Egypt draws up ambitious plan for booming IT sector

Over the past two years, Egypt’s IT sector has been growing 2.5% annually.
April 15, 2018
Growing sector. An Egyptian man talks on his mobile phone in front of the Ministry of Communications and Information Technology headquarters in Cairo.                                                  (Reuters)
Growing sector. An Egyptian man talks on his mobile phone in front of the Ministry of Communications and Information Technology headquarters in Cairo. (Reuters)

CAIRO - Egypt has unveiled an ambitious plan to raise its information technology (IT) exports and increase the contribution of the sector to the country’s gross domestic product.

The plan, formulated by and to be implemented by the Communications and Information Technology Ministry, seeks to turn the IT sector into a main driver of Egyptian economic growth. It is part of Cairo’s efforts to diversify the country’s economy and end dependence on traditional income earners, such as tourism, agricultural exports and the Suez Canal.

The plan, Communications and Information Technology Minister Yasser al-Qadi said, looks to raise IT exports to $20 billion annually by 2025 from $3.3 billion now. Egypt’s IT exports were $1.8 billion in 2016, the ministry said.

“It will also raise the contribution of the IT sector to the gross domestic product to 8%, up from 3.5% now,” Qadi said.

In 2017, Egypt’s web-enabled service industries, including export, onshore and in-house services, employed more than 292,000 people. The Massachusetts-based global research and consulting firm International Data Corporation (IDC) said it expected Egypt’s web-enabled service industry to employ 378,000 people by 2020.

Over the past few years, IDC said, Egypt has been at the centre of interest from multinational companies seeking to engage offshore IT services.

Major information and communication technology companies are establishing service delivery centres in Egypt to handle their global operations, IDC said in a report released in February. The companies include IBM, which has set up six centres in Egypt; Valeo, which has its main R&D centre in Egypt; and Mentor Graphics, which hosts its biggest R&D centre outside the United States in Egypt.

Over the past two years, Egypt’s IT sector has been growing 2.5% annually and the new plan set a goal of a growth rate of more than 15%.

“Egypt has what it takes to become a regional hub for data centres,” said Hamdi el-Laithy, head of communications at the IT Chamber of the Egyptian Federation of Industries. “Huge work is being done at the national level to achieve this goal.”

This work includes construction of seven technological zones outside Cairo. The zones are being established, among other places, in the southern province of Asyut, the northern coastal city of Alexandria and the central province of Beni Suef.

Construction of the technological zones is to be completed this year, with operations beginning soon afterward. Officials said they hope the zones convince tech companies to relocate their businesses to Egypt and will include state-of-the-art training centres to provide a qualified labour force.

The new plan of the Communications and Information Technology Ministry includes an aspect to increase locally made inputs in the final products and services produced in Egypt.

Qadi said outsourcing will be crucial to implementing the strategy. “Outsourcing is actually one of several pillars on which the strategy is built,” the minister said. “Other important components of the strategy include the localisation of technological industries, attracting more technological investments, modernising the communications infrastructure and opening new regional and international markets.”

There are hopes that online outsourcing will increase Egypt’s hard currency inflows and ease pressures on the trade and payments balances.

Egyptian policymakers said that outsourcing has great potential in a country where more than 800,000 university graduates enter the labour market every year.

Egypt’s economic reform, which has included the flotation of the national currency, has led to a severe drop in the exchange rate of the Egyptian pound. This drop has caused suffering to local consumers but is giving Egypt an edge as an outsourcing centre for IT industries.

Greater focus on the IT sector as a driver of the economic growth will benefit the economy, reduce pressure on other sectors and help Egypt’s economic policymakers draft long-term plans, economists said.

There is also demand for IT products from emerging markets, especially in the African continent and Egypt can use its proximity to reap greater dividends.

“We have a huge pool of skilled labour, infrastructure and a competitive environment to IT investments,” said Yumna al-Hamaqi, an economics professor at Cairo University. “All these advantages should give us an edge that compounds our country’s proximity to markets where there is demand for IT products.”

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