By targeting the Middle Eastern and African markets, Egypt has grown into a destination for the region's information technology industry. In five years, Egyptian IT exports have increased 300%, reaching $1 billion. But Egypt's ambitions are aimed at claiming a greater portion of Western markets as well. The country touts its telecom infrastructure, its close location to Europe, and a worker pool that is multilingual and affordable — advantages that are also cited by Amin Khaireldin, an evangelist for Egyptian IT. Officially, he is strategy advisor and member of the board of directors of the Information Technology Industry Development Agency (ITIDA) of Egypt. For the first 30 years of his career, Khaireldin worked for IBM Egypt before moving to Europe to manage IBM operations and strategy for the Middle East and Africa regions. In 2000, Khaireldin returned to Egypt, and led a national effort targeting ICT (information and communication technologies) export growth, resulting in the formation of the IT industry national development strategy. He remains in charge of executing the strategy. In an email exchange with Arabic Knowledge@Wharton, Khaireldin spoke on a variety of issues.
The following is an edited excerpt:
Arabic Knowledge@Wharton: Egypt's IT exports have just touched $1 billion. You can see this as either rapid growth – it was $250 million five years ago – small compared to India's $50 billion. What is your take on this and how do you see the future?
Amin Khaireldin: The ICT sector is one of the fastest growing in Egypt. Exports increased from $250 million in 2005 to $700 million in 2008, but our ambition does not stop there. Egypt's goal is to surpass $1.1 billion in exports by the end of this year and we are on track to achieve this. It has been estimated by [consulting firm] A.T. Kearney that the size of the Egyptian offshore services market will quadruple by 2010, compared to 2005.
We see Egypt as a strong partner for the Indian outsourcing industry rather than as a direct competitor, particularly in the call center/BPO [business process outsourcing] end of the market. Egypt is ideally placed to support Indian outsourcing companies in this area, and its proximity to Europe and the Middle East, abundant talent pool and low-cost infrastructure allow it to do so competitively.
American IT giants IBM and EDS have had operations in Egypt for some time, but now Wipro and Infosys are aggressively expanding into Cairo, taking advantage of the availability of low-cost, qualified people. Egypt is also a service provider for companies in other Middle Eastern countries.
At ITIDA, we are expecting to see more multinational companies moving operations to Egypt as they look for a location that is well positioned and cost competitive while offering language and competency skills that are not widely available in other markets.
Arabic Knowledge@Wharton: You are somewhat late in tapping the IT outsourcing boom. How do you propose to catch up?
Khaireldin: Egypt has been highly aggressive over the past decade in delivering on major infrastructure, bandwidth and educational and telecommunications projects to drive increased interest in companies looking to establish major global service delivery centers in the country.
We have seen huge growth in the ICT sector in recent years, despite the globally challenging financial climate. In the past 12 months alone, Egypt has seen several landmark transactions of new multinational companies investing in the country as well as existing centers expanding their capacities significantly.
Egypt has also invested heavily in infrastructure and has established the Smart Village, a 32 million-square-foot business park on the outskirts of Cairo, which is at the heart of the ICT business environment in the country. It provides state-of-the-art facilities to organizations and is home to technology suppliers, service providers and firms operating in sectors with extensive IT demands, as well as ITIDA itself.
Built and already occupied by multinational companies, including Microsoft, Vodafone, Ericsson, Alcatel-Lucent, Oracle and IBM, Smart Village allocates 10% to buildings and 90% to landscaping. There are currently 36 companies and 22,000 professionals at the Smart Village, and there is capacity for future growth, with room for 80,000 employees in total.
In addition, the first of three buildings in the Maadi Contact Center Park was inaugurated in May 2009 and, when fully operational in 2012, will accommodate 40,000 seats and hold 30,000 BPO employees in over 40 buildings and 2 million square feet of prime real estate. It will be equipped to cope with the country's fast development in the communications and information technology industry, and to benefit from Egypt's exclusive and strategic advantages, namely the availability of a qualified and multilingual workforce, excellent infrastructure, strategic location and political stability.
