Egypt
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Egypt is changing the world’s perception about the country, from being the home of history toward a nation with competitive edge
By: Kate Tulloch-Hammond, Director, Media & Communications, IAOP
Cost Benefits—Among Other Factors—Make Egypt an Ideal Outsourcing Destination
Rising in popularity as one of the leading global outsourcing destinations, Egypt is a key location identified for outsourcing, shared services and captives in Europe, Middle East and Africa (EMEA). Awarded as the ‘Outsourcing Destination of the Year 2016’ for the European Outsourcing Association (EOA) Awards, Egypt’s role in the outsourcing industry is not new. Between 2006 and 2010, the country’s image as a Westernized and scalable outsourcing location had resulted in an influx of high-class investors including IBM, Dell EMC, Oracle and Valeo.(1)
According to a new Gallup poll, Egypt has been ranked as the safest country in Africa and higher than both the UK and the US.
According to ITIDA, Egypt started expanding its global outsourcing footprint and is now one of the fastest-growing offshore destinations in the world. Currently, Egypt’s outsourcing workforce stands at around 170k employees. (2)
- 100+ million people, 50% of whom are between the ages of 15 to 44, which makes it a young population
- 500,000 annual graduates (50k graduating from IT related faculties, 220k relevant to BPO) out of 35+ universities & 100 institutes
- 20+ languages served across 100+ countries
- Egypt has been developing its talent through multiple programs run by the Information Technology Industry Development Agency
A national initiative named the Next Technology Leader (NTL) Certified high-value training in 39 Technology Tracks 16,000 Target Graduates spearheaded by Ministry of CIT and receive fully-funded training and certification in collaboration with leading platforms like Coursera, edx, and Udacity, in tracks developed by universities like MIT and Johns Hopkins, and enterprises like IBM, Google, Amazon, Facebook, and GitHub on emerging technologies that drive accelerated innovation, including data science, IoT, artificial intelligence, cybersecurity, etc.(2)
Software Engineering Competence Center works with ICT Companies in improving the process and content of their product or service production, by providing services that enhance their technical competence and improve their internal capabilities. In addition to training an average of 1,400 trainees annually.(2)
The Information Technology Institute (ITI), an affiliate of Ministry of CIT, provides several capacity building programs including its 9-month professional training program, which provides grants to around 1000 graduates annually in 28 different IT specialization.(2)
Economy
Egypt’s economic structure is one of the most developed and diversified among the African and Middle East countries. It has a large industry sector, an essential primary sector and a fast evolving service sector. On the other hand, weak economic growth and limited foreign exchange earnings have made public finances unsustainable leaving government authorities overly dependent on expensive borrowings for the financing of fiscal deficit.(1)
Source: Supply Wisdom
Egypt passed a new investment law in 2017 that offers foreign investors a bundle of incentives that includes tax breaks and rebates. It also deals with bureaucratic problems, promises the simplification of procedures, and provides guarantees for investors. (1)
Current infrastructure schemes proposed by the government are expected to leverage growth across all areas associated, such as export-oriented manufacturing, domestic and international tourism, and the Egyptian real estate market.(1)
Egypt is back in play and is pitching its hat into the ring as a serious contender for outsourcing service delivery destination for ITO and BPO industry.(1)
That said, in late 2016, Egypt embarked on a structural economic reform program supported by the International Monetary Fund (IMF) to revive the country’s growth prospects and unleash the economy’s potential. Main pillars of the program included:
- Liberalizing the exchange rate system, which improved competitiveness, boosted exports and increased attractiveness to foreign investors
- Improving the business climate by implementing reforms to ease the administrative procedures and provide more financial access for SMEs
Since then, the IMF projections for GDP have been increased with every quarter review. Also, according to the WB “Egypt has made ambitious economic reforms over the past few years, which have helped boost investor confidence and attract foreign capital.” The new investment law of 2017 has also further strengthened Egypt’s economic performance.
