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 V.I.P. INTERVIEWS
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| | Could you update us on the present situation of the telecommunications and IT sectors in Egypt?
Today we are passing through some exciting times and changes. I think the most important thing today is that Egypt's leaders have very strong political commitments to the information and telecommunication areas. In September, His Excellency President Mubarak aroused a national program for the advancement of technology in Egypt at large. The information and telecommunication area was pointed to as the most important area to start with. As a result, Egypt decided to create a ministry for information and telecommunications. I think it is unique to the area and shows the strong commitment that the government is putting in the future of the country. We did this because we believe firmly that IT development will provide us with a very important mechanism and support for the social economic development of Egypt in the next decade or so. We see two goals to achieve:
First of all, to build a strong local IT industry. In this area we can make use of the large number of human resources of many young university graduates. Half of the population of Egypt is under the age of 30 and we feel that they are very well suited to this type of industry. We are in a position to provide Egypt with a very good opportunity to compete in a large global market. The reason is that this industry is service-oriented, and we feel that you can bridge the gap in services. The size of the international market is 1800 billion USD in information and telecommunication. More than half of that is software services, about 60%. We believe that Egypt can try very quickly to assume a fair market share in this global market, and a fair market share for Egypt would not be less than one percent, because Egypt has one percent of the population of the world. So we should have at least 18 billion dollars in this area. This is the first goal, to achieve this industry, to have this industry create jobs and opportunities for our young people, and to have it as one of the major economic attractions for the next century.
The second goal is building what we call the Egypt information society. Information technology will have many applications. It should become a very big part of everyday daily life in Egypt. This means in the daily life of the government, in its planning, decision-making processes, its services to its community and citizens, a major part in business dealings, commerce, and all that is related to it. You cannot really have businesses that are competitive in the international market without enabling them with the proper information department. A information society is needed particularly for education, in schools and universities, to be sure that our population is information literate and able to use computers because it is the way of life in the new century, in the everyday life of its citizens.
You have recently drawn up a very ambitious program for your sector in Egypt, the National Plan for Communication and IT. This plan works in different ways. Could you give us some details of the different target areas and groups, as well as the concrete programs, objectives and means to achieve them?
Since the establishment of the new cabinet in October, we came up with the CIT plan. That plan works in four main ways:
1) Human Resources Development:
We feel that the government and the community at large should invest a great deal towards helping the population to be more effective in using new technologies. We have a number of programs in this area, for example, the creation of an elite group of professionals that can be software or network engineers, programmers, etc. Essentially, these people will be highly trained, selected from top level university graduates, and put in professional training programs in close cooperation with multinational companies in this area, like Microsoft, IBM, Lucent Technologies, Sun Microsystems and Oracle. All these top companies in telecommunications technology are contributing to this program. They are helping us in defining what we need, what the professionals should have, and defining the training part itself: the materials, the courses, titles, and the professional work that needs to be done, because someone with a university education is still not enough.
This program will be executed by the private sector in Egypt in partnership with multinational companies. The goal is to prepare 5,000 new professionals every year. It is very ambitious. The program has already started. We have already tendered out to private sector companies and designed the program multinationals, so that part is done. The design is done and we are starting the execution this month. The average productivity of a professional in this area is about 40,000 US Dollars. Worldwide, some countries come close to 100,000. With 5000 new people every year, that is an enlargement of the size of that industry by about 200 million US dollars every year. Theses are conservative numbers because we believe that what we are doing will have spin-offs. It will have a ripple effect. And the government is introducing part of the program, but we believe that industry can grow further than that. In human resources development, we do not just stop at the professions.
To build an information society, you obviously have to go to all the other areas of society. So we have another ambitious training program. But that is not for professionals. Rather for computer literacy and creating good computers users. That again focuses on the youth, helping them find jobs by improving their skills. So instead of the professional training 6 months a year, you have small periods of time, say 6 weeks, that are on the introductory level, providing skills such as the internet, spreadsheets, word processing, etc. That program targets 120,000 Egyptians. To do it, we are focusing on already existing resources, i.e. training centers around the country. These centers will be upgraded, models will be established where we train trainers who train others creating jobs. It will be started by the government, but not totally funded by the government. In fact, we have already started 120 centres across the country. We expect that by June 1st, 2000 training will begin for about 20,000 people, and in one year the program will attain its full capacity of 120,000 people. The focus is to prepare our generations to move, to enter this industry and to build an information society.
2) Infrastructure:
To have an information society you need a very strong infrastructure of international standards. And we have declared that Egypt will have a state-of-the-art telecommunications center in three years, starting next June. This program has many components. Egypt envisions a very large change in the environment.
