regulatory landscape.
The Egyptian government is making efforts to resolve remaining regulatory and administrative challenges hindering innovation:
While tax reforms aim to simplify the tax system and make it more business‑friendly, additional support may be required for some SMEs to effectively adapt to the changes. Frequent tax law changes, including multiple amendments to the Income Tax Law No. 91 of 2005 (PwC, 2025[44]), while tax procedures have been increasingly digitised, primarily under the Unified Tax Procedure Law No. 206 of 2020, which was amended recently by the Law No. 7 of 2025 (Taxspoc, 2025[45]). Additionally, revisions to the Value Added Tax Law No. 67 of 2016 are currently under consideration (Andersen, 2025[46]).
Lengthy customs procedures. While recent government efforts helped reduce the average cargo release time from 16.08 days in 2021 to 8.73 days in 2024 (Egypt Customs Authority, 2024[47]), more recent government reporting indicates a further decline to 5.8 days and a target of 2 days (Government of Egypt, n.d.[48]). Achieving this target would bring it to the good practice of release within one to three days (World Bank, 2023[49]).
The recently announced Startup Charter outlines the government’s commitment to strengthening administrative support for start‑ups across sectors, in response to regulatory rigidity and uncertainty for start-ups. Previous positive experience of measures in favour of the fintech sector have been extended to regulations in other sectors (such as pharmaceuticals and building materials) which were facing obstacles to innovation. (see Box 3.3 for further details).
Insufficient access to finance limits the potential for business innovation
Access to innovation finance remains a significant challenge in Egypt, particularly for SMEs and start-ups. Most R&D is financed internally, with 88% of fixed asset purchases funded from internal resources, compared to only 3% through bank loans, 1% through equity and 4% through supplier credit (World Bank, 2026[50]) . In contrast, averages for MENA countries, Afghanistan and Pakistan, and the lower-middle-income group of all countries (LMIG) show higher reliance on bank loans (15% and 12%, respectively), equity (5% and 7%, respectively) and supplier credit (4%). Egypt’s latest National R&D and Innovation Survey (2017‑2019) shows that only 4% of innovation-active companies received financial support for innovation, compared to an OECD median closer to 14% (OECD, 2023[51]).
The cost of bank financing has substantially increased during the monetary tightening cycle in response to high inflation between Q1 2023 and Q3 2024. The weighted average interest rate for short-term corporate loans denominated in EGP, based on data from a sample of banks representing over 80% of total deposits, remains high at 22.1% as of October 2025, albeit down from a peak of 26.7% in December 2024 (The Central Bank of Egypt, 2025[52]). However, improved business sentiment following the exchange rate unification in March 2024 has supported a recovery in credit, with nominal year-on-year credit growth in domestic currency lending to the private business sector reaching 32.1% and 29.6% in Q2 and Q3 2025, and corresponding real growth of 14.7% and 15.1% over the same period. The share of firms using banking services is lower than the MENA region average, and private-sector lending is low by international standards (OECD, 2024[2]). Encouraging informal enterprises to register is essential to improving SME access to banking and non-banking financial services.
Funding for early-stage entrepreneurship is also limited. While several private angel investor networks, such as Cairo Angels (now Acasia Group) (2022[53]), Alex Angels (n.d.[54]) and the Egyptian Business Angels Network (n.d.[55]) have emerged, they remain underdeveloped and lack targeted policy support from the government (OECD, 2025[10]). A notable initiative is Nclude, a venture capital fund supported by the Central Bank of Egypt and established through contributions from leading banks, Mastercard and e-Finance (DPI Venture Capital, n.d.[56]). The fund focuses on fintech and fintech-enabled solutions and primarily invests in seed and early-stage start-ups. Nevertheless, most of these investor communities are concentrated in Cairo and Alexandria, leaving other regions with little or no access to such financing.
3.3.1. Overview of current policies and support for business innovation
Egypt has implemented various policies and support mechanisms to foster business R&D and innovation. However, the current framework shows limitations in addressing the specific needs of businesses across different sectors and sizes. The policy landscape for business R&D and innovation in Egypt is characterised by multiple agencies and initiatives, often with overlapping mandates (Table 3.2).
Source: Authors’ elaboration.
The Egyptian government recognises the significance of SMEs and entrepreneurs and has been developing policies to support their growth. MSME Development Law No. 152/2020, implemented by the Micro, Small and Medium Enterprises Development Agency (MSMEDA), is a central initiative (Dcode Economic & Financial Consulting, n.d.[59]). As summarised in the OECD SME and Entrepreneurship Policy in Egypt (2025[10]), key provisions of the law include:
1. A definition of MSMEs solely based on annual turnover for existing enterprises, and capital for newly established enterprises, adopted from a definition issued under a CBE circular (The Central Bank of Egypt, 2017[60]).
2. Clarification of incentive eligibility, which extends benefits to informal businesses undergoing formalisation.
3. Tax incentives, including simplified corporate tax rates, unified tariffs on imported machinery, exemptions from capital gains tax on the sale of tangible assets and reductions in registration fees for land acquisition. Some of tax incentives and incentives for formalisation have been extended under Law No. 5 and 6 of 2025 (Taxspoc, 2025[45]).
4. Non-tax incentives, including financial incentives such as land allocation, reimbursement of technical training costs, support for exhibition participation fees and exemptions from patent registration fees, and in-kind incentives such as assistance with social security procedures and commercial registration and preferential access to public procurement.
5. Incentives for formalisation such as a temporary five-year license, forgiveness of the past unpaid taxes, suspension of ongoing lawsuits and penalties and exemption from stamp duties.
6. Protection for funding entities, which include banks, financing institutions, corporations, and any other financial organisations that are authorised to provide loans to MSMEs, offering guarantees allowing those to recover their funds in case MSMEs fail to comply.
Furthermore, the MSMEDA is currently proposing to add a chapter to the Law 152 specifically for start-up companies.
Egypt has also reformed to its IP system. In 2022, the National Intellectual Property Strategy was launched with four strategic goals:
1. governance of the institutional structure of IP
2. configuring the legislative environment for IP
3. optimising the economic return of IP in achieving the Sustainable Development Goals
4. raising public awareness on IP (Government of Egypt, 2022[61]).