Finally, according to the just-released UNCTAD’s World Investment Report 2018, Egypt saw the highest influx of Investment in Africa in 2017.(2)
Geo-Political Risk
As the dust settles on Egypt’s 2018 presidential election, investors are besotted with its recovering political situation. Despite government’s severe austerity measures and repressive tactics, support from people continues due to its success in upholding security front in the mainland Egypt. The country witnessed a drop in the number of violent attacks outside North Sinai from 671 in 2015 to 131 in 2016. Moreover, there were only three attacks outside North Sinai in the first quarter of 2017, in comparison to 75 attacks during the same period in 2016 and 261 during the first quarter of 2015. That being said, terrorism still remains a big threat for the country with travel warnings being issued by nations such as Canada due to the unpredictable security situation.
As seen in the graph below, Egypt ranks moderately high on its Geo-Political Risk rating by Supply Wisdom; and looks more uncertain when compared with some of the other top nations in the Middle East and North Africa (MENA) region.(1)
However, according to ITIDA, the IMF support in the reform program assures that Egypt has no political instability that could affect investments. It is worth mentioning the attacks in the Sinai Peninsula (in a very small remote area) are more than 400 KM/5 hours drive from Cairo. Even Sharm ElSheikh, which is in the South Sinai Peninsula, hosts regularly international and regional conference and events.
ITIDA also states that while India is a top outsourcing destination worldwide, in the Global Terrorism index, it is ranked higher than Egypt. Even the US, UK and France, are in the “High Impact of Terrorism” category. Regarding Travel advice, the US Travel alerts for India, Egypt, and surprisingly the UK have the same level. Similarly, for Canadian travel advice (high degree of caution for Egypt, India, and UK) and UK travel advise (Egypt, India, and US).(2)
Source: Supply Wisdom
Infrastructure
Due to its pivotal location in the middle of the world, Egypt is considered to be a prime outsourcing location:
- Business continuity with the Americas and Asia
- Similar timezone with Europe
- Only a 5-hour radius when it comes to EU countries
- A strong internet backbone, connecting 60+ countries through 13 marine cables that have a capacity of 60+ TBps
Egypt is home to several technology and business parks that support the outsourcing business with state-of-the-art infrastructure. In addition to the business hubs in Cairo, the government has started in 2016 to spread technology parks across tier-II cities under the name WE Parks. Two WE parks (Borg Al Arab and Assiut) were inaugurated in late 2016, another two WE Parks launched in 2017, (Beni Suef and Sadat City), and further two to come this year as well. In addition, a Knowledge City within the New Administrative Capital will be inaugurated in 2020 to create an ecosystem of business, government services and research and academia.(2)
Conclusion
Egypt has established itself as strong player in IT-BPO service sector sustained by its adequate labor pool and low cost. Still, a lot of effort is further required from the country to restore its political stability and social-security in order to improve investor’s confidence and boost the business environment. Egypt also has a lot of catching up to do with respect to developing human capital, adoption of new age technologies and improving ease of doing business in order to compete with other prime outsourcing destinations. Initiatives to address these challenges through public-private partnership will help Egypt to sustain the momentum of growth in the outsourcing industry. In recent years, the government has realized the seriousness of these challenges and started taking steps towards resolving them to ensure the country’s outsourcing industry meets the global sourcing dynamics.(1)
1: Supply Wisdom & Neo Group: Location Assessment – Sourcing in Egypt. Sandeep Suresh, Head Research; Meena Priyadharsini B, Manager Research; Sudeep Chakraborty, Senior Research Analyst.
About Neo Group: Founded in 1999, Neo Group helps organizations meet business objectives and address business challenges by leveraging global services and sourcing. To learn more about Neo Group, please visit NeoGroup.com.
About Supply Wisdom: Supply WisdomSM is a unique cloud-based service that provides data and intelligence for sourcing risk and opportunity monitoring of global countries, cities and suppliers. To learn more about Supply Wisdom, please visit SupplyWisdom.com.
2: ITIDA: The Information Technology Industry Development Agency
About ITIDA: The Information Technology Industry Development Agency (ITIDA), the executive arm of the Ministry of Communications and Information Technology, is Egypt’s engine for spreading technology, driving innovation, and supporting foreign investors seeking to enhance their global offering from Egypt. Visit TimeforEgypt.net to learn about what Egypt has to offer in the outsourcing industry.
About the Author: Kate Tulloch-Hammond is the Director of Communications at IAOP. She is also a freelance writer and editor.
