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The investment climate in Egypt has witnessed major legislative and institutional reforms, with a tangible impact on both the level of domestic investments, as well as inflows of foreign direct investment (FDI).
The Egyptian economy has also been receiving historically unprecedented levels of FDI inflows, which increased from US$2 billion in 2004 to US$13.2 billion in 2008; and in 2009 alone, FDI reached US$8.1 billion. As a result, confidence in the Egyptian economy has been strengthened by the key role played by the Egyptian government, in terms of improving the outlook for Egyptian, Arab and foreign investments, as well as instigating and sustaining high levels of growth and employment opportunities.
Investors have responded positively to this business environment in Egypt, with close to half of companies operating under the umbrella of the governing investment legislations that have been established during the last four year-period. A positive response to streamlining investment procedures has been reflected in the increase in the number of newly established companies as well as expansions undertaken by companies already in operation.
On the non-bank financial services front, we have introduced mortgage finance to the Egyptian economy, implemented major reforms in the capital market and restructured the insurance sector. These regulatory reform measures have been initiated to allow the non-bank financial services sector to accommodate new products as well as position Egypt as the regional centre for financial services. As a result, the Nile Stock Exchange (NILEX) was established to be the first medium and small cap market in the MENA region; the Egyptian Financial Supervisory Authority (EFSA) was created; and an Auditors Oversight Board was set up.
The Asset Management Program has become a much broader version of the traditional privatization program. The Ministry of Investment has been responsible for supervising the implementation of restructuring programs for all SOEs, improving their corporate governance, and overseeing and managing the transformation of ownership to the private sector in cases of privatization.
With an array of investment opportunities, Egypt’s Ministry of Investment is currently supervising a number of 46 projects in sectors such as infrastructure and public utilities in different governorates throughout the country, at a total cost of US$ 16 billion. The projects range over various fields including roads, railways, ports, sewage plants, water plants, integrated development projects of the Upper-Egypt Red Sea Road, the Special economic zones in the North of West Suez Gulf, developing technological industries, integrated civil and commercial centres throughout Egypt, developing tourism and introducing new medical cities. This comprehensive Public Private Partnership Scheme aims at enhancing the quality of services available in the country.
 Egypt – A Safe Haven in the Center of the World:
"At more than 45 percent annual growth in sales, the Middle East and Africa is clearly our fastest growing area." Jean-Philippe Courtois, Microsoft CEO for Europe, Middle East and Africa.
"Egypt is vital to our Middle East and African business, and with a strong base in this dynamic marketplace, we see great e-business potential.” Stanley Krasnow, IBM Software Group, Vice President for Sales Operation.
Egypt has all the resources necessary for becoming a hub in the ICT industry in the Middle East and North Africa (MENA). With its ideal geography and infrastructure, Egypt could well become the ICT leader of the region in the near future.
Egypt's central location in the north east corner of Africa, between the continents of the world is an amazing asset for any investor who wishes to tap this region. As a political leader in the MENA region, Egypt provides excellent access to markets in the area, and acts as a bridge between East and West, North and South. Egypt is the perfect location for placing a regional office that covers the entire area, and the time zone allows two operation shifts for call centers (Europe and USA).
In a turbulent world, Egypt enjoys a great deal of political stability and peace. In addition, Egypt has an indisputable competitive edge on an international level, with good trade relations with all its neighbors in the region and the rest of the world. Businesses can thrive and expand in the stable Egyptian political atmosphere, without any unnecessary risk to investments.
The Business Environment:
"I am very delighted that I am here today to announce the inauguration of Oracle's Global Support Center in Egypt. The center is one of the main global centers that serve over 250,000 customers worldwide. Egypt was chosen for this project because of the huge improvement in the telecom infrastructure, the availability of technical engineering talents and calibers, and the flexible labor laws in the country." Tarek El-Saadany, Advisor to the Minister for Technology Policies.
Costs of Doing Business:
Egypt represents a low cost base, especially after the local currency was floated in 2003. Egypt has a skilled and competitively cost-effective human resources pool. Average pay is US$ 4 to10 per hour for programmers. The Egyptian government reduced investment capital needed for investing in Egypt by paying for the required training of the Egyptian professionals according to the investors' requirements. This directly adds to the investor's bottom line, hence providing higher returns on invested capital.
