Minister of Telecommunication and Information Technology discusses government strategy for developing ICT Sector

Mohamed El-Bahrawi
24 Min Read
Minister of Communication Hani Mahmoud speaks to Daily News Egypt Hassan Ibrahim / DNE
Minister of Communication Hani Mahmoud speaks to Daily News Egypt
Hassan Ibrahim / DNE

What are the main obstacles currently facing your administration?

I can divide the challenges into two parts; first are short-term issues that we need to handle quickly. The second part is building for the future. When we talk about the first part, we have three or four main challenges. First is bringing foreign investment into the Egyptian Information Communication Technology (ICT) sector. The ICT sector in Egypt used to lead foreign investment, attracting large sums money and a wide range of companies to come and invest in Egypt for the last 20 years.

During the last couple of years, the volume of foreign investment has unfortunately shrunk severely. So our first challenge is to bring back investors and provide them with opportunities for investment in our sector. The main reason we want to bring them here is to develop the sector and create employment opportunities for Egyptian youth.

Unemployment rates have reached more than 12 per cent, and our biggest challenge in the next four to five years as a government is to achieve a much lower unemployment rate. Creating jobs is one of the main objectives of the government, including the ICT sector.


What steps is the ministry taking to enhance the competitive edge of the sector and lure foreign investment?

There are a couple of things. The government in general, and the Ministry of Investment in particular, are working on packages for all sectors, not just the ICT sector, to attract foreign investors and inject capital and develop many projects in Egypt. But as for ICT, what we’re workingon, firstly, is training the workforce to be able to work on these projects, what we call “capacity building,” which includes training and development.

We have the Information Technology Institute (ITI), the National Telecommunication Institute and some projects from the ministry here to develop advanced technical skills, in order to make workers ready for any projects coming from abroad.

Second, we have the Maadi Park, where we are encouraging foreign investors to come and construct their own buildings for outsourcing and offshoring.It is a very advanced technology park, withvery modern infrastructure.

The third aspect is to facilitate and support any company or organisation that wants to come and invest in Egypt, in every way possible, to help them start their business.


Your ministry is currently working on modifying the law regulating the auctions and tenders in the sector, what are the proposed modifications? 

We’re almost done with modifying the law for tenders and auctions. When this law was issued, the telecommunication and information technology sector in Egypt was not mature enough.

The old law deals with computer programmes and software as if they’re chairs and desks, since during that time, the area was not that advanced. So we’re not working on changing the entire law itself, but we’re working on creating a specific section within that law that specialises in telecommunication and information technology products, how to deal with them, because they’re not something tangible like furniture. We’re almost there; our legal committee is working on the final steps to be ready for introduction to the new parliament once it has formed early next year.


Could you please be more specificas to the modifications?

There was no acceptance for any software in the old law. If you have a programme, how can you receive that programme and capitalise it into a company. When you’re installing a computer programme. How are you going to capitalise it? How are you going to audit it? Who should receive it? It is not tangible so it’s quite difficult to monitor it.

If you’re commissioning a programmer to write software for your company, how can you as a company capitalise such an asset? Software is part of your assets as a company. If there is any conflict between the company supplying IT and the company receiving it, how can they solve it? How can they have arbitration? It requires a specialist to judge in these technical matters.

I am not just talking about programming, but networking as well. If you’re installing a network in a business, how will you trade it and capitalise it? There are many things related to the service of ICT products.

We also provide services, which are different to products. Upgrades for instance, how can you regulate upgrades? If you already have the software but you need to upgrade it, is it considered a new programme? How would you consider it? How would you measure the cost of it? There are many more examples of this type of technical matters that extant law doesn’t deal with.


How much does the ICT sector contribute to the GDP?

We currently contribute 4.3per cent. And we’re hoping to reach5 per cent in the next couple of years.


How many international cables are currently running under Egyptian waters and how much do they provide to the state treasury?

We currently have 17 cables on both sides [the Mediterranean and the Red Sea]. They bring in around EGP 1 billion annually. But that’s only roughly what we’re getting now, because the fees that we’re getting depend on the traffic on these cables, and such traffic increases every year. So the good news about these cables is that even if you do not increase the number of cables, the revenue received will rise with the increase in traffic. If we add another one or two cables, the income from these cables will be much higher.

As for our expectations in the next few years, the marine cable business can bring in around EGP 3 billion annually if we factor in the traffic increase and addition of new cables as well.


You accompanied President Morsy to China and we understand that there will be deals with China Telecom, any updates on this issue?

