The impact of designated industrial zones on Egypt's manufacturing SMEs

This study aims to investigate the relation between productivity and internationalization of small and medium-sized manufacturing firms in Egypt, and their location in designated industrial zone (DIZ). This is done using firm-level data from the World Bank’s Enterprise Survey for the year 2016. First, the factors that drive firms to locate in DIZs are identified. Then the dependence of these factors on the geographical location of the firm and the manufacturing sector it belongs to is analysed. The extent to which these firms achieved their perceived benefits from clustering there is then estimated. Finally, the impact that these DIZs have on SME’s labour productivity and export intensity is assessed. The study shows that several factors influence firm location in/outside of DIZs such as region, sector, firm age, gender of the manager if it has/had been owned by government officials. There is evidence that most firms have not achieved some benefits that should come from locating in DIZ such as land access and government facilitation; however, other benefits are achieved such as proximity to markets where they are more probably operating in the national level if they’re located in DIZ. Finally, the results imply that DIZs do have a significant effect on firm productivity as well as export intensity; however, it is worth taking into consideration the region and sector in which they operate. Keywords: SME, Clustering, Industrial-Zones, Manufacturing, Productivity, Internationalization