By Kim Piper Nabil Yousef heads one of the mostadvanced private R&D facilities in Egypt. News Focus Syria Thinks Small Damascus turns to microfinance to combat poverty An Industry Unraveling Once a symbol of national pride, cotton’s prospects are coming apart at the seams A New Way of Doing Business Non-profit group promotes economic development by giving companies a helping hand The Science of Buying Marketers examine the brain to find out what makes consumers tick Digital Booty With electronic piracy plaguing the music business,legitimate media companies scramble for a business model that pays A Rocky Start Theft, corruption and a little chaos mark the launch of a new property levy meant to haul the country’s tax system into the modern era Highway Robbery Reputation of white taxi program takes a hit as drivers caught rigging meters By Courtesy of Newport Media From Ain Shams to CEO: Mohy Abdelgany By Kim Piper A new kind of Egyptian office — staff at Newport Media’s Egypt Design Center

By Tom Gara

In a market best known internationally for its low-end manufacturing and commodity exports such as cotton, steel, cement and gas, the arrival of a cutting edge high-tech research and development (R&D) laboratory is a welcome sign of the growing capacity of the country’s technology sector.

Newport Media, a US-based producer of semiconductors and microchips for the wireless media industry, has made Cairo home for a team of the nation’s best engineers.

“I believe that engineers here are by no means any different from engineers in the US — they just need to be given a good environment and the right tools and resources, and I think they will perform just as well.”

Newport Media was founded in California in January 2005. Among its founders were two wireless media experts with a special connection to Egypt: Mohy Abdelgany, who graduated with a BS in electrical engineering from Ain Shams University before completing a master’s in electrical engineering at New Jersey’s Science and Technology University, and Nabil Yousef, who received BS and MS degrees in electrical engineering from Ain Shams in 1994 and 1997, respectively, before moving to the prestigious University of California in Los Angeles (UCLA) where he received a PhD in electrical engineering in 2001.

Both have been immersed in the booming American IT sector, with Abdelgany founding a successful technology business before working in senior roles at industry giants such as AT&T Bell Labs, Conexant and Rockwell. Yousef, meanwhile, worked as a staff scientist at broadband communications giant Broadcom.

Newport’s specialty is designing the microchips that enable the transmission and viewing of high-speed video on mobile phones and wireless devices. The company is certainly in the right place at the right time, with industry analysts predicting a boom in wireless broadcasting — specifically in areas such as live television and entertainment products being delivered over mobile phone networks. With the mobile industry’s current focus directly on encouraging mobile users to adopt such value-added data services (see related story page 32), Newport is well positioned to take a large share of a highly lucrative market.

The proven experience and capability of the founders as well as the clear market opportunity for its product helped Newport raise more than $66 million in venture capital in the last two years.

“Mobile TV is a good market, and it is set to grow considerably in coming years,” says Abdelgany. “We believe that we have the best product on the market in areas like power efficiency, performance and size,” he explains.

The company declined to name the clients for whom they design the chips, as manufacturers in the highly competitive industry prefer to keep such arrangements well guarded.

With Abdelgany (the US-based CEO of Newport) and Yousef (head of Newport’s new Egyptian design center) both aware of the talented Egyptian engineers looking to make full use of their potential in their home country, along with the cost effectiveness of operating here, the decision to open Newport’s design center in Cairo was an obvious one.

“The talent pool in Egypt is very large,” explains Abdelgany, “which means we can really recruit from the cream of the crop. We have been very impressed with the quality of the talent we have found there.”

Yousef also feels highly confident in the ability of Egyptian engineers to perform world class R&D. His desire to bring this kind of work to the country was based largely on a feeling that the full potential of Egyptian technical talent is still not being fully utilized. “I believe that engineers here are by no means any different from engineers in the US — they just need to be given a good environment and the right tools and resources, and I think they will perform just as well.”

Newport’s Cairo design center, based in Heliopolis and established in July 2006, is currently home to a small but growing staff of 12 specialist electronic engineers, researching absolute leading-edge technology in mobile communications. The staff is Egyptian, a mix of local engineers who have studied and worked here previously along with returned Egyptian expatriates who jumped at the opportunity to come back to their home country while continuing in the career they love.

The development of a sustainable and innovative indigenous technology sector has been a top priority of emerging economies across the world, for a number of reasons. Such an industry can contribute significantly to the overall industrial capacity of the country, allowing the manufacture of higher value goods and the provision of more advanced services both for the local market and for export. Such an industry also generates lucrative, high-paying jobs, which ensure that the country’s brightest people have opportunities to stay in their home country without sacrificing their careers.