Egypt's Greatest Asset – Human Capital:
“With very limited investments we can exploit our best asset, which is our youth, given that more than half of Egypt's population is below the age of thirty. We can fill the technological and communications gap faster than we can imagine." Dr Ahmed Nazif, Egyptian Prime Minister.
With a population of about 73 million, Egypt is one of the most populated countries in the region. About 58 percent of the Egyptian population is under the age of twenty five, and more than 16 million young Egyptians are currently enrolled in primary, secondary, and technical education. Meanwhile, over 265,000 university students graduate each year, as do more than 1.1 million high school students.
Out of the total number of university graduates, 16,000 graduate each year from technical universities, and more than a third of them speak two or more languages. The number of graduates from government sponsored human development programs increases each year, adding to the 23,000 professionals in IT, communications and networks. The Government is also willing to pay for the training of Egyptian professionals according to investors’ requirements.
More than 120,000 Egyptians have completed the government sponsored IT Basic Training Program, which provides training in the use of computers, with the aim of making IT a part of daily life. At the end of the course, students take the UNESCO approved International Computer Driving License (ICDL) exam.
Egypt has a young, educated, cost-effective human resources pool that has proven its efficiency in many fields all over the world for decades. Egyptian programmers can be recruited from US$ 4 to10 per hour depending on experience, skills, languages and other factors.
Legislative Environment:
"Reducing income, corporate taxes, and custom duties of course is very positive. A more favorable tax system helps us invest further. We consider Egypt as being even more attractive now." Vincenzo Nesci, Vice President Middle East, and Chairman, Alcatel Egypt
In its constant endeavor to create an environment conducive to thriving investment, the Egyptian government has passed several laws with the aim of smoothing the way for investors in the ICT industry in Egypt. Among these laws are the following.
- Investment Law 8 of 1997, in which a great number of incentives for foreign investors are stated. The General Authority for Investment and Free Zones (GAFI) is the government body responsible for investor incentives and guarantees
- Intellectual Property Law 82 of 2002 ensures that patents, trade marks and copyrights are protected by law in Egypt. Violation of Law 82 can lead to heavy fines or imprisonment, a guarantee for investors that the Egyptian government is seriously committed to the protection of intellectual property.
- Electronic Signature Law 15 of 2004, which was passed specifically for the ICT industry and regulates electronic signature transactions (e-signature). The law has also included the establishment of an independent entity called the IT Industry Development Organization in which one of its mandates is the regulating of electronic signature and licensing digital certificates required for conducting any sort of electronic transactions.
- The Labor Law 12 of 2003 clearly states the rights and privileges of companies and employees. Article 69 of the law gives employers the right to suspend workers provided they commit one of several misdemeanors listed in this article of the law.
In addition to the above laws, the Egyptian government provides excellent financial, legal and operational facilities with the aim of promoting significant investment and growth in the ICT sector.
A Promising Prospect:
"Egypt is a promising market with a lot of potentials and offers an attractive investment environment."
Karim Fahmy, Country Manager, Egypt Levant and North Africa (ELN), Intel Corporation
Egypt is one of the most densely populated countries in the area and the Egyptian ICT market is a young and growing market with great potential. The number of ICT companies in Egypt has increased from 185 companies in 1998 to 15132 companies in 2005, an incredible 522 percent increase over seven years. However, the market is still growing and has the potential to grow even further. The Egyptian ICT market contains enormous untapped opportunities just waiting for investors to capitalize on.
The implementation of the WTO agreements and many other regional and international trade agreements means that Egypt has excellent potential as a regional exporter and provider to other markets in the area.
A high Tech Working Environment – The Smart Village:
"We are impressed with the quality of the software engineers available, as well as the availability of state-of-the-art infrastructure in the Smart Village. These factors have been key in our decision to increase our investment in Egypt."
Sergio Giacoletto, Oracle Executive Vice President Europe and MENA
On the outskirts of Cairo, close to the Pyramids, lies Egypt's first high-tech park, the Smart Village. With an area of 450 acres, the Smart Village is a large, high-technology zone that aims to be the all-round business district of the region. Several multinational giants have already set up in the Smart Village, and many more are soon to follow. The companies that have already moved to the Smart Village include prominent names such as Microsoft, Alcatel and Vodafone. In addition, a large call center, Xceed, which has a capacity of 2000 agents, has already started its services in the Smart Village.
