Presented by:  

Walid Gad Chairman of the Egyptian Hi Tech Association (EHITA) 

EHITA

• An NGO representing 80 medium and large companies in the areas of IT H.T. our members are major companies in the S/W development, system integration, telecommunication and electronics area.

EHITA’s Mission

To participate in setting the ICT strategy for Egypt.

Subject today is:

The review of the IT services in Egypt and the possible effects of the liberalization of this sector and benefits to the IT sector if our request for liberating other markets were

achieved.

IT Spending in Egypt

050

100150200250300350400450

US $ Million

Hardware PackagedSoftware

Services

200020012002

Relative weights of Computer Services Sub sectors 14%

17%

34%

19%

16%0%

IT Consulting Implementation Support Services

Operation Management Training & Education Slice 6

Share of Computer Services Users 23%

11%

20%13%

10%

4%

2%

17%

Financial institutions & Banking Commercial & Trade SectorIndustrial Sector Educational institutions & researchindividuals Tourism SectorsConsulting Other Services

Relative Importance of Factors Affecting Demand in Various Sectors (%)

FactorFinancial, Brokerage

&ConsultingTrading

Other Services

Industrial

Quality/Reputation

35 25 40 30

Price 25 35 25 35

After Sales Service

25 20 25 20

Terms of Payment

12 16 8 10

Others 3 4 2 5

Total 100 100 100 100

Foreign Companies in Egypt

• Always been in Egypt.

• Formal presence since the twenties before that cross border.

• Enjoys all the benefits of the Egyptian Companies.

• Only restriction is on owing land, importation and some limitation on employing foreigners.

• But this this not unique to the IT sector.

Foreign Companies in Egypt

• Have represented a major pull of the IT society in Egypt, by bringing in leading edge technologies, training and developing staff.

• Most of the large Egyptian Companies are managed by Egyptians that worked trained and developed in foreign companies.

• Associations allow foreign companies to join as much as they do for Egyptian Companies.

Percentage of Value of Services , 2002

0

10

20

30

40

50

60

70

%

IT Consulting Implementation Support Services Operating management Training & Education

National Domestic Sales National Exports Multinational Domestic Sales Multinational Export

Investment in Computer Services

0

500

1000

1500

2000

2500

3000

US $ Millions

Egypt Indonesia Israel Malysia Arabia S. Africa Turkey

2002

2006

The following summarizes the economic impact of computer services:

  Direct Indirect Total

Value added (Value Added Coefficient)

0.8 0.65 1.45

Employment (Number of employees)

1.0 6.00 7.00

Exports ($ million) 50

200

250

Strengths, Weaknesses, Opportunities, and Threats Analysis

Strengths

• Lack of barriers to trade in IT• Growing demand resulting from large-

scale projects in the financial, telecommunications, energy, and manufacturing sectors as well as an increasing level of automation in the government.

• A young, educated labor force and a low cost of labor.

Strengths

• Egypt’s strategic location as the gateway to the Arab and African markets

• Time zone difference between Egypt and North America enable a second work shift for North American companies.

• A majority of computer services providers know both English and Arabic.

• Access to a high-speed communications network.• Investment incentives and tax exemptions.

·  

Weaknesses• Lack of business development services in the

computer services industry.• Shortage of IT graduates with managerial and

entrepreneurial skills who can fill the market needs.

• Focus by the private sector and public procurement sectors on price in general rather than quality of service.

• Lack of financial schemes to support start-up computer services companies (particularly for small and medium enterprises).

  Weaknesses

• Lack of individual consumer base for computers and computer services.

• High price sensitivity for SMEs in computer services purchases.

• General bureaucracy and difficulties in licensing companies (for all types of businesses).

• Lack of targeted export promotion program.

Opportunities • Development of a clear and flexible strategic vision for Egyptian computer services through a joint public– private sector endeavor that will be reviewed on an ongoing basis.

• Creation of the Pyramids Smart Village to centralize Egypt’s qualified labor and infrastructure to compete globally in the free market.

• Implementing training programs to increase the number of qualified computer services providers.

Opportunities• The currency devaluation— a short term

opportunity— could help companies promote exports while protecting providers of local services sector (if companies act immediately).

• Creation of a national legislative environment to encourage foreign direct investment in the sector.

• Attracting international producers interested in

subcontracting programming of tailored applications.

Opportunities

   Providing online content for the Middle East and North Africa.

·   Growing demand for application development, hardware and software installation, system/network implementation, and network integration from Egyptian companies needing to improve their operation systems.

·   Going beyond the Arab markets to build a strong presence in the European and American markets for more and faster transformation of technology.

Opportunities

• Establishing an export development organization responsible for promoting computer services exports and assisting developers and producers in marketing services globally.

• Making funds, aids, and financing facilities available to the local industry.

• Establishing R&D base depending on the academic and research institutions.

Threats

• Widening supply gap in well-trained human resources due to the ongoing brain drain.

• Fear of foreign competition leading to reactionary protectionism while the computer services sector (and all IT sectors) thrives on the global

exchange of ideas.

The WTO GATS NegotiationsModes of supply

Market Access National Treatment Cross border supply.

Consumption abroad.

Commercial presence

Presence of national persons.

Recommendations

Considering:

• The strengths and weaknesses of Egypt’s computer services market.

(2) The critical role of free trade, including Egypt’s membership in the WTO Information Technology Agreement, in ensuring access to global technology resources in the development of a vibrant global IT industry.

Recommendations

3) The number of countries that have taken commitments and benefited (or not been harmed) by the commitments.

(4) Egypt’s strong and vibrant IT computer services sector.

It is recommended that Egypt undertake

full and binding obligations to trade in computer services.