The strategy aims to balance IP rights with social needs, ensuring access to healthcare, food, education and technology without stifling innovation, and is being implemented in phases over a five-year period. Furthermore, in August 2023, Law No. 163/2023 established the Egyptian Authority for Intellectual Property to consolidate IP functions previously dispersed across multiple ministries. Its responsibilities include:
1. formulating and implementing the national IP strategy
2. registering, protecting, and issuing certificates for IP rights
3. maintaining and providing access to IP databases
4. establishing departments and support centres to promote awareness and offer support for IP matters
5. encouraging the registration and protection of IP rights for researchers, inventors, and SMEs
6. developing policies related to the evaluation and utilisation of IP (WIPO, n.d.[62]).
While this transition was expected to streamline administrative procedures and align Egypt with international standards, as of the writing of this chapter, the official website of the Authority could not be located and details on its activities remain unclear.
To reduce the state's footprint in the market environment and to level the playing field under current practices, several measures have been implemented. Law No. 159/2023 removed tax and fee exemptions for SOEs, and in 2023, the government launched an SOP to reduce state footprint through divestment, PPPs, management partnerships with the private sector, and improved SOE governance and transparency (Government of Egypt, 2022[63]). The policy identifies economic sectors for full or partial state exit within three to five years and those where state presence would be maintained or increased. To date, 21 transactions have been completed, with further divestments planned, including shares in 11 SOEs. The Sovereign Fund of Egypt is reviewing the programme to expand the target list from the current 35 to between 40 and 60 companies (Government of Egypt, 2025[64]). A specialised unit in the Cabinet is being established to oversee the implementation of the SOP, in accordance with Law No. 170/2025 (Soliman, Hashish & Partners, 2024[65]), supported by the International Finance Corporation and the World Bank to improve SOE governance and financial performance (Mada Masr, 2025[66]). Moreover, legal amendments adopted in 2024 strengthened the Egyptian Competition Authority's powers for pre- and post-transaction supervision and enforcement against anti-competitive behaviour. In parallel, at the time of writing, the MSMEDA is preparing a national strategy to integrate the informal economy into the formal economy, in co-ordination with several ministries, including the Ministry of Planning, Economic Development (MPED), with completion expected by end-2025. These initiatives are still at an early stage, and their impact on the private sector remains to be seen.
Egypt has initiated several promising reforms to create a more conducive environment for business innovation [see also Table A.1 in Chapter 3 of the OECD Economic Survey on Egypt (2024[2]) as an example of such reforms]:
Establishing SEZs, particularly the SCZone, offers streamlined procedures and tax incentives for innovative businesses (see Chapter 2, Box 2.1).
The Golden License scheme, established under Article 20 of Investment Law No. 72/2017, aims to streamline and accelerate the approval process for strategic, national, and public-private partnership projects by offering a single approval that covers the establishment, operation, management of projects, and building and land allocation (Egyptian Regulatory Reform And Development Activity, 2023[67]). Amendments to the Investment Law in 2023 and 2024 activated existing incentives, introduced tax rebates for projects financed by foreign direct investment and extended non-tax incentives to selected activities.
Tax and customs reforms. The Unified Tax Procedure Law No. 206/2020 established a taxpayer registration number, and digitised tax assessment, collection, and payment processes (PwC, 2020[68]) to improve efficiency, enhance transparency and encourage the registration of informal businesses. The law also introduced penalties for tax evasion and mechanisms for dispute resolution and advance rulings. In customs, the Advance Cargo Information (ACI) system, under the Decision of the Minister of Finance No. 38/2021, requires pre-registration of cargo data on a blockchain-based platform for sea imports (NAFEZA, n.d.[69]). Implementation of the ACI system reduced customs clearance time from 29 days to 6 days, lowered compliance costs from over USD 600 to USD 175 and increased tax revenue by 13% (CargoX, n.d.[70]).
Egypt has pioneered the use of regulatory sandboxes. The CBE introduced a fintech regulatory sandbox in 2019, providing a controlled environment for testing innovative products and services under regulatory supervision. This initiative has enabled safe experimentation while maintaining necessary oversight. In 2024, the Financial Regulatory Authority (FRA) launched another regulatory sandbox for the non-banking financial sector. The success of these approaches suggests the potential to extend sandbox models to other innovation-intensive sectors, such as pharmaceuticals, construction, and renewable energy. Complementary initiative to build co-creative ecosystems in the fintech, as highlighted in Box 3.2, further enhance the effectiveness and relevance of these policy frameworks.
Fostering co-creation relationships among diverse stakeholders is essential for industry development, and Egypt’s fintech sector provides a successful example. The remarkable growth of Egyptian fintech start-ups, alongside the emergence of two unicorn companies, highlights the success of community-building efforts. A notable initiative is the series of industry retreats, multi-day networking events that bring together diversified stakeholders of the fintech ecosystem, organised by ElRehla, a non-profit organisation established in 2013 to promote collaboration and socio-economic growth. Since its inception, ElRehla has organised over 170 retreats, including annual fintech-focused events launched in partnership with GIZ Egypt in 2020. The third edition in 2023, supported by Mastercard, GIZ Egypt, and Banque Misr, brought together start-ups, the banking sector, regulators such as the CBE, the FRA and the National Telecommunications Regulatory Authority. These retreats provided a platform for sharing policy updates, discussing industry challenges and exploring innovative solutions, thereby strengthening relationships across the ecosystem and demonstrating the roll of collaboration in driving sectoral innovation.
Source: ElRehla (2023[71]).
Several government policies to support start-ups
The Egyptian government has recognised the importance of start-ups for economic growth and innovation, so in addition to the aforementioned initiatives, it has implemented further policies and programmes to support the start-up ecosystem. These initiatives span different ministries and agencies, aiming to provide comprehensive support at various stages of start-up development.
Following the establishment of the MSMEDA in 2017, ministries and agencies have increased programmes and outreach to start-ups, particularly those in the ICT sector (OECD, UNIDO, UN ECA, UNCTAD, 2021[5]) (see Table 3.3) (see also Chapter 4, Box 4.13).
Source: Authors’ elaboration based on OECD, UNIDO, UN ECA, UNCTAD (2021[5]); African Development Bank (2022[75]).
However, stakeholders interviewed, as well as past reports [e.g. (African Development Bank, 2022[75])], pointed out some limitations of these programmes:
Co-ordination: There is room for improvement in co-ordinating these various initiatives to avoid duplication and ensure a more streamlined support system for start-ups.
