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Energy and IT sectors account for much of economic growth
Published in Daily News Egypt on 05 - 09 - 2007

CAIRO: The energy and IT sectors continue to move ahead and encourage foreign direct investment in Egypt, contributing to the nation's overall growth, said ministers of the sectors at the second day of the Euromoney Egypt Conference 2007.
"One of the most dynamic sectors of the economy, comprising 9-10 percent of the overall Gross Domestic Product (GDP) is the energy sector, said Richard Ensor, Euromoney Institutional Investor PLC's managing director, as he introduced Minister of Petroleum Sameh Fahmi at the opening session.
"Into the Second Wave - as this year's conference is aptly titled - is the issue at hand as panelists highlight the achievements of the past year as well as the challenges facing Egypt's continued economic development.
With the increase in oil and gas demand and consumption, much attention is being given to energy and energy security. The increase in costs of exploration, production and equipment worldwide is perceived as a potential threat to the energy market. Therefore, diversifying energy resources, with a focus on renewable energies, is crucial.
Egypt, however, has been lucky this year with the discovery of oil and gas at several new sites, the most recent of which was announced by Fahmi in his conference speech. "Oil has been discovered for the first time in the Upper Egypt field of Baraka, between Aswan and Edfu. The oil will be refined in the nearby Assiut Refinery, he said.
The only problem now is the lack of infrastructure in the Upper Egypt area. Twelve wells were previously drilled and "we were hoping to find oil there, but didn't know we would find it this soon, said Fahmi. Reinforcements will be sent since it seems the area could be a potential success.
In the past two decades, the government has been working on implementing and sustaining economic reform amid turbulent global markets. Fahmi highlighted the sector's major successes, saying that 131 concession agreements were signed in the past seven years, while proven reserves have increased from 16.9 billion balance equivalent, an increase of 4.1 billion balance equivalent.
"Oil and gas production this year has reached 84 million tons and it should reach 100 million tons by the end of the decade, announced Fahmi. Furthermore, oil and gas consumption reached 57 million tons, exports increased and more projects are being implemented by local companies in Africa and the Middle East.
More importantly, foreign direct investment (FDI) in the sector has reached $18 billion and is expected to increase to $20 billion. There are now 50 international companies operating in Egypt and more investment opportunities are being created for petrochemicals and oil and gas equipment manufacturing. Projects are also underway to extend the gas pipeline to Upper Egypt.
Meanwhile, Egypt is forging ahead in the gold industry and will produce its first gold alloy next month.
Moving to another booming industry in Egypt, Ensor introduced Minister of Communications and Information Technology Tarek Kamel by pointing out that he heads a "sector that now has over 20 million cell phones, after having none in 1998.
Egypt's IT sector has been taking off since the late 1990s. The MCIT continues in its efforts to attract FDI and put Egypt on the map as a knowledge-based society. "FDI has reached $1 billion annually in this sector and we have contributed 15 percent to 20 percent of overall GDP growth, which has reached 7 percent this year, Kamel said.
The IT sector has always attempted to implement five-year plans, but "this never worked because the sector changes at a fast pace.
The ministry's three-year strategy will be implemented from 2007 to 2010, focusing on developing the IT sector, Business Process Offshoring (BPO) and Knowledge Process Offshoring (KPO).
"We have succeeded in placing Egypt on the global offshoring map in the last two years, Kamel said. Through offering contact centers, call centers, IT production and software development services, Egypt has succeeded in entering the offshoring business. Egypt's main focus in this domain will be "providing Arabic content, addressing European markets and Australia, and partnering with India and the Philippines, he said.
Egypt is an attractive destination for IT investments, and the sector has garnered a lot of support from the government, especially with Prime Minister Ahmed Nazif's extensive IT background.
"Egypt is in a reasonable time zone as well as physical and cultural proximity [to its neighbors]. [It is] multilingual without dialects, making it easy for neighboring countries to understand us, which is a big plus, Kamel said.
In addition, Egypt offers competitive infrastructure prices, abundant human resources and competitive wages, which are three strong factors in attracting FDI.
"The ICT sector is playing a catalytic role in providing growth for the overall industry, said Kamel.
The BPO and KPO initiatives were launched by major IT companies in the Egyptian market, such as IBM, Oracle, Alcatel-Lucent, Microsoft and Vodafone.
Now international companies are establishing their service and call centers in Egypt. "Wipro, EC Nielson and HSBC have all decided to establish their regional support centers in Egypt, while Telecordia founded a regional academy in Egypt on Tuesday, he said.
Egypt has already established a strong partnership with India, a pioneer in the BPO and KPO domains. "Egypt and India could complement each other. The world needs to diversify, he said. The minister has visited India to discuss further cooperation and an Indian delegation has come to Egypt.
The IT sector faces the challenge of continuously developing its human resource skills at the right cost, in addition to attracting players from other sectors. "Not just IT companies, we already have the Ciscos, IBMs and Microsofts, we want those in the medical and financial [fields] to invest as well, he said.
Incentives will be given to those who choose Egypt, such as "the least cost in telecommunications infrastructure, logistic support and continuous labor training, he added.
Exports in this sector currently amount to $450 million and are expected to reach $1 billion in 2010. Around 50,000 new jobs were created directly or indirectly by the sector.
"It might not be an ambitious plan, but it's realistic, concluded Kamel.


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