By Gautam Singh Relatively similar experiences make India and Egypt comfortable economic partners. News Focus Syria Thinks Small Damascus turns to microfinance to combat poverty An Industry Unraveling Once a symbol of national pride, cotton’s prospects are coming apart at the seams A New Way of Doing Business Non-profit group promotes economic development by giving companies a helping hand The Science of Buying Marketers examine the brain to find out what makes consumers tick Digital Booty With electronic piracy plaguing the music business,legitimate media companies scramble for a business model that pays A Rocky Start Theft, corruption and a little chaos mark the launch of a new property levy meant to haul the country’s tax system into the modern era Highway Robbery Reputation of white taxi program takes a hit as drivers caught rigging meters By Ajit Solanki Upper Egypt’s Edfu has what these Indian farmers need: rock phosphate for fertilizer. By Associated Press Indian giants are turning out everything from high-quality IT services to cars.

By Tom Gara

An Egyptian may be misled, when walking the streets of Delhi or Mumbai, into thinking that they have stumbled across an as-yet-undiscovered district of Cairo. The similarities are striking, and they go more than just skin deep. The hustle and bustle of street life, the pungent smells and relentless noise, the constant presence of anarchic traffic and choking smog — all seemingly universal dynamics of an overpopulated developing-world metropolis — will certainly make you feel at home.

The contrasts of ancient and modern, wealth and poverty, globalization and local tradition; these also give India and Egypt a certain similarity. The two countries’ relatively similar experiences with colonialism and post-colonial socialism, nationalism and economic emergence create many shared cultural and economic spaces, not to mention the similar sights of housemaids hanging laundry on the ornate balconies of faded colonial gems.

For business leaders, the quick and simple details regarding the two economies are again a source of familiarity. Both countries have long, historic legacies of international trade, agricultural economies that began reforming and modernizing in the early 1990s, booming consumer bases that aspire toward the comforts of middle-class lifestyles, and major competitive advantages in labor costs, resource prices and geographic location.

India has moved faster and more consistently than Egypt in the race to convert these strengths into economic growth, capitalizing on its latent potential, smart government polices and entrepreneurial citizens. Its emergence as a major world economic power is based to a large extent on its booming population of over 1.1 billion people — a comparative advantage that no other country in the world, save China, is likely to compete with in the coming century.

There is no doubt that Egypt has a lot to learn, and benefit, from a strong trade relationship with India.

The economic relationship between India and Egypt is certainly an important one. In 2006, India became Egypt’s third-largest trading partner and the largest consumer of Egyptian exports. The $1.4 billion of Egyptian exports to India in 2006 represented a 150% rise over 2005 levels. Indian exports to Egypt also grew at a more moderate, but nonetheless significant rate of 20% in 2006, reaching $353.9 million, compared with $294.5 million in the previous year.

Indian investment in Egypt is also moving forward in leaps and bounds. In the last year, a number of high-profile Indian investments were made in Egypt, including the Sanmar Group’s purchase of Trust Chemicals and Marico’s purchase of a 50% share of the hair-care market through its acquisition of two local companies.

With bilateral trade and investment on the rise and the country becoming one of Egypt’s most important export partners, it is no surprise that government officials have been beating a well-worn path to Delhi in the last year. The ministers of communications and IT, administrative development, foreign affairs, social solidarity, and tourism have all visited the country since November 2006.

Although the overwhelming majority of Egyptian exports to India have been of oil and natural gas (up to 95% by some estimates), the potential for growth in business between the two countries is obvious. Much of India’s economic growth is coming from its export-oriented manufacturing sector, which requires raw materials, skilled employees and a global manufacturing and distribution network.

Chandra Srivastava, CEO of the Indo-Egyptian Fertilizers Company (IFFCO), one of the largest Indian investors in Egypt, believes that there is great potential for Egyptian industry to work with its counterparts in India. “There are many Indian companies who are now taking on the world in businesses like pharmaceuticals, textiles, or auto parts, for example,” he says. “If these companies want to work in Europe, the Gulf or Africa, Egypt makes a logical place to set up operations.”

In the services sector, where Indian businesses have established a world-leading position in the outsourcing of back-office administration and IT services, Egypt is also poised to share a piece of the action. A recent report by US-based technology research firm Yankee Group, published in the UK’s IT Week magazine, predicted that Egypt could become the “India of the Middle East” in relation to IT outsourcing. The key to such a development will be to see India as a partner, rather than a competitor, in the Egyptian IT sector.

“We cannot compete with India, we don’t want to compete with India. We want to cooperate with India,” says Mohammed Omran, CEO of Egypt’s Information Technology Industry Development Agency (ITIDA). Srivastava maintains that in areas such as Arab-world localization of software and Arab-language back-office and customer support functions, Egypt is a natural fit. “What [companies] like Wipro and Satyam have done in India, companies can do here for the Middle East,” he says.

The rationale for Indian outsourcing giants to work in Egypt is simple. Firstly, the explosive growth of the IT and outsourced-services industry in India means that the market for skilled, university educated employees — once a seemingly inexhaustable pool — is now tight, meaning that salaries are on the rise and in some cases, growth and expansion are hindered by a lack of human resources. Egypt represents a viable ‘overflow’ area for work which cannot be done quickly enough in India.

Secondly, Egypt has a similar cost structure to India, as well as similar pro-growth government policies, and an abundance of greenfield development opportunities, such as those available in Smart Village. Finally, for Indian firms looking to win business in the Arab world, the ability to localize software development or back office functions will be dependent on a pool of fluent Arabic speakers.

