AHMED Nazif, Egypt’s newly appointed Minister of Communications & Information Technology, is a man with a mission. He wants to galvanise the Egyptian IT sector so that it becomes one of the leading local industries and adds a major new dimension to the country’s export potential. Nazif is approaching this task using both arms of his newly created ministry. He is pressing ahead rapidly with the restructuring of the telecommunications system to make it more responsive to the needs of IT users, and he is seeking to stimulate rapid growth in the IT industry itself through upgrading the technology systems in all government departments and public sector organisations.
Nazif has set out a number of strategic targets. He is aiming to increase the number of IT specialists in Egypt over the next five years by 5,000 a year, which is double the present level. At the same time, he is seeking to raise the productivity of each IT worker to $40,000 a year from about $10,000 – in effect raising their turnover to $1,000 million a year from $50 million at present. Another element in the plan is to train 200,000 people a year in how to use IT. This programme is being supported by Microsoft Corporation of the US, which in January signed a protocol which included the provision of software for 100,000 students in Egyptian universities.
Microsoft’s support was first announced in 1997, but has been made contingent on progress made in combating software piracy. The government claims it has made significant progress in applying laws protecting intellectual property. Nazif on 23 January drew attention to a recent conviction by an Alexandria court of a businessman found to be using pirated computer programmes. He was sentenced to six months in jail. Nazif said he hoped the case would draw attention to the dangers of using illegally copied software.
The government has now embarked on a project aimed at increasing demand for locally produced software. Nazif’s ministry is co-ordinating a scheme whereby IT specialists have been assigned to every ministry and government agency to assess their computer needs.
‘They are building a distributed incubator for the software industry,’ says Tewfik Elbardai of National Telecommunications Company (NTC) which is among the groups bidding for this work. Most companies active in the business have submitted prequalification bids, and it is expected that within six months the first contracts will be placed by the various ministries and government agencies.
Elbardai says NTC has formed a new venture with a US-based company to bid for this project. ‘At the moment, there are not enough qualified people in Egypt,’ he says. ‘If you want to expand the software industry you need a partner, just the same as is the case for hardware.’ Elbardai declines to identify his partner.
Another leading local group pitching for the new business is Raya Holdings, which now boasts seven subsidiaries working in the IT and telecoms sectors. ‘The government is trying to boost private sector investment through identifying national IT projects,’ says Raya chairman Midhat Khalil. ‘I see this as a very positive step.’ Raya, which raised some$40 million in new capital as part of a consolidation exercise carried out in early 1999, is now planning a major new capital increase, likely to include an initial public offering (IPO).
Khalil says this will be aimed at financing the formation of new companies to extend the group’s software development capabilities and telecoms services. The deal, to be arranged by EFG-Hermes, will entail increasing paid-up capital to £E 350 million ($102 million) from £E 50 million ($14.6 million) at present. Khalil says group turnover reached £E 235 million ($69 million) in 1999, and is expected to more than double in 2000.
The government is pinning high hopes on the future export potential of the IT sector. However, Khalil says it is unrealistic to expect significant export earnings in the short term. ‘We have still got a lot of work to do to develop a mature industry in Egypt.’
An essential element in that development is the modernisation of the telecoms system. Nazif has set up working groups, to carry out a restructure the internal operations of Telecom Egypt, and has sharply cut international charges and fees on lines leased to internet service providers. He has also approved the formation of a joint venture between privately owned Ritsec and Telecom Egypt that will set up and operate a telecoms backbone for internet users. The next step will be the privatisation of Telecom Egypt itself. Nazif says he expects the first 10 per cent tranche, worth some $600 million, will be offered to investors in the second quarter of the year.