68870 Vol. 5
World Bank
Measuring foreign direct investment in the area of
information and communication technology in Egypt
Phase 2, Deliverable #4 -
Results and analysis of data collection in FDI in ICT
Prepared for the Ministry of Communications and Information
Technology, Information Centre (MCIT-IC)
Geoffrey Robertson (consultant) and
Tim Kelly (Lead ICT Policy Specialist, infoDev/World Bank)
Revised 19 January 2010
1
Abbreviations
BOP
Balance of payments
BPCG
International Monetary Fund Balance of Payments Compilation Guide,
BPM5
International Monetary Fund Balance of Payments Manual fifth edition)
BPM6
International Monetary Fund Balance of Payments Manual (draft sixth edition), 2008
CBE
Central Bank of Egypt
FDI
Foreign direct investment
FDIE
Foreign direct investment enterprise
FES
Foreign exchange system
GAFI
General Authority for Investment
GAFI EPD
GAFI Economic Performance Department
GICT
Global Information and Communication Technology (World Bank department)
ICT
Information and Communications Technology
IIP
International Investment Position
ITIDA
Information Technology Industry Development Agency
MCIT
Ministry of Communication and Information Technology
MCIT-IC
Information Centre of the Ministry of Communication and Information Technology
RTA
Reimbursable Technical Assistance
2
Table of contents
Executive summary ................................................................................................................................. 4
Chapter 1. Introduction .......................................................................................................................... 6
Chapter 2. An analysis of the interim results on FDI .............................................................................. 8
2.1
Why conduct a survey? ........................................................................................................... 8
2.2
Anticipated problems............................................................................................................ 10
2.3
Survey form and method ...................................................................................................... 11
Chapter 3. Analysis of the results for FDI in the ICT Sector .................................................................. 13
3.1
FDI inflows, 2006-2008 ......................................................................................................... 13
3.2
Interpreting the results ......................................................................................................... 13
3.3
What exactly is direct investment?....................................................................................... 14
3.4
The cumulative level of Foreign Direct Investment in the ICT Sector .................................. 14
3.5
Using the survey results ........................................................................................................ 15
3.6
Assessing accuracy ................................................................................................................ 15
Chapter 4: Recommendations and next steps ..................................................................................... 16
Annex:
Streamlined survey questionnaire ........................................................................................ 18
3
Executive summary
This study of the measurement of foreign direct investment (FDI) in the information and
communication technology (ICT) sector of Egypt’s economy forms part of the second amendment to
a reimbursable technical assistance (RTA) programme delivered by the Global Information and
Communication Technology (GICT) department of the World Bank to the Information Centre of the
Ministry of Communication and Information Technology (MCIT-IC) of the government of Egypt. The
initial agreement was signed in June 2006 and the second amendment in August 2008.
The focus of the Ministry of Communication and Information Technology (MCIT) is to promote the
development of ICT services (and ICT-enabled services) in Egypt so that Egypt has the best ICT
technology available to it. In addition ICT services provide significant export earnings, and provide
employment opportunities, particularly for the increasingly well-educated Egyptian community. To
achieve the further development of the ICT sector, Egypt aims to attract foreign direct investment
(FDI) from foreign entities that are ICT specialists. Indeed, attracting FDI is a key pillar of Egypt’s ICT
Strategy. To understand and monitor the success of this policy, MCIT therefore needs good statistical
data on FDI.
The World Bank’s GICT department has been asked to assist in MCIT’s measurement of FDI in the ICT
sector by clarifying what are ICT products and services, and what are appropriate measures, based
on international best practice, of FDI, and what strategies should be developed to obtain a more
accurate measure of FDI. Clarifying the nature of ICT services is the first part of the project and a
separate report exists on this (final draft delivered February 2009). In May this year, a draft report
covering Part 2 of the project concerned with the appropriate measurement of FDI, and forming the
second and final deliverable, was provided (revised report delivered in September 2009). The third
deliverable, conducted between June – July 2009 by a combined team of World Bank and MCIT-IC
staff, resulted in the development of a sampling framework based on some 50 companies present in
the ICT Sector in Egypt which were considered to have the potential for having made foreign direct
investments in the ICT sector. This was followed by a questionnaire survey conducted by AC Nielsen
on behalf of MCIT-IC between August – October 2008.
This report (Deliverable #4) prepared by Mr Robertson and Dr Kelly, was prepared following a
second visit to Cairo (November, 8-13). A first version was submitted in mid-November 2009 and this
revised version in January 2010, along with the final project report. It has the following structure:

Chapter 1, Introduction, sets out the objectives of the project and the overall progess to
date. It describes the methodology followed and the challenges encountered.

Chapter 2, An analysis of the interim results on FDI, presents the preliminary findings of the
work conducted by AC Nielsen, and deals with some of the methodological issues
encountered in reconciling this data set with other data sets, such as the financial data
derived from company annual reports.

Chapter 3, Revised estimates of FDI, presents the revised estimates for FDI in the ICT Sector,
once the data has been reviewed and revised. By the end of FY2008, cumulative FDI in the
ICT Sector had reached LE 16.6 billion (US$3.06 billion). The annual inflow peaked in FY 2007
at LE11.9 billion (US$2.18 billion), a higher figure than previously estimated. The main cause
of this was the sale of the third mobile license to Etisalat in July 2006 (at the start of
FY2007), and Etisalat’s subsequent investment to start operations.

Chapter 4, Recommendations and next steps, offers advice to MCIT-IC and other actors
within the Egyptian government on how to continue with the collection of FDI data in future,
including refinements to the questionnaire and the use of balance sheet data to supplement
and cross-check data derived from the questionnaire. It also identifies possible issues where
further work would be justified.
4

The annexes to the report provide more detail on the actual results derived from the
questionnaire and methods used for data reconciliation.
5
Chapter 1. Introduction
This study comprises the fourth and final deliverable for a project to measure the level of of foreign
direct investment (FDI) in the information and communication technology (ICT) sector of Egypt’s
economy.
To date a prime focus has been on
measuring the financial inflow of FDI into
ICT. However, concern has been
expressed about the measure of FDI
inflow because there is an apparent
discrepancy between the measures of FDI
inflow produced by the Central Bank of
Egypt (CBE) and those of the General
Authority for Investment (GAFI). The
measure of FDI inflows in ICT shows great
volatility from year to year (dropping from
$US 1.900 million in 2006-07 and almost
zero in 2007-08), and there is a lack of
understanding of exactly what is being
measured (see Figure 1).
Figure 1: Variation in the estimation of FDI in Egypt’s ICT
sector from official sources
GAFI estimates
Values in million
USD
Main line of business
2005
2006*
2007
2008**
Communication
-7.7
1,156.4
-70.3
57.83
30.42
6.34
25.28
6.46
2.23
0.89
1.08
0.56
24.95
1,163.63
19.33
64.85
Information
Technology
services of
Technology systems
Total
CBE estimates
Values in million USD
FDI
JulyDecember
2006*
JanuaryMarch 2007
April-June
2007
JulySeptember
2007
JulySeptember
2007
Value
1,921
0.2
2.3
0.6
7
Note: ** Year to Aug 2008.
The work carried out in phase 1 of the
project has laid the groundwork for this
second phase by reaching consensus on an agreed definition of the ICT sector in Egypt and
identifying some 50 or so firms that would be included in the data gathering phase.
The report on Part 2 followed the visit of Mr Geoffrey Robertson (World Bank FDI expert consultant)
to Cairo in April. That report advised on what are appropriate future measures, based on
international best practice, of FDI; assessed the discrepancies in Egyptian statistics on FDI in the ICT
sector, and more generally, the adequacy of the statistics; and outlined a plan to obtain a more
appropriate measure of FDI. That report was developed in close consultation with officials from
MCIT-IC, the Information Technology Industrial Development Agency (ITIDA),the Central Bank of
