Egyptian PC monopoly put on hold

The IT division of the Federation of Egyptian Chambers of Commerce has successfully stopped Egypt’s Ministry of Communication and Information Technology from creating a monopoly in the country’s PC market.

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By  Matthew Southwell Published  September 29, 2002

The IT division of the Federation of Egyptian Chambers of Commerce (ITFECC) has successfully stopped Egypt’s Ministry of Communication and Information Technology (MCIT) from creating a monopoly in the country’s PC market.

The initial proposal, formed earlier in the year, would have seen MCIT license a single company, called Centra, to sell locally assembled PCs through Telecom Egypt outlets. Rather than paying for a PC upfront and in cash, customers would have had their monthly phone bill credited for a set amount and the telephone connection would be used as collateral to secure the loan.

42% of the investment in Centra comes from government-owned sources, including Telecom Egypt, Bank Misr, and El-Ahram Investment, while the other 58% was not offered for public sale but held by private businessmen.

Members of ITFECC saw this as a “clear case of monopolising the market using a state owned asset” and predicted that once users could pay for PCs on a monthly basis, they would cease to purchase PCs assembled by any company other than Centra.

“If it [had been] restricted to only one company then it would have put the other companies out of business because there is no reason for people to buy PCs on a cash basis if they can get it for EGP70 per month on their phone bill,” says Dr. Hesham Ghaffar, treasurer of ITFECC.

“[This] would have jeopardised the business of some 88,000 engineers and technicians working for some 4400 small-to-medium sized companies,” he adds.

While not opposed to the idea in theory, ITFECC petitioned the MCIT to include all of Egypt’s PC manufacturers and local assemblers. As a result, an agreement has been reached with the MCIT that will see the initiative opened up to more companies.

A special committee, which includes three representatives of MCIT, three representatives of ITFECC and one representative of the ministry of manufacturing, has formulated a new version of the plan, which will be launched as the ‘Computer for every Home’ project.

“The door will be open for any interested company to participate by presenting its official papers to the committee,” explains Dr. Ghaffer.

Those companies wishing to participate in the new initiative will need to meet a number of criteria. For instance, they will have to have a manufacturing license, a contract with a licensed manufacture, a service centre, or a contract with a licensed service centre. They will also need to be registered with the sales tax authority, have a technical insured working force, a working capital of at least 50,000 EGP and 2 years experiences.

In addition to ensuring that companies wishing to participate in the scheme meet the set requirements, the special committee will also be responsible for recommending the technical specification of the PCs, ensuring that all PCs all loaded with legal software and verifying the serial numbering system for each producer. Furthermore, it will test the PCs using the Ziff Davis benchmarking system and ensure that a warranty for at least one year is in existence. It will also review prices and specifications on a regular basis.

However, while the resolution has the appearance of stemming the development of a monopoly, Dr. Ghaffer says that problems still remain. Foremost among these is the fact that the small and medium sized assemblers will still be cut out of the deal, as they do not have the requisite manufacturing licenses.

“This resolution will simply mean eliminating 90% of Centra’s competitors [as] the small and medium sized assembler will be cut off as they do not have a manufacturing license. [At the same time,] it will legitimise Centra’s business as another five or six manufacturers will be able to participate,” explains Dr. Ghaffer.

According to the treasurer, the situation is unlikely to improve either as the local manufacturers dominate the ITFECC board. “The manufactures representatives and MCIT are speaking the same language and have the same interests, which is clearly to cut the small and medium sized assembler from this project,” he says.

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