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By Micha Rinkus, Oxford Business Group

Anew high-growth industry is joining tourism and the Suez Canal as a major revenue-earner for the Egyptian economy — information and communication technology (ICT).

In recent years, Egypt has invested heavily in building up the infrastructure for an information society, dramatically improving digital literacy, technology in schools, and partnerships with ICT multinationals.

The investments seem to be paying off. As the financial crisis begins to pinch the balance sheets of the corporate sector worldwide, Egypt, with its large supply of low-cost skilled labor, has become a top destination in the Middle East for outsourcing. The country’s ICT sector is registering double-digit growth amidst the global financial crisis, and siding with the digital revolution seems to have been a smart gambit indeed.

Egypt has Africa’s largest online population: There are 13 million internet users, a far cry from the 450,000 Egyptians using the internet 10 years ago. The country’s high-tech turn-around dates back to the formation of the Ministry of Communications and Information Technology (MCIT) in 1999, when the idea of an “information society” as a means to propel economic development took hold.

Egypt’s unique location at the crossroads of Africa, Europe and the Middle East, combined with its young, educated population, made it a prime candidate to follow the example of India in becoming a low-cost technology hub.

Tasked with attracting sector investment, developing ICT infrastructure and mainstreaming technology, the ministry has been prolific in its initiatives. ICT spending totalled $5.5 billion (LE 30 billion) between 2000 and 2007, while the industry grew 700%, according to the MCIT.

The government’s liberalization campaign, including the establishment of the General Authority for Investment and Free Zones in 1997 and the Labor Law of 2003, protecting employer and worker rights, has beckoned foreign investment. The technology park Smart Village, opened in Cairo in 2001, has also been instrumental in attracting foreign companies.

Accordingly, the domestic ICT industry has been bolstered by a bevy of bilateral deals with multinationals. Egypt signed a $10 million (LE 55 million) deal with Google in June 2009 to improve its internet presence using the search engine’s advertising platform. In exchange, Google will re-invest $2.5 million (LE 13.8 million) in the Egyptian economy to support IT business and workforce development. Meanwhile, the Information Technology Industry Development Agency (ITIDA), the executive arm of the MCIT, has been instrumental in developing a domestic ICT industry via incubation programs, management courses and exports promotion.

An information society would not have been able to take root without a technologically literate populace as a foundation. Much of the MCIT’s efforts have been aimed at education sector reform via high-tech projects, such as the Smart School Network and the International Computers Driver’s License (ICDL).

Launched experimentally in 2003, the network of “smart” preparatory schools offering technology enhanced learning environments has expanded to 146 institutions. The ICDL is an ongoing computer literacy program enabling students to enhance their basic ICT skills for free. In addition, in September 2009, the Ministry of Education and the MCIT agreed on a plan to equip 1,730 high schools with state-of-the-art labs, libraries and teacher’s rooms by 2010.

The ICT-based school reform effort has spurred collaboration with private sector partners who offer more cost-effective products coupled with better technology. The Egyptian Education Initiative (EEI), a private-public partnership (PPP) between the government and the World Economic Forum, was launched in 2006 to promote the inclusion of the private sector in educational reforms.

The result has been the implementation of numerous educational programs by multinationals. For example, under the Project Learning Institute program, Oracle trained 80 teachers to factor project-based learning into their lesson plans using its platform, ThinkQuest, and now some 2600 students use the platform in school. In April 2009, Prime Minister Ahmed Nazif signed an agreement with Microsoft to develop technological collaboration across a number of sectors, including education.

The benefits of this technological focus in education are starting to become apparent, with Egypt’s tech-savvy demographic catching the attention of the $70 billion (LE 385 billion) international outsourcing industry.

India has traditionally been the go-to market for outsourcing, but Egypt offers a number of competitive advantages, including a greater diversity of language skills and convenient placement within the Eastern European Time Zone. And with 60% of the Egyptian population under the age of 25, there is no shortage of potential workers. The country produces 330,000 graduates annually, with approximately 10% studying fields pertinent to the ICT industry.

For the world’s ICT giants, Egypt is particularly attractive as a jumping-off point for Middle Eastern markets. At the signing of the Google deal, MCIT Minister Tarek Kamel told international press that global corporations, “realize that we have Arabic-speaking human resources with a multilingual background that has other differential advantages in terms of geographical location, in terms of growth in the local market and growing local market demand, [and] in terms of excellent infrastructure that connects us with the rest of the world.”

US-based consultancy Yankee Group wrote in its recent comparison of several Middle Eastern countries that Egypt, “has the strongest position in the outsourcing market,” based partly on the versatility of Egyptians’ language skills. Cairo was the top-ranked Middle Eastern city in Global Services and Tholons’ Top 50 Emerging Outsourcing Cities of 2009 report.

From funding education to cultivating a competitive outsourcing industry, investments in Egypt’s high-tech future have paid off. The ICT sector has been a major breadwinner in the past fiscal year, expanding 14.6%, compared to the 4.7% overall growth of the economy. In contrast, revenues from the Suez Canal, a major economic contributor, dropped 7.2% in the same period, while tourism receipts contracted 9.5%.

In September, Dr. Hazem Abdelazim, CEO of the ITIDA, said, “We have seen huge growth in our ICT sector over the past year, despite the globally challenging environment. More than 10 multinational companies have expanded or outsourced their business to Egypt in the past 12 months.” The MCIT recently announced plans to increase ICT exports to the US to $1.1 billion by 2010, led by low-cost outsourcing.

Heading into the next decade, Egypt stands poised to defend its reputation as the regional forerunner in ICT. This summer saw the opening of another major technology park in Cairo, Maadi Technology Village, with seating capacity for 40,000 workers.

In November, Egypt was the first Middle Eastern country to host the UN-sponsored Internet Governance Forum, uniting delegates from 100 countries for discussions on the development of the Internet. The MCIT has also reached out to the world’s 300 million Arabic speakers by applying for the world’s first domain name in Arabic script and creating a portal for digitizing Arabic books. As the Middle East becomes more digitally connected and should the government maintain its commitment to technological development, Egypt could well assume the status of a major international player.  bt