IT as a Determinant in non-IT Sector Business Decisions: Egypt

    As a generic multinational firm interested in opening an office in Egypt would the state of its current IT environment be a deterrent?  The progress Egypt has made in all facets of IT in the past decade has been remarkable.  Although communication tariffs are above competitive levels, the quality of service delivered by domestic and multi-national IT providers is amongst the best on the African continent and above-average for countries at Egypt’s level of development.  By combining an above par IT environment and its position at the crossroads of three separate markets, establishing a business presence  in Egypt is a feasible undertaking. A particularly good example is the joint venture banks established between international and domestic partners – heavily dependent upon IT and successfully functioning in the Egyptian IT environment.

    As an established domestic-based multinational is expansion of local operations possible in Egypt’s IT environment?  The current IT infrastructure can support expansion of an established business, particularly if expansion will be in one of the regional development initiative areas.  The primary consideration would be the quantity of communications traffic that the business must engage in on a daily basis.  Given the tariffs on telecommunications connectivity, this cost may become a factor if it is a communications intensive business.  Lacking this, other IT determinants would lead to an expansion of local presence.  Once again, the international joint venture bank partners buying a majority interest in the operations once the domestic majority requirement was lifted indicate a level of comfort with the existing market and the provision of IT products and services.

    The establishment of a regional distribution center, without factoring in government incentives and strategic regional positioning may be a dubious undertaking.  Without establishing the facility in one of the more advanced industrial parks with superior support and infrastructure, the communications tariffs would begin to weigh heavily on the decision.  It may be possible to establish a satellite connection to the site if the  benefits of this facility make it a strategic acquisition for Egypt’s development efforts.
If this obstacle is overcome the availability and quality of local products and services should support the size and scale of this undertaking.  Examples would include, companies located in the Trade Free Zones along the Suez Canal.

     The establishment of a manufacturing center is more likely than the regional distribution center, in that communications and coordination of information from diverse locations is less critical than in the above scenario.  The provision of IT equipment and services will likely be handled by the domestic entity of a multi-national corporation or if the operation chooses to maintain a self-sufficient IT department, the acquisition of local talent at a very competitive wage should not be difficult in a country known for its chronic underemployment.  BMW has built a successful manufacturing/assembly plant in Egypt that services both the domestic and regional markets.