Accessibility: Some entrepreneurs reported difficulties accessing information about these programmes and navigating the application processes. For example, entrepreneurship awareness programmes remain largely concentrated in Cairo, limiting access for individuals in other regions. In addition, there is a shortage of Arabic-language digital and video content.
Follow-up support: While initial support is often available, there is a need for more sustained support as start-ups grow and face new challenges. In particular, there is a notable lack of investment, both public and private, targeting early-stage and growth-oriented start-ups, as well as insufficient platforms for ongoing knowledge sharing and a limited pool of experienced business mentors.
Focus on specific sectors: Some interviewees noted that support tends to be concentrated in certain sectors, particularly ICT, potentially leaving gaps in other areas. For instance, sectors such as agri-business, energy and sustainability, the creative industries, healthcare, and financial technologies each face distinct challenges, and may therefore require tailored support mechanisms specific to their respective needs.
Evaluation and impact assessment: There is a need for more rigorous evaluation of these programmes to assess their effectiveness and adjust them based on outcomes.
Continued refinement and expansion of these policies, informed by feedback and outcomes, will be essential to strengthen Egypt’s start-up ecosystem. Better co-ordination among these initiatives could further enhance their reach and impact. To this end, in addition to a unit for start-ups established within GAFI and the Cabinet to streamline processes and improve the ecosystem, and moreover, the Ministerial Group on Entrepreneurship, chaired by MPED and composed of key ministries, has also been created to co-ordinate policy actions. A central outcome of their efforts is the development of the Egypt Startup Charter, intended as a new roadmap for policies that enhance the entrepreneurship environment by identifying specific incentives, legal frameworks, and simplified procedures for start-ups (Box 3.3). In addition, according to MPED, the ministry has established the Entrepreneurship and Innovation Program, which aims to create job opportunities for youth and to integrate Egyptian companies into global value chains.
Egypt Startup Charter is a national roadmap designed to comprehensively strengthen the country’s start-up ecosystem. It sets a clear ambition to transition towards an innovation‑driven, knowledge‑based economy, and targets the following outcomes over the next five years:
1. Align government policies to effectively empower the start-up ecosystem and support the growth of up to 5 000 start-ups.
2. Increase the economic impact of startups and contribute to the creation of approximately 500 000 direct and indirect jobs.
3. Support start-ups in expanding into international markets while strengthening local talent pipelines and reducing brain drain.
4. Encourage venture capital activity and attract up to USD 5 billion in startup investment.
5. Link real-world challenges across priority sectors with start-ups that deliver innovative solutions.
To realise these objectives, the Charter is grounded in more than 500 executive recommendations distilled from over 25 national and international reports and global best practices and consolidates over 80 prioritised policies and procedures selected by the entrepreneurial community on the basis of expected impact and feasibility. It is conceived as an execution‑oriented framework that integrates regulatory reform, administrative simplification, investment promotion, skills development, and internationalisation support into a single, coherent policy package.
The Charter is structured around five inter‑connected pillars that reinforce the ecosystem and underpin sustainable growth:
Pillar 1: Establishing a standardised and unified definition for start-ups
The Charter defines a start-up as “a recently established company, characterised by rapid growth, agility and innovation, and aiming to introduce or develop new products, services, or business models into the market.” Core eligibility criteria include:
Investment‑ready legal form permitting the entry of shareholders/investors.
Less than seven years since incorporation.
Innovation and scalability, typically grounded in technology and/or intellectual property, with credible prospects for growth.
Access to the Charter’s incentives and facilitations requires a Startup ID (classification certificate). Two certification tracks are available: a fast‑track (≤5 working days) for ventures nominated by accredited investors/incubators/accelerators, and a standard track (≤14 working days) for other applicants.
Pillar 2: Launching an integrated package of facilities and incentives
A comprehensive, lifecycle‑oriented package targets start-ups from incorporation through scale‑ups, including:
Simplified taxation (e.g., preferential rates and targeted exemptions).
Administrative streamlining (e.g., one‑day company registration; liquidation within 90 days).
Access to public procurement and more open, transparent tendering.
Non-tax financial incentives to support expansion.
Internationalisation enablers, such as visa facilitation and market‑access support.
For measures that cannot be implemented immediately and require legislative or institutional change, the Charter sets explicit timeframes, namely short term (6-12 months), medium term (1-3 years), and long term (3+ years), and organises them into 12 thematic areas as a future action plan.
Pillar 3: Launching catalytic financial initiative
To catalyse private capital and support start-ups across stages, the Charter establishes an integrated suite of instruments, including:
Grants.
Crowdfunding frameworks (lending‑based and equity‑based).
Funds‑of‑Funds.
Matching funds with angel investors and corporate venture capital.
Credit guarantees to enable venture debt and bank lending.
Together, these instruments aim to mobilise approximately USD 1 billion over five years, complementing private risk capital while reducing financing friction and leveraging five times that amount from private-sector sources.
Pillar 4: Launch a scale-up champion programme
For firms that have moved beyond the early stage and demonstrated rapid growth and sizeable fundraising, the Charter offers firm‑specific scale‑up support, including IPO/M&A readiness, removal of regulatory bottlenecks, networking with domestic and international partners, and targeted administrative facilitation, to accelerate the emergence of unicorn‑potential companies.
Pillar 5: Establishing an implementation mechanism
A Startup Ecosystem Observatory is established to collect and analyse data on firm growth, investment flows, and ecosystem bottlenecks, and to publish regular, transparent reports. The Observatory anchors an annual review and update of the Charter, ensuring course‑correction and continuity. This governance model aims to safeguard policy consistency, accountability, and long‑term sustainability of reforms.
Source: Egypt Startup Charter (Government of Egypt, 2026[76]).
There is also scope to provide more targeted support for deep-tech start-ups and to strengthen linkages with established industries. While the “Egypt Makes Electronics” programme by MCIT and ITIDA offers focused support on pre-seed or seed-stage start-ups in electronics, semiconductors, Industry 4.0 applications, IoT and embedded system, substantial reinforcement is needed.
3.3.2. Strengthening the current policy framework to foster business innovation
While Egypt has established various policies and mechanisms to support business R&D and innovation as mentioned above, the current framework faces several limitations that hinder its effectiveness.
