Cairo calling

Today Egypt’s IT sector is the embodiment of an up-and-coming market. The sector has exploded almost overnight, and multinational investors are drawn to the country like moths to a flame. So how has Egypt managed to turn its luck around?

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By  Sarah Gain Published  December 22, 2005

|~|PHOTO-1---Samir-BODY.jpg|~|Samir: Maybe the days of Egyptians travelling to Dubai to purchase cheaper technology products are over.|~|At the heart of the Middle East and North Africa (MENA) region, Egypt has traditionally played a leading role in regional politics and commerce. In the 1990s, under Hosni Mubarak's presidency, the country began a process to transform itself from a state-dominated economy to one driven by market forces, and it has made remarkable progress. “The economic reform agenda of this government falls across a broad area ranging from public expenditure to customs to trade to privatisation, to greater private sector participation in the economy. There are a lot of well thought out and co-ordinated changes that have been made over the past years,” as Christiaan Poortman, the World Bank’s vice president for the MENA region, says on the organisation’s website. “I share everybody’s view that the Egyptian [economic] reform programme is off to a very promising start.” Over recent years, the Egyptian government has succeeded in reducing inflation and slashing its budget deficit. Price controls and subsidies on most industrial products have been cut, while the banking and capital markets are undergoing a process of liberalisation. The government is also in the process of revamping its customs and tax structure to comply with World Trade Organization (WTO) agreements. The idea to abolish sales tax on certain IT products has been warmly welcomed by many organisations. “There is already no sales tax on software, so this is now very affordable. There is now also talk of abolishing the sales tax on hardware items, which would be a great improvement for businesses too. Maybe the days of Egyptians travelling to Dubai to purchase cheaper technology products are over and the situation will be reversed with people from the UAE travelling to Egypt instead,” says Wessam Samir, branch manager at Tradefairs Gulf, which organises the annual Cairo ICT event for the region’s IT sector. “The government has realised that a strong ICT sector would contribute to high and sustainable growth for the Egyptian economy and has pinpointed the development of this as a national priority,” he adds.||**|||~|PHOTO-2---Helmy-BODY.jpg|~|Helmy: The e-government programme will allow Egypt to be more competitive globally.|~|Following the example set by the Gulf States — and the UAE in particular — the Egyptian government is involved in a number of initiatives to include technology at the heart of the country’s economic development strategy. There have been a number of government initiatives to raise levels of technology adoption, and the Egyptian Ministry of Communication and Information Technology (MCIT) is leading by example with its aggressive plan to take its services online. As part of a comprehensive e-government initiative, the government is currently rolling out a four-year project to automate and streamline accounting, budgeting, purchasing, inventory control, and human resource management, in thousands of government units. “The e-government programme is bringing Egypt in line with other countries in the region, and allows the country to be more competitive on the global level,” says Atef Helmy, managing director of Oracle Egypt. The steps being taken by the Egyptian government to transform itself into an e-government show its commitment to developing human capital in the field of IT. Dr Tarek Kamel, Egypt’s minister of communications and information technology, sees ICT as a potential catalyst for internal efficiency, job creation, and ultimately a source of foreign income. “ICT companies played a major role in the transition that happened in Dubai over the past 15 or 20 years, resulting in what we see here today in terms of unprecedented growth in all fields,” he says. “This is an experience that is becoming contagious throughout the entire Arab region.” As both a Mediterranean and an Arab/African country, Egypt has been forging new relationships with regional and international partners in order to open channels of communication, as well as to develop mutually agreed upon policies and performance targets and standards. The country is now steadily carving out a place for itself in the international ICT market. “The government is more aware than ever that IT will improve Egypt’s situation,” says Ashraf Sabry, vice chairman and CEO for IT at Raya Holding. “Egypt’s IT sector is now considered to be one of the fastest growing in the MENA region,” he adds. The performance of the country’s IT industry has indeed been strong of late. According to figures from Cairo ICT, between 1998 and 2000, the Egyptian IT market grew 33% to reach US$730 million, and by 2004 this reached US$1.32 billion, increasing with a compound average growth rate (CAGR) of 16.1%. Mahmoud Amin, head of the IT department at engineering firm Dar Al-Handasa, attributes the rapid upturn in growth to improvements in Egypt’s national telecommunications network. “The liberalisation and development of the telecoms industry means there is a better infrastructure in place and competitiveness has made things such as dial-up internet access more affordable,” Amin explains. “This set the wheels in motion and now there is no turning back.” ||**|||~|PHOTO-3---Amin-BODY.jpg|~|Amin: We never import IT specialists. We have a lot of good, local IT professionals.”