The American Chamber of Commerce in Egypt hosted a special luncheon in New York City on June 22 featuring Minister of Communications and Information Technology Tarek Kamel, who was on a six-day official visit to the US with stops in New York and Washington, DC. Kamel spoke about recent changes in Egypt’s economy and how those changes are impacting investments, particularly in the IT sector.

The luncheon, held at the St. Regis Hotel in New York City, was attended by over 200 executives, representing US finance and business corporations. The event was sponsored by Cisco Systems International, Microsoft, Morgan Stanley and Telecom & Technology Company (TeleTech); and supported by Citigroup, Lucent Technologies and The Bank of New York.

In his opening remarks, AmCham president Taher Helmy spoke of Egypt’s favorable investment climate and the opportunities it has created. He noted that foreign direct investment (FDI) to Egypt tripled to reach $4 billion in 2005 – growth he attributed to recent reforms of fiscal and monetary policy, new customs laws and privatization.

Concerning Egypt-US trade, Helmy said a marked growth in bilateral trade was a result of the qualifying industrial zones (QIZ) agreement signed in December 2004 between Egypt and Israel. The deal grants Egyptian manufactured products quota- and duty-free access to the US market provided they contain 11.7-percent Israeli content. Helmy said that as a result of the QIZ agreement and other trade initiatives, he expects to see trade with the US, which amounted to over $5 billion last year, reach $7 billion in a couple of years.

In his keynote speech, Kamel offered insight into the economic and political reform process and the role that the IT industry and its deregulation have played. He stressed that competition is the organizing principle of ongoing economic reform, citing the establishment of a consumer protection agency and a competition authority as positive developments in this direction.

Egypt ’s IT sector has expanded in the last several years, employing over 40,000 people with total investments topping £E 30 billion. Yet Kamel says reforms are still needed. Specifically, he discussed a new framework for convergence, a new education quality assurance and accreditation agency, and the restructuring of subsidies and tariffs in fixed services

As examples of positive IT reform, Kamel cited the success of an initiative to proliferate broadband service in rural areas. He also pointed to the successful IPO of a 20-percent stake in state fixed-line monopoly Telecom Egypt (TE), which resulted in $1 billion in revenue to the Ministry of Finance.

He went on to discuss improvements in mobile technology. In 2005, he said, there was significant growth in second generation digital technology, known as 2G and 2.5G services. The number of subscribers to these services in Egypt now exceeds 15 million.

As a further sign of a robust industry, Kamel highlighted last month’s auction for Egypt’s third mobile operator license, which drew bids from international firms. The license, which sold to a consortium led by UAE-based Etisalat for a whopping £E 16.7 billion, promises to bring 3G service to the country by early next year. It will also contribute to increased competition in the mobile market and greater penetration, potentially doubling the number of Egyptians who own mobile phones by 2010.

“This is another success story that really shows the responsiveness of the international community to the investment climate in Egypt, to the transparency with which this sector is being managed, and to the increasing market that is really providing excellent investment opportunities in the IT sector,” said Kamel.

The minister outlined a number of other investment opportunities that have come about as a result of the deregulation of Egypt’s IT sector, such as postal reform, convergence services and upcoming licenses for international voice calls. He also anticipates a second fixed-line operator by 2009.

Kamel moved on to the issue of public-private partnerships (PPPs), noting that they have played a key role in IT development. He outlined three initiatives, the first of which aims to reform the education system using IT in pre-university and university level education. According to Kamel, the initiative’s first phase will introduce broadband connectivity and e-learning assistance to 2,000 preparatory schools. The project was launched in June in partnership with Cisco, Hewlett Packard, IBM, Oracle, Microsoft, Siemens, Intel and Lucent.

The second initiative aims at increasing broadband usage in Egypt. “We are fully convinced that broadband, DSL and Internet penetration [comprise] the backbone of the economic and political reform process in Egypt,” he said. “It is the backbone for opening up society, for tolerance, cultural diversity and for further interfacing with the rest of the world.”

Kamel noted that TE’s support for the Universal Service Fund allowed the ministry to lower DSL and broadband rates by 40 percent in June and to subsidize rural areas in order to decrease prices. This should greatly increase Internet penetration and usage.

The third initiative was the establishment of research and development centers. Kamel said the ministry is partnering with several multinationals, including Microsoft, IBM and Cisco, to establish R&D centers in Egypt that will foster innovation in data mining, wireless technologies and mobile services.

John Meyer, president of Lucent Technologies Global Sales & Services, took the stage to discuss how communications play a role in emerging nations. He also examined how economies can take advantage of communications growth to become further connected to the global economy, noting that geography is no longer a barrier to communication. “It’s not where you are or how far away you are [that’'s important], but rather how you are communicating across the global village network and offering near universal access to information.”

Meyer also summarized Lucent’s history in Egypt, which goes back to 1982, and in the region. “ Egypt continues to be a very important place for Lucent to invest in and conduct our business,” he said, noting that Lucent generated $8 billion in revenue across the Middle East over the last six years.

Egypt can take advantage of the evolving IT marketplace if it focuses on the best ways to distribute products to end consumers, Meyer said. “Making this a reality, especially at an affordable price, will take a combination of systems, services, technology and a strong research and development capability to help the service providers take care of that.”

In closing, Meyer praised the reforms of the IT sector in Egypt, particularly initiatives such as the Smart Village, “A PC in Every Home” and an education program that partners Lucent with rural schools to provide broadband service.

The luncheon’s final speaker was Robert Shepardson, managing director of global capital markets, Morgan Stanley, who spoke about some of the key trends around convergence that are affecting the industry globally. He explained that convergence evolved from the debate over fixed and mobile technology. Industry responded, and the key players developed convergent solutions. “As the Egyptian telecom and IT sector is evolving so quickly, driven by the program of reforms implemented by the government, these trends are already affecting the Egyptian telecoms and IT landscape and will intensify quite rapidly,” he said.

TE and other telecoms in the Middle East can create business opportunities in mobile, broadband and content, Shepardson stressed. Telecoms will be the drivers of convergence since they have the scale, deep pockets and resources relative to other competing sector players, which tend to be more fragmented.

Looking toward the future, he pointed out that “ Egypt is already seeing the beginnings of convergence and we see a very bright and exciting future in Egypt as these trends play out and drive dramatic growth.”

After the luncheon, a signing ceremony was held between the Ministry of Communications & Information Technology (MCIT), Lucent, Telecom Egypt (TE) and Lucent’s business partner in Egypt, TeleTech. Lucent signed a non-binding memorandum of understanding (MOU) with Teletech to provide it technical support and services in connection with TeleTech’s proposed optimization of TE’s network. At the same signing ceremony, TeleTech signed a similar MOU with TE. Lucent also signed a tripartite non-binding MOU with both TeleTech and MCIT, under which Lucent may provide high-speed data (Internet) access to schools within the coverage of an existing fixed wireless TE network (CDMA 1X) project in the Delta and Alexandria region. The target schools are part of the Egyptian Educational Initiative (EEI).