There are negotiations between Telecom Egypt and China Telecom regarding extending a cable through Egypt. There are three big Chinese telecom companies working in Egypt with all telecom operators. We recently had a visit from two regional directors of those companies to discuss future cooperation. One of those companies invited 12 Egyptian engineers to travel to China and do very advanced technology training completely sponsored by this company. So they’re also helping with capacity building.


When should we expect broadband to come online and how would it be financed? 

The committee of the National Telecommunication Regulatory Authority (NTRA) is working on finalising broadband strategy. We’re expecting the implementation to begin by the first quarter of next year after we’ve completed the study. One of the main aspects we’re currently studying is the best funding option. Are we going to have more than one backbone, or will we have a national one and another owned by Telecom Egypt? Will we ask operators to fund their own? There are several options on the table and there is a very skilled committee studying the issue.

Depending on the model they will reach we’re going to start working on how to fund it.  How much will the government provide? Will the operators fund it themselves? What kind of loans and grants can we get from other countries? There are several loose ends now but hopefully by early next year we will have it ready for implementation.


What is the ministry’s plan for developing the Egyptian Postal Service?

Earlier this year, we had several committees working on an improvement plan or a modernisation plan, which is now ready for implementation. It revolves mainly around providing new services through the post offices; financial services such as small loans, collection of invoices from different vendors, what we call “cash concentration.” Another service is parcels, which is a courier service. Currently, the Egyptian Post has only six per cent of the market share, and we’re working on a plan to increase that number to 12 per cent in the next couple of years.


What is the ministry’s strategy in supporting Small and Medium-sized Enterprises?

Supporting SMEs in the sector is one of our major objectives. It is one of the Information Technology Industry Development Agency’s(ITIDA) top priorities. ITIDA is working hand in hand with SMEs in the sector. We’re also working with the semi-government organisation the Commercial Chamber for Programmes. In addition, we’re working with Etisalat, the NGO assisting SMEs in the sector.


We are witnessing a rise in the outsourcing business in Egypt. What is the ministry doing to support the growth of such industry?

We believe that outsourcing is one of the biggest opportunities for Egypt. We’re currently ranked number four in terms of readiness to be an outsourcing hub. We’re providing companies with a variety of services. ITIDA is providing them with support in terms of training and development of their human resources.

ITI is EduEgypt, which aims at shoring up the gap between knowledge people receive in universities and the skills required for the businesses of outsourcing and call centres. We’re funding some training activities that they must undergo at the beginning of their work in Egypt. At the same time we’re offering work space here in Smart Village or in Maadi Park, with really attractive terms and conditions.


Would you provide us with an example of those terms and conditions? 

Normally, to come to Egypt and build your own call centre is very hectic; you need infrastructure, you need reliable internet, you need an uninterrupted power supply because you cannot afford to have electricity cuts, you need services and maintenance for your building and your office space.

Maadi Park provides all of these needs. So all the investor has to do is bring in his employees and start working immediately. All the buildings there are designed and equipped specifically for call centres.

Usually when a call centre company comes to Egypt, they choose a certain area and renovate it into a call centre. A call centre needs wide space and a specific design that is hardly available in Egypt in general. So what we’re doing in Maadi Park is designing the buildings from the beginning to work as call centres, providing them with the entire infrastructure. It is what we call in our business “plug and play.” All you need to do is come, bring people and start working.


Since we are discussing infrastructure, what are the latest updates on the virtual licence?

This is very related to the broadband strategy. We have two teams working on the NTRA now, and by the end they should be working together. One team is working on how we want to see the telecom sector and the telecom market in Egypt within the next three years. Because it’s not just the virtual licence that we’ve been talking about for a long time now, it is also how we can organise the telecom industry in Egypt.

We currently have four operators in Egypt. Each operator has some services and lacks other ones. So, is it better to start offering virtual networks for companies that want to enter the mobile market like Telecom Egypt? Or should we name all the services that we need to provide and put a price onthem, as well as terms and conditions, and any company who wants to utilise any service can pay for it? So at the end of the day we get four operators providing all the services, what we’re calling “integrated operator.”

This could be done by either building their own network or a virtual agreement with another company, those kinds of services will all be there. But before finalising the ‘who’ scenario, we want to find‘what’ is best for Egypt.

If you go around the world, you have hundreds of scenarios. The team in NTRA, with some support from foreign experts, are trying to find out what is the best scenario for Egypt’s telecom industry in the next three years. All over the world, it is a transition period. In Egypt we’re working with 2G and 3G mobile technologies, and now the world is heading towards 4G, which will make the mobile service and the internet one thing.

The beauty of 4G is in internet usage, not in voice. It will not impact the quality of the voice calls, but it will offer a completely different speed, and different internet services. That is why we’re working on both ends, the broadband strategy and the organisation of the telecom sector, because by the end we will have one product for the whole team.