A strategy to increase business expenditure in R&D
There is scope for further enhancement of measures to increase BERD. Improving BERD can enhance various factors essential for fostering innovation, such as investment in infrastructure needed for R&D, the recruitment and skill development of R&D personnel, and the growth of high-tech industries that add significant value. These improvements could lay a strong foundation for future innovation. R&D investment is influenced by a range of factors, including confidence in stable macroeconomic conditions and a fair competitive environment, and may not be easily altered through simple policy interventions. However, it is essential to develop a clear mid- to long-term strategy that includes specific BERD targets [like Finland (Deschryvere, Husso and Suominen, 2021[77]), Korea, and Viet Nam (Box 3.4)].
A balanced mix of direct support and indirect incentives is essential to promote business R&D activities. While many OECD Member countries have increasingly relied on R&D tax incentives as a form of government support for business R&D (OECD, 2025[78]; 2023[79]), direct financial support through R&D grants remains a critical tool. In Egypt, programmes such as ITAC provide some R&D grants (ITAC, n.d.[80]), but their present scale is relatively small, highlighting the need to expand these grant programmes (see Box 3.5). Establishing a one-stop platform for grant access similar to Singapore’s Business Grants Portal (n.d.[81]), would improve convenience and accessibility for SMEs and start-ups, thereby encouraging greater utilisation of available funding. Recently, the Egypt Startup Charter has introduced a set of relevant initiatives, including matching funds with angel investors and corporate venture capital funds, as well as the consolidation and publication of all available tenders accompanied by a clear point of contact for applications, inquiries, and complaints. Together, these measures are expected to drive further progress in fostering innovation by strengthening risk‑capital mobilisation and creating a more transparent, startup‑friendly public procurement environment.
Korea
Korea is one of the OECD Member countries with significant business R&D investments. Between 2010 and 2019, BERD doubled, reaching 3.9% of GDP in 2021, the second highest in the OECD and more than twice the OECD average. Nearly 90% of this investment is directed towards the manufacturing sector, with relatively little spending in services. This pattern is similar to manufacturing-intensive countries like Germany and Japan. However, recognising this imbalance as a barrier to service-sector development, Korea has made continuous efforts since 2010 to expand BERD in services and foster in high-value-added industries.
Key measures include: 1) successive mid- to long-term R&D expansion strategies, such as the first Service R&D Promotion Plan (2010), the Service Economy Development Strategy (2016), the Mid- to Long-term Promotion Strategy, the Promotion Plan on Service R&D (2017), and the Service Industry Innovation Strategy (2019); 2) expanding R&D tax credits by broadening the eligibility for corporate R&D centres from 19 industries to all, and by including new technologies; and 3) introducing Korea-Energy Service Provider (K-ESP) programme, which aims fostering specialised firms collaborating with SMEs on R&D projects and provides such firms benefits including labour cost support and up to 65% of development costs, capped at KRW 200 million (Korean won) over two years.
As a result, BERD in the service sector increased from 0.22% of GDP in 2010 to 0.52% in 2022.
Viet Nam
Vietnam has undertaken a range of policy measures to strengthen R&D. The Strategy for Science and Technology Development 2011–2020 set ambitious targets to increase total societal investment in science and technology to 1.5% of GDP by 2015 and over 2% by 2020 (Government of Viet Nam, 2012[82]). To support business R&D activities, the government implemented a policy mix that includes:
Tax incentives for R&D investment (Investment Promotion Center South Portal, n.d.[83]);
Financial support through the National Technology Innovation Fund, providing preferential loans and grants for enterprise R&D (Government of Viet Nam, 2015[84]; VietnamPlus, 2021[85]);
Establishment of high-tech parks offering tax incentives and one-stop investment application services (Investment and Trade Promotion Centre of Ho Chi Minh City, n.d.[86]).
As a result, the GERD-to-GDP ratio increased from 0.15% in 2011 to 0.42% in 2021 (UNESCO, n.d.[87]), with the share from the private sector rising from 12% in 2015 to 43.84% in 2021 (Government of United Kingdom, 2024[88]). Furthermore, the National Science, Technology and Innovation Strategy 2030 aims to accelerate this growth by setting explicit targets for private R&D investment (Government of Viet Nam, 2022[89]):
By 2025: R&D expenditure at 0.8-1% of GDP, with 60-65% contributed by the private sector.
By 2030: R&D expenditure at 1-1.2% of GDP, with 65-70% from the private sector.
Source: OECD (2023[90]), based on (OECD, 2024[91]); (The Ministry of SMEs and Startups, 2017[92]).
United States’ Small Business Innovation Research and Small Business Technology Transfer
The US Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programmes are competitive funding initiatives designed to support innovation in small businesses and the transfer of technology from research institutions (RIs). They provide funding for small businesses' R&D activities through public procurement or grants. Specifically, the STTR programme mandates that at least 40% of the R&D be conducted by small businesses, with 30% by RIs, such as universities, ensuring technology transfer from research to the commercial phase.
Japan’s SBIR Promotion Program
Japan’s SBIR Promotion Program scheme operates through two modalities: a once‑through type, in which NEDO administers both Phase 1 (Proof of Concept or Feasibility Study) and Phase 2 (R&D for practical application) within a single integrated programme, and a linked type, under which NEDO conducts Phase 1 or Phases 1-2 before transferring projects to designated subsidy schemes operated by other ministries. In the once‑through modality, Phase 1 provides fixed‑amount grants of up to JPY 20 million at a 100% subsidy rate, while Phase 2 offers grants of up to JPY 100 million with subsidy rates capped at two‑thirds. Under the linked modality, Phase 1 funding is available up to JPY 15 million at a 100% subsidy rate, and Phase 2 (when implemented by NEDO) provides up to JPY 50 million with subsidy rates of up to two-thirds. Together, these mechanisms support R&D-intensive startups from concept validation through application‑oriented development in alignment with national innovation priorities.
Source: America’s Seed Fund (n.d.[93]), New Energy and Industrial Technology Development Organization (2025[94]).
Stimulating demand for innovation
Policies that stimulate demand for innovation are needed to complement the current policy framework, which focuses primarily on supply-side measures such as funding support for start-ups and strengthening incubators and accelerators. Demand-side instruments, including public procurement of innovative solutions to address societal challenges (Box 3.6) on the European Union’s programmes) and tax incentives encouraging the purchase of green products, are critical for creating market pull for innovation. In this context, the Egypt Startup Charter outlines several forward-looking initiatives, including future tax incentives for firms investing in start-ups and measures to enhance start-ups’ access to government procurement. Effective implementation of these initiatives is expected to reinforce demand-side drivers and boost business R&D and foster a more dynamic innovation ecosystem.
