23 May 2008
Egypt and India are strengthening economic ties, with recent talks between the two countries highlighting potential for Indian investment in Egypt's information and communications technology (ICT) and energy sectors.
After three visits from Indian officials to Egypt in April, representatives of both countries met during the World Economic Forum in Egypt's Sharm El Sheikh during May 18-20. Jairam Ramesh, India's minister of state for commerce, industry, and power, spoke with Egyptian Prime Minister Ahmed Nazif, as well as the Egyptian ministers for trade and industry, finance, ICT and transport. During his visit, Ramesh said he hoped to raise India's investments in Egypt from the current $700m to $4bn.
Developing its ICT capability is one of Egypt's major goals, with the government hoping to promote the country as an outsourcing centre for technology services. While Egypt benefits from its central location between Europe, Africa and the Middle East, as well as a large pool of English and French speakers, the country needs more investment and expertise to develop this sector. India could very well be the right partner and several companies have already shown an interest in the Egyptian technology services market.
India's Satyam Computers opened a training centre in Giza in February, employing some 300 people, the majority of them locals. Tata Consultancy Services, another Indian firm, has also announced plans to establish a software development and training facility in Egypt.
While the Egyptian government will certainly welcome these investments, there are also significant advantages for Indian outsourcing operators who are looking to become more competitive.
"India is being recognised as a retreating option for outsourcing," Tamer El Naggar, managing director for North Africa at market research firm Synovate, told OBG. "A lot of companies have moved their back offices to India and this has elevated the country's labour pool, so India is pricing itself out of the market."
Another field for cooperation may be in energy. IPR Red Sea Incorporated joined forces with India's state-owned Oil and Natural Gas Corporation in 2005, and last year announced the discovery of over 200m barrels of oil in a block in the Gulf of Suez. The joint venture has also started drilling work in two other exploration sites in the Red Sea. The Indian oil company is currently looking at acquiring a 33% participation in a Mediterranean Sea block operated by Shell.
In other collaborations, the Gujarat State Petroleum Corporation recently signed a deal with the Egyptian Natural Gas Holding Company (EGAS) and the Ganoub El Wadi Holding Petroleum Company (GANOPE) to explore the North Hap'y offshore field in the Mediterranean Sea, as well as an onshore block located in Egypt's Western Desert.
Other Indian companies are looking at downstream investments. Tata and Essar Global have expressed interest in building refineries, while Reliance Industries, India's largest private sector enterprise, has discussed plans to invest in a $4bn plastics processing complex in Egypt.
Egypt's advantages for Indian operations go beyond its geographic location. The government's business-friendly programme won it the title of "world's top reformer" for 2007 from the International Monetary Fund. Manufacturing wages are competitive, even slightly lower than those found in India, and energy is almost three times less expensive in the Arab country, although this is soon to change as the Egyptian government intends to phase out subsidies for industry. However, Egypt's biggest asset is its net of preferential trade agreements, allowing direct access to the European Union and the Pan-Arab free trade zone, as well as several countries in Eastern and Southern Africa.
Egypt and India are strengthening economic ties, with recent talks between the two countries highlighting potential for Indian investment in Egypt's information and communications technology (ICT) and energy sectors.
After three visits from Indian officials to Egypt in April, representatives of both countries met during the World Economic Forum in Egypt's Sharm El Sheikh during May 18-20. Jairam Ramesh, India's minister of state for commerce, industry, and power, spoke with Egyptian Prime Minister Ahmed Nazif, as well as the Egyptian ministers for trade and industry, finance, ICT and transport. During his visit, Ramesh said he hoped to raise India's investments in Egypt from the current $700m to $4bn.
Developing its ICT capability is one of Egypt's major goals, with the government hoping to promote the country as an outsourcing centre for technology services. While Egypt benefits from its central location between Europe, Africa and the Middle East, as well as a large pool of English and French speakers, the country needs more investment and expertise to develop this sector. India could very well be the right partner and several companies have already shown an interest in the Egyptian technology services market.
India's Satyam Computers opened a training centre in Giza in February, employing some 300 people, the majority of them locals. Tata Consultancy Services, another Indian firm, has also announced plans to establish a software development and training facility in Egypt.
While the Egyptian government will certainly welcome these investments, there are also significant advantages for Indian outsourcing operators who are looking to become more competitive.
"India is being recognised as a retreating option for outsourcing," Tamer El Naggar, managing director for North Africa at market research firm Synovate, told OBG. "A lot of companies have moved their back offices to India and this has elevated the country's labour pool, so India is pricing itself out of the market."
Another field for cooperation may be in energy. IPR Red Sea Incorporated joined forces with India's state-owned Oil and Natural Gas Corporation in 2005, and last year announced the discovery of over 200m barrels of oil in a block in the Gulf of Suez. The joint venture has also started drilling work in two other exploration sites in the Red Sea. The Indian oil company is currently looking at acquiring a 33% participation in a Mediterranean Sea block operated by Shell.
In other collaborations, the Gujarat State Petroleum Corporation recently signed a deal with the Egyptian Natural Gas Holding Company (EGAS) and the Ganoub El Wadi Holding Petroleum Company (GANOPE) to explore the North Hap'y offshore field in the Mediterranean Sea, as well as an onshore block located in Egypt's Western Desert.
Other Indian companies are looking at downstream investments. Tata and Essar Global have expressed interest in building refineries, while Reliance Industries, India's largest private sector enterprise, has discussed plans to invest in a $4bn plastics processing complex in Egypt.
Egypt's advantages for Indian operations go beyond its geographic location. The government's business-friendly programme won it the title of "world's top reformer" for 2007 from the International Monetary Fund. Manufacturing wages are competitive, even slightly lower than those found in India, and energy is almost three times less expensive in the Arab country, although this is soon to change as the Egyptian government intends to phase out subsidies for industry. However, Egypt's biggest asset is its net of preferential trade agreements, allowing direct access to the European Union and the Pan-Arab free trade zone, as well as several countries in Eastern and Southern Africa.
© Oxford Business Group 2008