Arabic Knowledge@Wharton: Your major targets are apparently the Middle East and the African markets. Do these have adequate potential in the short term? Isn't the money in the West?
Khaireldin: The Middle East and Africa region is indeed a major target and Egypt is an outsourcing hotspot for companies from these regions. Part of that is because of its geographical location and the Arabic language skills it can offer, which are not widely available in other outsourcing locations.
However, our ambition goes beyond the region. We are attracting companies from around the world, including the U.S., the U.K., France and Germany, because of the benefits we have to offer companies from those markets.
Language is key for companies in the West, particularly those from Europe. Egypt's language skills make it an attractive option. Egypt has 330,000 new graduates every year, with some 31,000 capable of speaking different languages. For example, English is spoken by about 26,000; around 3,000 speak French, while approximately 800 speak German.
Arabic Knowledge@Wharton: What is the size of the domestic market in Egypt? In countries such as India, the MNCs [multinational corporations] have captured this market while Indian companies concentrated on dollar earnings. What has been the experience of Egypt?
Khaireldin: In 2009, Egypt established itself as one of the world's top outsourcing offshore destinations. The year 2010 will see Egypt build on this. There are currently 15,000 direct export-oriented jobs, 22,000 for domestic business accounts, and over 50,000 indirect jobs are supported by the industry.
ITIDA is the Egyptian business partner making sure that the Egyptian companies get the support they need. We are primarily concerned with building the capacities of the local IT companies, attracting and servicing multinational IT companies, and growing a qualified, sustainable, and deployable talent pool. ITIDA adheres to a public-private partnership mode to achieve the goals of the IT industry and create a business environment where cooperation is a salient feature.
Arabic Knowledge@Wharton: How has the crisis in the West affected Egyptian IT companies?
Khaireldin: Despite the global crisis, the ICT sector has continued to grow. Last year, Egypt announced a growth of 14.6% in the ICT sector over the fiscal year. Several multinational companies have expanded or outsourced their business to Egypt in the past 12 months, and the country is continuing to support the development of the industry through investment in infrastructure and education.
Arabic Knowledge@Wharton: Egypt seems to be leveraging the cost advantage. But that doesn't last as wages rise and other countries offer the same. What other USPs (unique selling propositions) are you trying to develop?
Khaireldin: Cost competitiveness is one of Egypt's attractions, but we are investing heavily in our talent. A competitive pool of human resources, a stable macroeconomic environment, strategic geographical locations, government support, telecommunications infrastructure and an improved business environment are the ingredients of stable costs.
ITIDA's human-capital development program seeks to provide world-class training and academic initiatives to build a skilled workforce and create ICT professionals from promising graduates. The overall strategy simulates multinational training programs, including sales, marketing, business development and finance.
The ministry of higher education and scientific research and the ministry of communications and information technology have joined forces to introduce "employability" skills programs in the tertiary education stage, in a project entitled EduEgypt.
EduEgypt supports undergraduate training using soft skills, language abilities and technical competence, enhancing the skills of Egyptian university graduates and preparing them for local and global marketplaces. This effort is a part of a workforce development initiative aimed at reducing the gap between student readiness and employer expectations. The initiative has produced 5,000 graduates in its first and second years and aims to supply the market with 20,000 graduates per year by 2011.
Existing educational initiatives have partnered with multinational companies such as Oracle, IBM, Microsoft and others to develop outstanding skill-based programs that are affordable for the local market. Core projects include the Nile University, the ICT Professional Training Program, the Export and Investment Promotion Program and the Medical Transcription Training Program.
Arabic Knowledge@Wharton: How many Indian companies have set up base in Egypt?
Khaireldin: We have a number of Indian companies investing in Egypt, including Tech Mahindra Satyam. Egypt is ideally placed to support Indian outsourcing companies in this area. Its proximity to Europe means similar time zones and shorter flight times. It is thus very competitive.