Egypt has started deregulating its telecommunications three years ago, providing licenses for the mobile phones and licenses for Internet, data communications and public phone booths. There are about 60 ISPs working in this area today. At the same time, it has moved to change the organization which used to be governmental, to become Telecom Egypt. This company is also one of the largest, probably the largest in the Middle East, with a large infrastructure of about 6 billion US dollars. The first and initial public offering will be provided for it by the end of the fourth quarter. This has not been decided yet, but it is coming. Right now it is managing the network of Egypt, all the text line telephony, the transmission and international tracking. It is a monopoly, so this is the start of the opening of the market and privatization. Telecom Egypt is a very successful, healthy company and we feel that it is moving very quickly to becoming one of the giants in the area. Through this processes of restructuring, deregulation, Telecom Egypt is moving from a governmental agency to becoming a real company.
We started from a very restrained environment, where all the tariffs were fixed and everything was controlled. Now we have formed three working groups working with the industry and the ministry in three areas. The first is technological. We are defining the new Egypt and what technologies which are needed. Last week we have just announced that we will have a very strong core backbone network for Egypt. Investments in this area are about a billion dollars in three years. We have also announced that we will have partnerships to develop Egypt within other businesses, not just mobile. We will have a new network. We will announce the detailed plan in June to be executed in three years.
The second group works with the Business environment defining the new services which will come into effect. The world is changing very quickly. The type of services that will be provided to the subscriber and the consumer in the telecommunication area and information technology is changing very quickly. We have groups defining the services the business structure so that next June we can in start opening licenses in a structured way.
The third group is the regulatory and organisation group. The plan is to issue a new telecommunication act, a new law for Egypt, to be able to cope with all these mentioned changes. We have a legal group and a technical group working together with a technical group to provide us with the first draft by the end of this month, and we hope that we can pass this law by the end of this session.
Considering the huge investments in infrastructure, we will have one of the strongest networks in the area. But we see that even that is not enough. It is difficult to compare to the rest of the area, and to richer countries like Saudi Arabia and the gulf area counties. By all standards and expertise, Egyptian networks are in a much better shape. There has also been a complaint, for example, that the international telecommunication tariffs were much higher in Egypt. Today we have lowered it to international standards. We did an original 25% decrease in December and another 25 % a year and a half ago. With these two changes today we are at the level and in many cases even lower than surrounding countries. We have lowered rates to the international standards and there will be a lot of changes in Egypt especially with the new challenges coming in. The important thing is that we are responding quickly to market demands.
3) Industry development:
First of all, all the experts agreed on a certain action plan and we are now into that action plan already. We have provided a special incentive package for the investment in this area. We are removing all taxes on software. We are reducing sales taxes on hardware from 10 to 5%. This was announced last week. We are including all the activities related to telecommunications and information technology into law aid, the law that provides certain incentives for investment in Egypt, including tax holidays. It is a special incentives law which focuses on special areas by providing investors with specific incentives like a 5-year tax break, full tax holiday. So talking about industry development, the first thing is incentives. | The second thing is that we are creating an industry development entity: an enterprise. It will be a partnership with the government. It will be supported by the government but run by the private sector, and it will do a number of things. The government will support it and provide it with all the clout it needs and to be impartial, and it will help start up companies like creating things like business incubators. This area does not require a lot of investment but needs to be supported. We are creating a number of venture capital funds. Two of them will be announced next month, specifically to finance start-up companies and the new ideas that come from them. We are also focusing on export development.
Through this entity we will be creating a new concept called smart villages. There will be a number of these high-tech areas in Egypt. The concept is that it starts with a small area, maybe one million square meters or so, where you can have a high concentration of high tech companies provided with the best infrastructure and services around. The first area has already been selected, 300 acres near the Giza suburb of Cairo, near the 6th of October City. Those areas will be promoted for international companies as well as Egyptian ones, and there is already a good feedback from industry development on this issue.
The last point is that we are also working in partnership with multinationals, like I mentioned with the human resource development. We are also talking about how we can promote work in Egypt in a number of ways. First, addressing the local market itself in partnerships and with technology transfer. The size of the local market is large. If you look at the telecommunications market alone, Egypt has 65 million people and the teledensity is of 10%. We would like to double it. Teledensity is the number of phones per 100 people, so we have 10 phones for every 100 people. We would like to double it. If you add to that the boom that will take place in information technology, we see a growth of about 35% in the number of users of PC and Internet users in Egypt today. Second only to China.
You have a country that is just waking up in terms of using information technology. A big boom is coming in this area and we need to capitalize on the local market in getting those multinational companies to take partnership with Egyptian companies and to deepen the value added part inside Egypt. For us not to be just receivers but to have the local content parts. On the subject of content, Egypt has traditionally always been the content provider of Arabic media. We are not talking about 60 million, but 250 million Arabic speaking people in about 25 countries or so. So it is different. We can have the base here, the multimedia base of the Arab world. Again we are promoting this because we feel we have a competitive advantage in making Egypt the Hollywood media center of the area. Actually the potential is big with the multinationals. Bring them here as a gateway to the Middle East and to Africa.