Memorandums of Understanding (MoU) have been signed between ITIDA and two of the giants of Indian outsourcing: Wipro and Satyam. Together, these two companies earn almost $5 billion in IT outsourcing revenue each year. Wipro, which employs over 70,000 employees across the world, signed their MoU in August, and are set to open a development and localization center here in the coming year.

“Wipro has always been focused on the Middle East as a region and localization in this region is one of the key strategies for growth this year,” said Rajat Mathur, Head of Middle East and Asia Pacific. “This development center, besides strengthening Wipro’s presence in the region, will also give a thrust to Wipro’s Global Delivery Model. We are impressed with the focus of the Egyptian government on IT and are proud to be associated with them in this talent development initiative.”

Srivastava’s IFFCO operates at an almost diametric opposite of the technological spectrum to the IT players, but its business model and success story is no less remarkable. The Indian Farmers Fertilizer Cooperative was founded in 1967 as a collaboration between farmers’ cooperative groups across the country, who banded together to create a fertilizer producer of the scale needed to deliver a high-quality, low-cost product to farmers across the country.

IFFCO is owned entirely by its members, over 55 million Indian farmers. Its mission is to produce fertilizers that are distributed directly to the farmers. “All the product, every singe ton of fertilizer, is taken by the farmer,” says Srivastava with a broad smile across his face. “There is no middleman, no retailer, no dealer, nothing like that. The shareholders, Indian farmers, are the consumers of all the production.”

In 2006, IFFCO produced just over 9 million tons of fertilizer, accounting for almost 20% of total fertilizer production in India, the world’s third-largest fertilizer consumer. With a rapidly growing population and depleted resource base, IFFCO must search across the world for the resources, particularly raw rock phosphate, needed to produce an ever-growing amount of fertilizers — a need that brought IFFCO, and Srivastava, to Egypt.

IFFCO has operated abroad since 1982, when its first overseas factory was established in Senegal. Srivastava explains that since 2002, the company has been on the lookout for new opportunities, particularly for rock phosphate developments. Egypt’s Al Nasr Mining approached IFFCO, inviting them to evaluate Egypt’s rock phosphate deposits and assess their suitability. After analysis proved the rock phosphate available here would be of sufficient quality for fertilizer use, IFFCO crunched the numbers. “Economic analysis proved it would be worth investing here,” says Srivastava.

The total cost of IFFCO’s investment in Egypt will reach just under $320 million, $214 million of which is being funded by the International Finance Corporation (IFC), a member of the World Bank Group (For a look at the activities and future of the World Bank in Egypt, see “The Bank we Love to Hate,” page 52). The factory will generate over 2,500 direct and indirect jobs in its construction and operations, along with plenty of new business for Egyptian suppliers and service providers. Located in the Upper Egyptian town of Edfu, the factory will bring welcome economic activity to a region of Egypt in desperate need of new non-tourism industries.

As India’s Commercial Attache to Egypt, Jaideep Mazumdar knows better than most the opportunities available for Egyptian businesses who can build successful cooperation with India. “We are seeing very encouraging growth, and a lot of interest from both sides in working together,” he says. Mazumdar points to a series of Indian investments into Egypt (see box) as a sign of the confidence held in the Egyptian economy and business environment.

After spending much time discussing the ways in which Indian investment and exports can support growth in Egypt, the conversation turned to another aspect of Indian-Egyptian trade less commonly discussed: What can Indian businesses learn from Egypt? And what opportunities are there in India for Egyptian business?

“Hospitality and tourism is one area that Egypt has capitalized on very well, and there are some world-class operators here that I am sure would do very well in India,” says Mazumdar. “As a rapidly growing country, there are also many opportunities in India for construction and infrastructure development, which is currently a major priority of the Indian government. Egypt has a number of very professional construction businesses and infrastructure developers, and they would be welcomed in India.”

A major opportunity for Egyptian businesspeople interested in India is the “Made in India” show, an event hosted by the Confederation of Indian Industries. The show, a mixture of trade show, one-on-one business meetings and trade seminars, will be attended by a high-level delegation of Indian business figures. Every year the Made in India show visits one or two different countries; in recognition of the growing importance of Indian-Egyptian trade, this year the show will be held in Cairo, from November 25-28.

Mazumdar also recommends business delegations as a good way to build networks and understanding of opportunities in the Indian market. Whether joining an Egyptian delegation to India or meeting with Indian delegations visiting Egypt, Mazumdar believes that such interaction provides an understanding that cannot be obtained through reading or online research.

Whether or not Egypt becomes the India of the Middle East will be largely dependent on how well Egypt’s business community learns to work in co-operation with the Satyams, Wipros and IFFCOs of the world. There may never be 1.1 billion Egyptians, but 75 million is enough to make its mark on the world’s most important region.

A Fortune from the Subcontinent

Financial Year	Total Indian Exports to Egypt	Total Egyptian Exports to India	Total Trade	Trade Surplus for Egypt
2002 - 03	261.59	466.03	727.62	204.44
2003 - 04	155.11	453.19	608.30	298.08
2004 - 05	246.40	438.32	684.72	191.92
2005 - 06	363.57	930.04	1,293.61	566.47
2006 – 07(July-May07)	396.14	1,364.01	1,760.15	967.87

 bt