|~|With a strong IT operation in Egypt, Raya Holding is one of many local companies relieved to see the IT sector beginning to flourish. The Cairo-based company has been involved in several of this year’s biggest projects spanning Egypt’s financial, manufacturing, telecommunications and government sectors. In addition, Raya has successfully delivered a series of projects outside of Egypt, carrying out major deployments to a broad spectrum of clients, including the UAE Ministry of Finance, Etisalat and Qatar’s Ministry of Municipal Affairs and Agriculture. “As a large Egyptian company we are able to act as ambassadors, spreading the word that Egypt’s IT industry is maturing fast and is ready to compete on a global scale,” enthuses Raya’s Sabry. As well as spreading the word of Egypt’s IT expertise across borders, the government is also keen to entice multinationals to invest in the country. Cairo’s Smart Village combines the benefits of Egypt’s high tech infrastructure with economic incentive packages to attract companies to base themselves in the country. Dr Ali Hefnawy, chairman and CEO of the Smart Village, hopes the new development will help Egypt become a goldmine for IT investment. “Through the Smart Village, a technology hub that offers an exceptional and unique technology environment, Egypt will establish itself as a cornerstone of advancement in this area of the world,” he says. The creation of this kind of trade zone is likely to prove a smart move on the part of the Egyptian government because, according to Samer Alkharrat, general manager for Cisco Systems in the Gulf and Pakistan, foreign companies attempting to establish themselves in an emerging market always face a challenge. Designed specifically to accommodate information technology activities, the technology park will be a strategic base for ICT- focused businesses. “The availability of facilities, services and talent is a strong draw to companies wishing to serve the Middle East region,” Alkharrat confirms.||**|||~|PHOTO-4---Sabry-BODY.jpg|~|Sabry: Egypt’s IT sector is now one of the fastest growing in the MENA region.|~|A growing number of ICT vendors are beginning to see the advantages of having a local presence in every country in which they operate. For companies dedicated to providing exceptional customer service, and seeking a competitive edge, a foothold in Egypt is essential. “Wherever we see the more lucrative opportunities and long-term sustainable business we will generally open country offices. As the potential in business increases, we like to be closer to our customers and partners,” explains Alkharrat. By basing themselves on their customers’ doorsteps in this way, vendors are better able to tailor their business models and solutions to the country’s market. As a customer, Dar Al-Handasa’s Amin says the localisation of operations has benefits for both parties. “Vendors are able to interact more closely with the local market. For enterprises like us, however, it is possible to form closer relationships with vendors, and this makes it easier to conduct business.” In addition to offering state-of-the-art facilities to international businesses, the Egyptian government has also relaxed the rules for foreign investment and altered its labour laws to allow for the flexibility of working hours required by global corporations. Such changes have succeeded in tempting a number of well-known names to invest in the country, and the majority of key IT vendors already have a presence in Egypt. “Egypt has a lot of business opportunities, especially in the IT sector,” says Sun Microsystems’ Denis Heraud, vice president of Southern, Eastern, Middle East and Africa (SEE region). “We have been active in Egypt for years and have witnessed the push that the government’s initiatives have given to the IT industry.” Also taking advantage of the booming Egyptian economy is Oracle, which has recently opened a Global Product Support centre in the country. The facility, located in the burgeoning Smart Village, is one of only eight Global Product Support centres around the world. It will provide support services to Oracle customers worldwide, forming an integral part of the vendor’s international support network. “Geographically and logistically, Egypt is an ideal location for our latest global support hub,” says Oracle’s Helmy. “With the country’s highly-skilled technology workforce, the cost benefits that Oracle and its customers are deriving from the opportunities in this market, and the support that the Egyptian government has provided to this project, we see considerable scope for further investment into Egypt’s growing IT sector,” he adds. Raya’s Sabry suggests that a lack of availability of skilled IT professionals was one of the issues holding back investment in the country in the past, but today the consensus has certainly changed. Not only does Oracle cite the abundance of high-quality IT professionals as a key reason behind its choice of Egypt as the base for its global support centre, but Dar Al-Handasa’s Amin insists that he prefers home-grown talent in his IT team. “We never import IT specialists. There have been many training initiatives from the government and major IT vendors and now we have a lot of good, local IT professionals.”||**|||~||~||~|There have been a number of joint initiatives between the MCIT and IT vendors to develop human resources for IT. Working with companies such as Oracle and Microsoft has allowed the Egyptian government to bolster ICT skills development for the entire community. ICT has been integrated into all levels of the country’s education system and there are now a number of specialist training colleges where professionals and enthusiasts can continue to develop their skills. With these types of education facilities now in place, Egypt’s enterprises can be confident of having a constant supply of IT specialists to meet the country’s ever growing demand. All the government needs to worry about now is keeping this flock of talent from straying too far from home, points out Raya Holding’s Sabry. “In the past there has been something of a problem with what they call the ‘brain drain’ — losing Egyptian-educated professionals to other countries around the region and beyond,” he admits. “Now, this is less of an issue as companies here are able to offer competitive packages and a lot of benefits to IT specialists. As long as we can tempt IT experts to stay in Egypt we can ensure that our IT market, and the country’s economy as a whole, will be booming for years to come.”||**||

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