Information Technology and the Arab World (April 2001)

September 7, 2008 at 7:15 pm 2 comments

AMBASSADOR ROBERT H. PELLETREAU discusses “Information Technology and the Arab World,” a comparison of developments in the United Arab Emirates and Egypt, at CCAS (April 2001).

Wherever you turn across the broad expanse from Morocco to Iran, governments are opening the doors of their societies to the cyber world and working to remove the underbrush of regulations and restrictions that have impeded the spread of the IT revolution to date. In Morocco, Vivendi Universal of France emerged as the winning bidder in December for a strategic stake in Maroc Telecom offering $2,310 million, $230 million higher than the asking price. Jordan’s King Abdullah II went out of his way a year ago at the World Economic Forum gathering at Davos to court AOL and invite Steve Case to visit the Hashemite Kingdom to help launch Jordan’s ambitious information and communications strategy. President Mubarak’s annual visit to Washington last spring for the first time included a visit to Northern Virginia’s high tech corridor, and Emir Hamed bin Khalifa al-Thani of Qatar used the occasion of his attendance at the Millennium Summit to make a visit to Silicon Valley before returning to the Gulf. Even in Damascus, Dr. Bashar has pledged to bring the information age, belatedly, to Syria and took the first step by passing a copyright law that had been sitting on the books for 20 years which affects all creative works, including computer programs, books and films.

At the Middle East Institute conference in fall 2000, I compared what has been happening with Dubai Internet City and Egypt’s National Telecommunications Plan in order to give an idea of where expansion of the information economy to the Middle East is today. I concluded that Dubai was moving much faster than Egypt for a number of reasons, but that Egypt was more likely to be the model other Arab states would follow. Developments over the past six months have confirmed that Dubai is the racehorse, but Egypt is also moving forward with an important assist from U.S. Government-sponsored projects in the education and technology sectors. Let me review with you briefly what is happening in the two countries and how the U.S. AID program is assisting in Egypt.

Dubai Internet City

In October 1999, the initiative to establish Dubai Internet City was formally announced by Sheikh Mohammed bin Rashed. Using the free trade model that has worked so successfully in Jebel Ali, Dubai has set out to establish DIC as a regional hub for the whole gaunt of Internet-related activities from network platforms and infrastructure to software development.

The mission of DIC – and you can get this very easily off its website, www.dubaiinternetcity.com – is the following simple statement: “To provide an infrastructure, environment and attitude that will enable New Economy enterprises to operate locally, regionally and globally out of Dubai with significant competitive advantages.” These advantages are basically six:

  1. A conducive legal framework that allows fast, easy registration, 100% foreign ownership, up to 50-year renewable licenses, and zero taxes on sales, profits and personal income;
  2. World-class technical infrastructure, developed and operated by leading companies in the field;
  3. Access to regional markets north, south, east and west;
  4. A supportive environment provided by the most business-friendly government and bureaucracy in the Arab World;
  5. Access to a skilled talent pool which includes well-trained workers from Jordan and Egypt and also from the Subcontinent, particularly India; and
  6. A local infrastructure that includes easy air travel, available housing and office space, medical and educational facilities and a range of leisure activities.

When I met with DIC’s acting President Hamed Kazim last spring, seconded from Andersen Consulting, DIC’s initial operating space had already been outgrown, and he reminded me of a chariot driver urging powerful horses ahead at breakneck speed with each one threatening to break out of control. All at one time, he was supervising an impressive physical construction program, trying to put in place a new liberal regulatory infrastructure, and inviting the world’s leading companies to come and use Dubai as their regional base. I asked him what he thought the regional pattern would be in 5 years. His reply painted a vision of four regional hubs from and through which a wide array of cyber services would spread throughout the region. His four hubs were Egypt, Israel, Dubai and Singapore and his vision considered political boundaries and tensions irrelevant to the free flow of information in cyberspace between and among all the hubs.

The day after our meeting, Dubai’s press carried news of an initial licensing agreement between Microsoft and DIC, and in August Microsoft broke new ground on construction of its new Gulf and Eastern Mediterranean headquarters. The software development unit of Gemplus International SA, the French smartcard manufacturer, recently left India’s Bangalore IT Center for DIC citing the work ethic and speed to delivery in government decisions as key reasons for their move.

