The Future of Communications Information Technology in Egypt

Minister of Communications & Information Technology Ahmed Nazif was the guest speaker at AmCham Egypt's Annual General Meeting (AGM), held on May 29 at the Semiramis Inter-Continental Hotel. "I'm not going to talk about phone bills, mobile licenses, free Internet," the minister began. While any of these would have been a timely topic, he instead focused on another of the ministry's current projects, developing Egypt's "communications information-technology," or CIT, industry.

"There are a lot of opportunities for Egypt in this area," Nazif said. "There's high value added, and it's not capital intensive. Not a lot of money is needed." Moreover, he added, "CIT is something you can jump into quickly. And that' s what we intend to do."

Building an advanced telecom/IT base, Nazif argued, is increasingly important if Egypt is to be internationally competitive in any sector. Meanwhile, however, the spread of new communications devices is having a profound impact on society. "For example, the layman can use a mobile phone as his office."

Nazif said he was especially proud of the IT clubs that the ministry set up for youth and children in Upper Egypt.

Egypt has some significant assets as a potential CIT center. First is the traditional advantage of central location. Second, several key technologies are already in place, thanks to $100 million worth of infrastructure investments in the past 20 years. "There's lots of bandwidth around," the minister said. "And we have our own satellite systems. And in addition, the footprints of most satellites pass through Egypt."

Egypt's commitment to developing its CIT industry is evident, the minister said, in the National Project for Technical Development, launched by President Mubarak in September 1999 and enhanced with the establishment of the Communications and IT portfolio. "Many of the things talked about a year ago have started to happen," Nazif said, adding, "Other countries are now starting to imitate us."

But still, Egypt can draw inspiration from the models established by India, Israel and Ireland, which have all established themselves as IT exporters. Egypt currently exports only $50 million per year worth of software, but this is hoped to reach $100 million this year and $500 million by 2005.

Infrastructure, human-resource development and incubation programs all play a role, and the regulatory environment must foster fair competition. "The government's role is to set up the climate to allow the private sector to grow," Nazif said. "But the private sector needs people with ideas, guts, persistence."

The minister referred to deregulation in the mobile sector, Telecom Egypt's seeking of partnerships with private firms and the ministry's e-government initiative with Microsoft as areas where Egypt offered good investment opportunities for private CIT companies. In addition, just the week before, the ministry had signed an "e-culture" web-portal agreement with IBM. Technology-oriented free zones will facilitate the setting up of operations in Egypt, Nazif added. CIT activities were added last year to Law 8 for Investment.

The private sector, Nazif noted, represents 80 percent of investment in the Smart Village Development Company, which is now building the country's first Smart Village in the 6th of October area.

Funds are also available for the incubation of private sector start-up companies. Nazif said that LE 50 million had been put into a fund for new ideas in the field of CIT. He also referred to the USE-IT fund, a U.S.-Egypt government-to-government initiative that is "based on a B2B philosophy." The program is currently under consideration by the U.S. government. Another important element in the ministry's plan is to "try to stimulate local market by investing in IT within government itself."

With regard to developing human resources, Nazif said that there were currently 5,500 new graduates being trained in as CIT professionals, in programs receiving significant amounts of private support. But at a more basic level, too, the ministry is working on building IT skills around the country. "Last year, 28,000 people became computer literate," he said.

There was LE 290 million worth of investment in CIT in 1999, and this more than doubled to LE 614 million in 2000, the minister said. "This year it is doubling again," he added.

Growth of demand in the IT and telecom sectors, meanwhile, also continues to be rapid. Fixed-line phone subscriptions are rising at a rate of one million per year, while mobile subscriptions - which passed the 2 million mark early this year - are now around 2.7 or 2.8 million, according to Nazif. The number of Internet users has doubled from 300,000 to 600,000 in just a year.

According to the minister, local upgrading could translate in export opportunities. Egypt has developed the capacity to produce all the components needed for telecommunications infrastructure, from copper wire to fiber-optic cables. "So let's do it in Africa," he said. "Let's do it in the Middle East."

As further evidence of Egypt's potential in the CIT sector, Nazif cited recent, favorable reports published by Business Software Alliance and the Economist Intelligence Unit. According to BSA, the level of software piracy in Egypt fell from 75 percent to 56 percent last year, representing the world's largest proportional drop and making Egypt "the second lowest in the developing world," Nazif said. A March 2001 EIU report that ranked countries according to "e-readiness" suggested that Egypt is a very promising newcomer, he added.

In the question and answer session that followed, Nazif dealt with the comparative advantages of Dubai and Egypt as centers for IT investment. "We don't really have to compete; we can complement each other," he said. "Dubai can be a window for us to the Gulf."

Regarding his role as head of the Telecommunications Regulatory Authority (TRA), Nazif admitted that "wearing two hats is a problem." He said that the current arrangement is considered transitional and that the authority would eventually be headed by someone other than the communications minister.

As for the long-promised partial privatization of Telecom Egypt, Nazif argued that the company is already healthy, so there's no reason to rush into a sale when market conditions are unfavorable. Eventually, he said, "we'll sell it for a fair and just price."

The event was attended by approximately 480 guests.

Sponsors:

• Booz Allen & Hamilton
• CBS-IESC
• Click GSM
• Compaq Computer Corporation
• Microsoft-Egypt
• Noor Advanced Technologies
• The Egyptian Co. for Mobile Services (MobiNil)

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