EGYPT’S SMART VILLAGE WANTS TO BE REGIONAL IT HUB
After spending nearly three years on drafting boards and scale models, Egypt’s ambitious Smart Village Pyramids project has finally come to life in bricks and mortar. The Smart Village, the country’s first dedicated IT business center, is the centerpiece of a plan to develop the local IT industry and attract foreign investment to a fast-growing sector.
The 120 hectare Smart Village, located in Sixth of October City just outside of Cairo near the famous Pyramids and Sphinx of the Giza Plateau, is not yet finished but already hosts a few companies attracted by competitive land office prices and generous tax breaks.
President Hosni Mubarak and Communications and Information Technology Minister Ahmed Nazif inaugurated it in September, although it is not expected to be fully finished for another year. For the government, it was an occasion to invite foreign investors to consider Egypt as a base in the region.
"Besides the modern, newly upgraded infrastructure, excellent geographic location, strong government commitment, an emerging market and a conducive investment environment, I would like to lay emphasis on our prominent and most valuable asset: people &SHY; a large pool of talented, multilingual and experienced workforce with a distinguished skill set," Mubarak said. "For decades, our people have been exporting their knowledge and their know-how to the rest of the world and are now more determined to position the country on the world’s technology map."
Sporting immaculate lawns and futuristic pyramid-shaped buildings, it is in effect a hi-tech version of the free zones that exist elsewhere in Egypt, such as in the Nasr City suburb of Cairo and Ismailiya on the Suez Canal. Like these zones, the Smart Village offers 10-year tax breaks to foreign investors and other advantages to companies that solely engage in exports. While some of these free zones host IT companies, such as leading software Arabization specialist Sakhr Software based in the Nasr City free zone, this is the first such zone conceived specifically for the hi-tech sector.
The backers of the Smart Village say the difference with other free zones is that it is tailored to the IT industry, featuring the latest network and communications infrastructure and on-site training facilities. Owned and operated by a private consortium &SHY; with the Communications and Information Technology Ministry (CITM), holding a 20-percent stake through its contribution of land for the project &SHY; it has already attracted top international and Egyptian companies, including Alcatel, Raya Holdings and Microsoft.
It also hosts the Software Engineering Certification Center, a private-public partnership to provide training to Egyptian software companies, like Ideavelopers, an IT incubator financed by EFG-Hermes that aims to develop the industry; and Xceed, Telecom Egypt’s new 1200-operator-capacity call center.
Telecom Egypt Chairman Aqil Beshir said Xceed will provide at least 1000 jobs by 2005 and marks Egypt’s first large-scale foray into the call center business, which has boomed over the last decade in countries such as Ireland, India and Tunisia.
But for now the Smart Village’s most prestigious occupant is Microsoft, which has a building on the premises. Microsoft Chairman Bill Gates made a special appearance at the opening ceremony through a pre-recorded video message, praising the project and announcing Microsoft Egypt’s intention to locate part of its staff there. "Microsoft is committed to the Smart Village and has made a major investment in the Microsoft Building located there," Gates said. "This building will house key operational units for Microsoft in the region, including the Microsoft Developer Support Center for the Middle East and Africa … Today Egypt is one of Microsoft’s fastest growing subsidiaries."
Despite the praise lavished by Gates on the Smart Village, Egypt faces tough competition to become the region’s IT hub, such as a local competitor in the form of CityStars, a shopping mall-cum-office center complex that has opened in the affluent Nasr City suburb of Cairo. Like the Smart Village, CityStars offers hi-tech infrastructure, although it does not automatically grant the other advantages the Smart Village has, such as tax breaks.
"We looked at it about eight months ago when a lot of companies were moving there," Assy said. "You get a lot of great features, but it is also a bit expensive. I’m not only talking about the office space, but also the overheads. For instance because it’s outside Cairo, we would have to provide transportation for our 22 employees. Also, if you need to have a sales office that deals with customers, you would need to have a presence in central Cairo."
The tax breaks that the Smart Village offers is also available to any IT company specializing in software programming &SHY; ironically reducing the appeal of the Smart Village to the type of companies that stand to benefit the most. Companies such as Assy’s which qualify for the tax break may long for the state-of-the-art facilities and networking opportunities offered by the Smart Village, but may not be able to afford the move just yet. Consequently Cairo’s growing IT sector is likely to remain scattered across the city for some time to come. Cairo also has to face fierce competition from other regional capitals, most notably Dubai.
Over the past few years, Dubai has surpassed Cairo in attracting foreign investment and becoming the regional headquarters of international firms, offering Dubai Internet City, its own version of the Smart Village, over two years ago. The economic capital of the United Arab Emirates offers a more streamlined business environment than chaotic Cairo, and easier access to wealthy Gulf markets. Although CITM is one of Egypt’s rare ministries with a solid pro- business reputation &SHY; Nazif, a former computer engineer, is regularly celebrated by businessmen and the business press as a rare new breed of technocrats in a Cabinet dominated by political dinosaurs &SHY; there is little it can do to counter concerns about Egypt’s macroeconomic policy and general lack of transparency.