Egypt (CBE), which is responsible for the compilation of Egypt’s balance of payments (BOP), and
various staff of GAFI (General Authority for Investment). The project was conducted under the
guidance of Dr Tim Kelly, Lead ICT Policy Specialist at infoDev / World Bank.
Following the recommendations of that report (deliverable #2), which provided detailed survey
design instructions, MCIT-IC staff, with assistance from Carlo Rossotto (Senior ICT Policy Specialist,
World Bank) and Tim Kelly, and with the assistance of leading industry experts, selected ICT sector
companies with direct investment in Egypt for inclusion in the data sampling framework (Deliverable
#3). With help from AC Nielsen, MCIT-IC carried out a pilot survey of these companies, and then
conducted a survey measuring, for recent years, FDI in the ICT sector and the contribution that FDI
companies make to the Egyptian economy.
This report (Deliverable #4), prepared by Mr Robertson and Dr Kelly, was prepared following a
second visit to Cairo (November, 8-13). During this visit, the team worked closely with MCIT-IC staff,
notably with Dr. Nagwa El-shenawy (Director, MCIT-IC), Ms. Maie Asraf Hamdy, Ms. Eman El Shewy,
Ms Heba Youssef (all MCIT-IC).
The terms of reference for this second mission also cover a number of sub-deliverables, including
developing a platform for data sharing, a sampling framework and data analysis and reporting.
6
During the second visit, Mr Robertson and MCIT-IC staff met a number of ICT companies, including
Vodafone Egypt, Etisalat, MobiNil, IBM, Microsoft, HP and Cisco, to discuss the nature of their
activities, direct foreign investment characteristics, measures of their economic performance and
account keeping practices. He reviewed the selection and data gathering procedures from the
selected ICT companies, investigated data that had been reported and compiled interim estimates of
FDI and measures of economic activity in the ICT sector. The World Bank team discussed and
presented the findings with MCIT-IC staff on 11 November 2009. A further meeting was held on
23 November with the Central Bank of Egypt.
As a result of the analysis, it was possible to review and revise the results obtained from MCIT-IC’s
work on financial data from the financial reports of operators. Much of the work focussed on
reconciling estimates received from different sources, the survey, the interviews and the financial
data contained in annual reports. Additional efforts were made to fill some of the gaps left in the
original data collection exercise conducted by AC Nielsen. A revised set of estimates were made and
are presented in chapter three of the report. Finally, chapter four presents recommendations and
other suggested next steps for MCIT-IC and its partner agencies.
7
Chapter 2. An analysis of the interim results on FDI
2.1
Why conduct a survey?
The second deliverable for this project had identified the need for a survey to establish a new
reporting mechanism for FDI data in the ICT sector. Unlike other existing reporting mechanisms, it
would focus only on firms identified to be active in the ICT Sector (based on the definition adopted
in Deliverable 1: See Table 1) and the results obtained would be treated as confidential, as they
touch on the commercial operations of the firms concerned.
There are a number of reasons as to why a survey approach is desirable:

Foreign exchange statistics are used in many countries to measure Balance of Payments
(BoP) transactions, but unless supplemented by direct surveys of FDI enterprises cannot
measure FDI flows, or the stock of FDI adequately. This is because many transactions of FDI
enterprises are not captured in foreign exchange statistics, for instance because they may be
carried out outside the host country.