In June last year, the Emirate Internet Association was launched, and in July, technical contracts were awarded to Siemens, Cisco Systems and Sun Microsystems to develop the technical infrastructure of the Dubai hub. The hub itself has now opened and expanded as Dubai Ideas Oasis (a talent and ideas incubator), announced also in October 2000, and Digital Media City, launched on January 20, 2001 swung open their doors to new businesses. This triangle of enterprises has now attracted 194 new businesses including Reuters, Arabia.com (the premier Arabic-language portal), 2 London based Arab satellite television studios, Zen TV (a new satellite TV network aimed at Arab youth) and other industry giants, such as Oracle, Compaq and IBM.

The telecommunications infrastructure of the UAE, run by the state monopoly Etisalat, was also upgraded by Siemens improving its reputation as the lowest-cost provider of Internet access in the Arab world and is expected to offer DSL service soon. A recent announcement adds Avaya to the team to advise on cabling infrastructure. Some have criticized Etisalat for refusing to permit rival Internet service providers into the market arguing that this may hinder development of the Dubai market by making bandwidth expensive and slows data speed because of censorship by proxy servers. Etisalat however has continued to improve its network capabilities.

In February, the Institute for Technological Innovation was announced. Its programs are to include courses and seminars for information technology students and specialized education for managers, directors and executives in business and government. The Internet University is scheduled to open this month with the mission of providing students with the skills needed to meet the personnel needs of the growing IT sector. In addition, Dubai is trying to lure talented individuals through imaginative incentives such as a website contest in English and Arabic and an e-business competition that offers $150,000 incubation support to the top three winners.

Dubai hosted the OECD Emerging Market Economy Forum on Electronic Commerce in January, and the new chief of DIC, Mohamed Al-Gergawi recognized the steps that Dubai still needs to take to make DIC and other e-initiatives successful in the long-term. In his closing speech, he identified four policy areas: (1) ensuring access to information infrastructure, (2) building trust for service providers, users and consumers in electronic systems and transactions, (3) establishing simple, predictable regulatory environments notable for taxes and tariffs, and (4) easing logistical problems for payment and delivery both for intangibles and physical goods.

Egypt

Let’s turn to Egypt, whose pace is a bit slower but equally impressive given that it has much more to undo in the way of old laws and bureaucratic attitudes than Dubai. Also, because Egypt represents such a big market in its own right, most of its efforts are directed locally rather than regionally at the present time. Egypt, for example, now has a telephone density of about 10 percent; that is a current network of about 7 million lines that is expected to grow by about 1 million lines annually. The number of mobile telephone users just about doubled last year and five new licenses for broadband service ventures have recently been granted.

It was only a year and a half ago that Egypt created a Ministry of Communications and Information Technology and appointed Dr. Ahmed Nazif as its first minister. One of his first acts was to develop and push through a national communications and information technology (CIT) plan and since then he has been in constant motion inside and outside Egypt to put it into effect. He met with Steve Ballmer of Microsoft and has since worked out an arrangement through which Microsoft provides software to Egyptian university students at low cost in a massive education and training effort. Similar agreements have been negotiated with other high tech companies, and Lucent has opened a software center. In September of last year, Dr. Nazif was back in Washington holding an investment seminar for U.S. technology companies in order to attract them to Egypt. His Ministry also prepared a new telecommunications law which will complement the new Intellectual Property Protection legislation now being considered by the Egyptian Parliament. Another effort to force feed Internet familiarity to the Egyptian public is the project to create some 300 community Internet centers around the country, mostly by transforming existing youth and community centers, so as to give a large number of Egyptians access and training on Internet use. These centers complement the Information and Decision Support Centers established over the past several years in the ministries and governorates under the pioneering influence of Dr. Hisham Sharif.

The partial privatization of Egypt Telecom was scheduled to take place in October 2000 and was intended to revitalize management as part of the Government’s foundation building process. The government planned to spend roughly $1 billion over the next year or so to create a high-speed data, voice and image network in Egypt. However, the government decided to delay its planned IPO citing poor market conditions leading to undervalued shares. For the latest developments in Egypt’s technology sector, the website – www.egyptinc.com – provides a regularly updated reference.