A key advantage of having a competitive local R&D industry is that it can attract business on an unprecedented global scale. When it comes to solving problems and creating knowledge, the market is entirely fluid, with geographic considerations effectively meaningless. India’s phenomenal boom of investment in outsourcing began with relatively menial work such as call centers and back office administration, but all indications suggest that the truly remarkable boom is still to come. The outsourcing of high-value scientific research and product development is already well and truly underway, and emerging markets with a capable local R&D sector stand to benefit enormously.

In the case of Newport’s Egypt Design Center, one is quite clearly looking at an example of the outsourcing of high-level R&D. “This is pure R&D they are doing,” says Abdelgany, “Real cutting edge stuff.” As such, Newport may be more than just an exciting technology start-up — they could be the promising beginning of an emerging R&D industry in Egypt.

The case to be made for locating R&D operations here is clear. The country has a huge population of technical graduates — of skill levels varying from woeful to brilliant — all competing intensely for the best employment opportunities available. With a lack of high-end technology jobs, many of the best graduates must resort either to moving abroad for work, or remaining in Egypt working a job that does not make use of their education and skills. Given this, the small number of truly high-quality technology jobs attract a huge number of applicants, including the “cream of the crop” previously described by Abdelgany.

Secondly, due to the low cost of many goods and services crucial to R&D — telecommunications, land and buildings, utilities, labor — research budgets in Egypt can be focused on the areas of most value: Paying for the best people, equipment and knowledge needed to produce the best output.

Finally, Egypt’s geographical location makes it more beneficial for offshoring than Far Eastern countries — in the same time zone as much of Western Europe, the Middle East and Africa and within a few hours flight from financial and technology centers such as London, Frankfurt and Dubai.

All of this, combined with a government anxious to follow the lead of India and attract lucrative technology jobs — and building subsidized technology districts like Smart Village for that specific reason — means that logically, R&D should be flourishing in Egypt.

Why isn’t it? Yousef’s experience in establishing and managing Newport’s Egypt design center has left him with a firm belief in the potential of the Egyptian R&D sector — along with a conviction that changes are needed before this potential can become reality. When speaking with Business Today, he offered a clear set of actions that he believes would greatly assist the Egyptian R&D industry take off.

He first wants to see the best Egyptian minds being encouraged to return home. “I think there should be a government-supported program to recruit expats to come back to Egypt. The Chinese and Korean governments have done this before. Without experienced people, you can’t grow talent organically at home. You have to have people that will train the young talent,” he explains. This is important not just for immediate needs, but for the long-term viability of the industry, he believes. “This is basically reverse brain drain ... creating the critical mass of knowledge needed, because after that, it can grow on its own.

Secondly, Yousef calls for universities to work closer with the industry to ensure their technical curriculums are relevant to the market. “I’ll give you an example, with embedded software,” he says. “There are not enough engineers who have the right background to do embedded software — the talent is in the country, but the university programs need to be industry-oriented more than they are right now. [...] It has moved in the right direction in the last ten years, and we would certainly like to see more of that.”

To encourage this kind of collaboration, Newport’s Egypt Design Center is now preparing a university partnership program, which will support universities in teaching the most advanced curriculum possible. The company aims to cooperate with universities to identify the topics most important for young graduates to be familiar with, and support the development of relevant teaching modules. They will also collaborate with universities through hands-on graduation projects which will give students real industry experience, an asset that Yousef believes is hugely valuable.

Finally, Yousef feels that the government should play an even more active role in encouraging R&D to come to Egypt. “They have already started something like this with the Smart Village,” he says, “but I hope that they will do more. For example, we bring equipment from outside the country; we are setting up a significant lab here. We would like to see customs exemptions on these type of imports.” Yousef also believes that the government subsidizing office space and providing seed funding for young entrepreneurs would help the country’s emerging technology sector grow.

Newport also sees itself playing a role in the development of the sector, particularly once the business has grown and stabilized. “We might be outsourcing work to other local companies, we might be giving know-how to smaller companies so that they can contribute in this field.”

Although Yousef believes that the company is still too small and new to play a significant role in influencing the R&D sector here, he is confident that the company will double in size in 2007, tripling by 2009, meaning more high-end jobs for the best electrical engineers. More importantly, it means a bigger, brighter example of Egypt’s high-tech R&D potential for the rest of the world to see, and hopefully, follow.  bt