FDI in Egypt’s ICT
The "Other
The "Big 3"
Reporters"
Other companies included in the survey
sector is
Orascom Telecom
concentrated into a
Etisalat
Cisco
ACCM
Hitachi
Holidings
MobiNil
East Nets
Alcatel-Lucent
Huawei
Raya Telecom
relatively small
Vodafone Egypt Ericsson
BEA
Intel
SAP
HP
Convergsys
Libertis Telecom SA Satyam
number of
IBM Egypt
Ditech Networks
Link.Net
SQS
multinational firms.
Mentor Graphics
Microsoft
EDS
Europe
Stream
Initially some 50
Nile Online
EgyNet
Metra Computer
Summit Technologies
firms were
Egyptian German Telecom
Oracle
Industries
Mobiserve
Systel
identified as
Telecordia
Epicor Software Corp
NEC Group
Technologies
potential FDI
Nokia Siemens
investors but,
Fujitsu services Ltd
Network
Teradata
Giesecke & Devrient Egypt
following detailed
Nortel Egypt
WiPro
Global Beam
Orange (Equant)
Zhone Technologies
deliberations with
Orange Business
Google Cairo
Centre
ZTE
sector experts, this
was reduced to just
Figure 3: ICT sector companies considered for inclusion in the survey
16 who account for
Based on the sampling framework developed as Deliverable 3 (June/July 2009)
the majority of
investment which
were included in the sampling framework (see first two columns in Figure 2). Of these 16,
some 11 (69 per cent) responded to the survey.

Furthermore, the data is somewhat skewed by the fact that the “big three” (ie the mobile
operators MobiNil, Vodafone Egypt and Etisalat) constitute a high percentage of the total. In
this Deliverable, the focus has been placed on the “Big three” (telecom sector) plus eight
“Other reporters”(mainly in the IT sector) and the “long tail” of the remaining 39
companies, which are considered to be representative of the rest of the industry. The
Benchmarking Exercise carried out for this study (see Annex B) provides a reasonable set of
estimates for the percentage of total FDI that can be attributed to the “big three” (estimated
at 96.6 per cent), the “other reporters” (2.9 per cent) and the “long tail” (0.5 per cent). This
means that a relatively high level of accuracy can be obtained cost-effectively by focussing
data resources on a number of firms that is smaller than the entire population.

The data required to measure FDI can be taken readily from the balance sheet and profit and
loss statements of FDI enterprises. It should be emphasized though that the financial data
provides an important sanity check to the number obtained from the survey.
8
Broad category
1. Telecoms
Hardware,
manufacture,
wholesale and repair
Corresponding ISIC Rev 4 sector
ISIC Rev. 4
code
Manufacture of communication equipment
2630
Manufacture of magnetic and optical media
2680
Wholesale of electronic and telecommunications
equipment and parts
4652
Repair of communication equipment
9512
Wired telecommunications activities
6110
Wireless telecommunications activities
6120
Satellite telecommunications activities
6130
Other telecommunications activities
6190
Manufacture of electronic components and boards
2610
Manufacture of computers and peripheral equipment
2620
Manufacture of consumer electronics
2640
Wholesale of computers, computer peripheral
equipment and software
4651
Repair of computers and peripheral equipment
9511
4. Networking
Computer consultancy and computer facilities
management activities
6202
5. Software
development and
computer services
Publishing of computer games
5820
Other software publishing
5820
Computer programming activities
6201
6. IT-enabled services,
business process
outsourcing and call
centres
Data processing, hosting and related activities
6311
Other information technology and computer service
activities
6209
7. Advanced media
services and digital
content
[Part of] Television programming and broadcasting
activities
6020
[Part of] Motion picture, video and television
programme distribution activities
5913
8. E-commerce, etransactions and
services that support
e-transactions
Web portals
6312
2. Telecom services
3. Computer
hardware and
consumer electronic,
manufacture,
wholesale and repair
Table 1: Definition of the ICT Sector based on industrial groupings used in Egypt and their
derivation in ISIC Rev. 4
Source: Table 15 from Deliverable #1
9

There is a close contact and mutual respect between ICT businesses and MCIT-IC. This is
essential in obtaining commercially sensitive data

MCIT-IC already measures the national accounts of the ICT sector in Egypt, and therefore the
additional effort to measure FDI flows represents an incremental effort. MCIT-IC is thus
better placed to collect this data than other agencies of the Egyptian government.
In addition to the 50 companies that were included in the survey, there is a much larger number of
firms that were considered for inclusion (for instance, the ITIDA database lists over 1’200 firms,
many of which are only involved in retail services). But these were not included in the survey either
because:

They are not covered by the definition of the ICT sector adopted in Deliverable 1. Examples
of firms that were considered but ultimately excluded from the survey include Valeo, ITS,
HSBC Regional Centre, Xerox, Teleperformance and EMC.