4) Information Infrastructure:
By that information infrastructure, I mean building up the information base. People working in Egypt need up-to-date information. To do that we need to build a number of data bases and network the information more and more. We have started that 15 years ago and a lot has been done but there is more to be done and a number of projects need to be executed to improve the way information is collected and distributed in Egypt. To do that the government has an important role to play. You are really getting two versions of one story because when you include these types of programs in improving the information provided by the government, you also create local demands for companies to work. You are improving the local industry and giving them chances to grow. We tell the government to put out a number of projects for the private sector to implement geared towards improving the information infrastructure. Examples include: having the governmental on line, government services, purchasing, accounting.
We are also looking for a government role in promoting and providing the environment for e-commerce. There are many necessities in technical and financial infrastructure to allow us to play an active role. In e-commerce the banks have to be involved, as well as an authority to allow the authentication of the processes taking place on the Internet, the financial transactions and regulations. There is an important legal aspect and a big initiative is taking place now on this subject.
In terms of national databases, we are improving a national ID program to give a card to every citizen and keep track of information, making a database of demographics and linking the databases together to use them in planning. We have a national database for certain kinds of ownership, properties and land ownerships. The third one is for economic activities, commercial registry and automation. We are automating the whole country and doing it to provide better services as well as good information for investors when they want to know specific information.
We are today in 20 different projects with the private sector. For example we are building a national network for tourism, one of the main inputs of Egypt and we feel that we need to have all of our tourist business on line. We need to be able to compete in the international market, make sure that you can make reservations on line. Promoting and getting these types of projects out quickly will help in restructuring the infrastructure and getting more business in the area of telecommunication, stimulating the demand of the market at the same time. This is our plan in a global sense.
Do you see a day when Egypt will become a regional IT hub, such as Ireland for Europe?
This is our goal. We will create a hub here and I do not think that any other country in the area is qualified to do that because you have to look at all the other factors, the infrastructure, the political side, the economic side, and the human resources. The potential is there. In the last few months we have signed many agreements with multinational companies interested in cooperating to do that.
Is the World Bank or other international institutions involved as well?
Yes of course. The World Bank has many programs in this area but so far in information technology and telecommunications we have not talked to the World Bank about financing or giving support. We think that the internal capacity in Egypt today would allow us to do a lot without going to the World Bank. There are a lot of donor organizations that are working with us and supporting our projects.
Concerning the floatation of 10 to 20 percent of Telecom Egypt, could you tell us about the latest developments?
We have a consortium working with us which is evaluating the company today. We will have the evaluation results hopefully by April and then we will start the promotion campaign during May, and before the beginning of June we will have the IPO issue. In terms of the amount that we will be putting out, you are right, it will be between 10 and 20 percent. We are also working on improving and restructuring the company to get the best out of our initial offering.
The government is committed to foster the development of telecommunications and IT in Egypt. What should be the role of the private sector in these common projects?
As I mentioned, we are in the planning stages and we have involved the private sector in the planning. By June we should have two main things: we will put out the new structure of the network, which will provide an indication of what Egypt's network will look like in three years and in 10 years. The second thing is that we will provide the framework for the private sector to participate in building this network. We envision this to be done through partnerships that will be licensed.
We have created something called the Telecommunications Regulatory Authority, and in June we will put out licenses. We will invite the private sector to come and partner with Telecom Egypt in all areas including the fixed telephony side. We envision this to happen in partnership in the first phase, not in competition, in order to make sure that we have a good chance of moving. Obviously partnership will create competition. But we will be looking very closely at a number of options, including breaking down companies, which has not worked very well in other countries. So we see partnerships as the best way to do it. Partnerships in access for building the backbone itself and partnerships in outside land areas. We see this as something that will strengthen our companies and even open up a lot of opportunities for the private sector to investigate the telecommunications.
The government does not intend to invest any more. That is not part of the plan for telecommunications. The investment will come from the private sector. But to do it in a structured way we need to have our plan out in defining the network and framework for the licensing.
Since one of the major problems of Egyptian economy is the balance of trade deficit, and the country needs to increase its exports and find new foreign currency earners, would the development of a local software industry be a solution?
Yes. We feel that we can easily build a strong industry that can contribute to our exports with at least 3 US billion dollars worth of exports. We can have those 5000 people a year. It is a very simple argument, each one of them can contribute to the exports by 40 thousand dollars. That is a billion dollars. So we can target with the multiplier effect to have an industry in 10 years with an export of 3 billion US dollars. This is sizable, and only includes software. If you try to extrapolate this in other service areas and if we can build Egypt to be the hub of those service areas in the region, I think that we would be able to contribute even twice as much.
As a conclusion, I think that this area is going to move. We do not have to focus on growing because it is going to grow on its own. We are becoming number one, and I think we are well suited for it. |
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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine. August 7th 2000 Issue.
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