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Egypt's Burgeoning It Sector Continues To See Growth Despite Downturn

As one of the few sectors in Egypt that continued to show strong growth during the economic downturn of the past five years, 2005 looks likely to turn out to be an eventful year for Egypt's burgeoning IT sector. According to official statistics, youth has given the sector some tremendous growth figures, hitting 16% over the past few years, compared to a real GDP growth rate of around 2%.

With the economy as a whole re-energised by the stabilisation of the Egyptian pound, along with new monetary and economic reform policies, CEOs are predicting even higher growth rates in the next few years, as firms across the economic landscape invest in more IT.

With the popular former minister of communications and information technology (MCIT), Ahmed Nazif, having become prime minister, the sector is confident that it will continue to receive the attention of the government. Indeed, Nazif is said to be fond of finding technological solutions to social and economic problems. For instance, he is championing the use of smart cards to better target food subsidies - an application that could eventually extend to other subsidies, such as those on fuel. His new cabinet has also created a new position, minister of state for administrative development, which has been filled by MCIT consultant Ahmed Darwish with a mandate to focus on e-government.
Meanwhile, the outlook for public-private partnerships (a favourite term of Nazif's) is bright, as are large government contracts for IT and related firms. Major industry players say that government work represents 60-70% of the total market, most of it going to large multinational corporations and their local partners.

A visit last week by the king of geeks himself, Microsoft Chairman Bill Gates, put the ultimate stamp of approval on the Egyptian government drive towards making bureaucracy smart. Gates was in Cairo - a city he frequently visits and whose Microsoft subsidiary has been named the company's best in the Europe, Middle East and North Africa region. This time he was in town to launch Egypt's new investment portal: (www.investment.org.eg), a web site dedicated to attracting foreign direct investment (FDI) into the country, and which Microsoft helped build. Attracting FDI has been made the Nazif government's most important priority, and a new Ministry of Investment, headed by a young, outspoken and economically liberal professor of economics, Mahmoud Mohieldin, has been created. The idea behind the portal, Mohieldin told reporters at the launch, is to make economic and investment information about Egypt more readily available. The availability of information is no longer a privilege to be taken away, he said.

The portal's creation coincides with a joint announcement by the government and the International Monetary Fund (IMF) that Egypt will from now on adhere to the IMF's Special Data Dissemination Standard, a framework intended to guide the institution's members in the provision of their economic and financial data to the public by focusing on four dimensions of data dissemination. These are: coverage, periodicity, and timeliness; access by the public; the integrity of the disseminated data; and the quality of the disseminated data. The move will hopefully avoid the sometimes embarrassing incoherence of key macro-economic data across different ministries that has been a problem in the past.

But Gates was also in Cairo to announce that Microsoft would soon be doubling its USD150m investment in the country, and to open Microsoft Egypt's Innovation Centre - a research and development facility that will also provide training to young Egyptian computer engineers.

Microsoft enjoys a privileged position in Egypt, where it has been the government's partner in a number of public initiatives that have helped make IT more accessible to middle-class Egyptians and students of all ages. A PC for every home initiative, for example, makes cheap computers available along with discounted Microsoft software such as Windows XP. Another programme subsidises the company's Office suite for university students. This preponderance of Microsoft products - as in many other countries - has made some proponents of open-source software (a movement still in its infancy in Egypt) nervous that the education sector, for one, will be a de facto Microsoft monopoly.
In the meantime, technology companies like Microsoft or IBM (or in telecoms Alcatel and Siemens) are playing a major role in funding training programs for computer engineers. These companies naturally hope that the graduates (which they often recruit from) will show a preference for their products - an arrangement that seems to suit all parties involved.

As a result of all this, at Cairo ICT 2005, a trade fair that takes place annually during the first week of February, the dynamism of the sector was in evidence. Along with stalls offering bargain basement discounts on hardware and software, the country's leading companies competed to get the attention of trade specialists and the general public. With the fair growing in size each year, it could be a good indicator that the sector is still generating a lot of buzz - something that is confirmed by this week's endorsement by the man who controls over 55% of world's software market and whose products are on at least 90% of all computers.

It is a very short period since the last time I was here, but I have followed closely the developments that have taken place in recent months, Microsoft's Gates told businesspeople at a meeting of the American Chamber of Commerce in Egypt during his visit. The very strong and positive steps that have been taken enhance our opportunity to make business here. I am very optimistic.

Marseille,02 28 2005
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