CAIRO: “Pity the nation that wears a cloth it does not weave, Khalil Gibran once wrote. This sentiment was echoed by Ibrahim Saleh, who heads up several of the Kharafi Group’s manufacturing ventures in Egypt, including a smart card factory and a computer hardware manufacturing plant that started operation earlier this month.
“Up to when shall we be a supermarket for Europe and the United States? asked Saleh rhetorically in an interview with The Daily Star Egypt, adding that Egypt and the Arab world have the markets, skills and resources to manufacture many of their own needs.
Saleh is the chairman and managing director of the Arab Company for Computer Manufacturing (ACCM) and Maxalto, which respectively own and operate the computer hardware and smart card factories. Construction of both factories began twelve months ago and production is currently underway.
ACCM has a startup capital of LE 140 million and is majority- owned by the Kharafi Group with various minority shareholders including the Ministry of Education, the National Organization of Military Production and Telecom Egypt.
The computer hardware factory has a capacity to produce 400,000 monitors, 50,000 notebooks and 500,000 motherboards. Technological expertise for this production is supported by Aopen, a Taiwanese computer maker that supplies components and peripherals internationally.
Of all Arab countries, Saleh said that Egypt is the most suitable base for technologically advanced production because of its location, its population and the availability of a skilled domestic workforce.
Nevertheless,one of the company’s biggest challenges is finding employees with the appropriate skills. To overcome this difficulty, ACCM conducted a local training program for its employees in addition to staff visits to Taiwan and South Korea.
ACCM must also achieve sufficient volume to make local production worthwhile. In this regard, its objective is to export up to 50 percent of output to other Arab and African countries, and in particular to take advantage of the Common Market for Eastern and Southern Africa to sell to the latter.
While ACCM is the only computer manufacturer in Egypt, it faces competition from international companies. ACCM’s main advantage in this respect is its proximity to its customers, which allows it to transport goods at a lower cost and to provide speedier aftersales service.
“If you have any fault of the motherboard and you’d like to repair it, you need at least two, three months [with foreign manufacturers]. Here, we can make it within twenty-four hours, said Saleh.
The company also benefits from an in-house research and development department that can design motherboards cheaply. If such design were outsourced, it would typically represent 20 to 25 percent of the total manufacturing cost.
Maxalto produces smart cards and SIM cards for mobile phones. The company was formed with a startup capital of LE 96 million as a joint venture with Exalto, which was previously the smart card unit of Schlumberger. Exalto is the world’s largest producer of smart cards.
As per the joint venture agreement, Maxalto will take over Exalto’s sales in the region. The company already has orders from Iraq, Jordan, Kuwait and Bahrain.
Production is targeted at 30 million smart cards in the first year, with plans to expand this to 100 million annually by the third year.
In addition to GSM SIM cards, smart cards have a variety of applications including secure payment and storage of health and other identity information.
Drawing on the Kharafi Group’s experience with paper production, Saleh’s message is that manufacturing is a challenging and long-term investment.
“It is easy to be a trader, but it’s not easy to be industrial, said Saleh, emphasizing that Egypt’s proximity to European markets makes it a better candidate than China for multinational production and export to Europe.
The attitude of aversion to manufacturing, however, is an obstacle to attracting multinationals. “We give the impression to all European manufacturers that we don’t have the industrial mentality, said Saleh.
In addition to changing this attitude, successful industrialization requires reversing the brain-drain phenomena, attracting the funds for investment which are already available in the Arab world and taking advantage of Egypt’s strategic location on the doorstep of Europe, Africa and the Middle East. For specialized ventures such as ACCM and Maxalto, cultivating a partnership that provides technological competence is also critical.