Companies that may fit within the sector, but which were excluded because they are very
small (such as self-employed individuals, or companies, like retailers, that may have a small
percentage of their activities relevant to the sector. These companies are indirectly included
through the scaling up technique which takes the estimate of FDI derived from the Big 3 and
other reporters and multiplies is up to cover the sector as a whole.
2.2
Anticipated problems
Carrying out a survey like this for the first time is never easy. As a result, it is possible to anticipate a
number of problems:
•
•
Companies are not required
to provide data to MCIT-IT,
although there is a
requirement that they
provide copies of audited
accounts to GAFI and ITIDA.
The nature of this
requirement needs to be
clarified, but it is certainly a
potential source of data, if
the data collected by GAFI
and ITIDA could be
amended to better reflect
the data required for the
FDI survey
Box 1: Survey Design principles
In order to maximise the number of useable responses, a number of design
principles were adopted in the questionnaire survey:
•
Adopt a rigorous definition of which businesses are in scope (50 FDI
enterprises in the ICT sector were selected: see Figure 3)
•
Collect data items, based on balance sheet and profit and loss
statements, that measure:
•
Measuring FDI requires
understanding complex
concepts associated with
FDI and accounting records
of companies – not an easy
challenge.
•
FDI enterprises are large
and complex structures.
•
Points of contact in the
firms surveyed are likely to
be with sales and ICT
–
FDI flows
–
FDI stock
–
Economic activity of FDI enterprises and impact on
economy.
Adopt measures and procedures based on world’s best practice.
–
Measures and survey design comply closely with the IMF
Balance of Payments and International Investment Statistics
Manual sixth edition, and Balance of Payments Compilation
Guide, and
–
Follow survey method adopted
•
In many counties to collect BOP and IIP measures
of FDI
•
In Australia and elsewhere to measure economic
activity of FDI enterprises.
•
Maintain close contact with companies.
•
Combine data from different sources, if appropriate, and at a
minimum focus on getting data from the larger companies (Big 3)
right. Use estimation if required.
10
technical staff, not accounting staff, who are often located abroad.
•
The data required are considered highly sensitive and commercially confidential.
•
Only a short timeframe is available to achieve a result.
The sampling framework was finalized in July 2009 and the survey was launched, under contract by
AC Nielsen, with results expected by September. Because problems were anticipated with the data
collection phase, as noted above, it was necessary to design the survey carefully to maximise the
number of useable responses. A number of design principles were adopted (see Box 1).
2.3
Survey form and method
To implement the safeguards outlined in Box 1, much care and attention was taken to get the survey
form design right. In particular:
•
Designing survey form and procedures is an art to ensure form gets to the right person, is
accepted as legitimate, is understood, and is easy to complete. For more background see
BOP Compilation Guide.
•
The key data items cover:
–
Shareholders (are shareholders direct investors or direct investment enterprises?)
Percentage of shares held is used in some calculations.
–
Balance sheet items (on shareholders funds and financial claims/liabilities with
related enterprises are used to measure the stock and flow of direct investment).
–
Income and expense items are used to measure the level of economic activity and