Public procurement has been widely used as a key demand-side instrument to drive innovation. The OECD Council Recommendation on Public Procurement (OECD, 2015[95]) advises that when procurement is used to pursue secondary policy objectives, it should remain balanced with its primary goal. Since then, many countries have strategically leveraged procurement to foster innovation and address societal challenges such as climate change. Public procurement expenditure across the OECD increased from 11.8% of GDP in 2007 to 12.9% in 2021 (OECD, n.d.[96]).
The European Union has adopted a structured approach to innovation procurement, distinguishing between pre-commercial procurements (PCP), which focuses on R&D services and prototype testing when no market solution exists, and public procurements of innovative solutions (PPI), which supports large-scale commercialisation. Both are backed by the European Union’s funding programmes, such as Horizon Europe, which provides 100% funding for PCP and 50% for PPI. In 2014, the European Union revised its procurement directive [Directive 2014/24/EU (European Parliament, 2014[97])], introducing the Innovation Partnership model that combines PCP and PPI, and the most economically advantageous tender criterion, which allows evaluation beyond price to include lifecycle costs and innovative characteristics. The directive also enables lower turnover requirements and acceptance of qualifications as proof of capability, ensuring that start-ups and SMEs are not excluded from procurement opportunities.
Source: OECD (2015[95]); (European Commission, 2021[98]), (OECD, 2019[99]).
Improving framework conditions for business
Further efforts are required to relax regulations and streamline administrative procedures that continue to hinder innovation (see Chapter 2). While initiatives such as the Golden License, SEZs, and regulatory sandboxes have been introduced, challenges remain and sustained action is required. In particular, there is an expectation to expand the scope of regulatory sandboxes beyond the successful fintech sector to other industries, such as ICT and pharmaceuticals. The OECD has developed the Regulatory Sandbox Toolkit to support regulators in establishing and managing sandboxes, offering practical guidance and good practices for effective implementation (OECD, 2025[100]). Additional international examples are provided in Box 3.7.
Several countries have successfully used regulatory sandboxes to foster innovation.
Singapore’s Multi-Sector Approach to Regulatory Sandboxes
Singapore has adopted a multi-sector approach to regulatory sandboxes to foster innovation while maintaining public trust and safety. In the data domain, the Infocomm Media Development Authority operates a sandbox enabling companies to pilot innovative data uses under strict privacy safeguards
In the energy sector, the Energy Market Authority (EMA) has managed a sandbox since 2017, allowing firms to test new technologies and business models under temporary regulatory flexibility. EMA has also introduced thematic sandboxes such as virtual power plants and demand-side management, supporting energy transition and integration of distributed resources. Companies participating in sandbox projects can apply for R&D funding through EMA’s grant schemes.
In healthcare, the Ministry of Health operates the Licensing Experimentation and Adaptation Programme to facilitate innovative care models while safeguarding patient safety, complemented by the Community Pharmacist Influenza Vaccination Sandbox, which expands access to preventive care.
Source: Infocomm Media Development Authority (2023[101]), (Energy Market Authority, n.d.[102]; 2022[103]), (Ministry of Health, 2025[104]).
Japan’s regulatory sandboxes: A cross-sector approach covering healthcare, mobility and fintech
Japan’s Ministry of Economy, Trade and Industry established a regulatory sandbox in 2018 to enable rapid testing of new technologies and business models without being subject to existing regulations. The sandbox applies time and participant limits to facilitate controlled experimentation and, by the end of 2023, has accredited 150 projects across sectors such as mobility, IoT, fintech, and healthcare. Data from these trials has supported business model refinement and informed regulatory reforms. A notable example is the electric scooter-sharing business, where trial results led to revisions in the Road Traffic Act, enabling commercial implementation. The sandbox has since been transferred to the Cabinet Office and institutionalised as a permanent system.
Source: Ministry of Economy, Trade and Industry (n.d.[105]; 2021[106]), (LUUP, 2023[107]).
Co-ordinate current support measures
Greater co-ordination of existing support measures is essential to ensure strategic alignment and avoid duplication. While numerous organisations provide programmes for start-ups, overlaps persist, reducing efficiency. For instance, the MSMEDA and the ASRT support incubators and accelerators, while Egypt Ventures, EEIC, TIEC and ITIDA offer similar services. The MSMEDA, Egypt Ventures and TIEC also contribute to start-up financing, either directly or through fund-of-funds mechanisms, and initiatives such as EgyptInnovate, led by TIEC, HAFIZ, and Egyptian Innovation Bank, serve as hubs for stakeholder engagement (see Table 3.3). This fragmentation makes it difficult for provides to deliver long-term, targeted support and for beneficiaries to navigate the available options, undermining overall effectiveness. Although the Ministerial Group on Entrepreneurship has begun efforts to streamline support, continued co‑ordination efforts will be essential to establish a more coherent framework.
Enhancing competitive neutrality and levelling the playing field between SOEs and POEs is also crucial to fostering a dynamic and efficient market environment. Persistent advantages for SOEs undermine the competitiveness of private SMEs and limits their capacity to invest in R&D. While the Egyptian government has launched measures such as SOP to eliminate these advantages, it is still too early to assess their full impact, and sustained efforts will be required.
In addition to opening SOE capital to private participation, it is important to leverage its innovation potential. Although SOEs are often perceived as less efficient than private companies, they can contribute to innovation if governance and managerial transparency are strengthened (Belloc, 2014[108]). SOEs’ stable labour relations can support incremental innovations, and their roles vary from providing public goods to pursuing commercial objectives, with the former benefiting less from privatisation in terms of R&D capacity (Pan, Cheng and Gao, 2022[109]). Alongside privatisation, improving governance and transparency and allowing greater flexibility in resource allocation within SOEs can help align their activities with national innovation strategies.
Deep-tech start-ups
Strengthening targeted support for deep-tech start-ups is essential. These firms can address societal challenges and transform markets through advanced technologies, but their implementation typically requires more time and resources than conventional start-ups, calling for long-term and intensive support. In Egypt, examples remain limited, though InfiniLink, a semiconductor company developing optical data connectivity chips for AI-driven data centres, recently raised USD 10 million in seed funding with participation from Egypt Ventures (Cision PRWeb, 2025[110]). Venture capital, however, tends to concentrate on Series A and later stage; in 2024, 51% of start-up investment in Africa went to the top ten firms, including unicorns (Africa: The Big Deal, 2025[15]).
