The economic impact of shutting down Internet and mobile phone services in Egypt

 

Last update: 4 February 2011 

The Internet and communications infrastructure is a key platform to conduct business, connect people and provide government services. The Egyptian government has taken great steps in the past years to develop and promote the use and uptake of technologies. But the current shutdown of Internet and communications services for five days will have a pronounced economic impact. It is estimated to have incurred direct costs of at minimum USD 90 million. This amount refers to lost revenues due to blocked telecommunications and Internet services, which account for around USD 18 million per day, or, on a yearly scale, for roughly 3-4% of GDP.

Wider economic impacts

However, this amount does not include the secondary economic impacts which resulted from a loss of business in other sectors affected by the shutdown of communication services e.g. e-commerce, tourism and call centres. In fact, the IT services and outsourcing sector in Egypt has been a growing part of the economy and relies heavily on the Internet and communications networks. IT outsourcing firms in Egypt made USD 1 billion in revenues in 2010 (or around USD 3 million per working day), servicing overseas customers through call centres, helpdesks, etc. 

The longer term impact of the Internet and communications shutdown on Egypt’s economy is hard to assess. The shutdown may impact negatively on foreign direct investment in the ICT sector and industries that rely on stable communications and the Internet. The loss of connectivity for five days to these vital business services could make them reconsider overall outsourcing plans. Attracting such firms has been a key strategy of the Egyptian government (see Chapter 7 of the OECD Information Technology Ooutlook 2010).

Egypt has other sectors that depend on Internet and communications, notably a vibrant tourism sector. It is difficult to put a number to the loss of tourism due to the Internet shutdown alone, but it provides an idea of how much the Internet has become part of mainstream economic activities, even in Egypt. In regards to long-term effects, it may be extremely difficult to unravel the impact of the general political and social conditions from the shutdown of the Internet and mobile networks.

At the time of writing, the OECD is engaged in a country review of ICT policies that had put Egypt on a path of developing towards an information economy. Egypt is a signatory country to the OECD’s 2008 Seoul Declaration for the Future of the Internet, which calls for an “open, decentralised and dynamic” Internet (click here to open the Declaration).


Contact:

Taylor Reynolds and Arthur Mickoleit

 

Telecommunication data for Egypt

  • Population: 83 million (2009)
     
  • Mobile phones:
    • 55 352 233 subscriptions (2009)
    • 66.7 subscribers per 100 inhabitants
       
  • Internet
    • Fixed (wired) broadband Internet subscriptions:
      • 1 101 635 subscriptions (2009)
      • 1.3 subscriptions per 100 inhabitants
         
    • Internet dial-up subscriptions:
      • 1 222 815 subscriptions (2009)
      • 1.5 subscribers per 100 inhabitants
         
    • Wireless broadband:
      • 6 934 161 subscriptions (2009)
      • 8.4 subscribers per 100 inhabitants

Further information

OECD Information Technology Outlook 2010
OECD Broadband Portal
The Seoul Declaration for the Future of the Internet Economy (pdf)
MENA Initiative on Governance and Investment for Development

 

 

 

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