BOP components FDI flow (reinvested earnings) and FDI investment income (e.g.
dividends and reinvested earnings).
–
Other items measure employment and gross fixed capital formation during the year.
The survey method was also optimized to ensure the results were useable. This was done by:
•
Using a Survey register for tracking contact with each business and quality of reporting.
•
Employing a Compilation system with:
–
Data entry form for each business - shows reported data, calculations, data from
other sources, and data checks.
–
Data entry form for benchmarking and other sources.
–
Collation table(s) to allow survey aggregates to be studied by contributors.
–
Publication or output tables – show summary results.
–
Transparency, connectivity and documentation.
Despite all these efforts, the survey response rate was poor. In some cases this was because the
questionnaire may not have been fully understood, and clarifications were provided by the World
Bank team at several stages during the data collection. The deadline was also extended from
September to November 2009. Nevertheless, only two of the big three responded and eight other
companies (the “other reporters”). This response rate (69 per cent) was lower than expected, and
the responses contained many errors and misunderstandings. As a result, the World Bank/MCIT-IC
team needed to make an unexpectedly high level of effort to collect additional data (through
interviews with the largest firms), to eliminate errors from the data reporting, to reconcile the data
with other sources through back-checks (e.g., annual reports) and to work alongside MCIT-IC staff to
11
provide training on how to assess and modify the responses. Much of the required data is publicly
available in annual reports and in at least one case, a missing data response was created from
scratch in the absence of a response to the questionnaire. As an example of the data cleaning that
was required, Annex A provides an example of the differences between the sets of figures. Better
data collection would require some sort of legislative obligation to report.
12
Chapter 3. Analysis of the results for FDI in the ICT Sector
3.1
FDI inflows, 2006-2008
As a result of the work done by the World Bank and MCIT-IC team it has been possible to come up
with an estimate of the value of FDI inflows, as shown below, and summarized in Figure 3:
FDI inflows (LE million)
FY 2006-07
LE 12’339
FY 2007-08
LE 1’431
Source: Revised responses to MCIT-IC questionnaire.
US$m
US$2’260
US$ 262
The results show, as expected, a spike in FDI inflows in the FY 2006-07, associated with the entry of
Etisalat (UAE) as the third mobile operator in Egypt, notably for the costs of acquiring the license.
The figure obtained (US$2’195 million) appears to be higher than previous estimates, probably
because a wider number of companies are included in this estimate. Equally, the decline in the
following year, to US$262m), although only a fraction of the inflow in the previous year, is
nevertheless much higher than had been estimated by other sources.
Figure 3: Cumulative stock and inflow of FDI, in LE million
Cumulative stock of FDI (in LE million)
16'847
18'000
Inflow of FDI (in LE million)
14'000
15'616
16'000
12'339
12'000
14'000
10'000
12'000
10'000
8'000
8'000
6'000
6'000
4'000
4'000
3'235
1'431
2'000
2'000
0
0
2006
2007
2008
2007
2008
Source: World Bank estimates, based on results of project research.
3.2
Interpreting the results
In order to make sense of these results, it is necessary to revisit some of the work done in
Deliverable #2 on the theory behind FDI analysis. The FDI inflow has four components:




New issues (less redemptions) of shares purchased by the Direct Investor (DI).
Reinvested earnings of the Direct Investment Enterprise (DIE).
Changes in claims on and liabilities to the DI (and related/associate companies).
Purchase or sales of existing shares by DI’s (takeovers).
13
For non-accountants and non-financial economists, this way of measuring FDI may seem a little
strange. Investment is normally considered to build up the assets (resources) of a business. These
may be financial assets (bank accounts, loans, shares), stocks of goods held, land and buildings,
capital equipment, communication licences and possibly R&D expenditure if capitalised. Investment
is normally considered to be expenditure on items that will not be consumed in the immediate
(twelve months) future. Social capital (training) is not however included on balance sheets as assets.
Direct investment (influx of cash or resources) may be the source of building up the assets. However,
if financed by borrowing from other parties, it is not necessarily Direct Investment (DI). Hopefully
this explains why we measure DI as we do.
3.3
What exactly is direct investment?
The issue of how foreign direct investment is defined is covered in Deliverable #2. Here it is sufficient
to remember that a direct investor (DI) is a resident of foreign economy that establishes, or helps to
establish, or purchases (or partly purchases) a business in Egypt. The business in Egypt is then
regarded as a direct investment enterprise (DIE). The DIE may be a branch (ie managed from the
foreign site) or subsidiary (ie a company with some level of local management, but with overall
control vested elsewhere) of a foreign company, or any company in which the DI has a shareholding
of ten percent or more of the issued shares. The DI is considered to control (when holding more than
50% of the ownership of the business) or to influence the management of the DIE. Direct investment
therefore is investment (providing finance or resources) by the DI to the DIE. Knowledge or knowhow is often provided by the DI, but this is difficult to measure except by looking at the performance
of the DIE.
3.4
The cumulative level of Foreign Direct Investment in the ICT Sector
In addition to calculating the net inflows of FDI in any particular year, it is also important to estimate
the cumulative level of FDI in the sector, as this gives a better idea of the overall level of foreign
commitment to the sector. The dataset is also less prone to sudden swings than the net inflows. The
table below summarises the revised results obtained from the survey.
Cumulative level of FDI
(LE million)
30 June 2006
LE 3’235
30 June 2007
LE 15’616
30 June 2008
LE 16’847
Source: Revised responses to MCIT-IC questionnaire.
US$m
US$ 594
US$2’870
US$3’097
At the start of FY2008-09, the cumulative level of FDI in the ICT Sector crossed the US$3 billion mark,
which is a higher figure than previously estimated. Although FY2006-07 stands out as the stellar year
because of the entry of Etisalat and the sale of 3G licences, nevertheless the upwards growth has
been sustained, albeit at a lower rate. The results are also summarised graphically in Figure 3.
It should be noted that it is not necessarily the case that the cumulative level in Year 2 equals the
cumulative total in Year 1 plus the net-inflow during that year. That is because a number of factors
impact the equation (such as depreciation, dividends etc). The level of investment is the
accumulation of investment (new investment, reinvested earnings, and other claims and liabilities
with related companies) plus revaluation of assets and liabilities that may have occurred.
The level of investment at the end of a year equals:
•
Level of investment at beginning of year
14
•
Plus new investment
•
Plus reinvested earnings
•
Plus revaluation of balance sheet items.
The survey data may also be used in calculating the Balance of Payments (BOP) and the International
Investment Position (IIP). The relevant results include:
 Direct investment inflow:
LE 1,431m 2007-08
 IIP direct investment in Egypt:
LE 16,847m at end June 2008
 Direct investment dividends:
LE 2’582m 2007-08
 Direct investment, reinvested earnings (included in both direct investment income and direct
investment inflow):
LE -1’005m 2007-08 (Note: the negative figure
suggests that some profits may be retained in the home country).
3.5
Using the survey results
The survey should bring three main benefits for MCIT-IC, and more broadly for the Egyptian
government:
Firstly, they should provide a more informed understanding of size and nature of direct foreign
investment and its impacts in the ICT sector. Secondly, they should assist many different types of
stakeholders including:

Policy analysts in MCIT and associated agencies;

ICT sector industry;

Those more broadly concerned with Egyptian economic management;

Education institutions and international organisations studying the Egyptian economy.
Thirdly, the survey data should provide better data to measure BOP/IIP and national account
statistics.
However, in putting the results to practical use, it is necessary to take into account a number of
treatment issues. Often, these can be resolved by referring to a previous year’s report. For example:
An Egyptian resident company A is owned by B, a foreign resident company, with a 40%
holding, and a resident company C, with holding of 60%. However, C is a DIE, with 80% of its
shares owned by non resident company. For issued capital and dividends, 40% are
attributable to DI. However for reinvested earnings and shareholders’ equity other than
issues shares, 88% is attributable to DI (i.e. 40% + (60%x80%)).
Account should be taken of costs for research and development (R&D), training, and other free
services intended for social objectives (ie corporate social responsibility initiatives). The value of this
work should be included in revenue with an offset in other expenses, a lower dividend or reduction
in reinvested earnings depending on circumstances.
Employment of contract workers, where these work alongside normal staff, should be counted as
employees and included in employment costs.
3.6
Assessing accuracy
In view of the fact that this is the first year the survey has been conducted, and because of the
difficulties encountered in data collection, it is necessary to bear in mind a few caveats in assessing
the accuracy of the data. The dataset involves estimation, through benchmarking for the large
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number of smaller companies and even for the larger companies that were included, some
estimation was involved1. Many companies did not provide actual data because of company policy
on release of data but provided assistance with estimation. To compensate for these shortcomings,
data were tracked down from many additional sources (e.g., financial reports) and sometimes this
was used to revise reported data. As such, the data presented here should be regarded as
preliminary, but they nevertheless provide a reasonably sound account of the level of FDI in ICT
Egypt.
During the review process, it was necessary to make certain assumptions in order to complete the
project in the available timeframe. These assumptions may need to be reviewed when more time is
available. Specifically:
•
The FDI inflow in 2007-08 may be estimated too high. It may also be negative, if profits have
been retained in the home country. It is assumed that the losses sustained by DI Enterprises
are financed by borrowing.
•
The FDI level in 2007-08 may represent a dip, but it is more likely that the figures for the
year earlier were exceptionally high and 2007-08 is closer to the norm. It is also possible that
the estimates provided by the companies, or by the estimation methodology, produced
results that were lower than actually prevailed.
•
The estimates made for dividends and reinvested earnings are largely guesswork at present.
This requires further investigation by a trained accountant and with the cooperation of the
companies concerned.
•
The employment numbers are estimated and more reliable figures may be available from
other sources.
•
It was decided to exclude Orascom Telecom Holdings because of the danger of double
counting of MobiNil and because most of its holdings are outside Egypt. As a result, this may
understate levels and flows of FDI. This decision may be reviewed following discussion with
the MCIT team.
•
There remain some reliability issues with the data reported by Etisalat and Vodafone. For
Etisalat, no balance sheet information was received while for Vodafone the latest FY2008
report has not yet been received.
Chapter Four: Recommendations and next steps
This project has provided an opportunity for the MCIT-IC team to work alongside an international
team of experts in together tackling a complex set of problems. The MCIT-IT staff members are to be
congratulated for achieving a remarkable outcome in a very short timeframe. The experienced
gained, both by MCIT-IC and the respondents, will facilitate better data collection in future.
Recommendation 1: The momentum gained during the study should be continued as a full data
collection is commenced on a regular reporting cycle. A timeline for the next phase of this work was
established in the revised Deliverable 2. Although the schedule has been slightly delayed because of
data collection problems, the next phase of regular data collection and report should be launched
upon the completion of this project.
Recommendation 2: The study results should be published with confidential information
removed. This should encourage companies both to appreciate the study and to cooperate more
1
The research process did provide estimates of FDI for individual firms. These have been made available to the
client. However, company-level data is not included in this report for reasons of commercial confidentiality.
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fully in future data collection. Furthermore publication will assist in encouraging companies to
revised and improve their own internal data collection and reporting. Reporting the results will also
act as a showcase for Egypt’s achievements in the field of ICT and in attracting further investment.
The headline figure of US$3billion in cumulative FDI can be a powerful sales tool for promoting the
benefits of ICTs in economic growth in discussion with other agencies.
Recommendation 3: Data collection would be more effective if the requirement to report were
made a legal obligation. Already companies have some obligations in reporting to GAFI and ITIDA.
These requirements should be codified and, as appropriate, extended to the necessary FDI data.
Recommendation 4: The survey questionnaire should be further improved and streamlined. The
original questionnaire proposed in Deliverable 2 was simplified because companies were resistant to
answering too many complex question. The streamlined version is enclosed as annex 3. Based on the
experience of this project, it should be possible to further improve and streamline the questionnaire
for the phase of full data collection.
Recommendation 5: FDI estimates should be presented as an annualised figure. The calculation
is complicated by the fact that different companies have differing year-ends (e.g., in December, in
March or in June. It will be necessary to present a consolidated figure so that changes over time can
be compared on a like-with-like basis.
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Annex:
Streamlined survey questionnaire
The revised questionnaire is shown in the enclosed file.
Streamlined
questionnaire survey.pdf
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