Launched in 2013, Korea’s TIPS is a public-private matching grant scheme that supports promising start-ups with innovative ideas and breakthrough technologies. Eligible firms must be less than seven years old and secure an initial investment of KRW 100 million from designated TIPS partners such as accelerators, VC firms or large enterprises. Following screening by the Korea Business Angels Association (KBAN), selected start-ups can receive up to KRW 500 million in government R&D funding over two years, with possible extensions for commercialisation, overseas marketing and additional angel investment support. Successful firms return 10% of government funding as royalties, while failures incur no repayment obligations; the government does not take equity.
TIPS partners provide mentoring on business strategy, market research and commercialisation, complemented by KBAN’s broader expert network. Additional non-financial support includes access to R&D facilities, co-working spaces such as TIPS Town and networking opportunities. This model leverages private-sector expertise while reducing investment risk for angel investors, creating a robust mechanism for channelling large-scale funding into high-potential start-ups. Between 2013-22, TIPS facilitated KRW 1 144.9 billion in matching investments against KRW 493.9 billion in private angel funding, supporting 2 134 start-ups. By the end of 2022, TIPS-backed firms had attracted KRW 10.4 trillion in follow-on investment from domestic and international sources, exceeding a tenfold return on government contributions.
Building on this success, Korea launched Deeptech TIPS in 2023 to target start-ups in ten strategic technology sectors, including semiconductors, biotechnology, future mobility, green energy, robotics, AI, cybersecurity, aerospace, next-generation nuclear power and quantum technology. Following a similar selection process, eligible firms securing KRW 300 million from private investors may receive up to KRW 1.5 billion in government R&D funding.
Source: World Bank (2024[111]).
Expanding funding for pre-seed and seed stages is critical (see Box 3.8 on the Korean example). Beyond public procurement and other government financial instruments, effective measures include capacity building for fund managers in the early stages, tax incentive for angel investors, strengthening and regionalising investor networks, establishing public-private co-investment schemes (African Development Bank, 2024[112]). As patents are key to protecting core technologies, complementing the MSME Development Law’s patent fee exemptions with fast-track examinations and IP advisory services could further improve Egypt’s patent filing performance.
Innovation in traditional SMEs
While continuing support for start-ups, it is essential to strengthen policies for traditional SMEs, particularly to foster R&D and their transition to knowledge-intensive industries, which remain underserved. Current measures focus heavily on start-ups and the ICT sector, leaving the innovation needs of established firms largely unmet, despite their central role in Egyptian economy. The existing framework provides limited targeted support for developing high value added and knowledge-intensive industries, which are crucial for economic transformation. In addition to direct measures such as improving access to finance, promoting technology transfer and offering specialised financial and administrative assistance for SMEs entering high-tech sectors that require upfront investment (for international examples, see Box 3.9), indirect measures are also important. These include awareness campaigns and incentives to encourage informal businesses to register, thereby levelling the competitive playing field.
Linkages between academia and industry still have room for improvement to enhance the transfer of technologies and knowledge to the private sector. The higher unemployment rate among university graduates compared to non-graduates, combined with stagnation in R&D talent growth in the business sector despite rising graduate numbers (see Chapter 2), indicates a mismatch between higher education outcomes and labour market needs, particularly in high-tech industries. Initiatives such as ITAC (Table 3.2) have not sufficiently strengthened collaboration between universities and businesses, and current policies have failed to close the gap between academic research and industrial application. Similarly, while TICOs (Table 3.2) aim to support technology transfer, the overall mechanism for converting research into commercial products remains inadequate, limiting the economic impact of research conducted in universities and public RIs. Box 3.10 highlights ELARABY as a successful example of academia-business collaboration.
SMEs account for a large share of businesses and employment in many countries, yet their contribution to innovation remains limited due to insufficient capacity to absorb and integrate advanced technologies. To address this gap, several countries have implemented initiatives to strengthen SMEs’ technological capabilities.
The US MEP (Manufacturing Extension Partnership)
In the United States, the MEP, established in 1988 under the National Institute of Standards and Technology (NIST), supports manufacturing growth through operational improvements, risk reduction and technology transfer. The MEP National Network consists of NIST MEP, 51 MEP Centres across all 50 states and Puerto Rico, and over 1 450 experts at 430 service locations. The federal government covers up to 50% of operational costs, with the remainder funded by manufacturers and state contributions. In FY 2023, every USD 1 of federal investment generated USD 24.60 in new sales growth and USD 27.50 in client investments, resulting in over USD 4.3 billion in new sales. For every USD 1 633 invested, one manufacturing job was created or retained.
The Industrial Research Assistance Program in Canada
The National Research Council of Canada Industrial Research Assistance Program (NRC IRAP), launched in 1962, fosters wealth creation through technological innovation, focusing on SMEs that develop and commercialise new technologies. NRC IRAP employs over 250 Industrial Technology Advisors across 130 offices to provide technical and business guidance. In FY 2023, 9 410 companies received support, including 3 262 firms with direct financial assistance. The programme also runs a Youth Employment Programme and supports internationalisation through Canada’s participation in Eureka, the largest global industrial R&D network.
The “Mittelstand-Digital” in Germany
In Germany, the "Mittelstand-Digital" programme, promoted by the Federal Ministry for Economic Affairs and Climate Action, accelerates SME digitalisation under the "Mittelstand 4.0" initiative. It operates through 26 competence centres offering training, workshops, and demonstration facilities, with tailored programmes for sectors such as manufacturing and construction. Since 2021, these centres have evolved into "Mittelstand-Digital Zentrum" (SMEs Digital Centres) to expand outreach and capabilities, including AI-focused support introduced in 2019.
Source: BMWK (2024[113]), National Institute of Standards and Technology (2026[114]), National Research Council of Canada (2024[115]; 2024[116]).
ELARABY, an Egyptian industrial group with a turnover exceeding USD 2 billion and operations in over 60 countries, has evolved from a family-based trading company founded in 1962 into one of the largest manufacturers of household appliances in Egypt and the Middle East. The company employs more than 45 000 people and has progressively transformed into a technology-based enterprise. It established its own R&D department and, since 2002, has partnered with Japanese and European multinationals to develop smart factories, including facilities in Leipzig, Germany. ELARABY has also created a corporate ventures arm, ELARABY Ventures, to invest in start-ups that complement its operations or diversify its portfolio.