The Smart Village's amenities include an enormous, modern conference center, public library, exhibition Center, hotel, health center, day care center, and an emergency services center.
Cairo’s Smart Village is only the first of several high-tech parks that will be located in cities all over Egypt. The Smart Villages are part of an initiative to create technology districts all over Egypt.
Smart Village Financial District:
The aim of the Smart Village is to create an all-encompassing hub of commerce in the region. For this reason the Smart Village also includes an entire financial district dedicated primarily to financial institutions, banks, and stockbrokers. Some of these financial institutions include the following:
- Cairo Alexandria Stock Exchange (CASE)
- Capital Market Authority
- Egypt for Information Dissemination (EGID)
- Misr for Clearing, Settlement & Depository
In the near future the Smart Village financial district will include an even larger number of financial institutions.
Smart Village ICT Infrastructure:
The main ICT infrastructure of the Smart Village consists of the following:
- High-speed network for data, voice, and video transmission.
- VPN connection, VoIP capabilities and data center.
- Cable TV and video conferencing systems.
- State-of-the-art power network that meets international standards and codes of practice.
- Uninterrupted power supply and standby generators.
Powerful Telecommunications Infrastructure:
International Telecommunications Hub
The Egyptian telecommunications infrastructure is engineered to provide substantial services and to absorb the rapidly growing ICT industry. With its current infrastructure, and the large number of international and regional fiber optic cables that pass through Egypt, the country has international and national links and reliable connectivity to the rest of the world. In this way, Egypt has excellent components for an emerging call-center hub. The following are the regional and international telecommunications links between Egypt and the rest of the world.
- SEA-ME-WE. This is the first submarine cable to pass between South East Asia, the Middle East and Western Europe.
- SEA-ME-WE-II. This is a second cable along the same route as the first, but serves more countries and uses digital fiber optic technology.
- SEA-ME-WE-III. This is a third cable using the same routing with extended coverage from Europe to Japan, Australia, and elsewhere in East Asia.
- The FLAG Project (Fiber Optic Link around the Globe). Egypt is a part of this worldwide project.
- A submarine cable shared with Italy and Greece.
- A submarine fiber optic cable shared with Sudan.Regional microwave links to Libya and Jordan.
- Telecom Egypt (TE) satellite earth station with multiple connections to Intelsat, Inmarsat, and Arabsat.
National Backbone Network:
Egypt's core infrastructure is based on optical fiber 10 Gbps and 2.5 Gbps rings. This huge infrastructure is the fundamental layer that connects and delivers services over PSTN, mobile and packet based networks across the country, in addition to Class 4 switches in Cairo and Alexandria respectively.
This nationwide optical core has been expanded not only to accommodate the increasing demand in voice and mobile services, but also to allow for fully fledged IP backbones to be built to absorb the exponential growth in data and internet traffic.
Multinational ICT Success Stories in Egypt:
Realizing the immense potential in the Egyptian ICT industry and the multitude of advantages Egypt enjoys, several ICT multinationals run their regional operations from Egypt. Industry giants such as Microsoft, Hewlett-Packard, and Alcatel are among the numerous multinational success stories in Egypt.
Government Incentive Packages:
As an indication of support for potential investors, the Egyptian government offers a generous incentives package to each investor. The government works in partnership with each investor to customize an incentives package to cater to the investor's needs. Examples of these incentives include the following:
- The Egyptian government offers special tax exemptions and reductions for ICT industries.
- There are special reductions on land prices for investors in the ICT sector.
- Easing of export and import regulations.
- The Egyptian government offers training programs for professionals in the ICT industry that investors intend to recruit. The government offers training in IT, communications and networks according to investors' standards and specifications. These training programs are often offered at the government's expense.
- The Egyptian government assigns a government official to facilitate interaction with government organizations.
Resources:
- Information Technology Development Industry Agency –ITIDA
- CIT Egypt Website
- Egypt Expatriates Website
- Egypt On PUBLICATION: Investor's Guide
- IT Industry National Development Strategy: Targeting Export Growth, June 2006
- IT Industry National Development Strategy: Targeting Export Growth – Status Review, May 2007
- Why Egypt ? Your guide to Egypt’s strengths as an outsourcing destination
For More Details please visit the Investment Portal: www.investment.gov.eg/
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