Egypt
Egypt is rapidly gaining popularity as a location for global business process and IT outsourcing. In 2008 Cairo was ranked 7th on the Top 50 emerging outsourcing cities, and Egypt was bestowed with the prestigious title of "Outsourcing Destination of the Year.” According to a report by the Yankee Group, Egypt is “by far the Middle Eastern country currently best positioned to take advantage of the boom in outsourcing.”
Egypt has one of the best average wages with low infrastructure costs. It is open to westernized culture, home to many language institutions that can support the demand for skilled and multi-lingual labor, and its diverse population speaks English, German, French, Spanish and many other languages as well. Its geographical location between Europe, Asia, and the US, puts Egypt within the time zone of GMT +2, allowing it to serve the world in a round-the-clock pace. Some of the multinational companies that have invested in Egypt include: Wipro, Vodaphone, Valeo, Teleperformance, Satyam, Microsoft, and IBM.
Egypt has a Smart Village, a 600-acre business park outside Cairo designed to become the Middle East Center of Information Technology. Industry analyst Datamonitor predicts that the demand for Egyptian call centers will grow by 50 percent over the next three to four years. In the future, the country plans to generate around $2 billion in revenue by 2013 and $10 billion in ten years.
Despite its potential, the region has an unstable geopolitical system that can prevent it from attracting foreign investors, especially with recent events and political uprising. It also has infrastructure and pollution problems in Cairo, which is considered one of the most polluted cities in Africa. Its state-of-the-art IT parks is relatively few compared to India, which has around seven IT locations around the country.
Country overview
Egypt is a major power in the Mediterranean and northern African regions. Its 80 million residents live in one of the most densely populated in Africa and the Middle East, sized comparably to triple that of New Mexico. Most of its people are Muslim (Sunni), and its primary language is Arabic, followed by English and French. Egypt benefits from strong business relationship with the US and Europe for many years now, so it is generally well-versed to understanding the two cultures with relative ease.
Egypt has one of the most diverse economies in the Middle East, and is currently undergoing developments to attract investors. It aggressively pursued economic reforms by removing customs and tariffs and implementing decreased corporate taxes from 40% to the current 20%. It also announced three separate stimulus packages in 2008 and 2009, totaling $6.3 billion. Its gross domestic product measured by its exchange rate is USD $217 billion, or $501 billion when calculated using the country's purchasing power parity. The IFC-World Bank's Doing Business review has reported that Egypt's rank has risen from 116th to 106th for operating business. due to regulatory reforms enacted to assist companies establish and operate their businesses. Egypt has also jumped 11 notches to seventy, on the World Economic Forum's Global Competitiveness Report.
Despite these economic achievements, Egypt has flaws to contend with. Although the country has successfully implemented most of its economic reforms, factors, such as rapidly growing population, geopolitical instability, and corruption make the living conditions for the average Egyptian resident still relatively poor even today.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
Employee compensation
Egypt offers cost competitiveness, attributable to its developed business environment, good geographical locations, telecommunications, government support, and its human resources. Its junior resources are relatively cheap -- it is ranked together with Indonesia, Philippines, Pakistan, and India as the top five countries with the lowest salaries for its junior software engineers or web developers. The average salary of a junior software developer with one to four years experience is 12.43% in comparable resources to the US. This usually falls between EGP 27,000 to EGP 60,000, averaging USD $7,338.
Egypt's senior resources are particularly low. It is ranked number one in Payscale's report on Senior Software Engineers or Web Developers with the lowest compensation in a country. The others that follow are Pakistan, Argentina, Bulgaria, and the Philippines. IT Project Managers cost just 19.9% of their US counterparts. These are some of the best savings, even when comparing with India (25.3%), Malaysia (37.4%) and Canada (82.1%).
The Information Technology Industry Development Agency, or ITIDA, reports that the operating cost of a full-time voice-based contact center in Egypt is lower or similar with India. This can further be validated in Paypal's report, which shows that India and Egypt only have a .3% difference in their ranks. Junior voice and non-voice resources are just 10% of their US counterparts. Senior positions, highly skilled BPO employees and operations managers command about 20.7%.
Taxes
Corporate tax rates in India are low. It is only 20% higher than many other outsourcing locations. Its indirect tax rate is around 10%, which is much lower than the Philippines (12%) and India (12.5%).
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Resources and skills
Over the years, Egypt has been finding ways to attract foreign companies through its telecommunications, infrastructure, educational, and bandwidth projects. One of the biggest accomplishments of Egypt is the Smart Village, a 32 million-square-foot business park within the borders of Cairo. It is considered the central hub of the ICT business environment and home to many IT suppliers and providers. Another one is the Maadi Contact Center Park, which will be fully operational in 2012.
Workforce and offshore outsourcing sector size
Egypt's IT services exports approaches $218 million and its exports of miscellaneous services nears $1.79 billion. The total workforce of Egypt is to 26.1 million, comparable to the Philippines, Vietnam, and Thailand. Although it is strategically placed to go after the Middle Eastern and African markets, its multilingual skills and geographical location make it very attractive to European companies as well. Despite its growing number, there is an inadequate size of trained labor that can meet the demands of outsourcing companies.
Education and Skills
EduEgypt, a program offered in the tertiary education stage by the ministry of higher education is designed to teach students "employability" skills, which include "soft skills, language abilities and technical competence." This program alone has generated 5,000 graduates in the first two years, and its aim is to introduce 20,000 graduates by the year 2011.
Technological readiness
Internet access in Egypt indicates the technological readiness of its population. According to the International Telecommunications Union, 15.4 users per 100 inhabitants are connected to the Internet, placing it at the bottom of the list with India, Philippines, and Ghana. Similarly, the country ranks below average in Internet and broadband subscription rates, which only attracts less than one percent of the population.
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Economic competitiveness and stability
Economic competitiveness is an essential indicator in the long-term prospects of an outsourcing location. According to the Global Competitive Index published by the World Economic Forum, Egypt has an index score of 4 compared to the United States (5.6), Canada (5.3), Malaysia (4.9), Israel (4.8), and China (4.7). The country is also second to the last in its vulnerability to exchange rate fluctuations and price instability.
Infrastructure
Egypt ranks below average for providing reliable, low-cost telecommunications. Its infrastructure and electric supply however, are ranked average by the International Telecommunications Union. Egypt's intercity roads are usually in good condition, although traffic rules are often times ignored by impatient drivers - Egypt has one of the highest road fatality rates per miles driven in the world according to Travel.State.Gov.
Regulation
It is not easy to do business in Egypt, particularly when compared to the top three countries with the most conducive environment: the United States, Canada, and Thailand. However, starting a business is relatively easy, as it takes only seven days to register a start-up.
Corruption
Egypt has a low corruption perception index of 2.8 and joins Vietnam, Philippines, Pakistan, Russia, and Ukraine at the bottom of the list. Corruption is often blamed for higher prices of goods while the country continues to experience inadequate standards of living.
Legal protection
Part of a nation's global competitiveness is how it enforces contracts and the simplicity or complexity of its associated processes. While the Czech Republic only takes 27 steps to enforce a contract, it takes an average of 39 days to do it in Egypt. It also takes 1,010 days to resolve a commercial dispute compared to Russia, which only takes 281 days.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009