The company maintains long-term research partnerships with universities, viewing joint research as highly beneficial for solving practical problems, particularly in product development. For example, in collaboration with universities in both Egypt and Japan, ELARABY conducted a comprehensive analysis of a production line and proposed an optimal layout. The company acknowledges challenges such as risks linked to the annual budget cycle and misalignment between academic and business priorities, which can slow progress. However, its experience demonstrates that these issues can be mitigated through mutual understanding and alignment fostered over long-term collaboration.
Source: OECD based on company interview and corporate information (ELARABY Group, 2025[117]).
Strengthening systematic evaluation and assessment mechanisms is crucial to track the progress of policies such as the SOP and efforts to formalise unregistered businesses, as weaknesses in these areas undermine evidence-based policymaking and the refinement of support measures. In this regard, periodic SOP follow-up reports by the Information and Decision Support Center (Government of Egypt, 2025[37]), together with initiatives such as the Egypt Innovation Lab, established under MPED, provide structured frameworks for monitoring and evaluating policies, including those aimed at improving financial access, and provides capacity-building programmes (Egypt Impact Lab, 2024[118]). Sustaining and expanding these initiatives is essential to strengthen national capabilities for evidence-based policymaking, Regular collection and publication of reliable, comparable, and internationally standardised data are also critical to support these processes and to identify relevant international good practices for benchmarking.
3.3.3. Access to finance is one of the keys for business R&D and innovation
Public funding for business innovation through agencies such as STDF and ISF (Table 3.2) remains limited in scope. While Egypt’s venture capital market is growing, it is still relatively small and concentrated on technology-based start-ups in consumer products and services, such as fintech. In contrast, deep-tech firms, which rely on in-house R&D and face higher risks and longer development timelines, encounter greater funding challenges.
The CBE has introduced several initiatives to improve SME access to finance (The Central Bank of Egypt, 2023[119]). In 2016, the CBE required all banks to allocate 20% of their total credit portfolios to finance SMEs, a target raised to 25% in 2021, with at least 10% directed to small businesses until December 2024, and allowed equity investments in SME-focused funds to count toward this ratio, applying preferential risk-weight treatment. The CBE also required banks to establish specialised SME departments and develop comprehensive quantitative and qualitative strategies with clear timelines and action plans to meet these targets, with progress monitored quarterly by the CBE. Moreover, in 2021, banks were allowed to lend to micro and small enterprises, many of which are informal, without financial statements and were encouraged to contribute to SME-supporting funds. To mitigate risk, the CBE established a trust fund of EGP 2 billion for the Credit Guarantee Company (CGC) in 2018. These measures contributed to a 362% increase in SME loan portfolios between 2015-23 (The Central Bank of Egypt, 2023[120]). The CBE also supported the Egyptian credit bureau “i-Score” in projects aimed at streamlining data integration, developing analytical dashboards, enhancing grading modules, and creating a behavioural scoring model to enable real-time, data-driven credit decisions and improve access to finance.
In addition to these measures, the CBE has implemented complementary initiatives to strengthen SME financing capacity, including:
Capacity building for SME banking staff through the Egyptian Banking Institute by introducing mandatory certifications for SME credit officers (accredited by the Frankfurt School of Finance and Management) and for Business Development Services (BDS) advisors, in cooperation with the Financial Regulatory Authority and the International Labour Organization.
Advancing women’s financial inclusion via the Women Entrepreneurs Finance Initiative (We-Fi), signed with the European Bank for Reconstruction and Development (EBRD) in 2024, which focuses on supporting women entrepreneurs and SMEs through tailored financial and non-financial products, data collection, and capacity building for financial service providers.
Supporting high-potential exporters through the SME National Champions Program, launched in partnership with the EBRD and implemented via three local banks, offering integrated non-financial services such as management, finance and marketing training, specialised consulting, and networking opportunities.
Expanding financial access beyond traditional banking is also necessary. For example, the FRA should strengthen legal frameworks for alternative finance, such as crowdfunding, building the Microfinance Law (Presidential Decree No. 141/2014) (General Authority of Investment and Free Zones, n.d.[121]). Targeted policy interventions to facilitate seed and early-stage funding are critical. International experience shows that tax incentives can stimulate angel investment; for instance, Türkiye’s Angel Investment Capital Regulation in 2012 allows registered investors to deduct 75% of investments from taxable income, rising to 100% for start-ups engaged in public R&D projects. Networking platforms connecting angel investors, venture capital firms and other ecosystem actors, alongside initiatives such as the MSMEDA's Fund of Funds (Government of Egypt, 2025[122]), can further strengthen early-stage financing and create exit opportunities for angel investors (OECD, 2025[10]).
Building on these efforts, blended finance offers a complementary approach to bridge funding gaps, particularly in high-risk, R&D-intensive sectors like deep-tech. Blended finance combines public resources, such as grants, concessional loans and guarantees, with private or philanthropic capital to de-risk investments and attract private funding. For Egypt, adopting blended finance mechanisms could amplify the impact of existing initiatives by the STDF, the ISF and the MSMEDA. Public funds could serve as first-loss capital or guarantee layers within co-investment funds, encouraging private participation in early-stage or deep-tech projects. The MSMEDA’s Fund of Funds could integrate a blended structure to catalyse investments in priority sectors such as green technologies, health innovation, and advanced manufacturing.
Leveraging new innovative financing mechanisms to crowd in private-sector finance in R&D and innovation.
The MPED, in co-operation with Multilateral Development Banks, is promoting innovative financing mechanisms such as blended finance and green bonds to address the funding gap in clean energy and climate-smart infrastructure, including energy, water, waste management, transport, and logistics. These initiatives involve R&D and innovation in areas where public good considerations and market failures limit private investment. The OECD has explored the potential of blended finance for STI and identified principles through a multi-stakeholder approach. These include piloting the combination of public R&D grants with instruments to leverage private capital; creating platforms for the innovation and finance communities to exchange knowledge; developing pilot models and contingent financial structures to facilitate transactions; and improving integration between STI and ODA funding streams through interministerial co-operation.
