CAIRO: Egypt climbed seven places this year to come in as the sixth most attractive offshore locations globally, according to a recent report.
The 2009 report recently released by A.T. Kearney, a global management and research consulting firm, ranked Egypt number six after India, China, Malaysia, Thailand and Indonesia,
Egypt, which ranked 13 in 2008, is now followed by the Philippines, Chile, Jordan, Vietnam, Mexico and Brazil.
“While offshoring is often understood as a phenomenon in which companies in developed countries outsource work to low-cost countries, the global offshoring landscape is more than that, said the report.
“Just as it makes sense for advanced economies in North America and Europe to trade business services with lower-cost countries, it also makes sense for low-cost countries to offshore to each other, the report continued.
Egypt has been growing as an offshoring destination for the past couple of years, said Abdel Rahman Al-Sawi, IT professor at Helwan University and vice chairman of the Chamber of Information Technology. Even “India, which tops the list, has opened [offshore businesses in Egypt] in recent years, he added.
“Saudi software companies, including Saudisoft, Harf and Sakhr, and Kuwaiti company’s have established IT development centers in Cairo, added the report. “Local Egyptian systems integrators sell more services in the Gulf markets, supplying much of the development work from their home offices.
There are several reasons behind the growth of Egypt’s offshoring industry. “Egypt has made rapid progress in many aspects, such as the use of mobile telephones, landline phones and an [increasing] internet penetration. It has a healthy business environment, IT expert Sherief Abdel Baqi said.
Adel Danish, chairman and CEO of Xceed, an Egyptian offshoring company, cites Egypt’s comparative advantage when it comes to the cost of salaries and telecommunication – namely international phone calls between the offshored country and the destination county.
It’s also relatively cheaper to buy or rent real estate in Egypt.
There’s an advantage in the sheer size of the human resources available. Egypt has 300,000 fresh graduates every year, which is a significantly larger pool of talent than other nations, Danish added. A good percentage of these graduates are multilingual, with English, French and German as popular second languages.
The annual report by A.T. Kearney did not come as a surprise for experts in the sector.
Al-Sawi cited Egypt’s geographical location as another key aspect for it’s popularity as an offshoring destination. “[Egypt] is located in the middle of the world, which makes our working hours close to many other locations, he said.
In addition to the time zone, Egypt’s is at the intersection of several international communication networks, all of which “helped Egypt’s rank improve, even though we started developing our poison in this industry a bit late, he added.
Egypt began focusing on the call centers and offshoring industry in the early 2000s, when current Prime Minister Ahmed Nazif was the minister of IT. The initiatives he implemented to restructure the sector were developed after the cabinet shuffle in 2004, and were further broadened under MCIT Minister Tarek Kamel.
“The good news in [Egypt’s] rank is that we jumped ahead of countries like Philippines, which has a very solid position in this industry, said Danish.
The current industry in Egypt has a workforce of between 15,000 to 20,000, according to Danish, however, with an annual growth rate of around 30 to 35 percent, those numbers may reach 100,000 within three to five years.
The average annual salary of an offshoring employee is $20,000, Danish said, and with 100,000 employees, this means the industry may contribute the same percentage to Egypt’s GDP as the Suez Canal.
The main challenge is to arm that pool of talent with the skills needed by the market through training and capacity building. This is currently part of a large-scale initiative being implemented by the Ministries of IT and Education, to provide university students with language and communication training before graduating.
Offshoring services include back office services, ordering management, claim management and payroll management, Danish said, and Egypt has a lot of potential in this industry.