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Egypt: going high tech.

Simon Brindle reports on the state of the computer industry in Egypt, on recent legislative developments and the potential to develop indigenous high tech export oriented industries.

COMPUTERISATION HAS come piecemeal to Egypt as it has to other developing countries. Today, Egypt's computer market is estimated at around $200 million a year with a substantial potential for growth. However, imports still account for well over 90% of sales.

Sales of mainframe computers in 1991 were about US$40 million or 20% of the total. The market is dominated by three leading multinationals - IBM, ICL and NCR - each of which have branches in Egypt. Other installed mainframe systems were purchased directly from suppliers abroad. Most systems in use in Egypt are either all-purpose or high speed systems. These generally cost in excess of $1 million each and are able to support up to 128 users in a commercial environment. While mainframes are expected to play a major role in the medium term, with an estimated average real growth of 20% a year over the next three years, market share in the longer term is expected to decline as users rely more on smaller, less costly machines to handle data processing tasks.

Sales of software in Egypt, which includes office automation software, games, spreadsheets, graphics, cad/cam and networks were about $6 million in 1991 and accounted for about 3% of the total market. However sales have been increasing at about 25% a year and are expected to increase further with the expanding market of first time users. An estimated 90% of software is imported from the United States with the remaining 10% (mainly Arabic language software) developed locally.

US software developers have been victims of widespread computer software piracy in Egypt as they have in other developing countries and the need has been felt to lobby the government for greater protection. Under the so-called "Special 301" provisions of the US Trade Act of 1974, the US Trade Representative (USTR) is required to identify foreign countries that deny "adequate and effective protection of intellectual property rights".

The provisions classify such countries into "priority," and "priority watch list" countries. The former are those countries whose practices are considered to have the greatest adverse impact, actual or potential, on US products and which the USTR considers are not making significant progress in bilateral or multilateral intellectual property negotiations. "Priority watch list," countries are those whose acts, policies and practices meet some but not all the criteria for "priority" identification.

Egypt was placed on the "priority watch list" in 1991 because of what USTR considered to be deficiencies in its patent, copyright and related laws as well as significant enforcement problems. In addition to the fact that Egypt did not specifically protect computer programmes, USTR considered that terms of protection were too short and penalties too weak. USTR pointed out that although the Egyptian government had stated in 1989 that a new patent law was under consideration, at the time of the USTR investigation in 1991 legislation had still not been submitted to parliament.

According to Khaled el Shalakany, an Egyptian lawyer who spent four years at IBM as a computer engineer before taking up law, recent amendments to the original copyright law 354 of 1954 have introduced stiffer penalties for software piracy. Under the amendments contained in Law 38 of 1992, first time offenders now face fines ranging from $1500-$3000 and possible imprisonment while second time offenders face fines of $3000-$15,000 and mandatory prison sentences of up to three years. While the new legislation has been welcomed by USTR and US and other foreign software developers, El Shalakany points out that the original law in so far as it encompassed "any innovative expression of the human mind", was sufficient and there was actually no need for express reference to computer programmes in the amendments.

Another area of legislation that is going to become of increasing concern in coming years is privacy of information. In most industrialised countries, data banks and systems are able to store vast amounts of information about private citizens. Employers, banks, tax authorities, insurance companies and government organisations all keep this kind of confidential information. Very often this data can be accessed and this has led to a need for legislation that not only enables individuals to access their own files to check the accuracy of the information that has been recorded, but also to limit access by others to ensure it will not be misused.

At present, Egypt has no legislation along these lines but as computerisation becomes more widespread, many people believe Egyptians should be entitled to this kind of protection and that initiatives by individuals and groups to lobby government to have relevant laws introduced should begin soon.

What of the future of the computer industry in Egypt? The Information and Decision Support Centre (ISDC) set up by Egypt's Cabinet of Ministers in 1985 has perhaps served to create more awareness in Egypt of information technology, its role and the tools it employs than ever before. The Centre was set up with the stated aims of developing decision and information support for top policy makers and setting up similar operations in various ministries and local authorities.

With over 200 full time staff, ISDC facilities include several IBM mainframe computers, over 300 microcomputer systems (200 on site and 100 in government agencies throughout the country) and on line access to international hosts and databases to retrieve information on socio-economics, business, investment, trade and technology.

Among the various projects that have been undertaken by ISDC is an information networking system that allows businessmen, trade organisations and government authorities to access Tradenet for information on exchange rates, prices, markets, business openings, company profiles, trade statistics and international trade fairs exhibitions. A second phase of the project will link the network of Egypt's Commercial Representation Offices in 35 countries around the world. Other projects include an integrated national debt management system in the Central Bank, a management information system to support optimum utilisation of water, land energy and mineral resources, a decision support model designed to maximise customs tax revenues and several local databases on laws and regulations, local industry, education and labour.

ISDC has also been instrumental in promoting the Pyramids Technology Valley Programme (PTVP). As labour costs in the West and the Far East continue to rise, high tech companies around the world are looking for other countries in which to set up operations. PTVP aims to create the type of environment and infrastructure, possibly including a high tech zone in the 6th October city near the Giza pyramids, that Egypt will need to attract foreign investment and develop its own computer based electronics industries, high tech manufacturing, biotechnology, software development, training and other service industries. Designers of the programme hope Egypt can capture a share of the growing $800 billion a year world high tech market to which other developing countries such as Brazil, India, Singapore and Taiwan are already staking a claim.

Tentative steps in this direction have already begun. Several microcomputer assembly projects have started including one between American Computers and Electronics (ACE) and a local company.

IBM's Mohammed El Hamamsy says that what while these efforts are to be applauded, there is still no strategic desire by the country's decision makers to pursue the high tech route. Thus, while Egypt enjoys comparative advantages of location and a large pool of well trained hardworking and low cost engineers and programmers, this is not enough. While conceding there are opportunities to export both products and skills to the Arabian Gulf, El Hamamsy suggests Egypt should look at the experiences of other developing countries such as India, that began by sub-contracting to the large software houses in the United States and Europe.
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Title Annotation:Business & Finance
Author:Brindle, Simon
Publication:The Middle East
Date:Apr 1, 1993
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