3.3.4. Aligning innovation policies with the green transition and digital transformation
The global shift towards sustainability and digitalisation presents significant opportunities for business innovation in Egypt. The OECD’s Agenda for Transformative STI Policies (Transformative Agenda) outlines three ‘transformative goals’ that countries can pursue for STI policy. These are sustainability transitions, economic development that is fair and inclusive, and increased resilience and security – and identifies six STI “policy orientations” that can guide STI policy reforms. Among these are calls for greater directionality in STI policy, including ambitious and intentional STI investments to promote the green transition (OECD, forthcoming[123]).
Egypt has taken steps to integrate the green objectives into its innovation agenda. Following the 2022 United Nations Climate Change Conference (COP27) in Sharm El-Sheikh, political discourse has increasingly focused on leveraging green technologies to reduce industrial emissions and enhance climate resilience. The National Climate Change Strategy 2050, launched in 2022, aims to raise renewable energy’s share in electricity generation to 42% by 2035, up from 6% in 2022, while promoting low-emission growth, energy efficiency, and sustainable consumption. It also seeks to strengthen resilience by protecting health, assets, ecosystems and infrastructure (see Chapter 2). To translate these objectives into concrete and actionable climate projects, Egypt launched the Nexus of Water, Food and Energy (NWFE) Programme in 2022 (Government of Egypt, n.d.[124]; OECD, 2025[125]). This platform mobilises climate finance and private investment to support Egypt’s green transition, reflecting the interlinkages between climate action and broader development efforts. In addition, Egypt introduced the Integrated National Financing Strategy (E-INFS) in September 2024, which provides a framework to mobilise and align domestic and international resources with Egypt’s development priorities, including the green transition (Government of Egypt, n.d.[126]). By reducing investment risks and signalling long-term policy commitment, these initiatives are expected to stimulate private-sector engagement and accelerate research and development in green technologies.
However, aligning innovation policies with these goals remains challenging. Egypt’s target of achieving an 8% global share in hydrogen production by 2040 (Green Hydrogen Organisation, 2024[127]) requires technological breakthroughs and infrastructure investment not yet fully supported by current policies. Law No. 2/2024 provides preferential treatment for green hydrogen projects, including tax incentives, VAT exemptions on equipment, and discounts on port and land use fees (ecoris, 2024[128]). The National Initiative for Smart Green Projects in Egypt's Governorates adopts a bottom-up approach, selecting 162 projects across 27 governorates, with top projects receiving financial awards, technical support, and access to domestic and international networks (The National Initiative for Smart Green Projects, 2023[129]). To meet ambitious climate targets, additional innovation-oriented policies are essential. Box 3.11 highlights Denmark’s experience in aligning innovation policy with climate objectives.
Denmark is a global leader in environmental technology innovation, with 22.3% of its 2021 patents related to green technologies, compared to the OECD average (11.2%) (OECD, 2025[130]). By 2020, Denmark had reduced its CO2 emissions by 50% from 1990 levels, far exceeding the OECD average of 6% (OECD, 2022[131]).
In September 2020, the Danish Government launched its first national strategy for green research, technology, and innovation, Green Solutions of the Future (Innovation Centre Denmark, n.d.[132]) (The Danish Ministry for Higher Education and Science, 2020[133]). The strategy aims to accelerate the development of technologies that protects the climate, nature, and the environment, reduce greenhouse gas emissions and strengthen Denmark’s leadership in green industries to boost exports and create green jobs. It focuses on four key missions: carbon capture and storage or utilisation; green fuels for transportation and industry (Power-to-X); climate- and environment-friendly agriculture and food production; and recycling and reducing plastic waste.
In October 2020, Denmark introduced the Global Climate Action Strategy: A Green and Sustainable World (The Danish Ministry of Climate, Energy and Utilities, 2020[134]), outlining its long-term approach to international climate efforts. The strategy seeks to raise global climate ambition, reduce global greenhouse gas emissions, strengthen adaptation and sustainable development, shift financial flows towards green investments, and foster private-sector co-operation on green solutions.
Egypt has made progress in digital transformation, with ICT services exports increasing by 26.5% to USD 6.2 billion in 2023 and a government target of reaching USD 9 billion by 2026 (Ministry of Communications and Information Technology, 2024[135]). However, digital adoption across the wider economy remains limited. While mobile broadband coverage is comparable to OECD levels, mobile and fixed broadband penetration is low, and Internet use is stagnating at 72%, compared to the OECD average of 91% in 2022 (OECD, 2025[136]). Government initiatives under the Digital Egypt Strategy (Ministry of Communications and Information Technology, n.d.[137]) include digitalising public services and business registration processes, and the success of the fintech regulatory sandbox illustrates the potential of regulatory innovation. Similar frameworks could support green technology innovation in sectors such as renewable energy and sustainable construction.
Despite these efforts, SMEs lag in digital adoption, missing opportunities to benefit from digitally enabled tools and services (OECD, 2025[10]). Adoption also varies significantly across industries. In addition to general ICT capacity-building programmes, targeted for e-government services such as taxation, financial support for digitalising business operations, and tailored education programmes aligned with specific needs (Box 3.9). These actions would strengthen SME competitiveness and accelerate Egypt’s digital transition.
R&D activity and innovation performance in Egypt’s private and public business sectors remain low and below potential. While Egypt boasts one of the leading start-up ecosystems in the MENA region, innovation within traditional SMEs, which constitute the vast majority of Egyptian businesses, continues to progress slowly. This can be attributed to several factors, including the relatively large domestic market, complex and burdensome regulations and administrative procedures, and an uneven competitive environment driven by state-owned and informal enterprises, all of which provide few incentives for existing businesses to invest in innovation.
Furthermore, the existing policy framework, while offering comprehensive support to technology-based start-ups, provides limited assistance to traditional SMEs and deep-tech ventures. Building on ongoing efforts, additional targeted support, such as strengthening technology transfer and innovation capabilities, expanding early‑stage funding mechanisms and enhancing financial and procedural support to promote the registration of IP rights would enable these firms to better engage in innovation activities (see Recommendations R8.5, 8.6, 9.5).
STI policies can play a significant role in further enhancing innovation within the business sector. While recent efforts have contributed to gradually strengthening the national R&D landscape, further incentives are needed to promote business expenditure on R&D and innovation. Additionally, strengthening support, including improving financial access for deep-tech ventures and traditional SMEs, is crucial. It is also important to implement measures that foster demand for innovation and leverage the global demand resulting from the digital and green transitions that could boost domestic innovation.
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← 1. According to provisional figures compiled by OECD based on data provided by ESTIO.