A comparative advantage that Egypt possesses is the availability of U.S. economic assistance funds. Last September, the United States and Egypt signed a $40 million Information and Communications Technology project which is providing technical assistance, training and commodity procurement grants for ICT-related hardware, software and services. The project will be concentrated in four key areas:

  1. An improved legal and regulatory framework. U.S. experts are assisting Egyptian experts in drafting telecommunications and E-Commerce laws, regulations and procedures. They are also supporting Egypt’s adoption of some of the basic international agreements, such as the Basic Telecommunications Agreement and the Information Technology Agreement. They are providing assistance to the newly established Telecommunications Regulatory Authority and a proposed non-governmental organization called for now “The Federation” which together should establish a user-friendly enabling environment for growth of the industry.
  2. Increased E-Government and E-Commerce. This part of the project is promoting a healthy E-Business environment, establishing pilot projects for electronic financial and payment services, access to government ministries and government-fimded services, and E-Privacy protection.
  3. Expanded usage of ICT throughout Egypt. Through establishing telecenters and incubators, building on Egypt’s smart villages and existing community center network, the U.S. is helping expand ICT usage in the private sector and among individuals. These activities are already underpinning the creation of start-up ICT firms.
  4. Grants to U.S. and Egyptian NGOs. Targeted assistance to NGOs already operating in rural and non-urban areas is expediting the spread of information technology beyond the major cities and familiarizing large numbers of Egyptians with its usage and benefits.

The total project is expected to run for five years and to set standards in Egypt that will help build the bridge from Silicon Valley to the Nile Valley.

Recently, the U.S. Department of Commerce concluded a joint statement with Egypt on principles for an unfettered Internet environment. Similar statements are being concluded with Jordan and the countries of the Gulf Cooperation Council.

Comparisons

A big difference between Egypt and Dubai is that Dubai is entering the Internet arena with a relatively clean slate and a very pro-business environment. Egypt faces a certain amount of regulatory underbrush from the previous era of socialist, centralized planning to clear away well entrenched bureaucratic obstacles. For example, customs duties and sales taxes on computers are a relatively low 5 and 10 percent respectively, but Dr. Nazif has been unsuccessful so far in his efforts to remove these levies altogether in order to make PCs more affordable and accelerate the number of owners and users of PCs in the country. Customs duties on components are also inhibiting the development of local assembly plants that again could lower costs. Yet, in the past year, sales of PCs in Egypt increased by 20%. These kinds of numbers indicate with the removal of duties and taxes, the level of sales could grow much faster. However, additional problems of transparency and the willingness of other ministries and private companies to provide timely information are complicating the development of a systematic national database for IT providers and users. A further problem faced by nascent IT companies is access to capital because of the limited private sector and a state-dominated banking sector.

Egypt, in a sense, is a laboratory of the challenges facing IT in the digitizing economies of the Arab world. Certain parts of its Government have security concerns about how the net may be used by opposition or terrorist elements, or censorship concerns, although censoring cyber news is much harder than blacking out newspapers or news broadcasts. Other parts are concerned about the potential spread of pornography or violence or “Western cultural trash.” Traditionalists in the telephone monopoly want to preserve its high profits and only secondarily facilitate access. Bankruptcies face greater stigma than in the U.S. and “dot coms” have a high failure rate. The culture also prefers personalized, face-to-face dealings and the development of business relations through the growth of personal relations over successive visits and cups of tea. The very speed of Internet communication contrasts with more leisurely patterns of life along the Nile.

Despite these problems, Egypt is moving forward into the global IT world and because of its great political, cultural and legal influence throughout the region, providing a model and example which is naturally looked to by other nations in their own cyber development efforts. Egypt has been applauded as the only country in the region that has allowed new licensed service providers to compete against the national service provider. There is also the leapfrogging effect in that Egypt is not trying to reinvent technology already developed elsewhere but only to reconfigure and customize it for local and regional use. Existing software is being translated into Arabic by Egypt’s growing software industry, and the Egyptian educational curriculum at all levels is being digitalized for computer teaching. It is thus Egypt, rather than Dubai, which provides the more accurate measure of the size and pace of IT development in the Arab world.

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* Robert H. Pelletreau was Assistant Secretary of State for Near Eastern Affairs from 1994 to 1997. Before that he served in half a dozen Arab countries and as Ambassador to Egypt, the UAE, and in Tunisia, where he opened the U.S. dialogue with the Palestine Liberation Organization. Since leaving government service, he has been a partner in the international law firm of Afridi & Angell and is a member of the Board of Advisors of Georgetown University’s Center for Contemporary Arab Studies.

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Entry filed under: Internet, Satellite TV. Tags: , , .

Egyptian CIT Policy and Initiatives (September 2000) Internet Pioneering in Four Arab Countries: The Internet as a Force for Democracy in the Middle East

2 Comments Add your own

  • 1. Michael Tim  |  February 28, 2009 at 5:13 pm

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  • 2. ngekngok poems  |  October 12, 2010 at 3:52 am

    thanks for sharing Information Technology and the Arab World (April 2001)

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