So to answer your question, we have yet have a final answer for the broadband or what we’re calling “unified services,” where every operator working in Egypt can buy any service and utilise it. Those kinds of services include international gateway, mobile voice, fixed voice, mobile data, fixed data, infrastructure and many more. And we expect all this to be available by the first quarter of next year.


There has been a heated debate regarding the one piaster tax on mobile calls. Where does the ministry stand on this matter and what could be done to provide a resolution?

It is not a problem to be resolved. The government is working to increase funds to the state’s treasury, and they have several ideas. One of them is how the mobile revenue can contribute to such an increase. There is a committee working between our ministry and the Ministry of Finance, to find the best way to go about the mobile sector’s contribution to the state’s treasury.

The one piaster-tax is just an idea that is currently being studied. There is another idea that revolves around slightly increasing the sales tax. Who will bear such a tax? Is it going to be the customer or the mobile companies?  That has yet to be finalised.


But in your opinion, who should bear the cost?

The study that we’re conducting now will answer such a question.


Regarding Telecom Egypt, what is the ministry doing to enhance the competitive advantage of the company? Will it be offering any new products or services to boost its revenues and increase its market share?

Telecom Egypt is the backbone for the telecom industry in Egypt. It is the main company in telecom. They offer all kinds of services, except for mobile. All other operators are working on their infrastructure; two of the mobile operators are working on an international gateway.

Telecom Egypt is a strong company, with EGP 10 billion in annual revenue. To finalise the vision for the telecom market in Egypt, we need to consider the future of Telecom Egypt. If we’re going to apply a unified licence, Telecom Egypt will definitely take some services, such as mobile voice and mobile data to be able to provide all kinds of services to its customers.

The additional products and services they can offer, they will get them after finalising the vision of the telecom market in Egypt. Now they’re hardly working to reduce the Voice over IP (VoIP) because they’re losing revenue. And we’re working with them through some initiatives to control the VoIP activities and also working to increase the revenues coming from marine cables.


What do you mean exactly by controlling Voice over IP?

Well, VoIP is illegal. So the revenue companies make from such services is therefore also illegal. It also takes away from Telecom Egypt’s revenue.  Which is why we’re working with the three operators to give us all the activities that they believe might be in used in VoIP technology. We’re working with the police and the courts to try and apprehend those who are conducting these illegal businesses. During the last six months, we’ve managed to bring in several cases. And I believe that the VoIP now is reduced, which will increase the revenue of Telecom Egypt.


Why not integrate VoIP into the ICT sector’s services, instead of deeming it illegal and working towards preventing its use? 

There are several reasons. Firstly, our current infrastructure is not ready for VoIP. Secondly, to begin any new telecommunication service, you need to have it licensed, and the current users are not getting any licences. You have to pay money to get that licence, like any other service. Until now the infrastructure to legalise VoIP doesn’t exist, which is why the government decided that VoIP is illegal and that we wont be issuing licences for it.

In other countries, the readiness of their infrastructure allows them to issue licences for VoIP, but we in Egypt are not ready for that now. And since we’re not ready, people are not allowed to conduct these illegal activities. What they’re doing now is using Egypt’s infrastructure without paying any fees.


What is the administration’s stance on internet censorship? How will the government ensure that freedom of information is not hindered?

During the previous parliament, we had a committee between the parliament and the Ministry of Telecommunication. We conducted a study on this matter, but the dissolution of the People’s Assembly stopped any further discussions on the matter.

Once the new parliament is in session, this study will be reviewed again. Our stance is that yes, technically,[censorship] could be done, but it could be easily circumvented as well. We can spend a lot of money and we can ban certain websites, but with very simple technology and a little money people can bypass it. This will create illegal business in the system. So even after spending a large sum of money, it could be easily broken, even young people can do it easily.

Still, we’re ready with the study, and we will discuss it with the parliament once it’s up and running. We’re ready with all the information; the cost, the pros and cons, but eventually the parliament will decide. It is not a decision that could be taken by the ministry.

From my point of view, it is not worth the cost. You can invest in censoring the internet if you’re really keen on it. But for the future, once you start using such filters now, no one knows how much they’re going to be used in the future, which is very risky. And still, it will not ban those sites completely because people easily can break the ban.


Any final thoughts?

Going back to law modification, we are currently working on several; the telecommunication law, the freedom of information law, and especially the confidentiality of personal information lawis quite important for us.It will be submitted to the parliament once it starts. This law will bring a lot of business to the outsourcing area, because financial organisations such as banks cannot be active in a country without a confidential personal information law.

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