Where To Begin?

By Ed Cohen | Spring 2012

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In post-revolution Egypt, students from Business on the Frontlines discover a new country with old problems

The question was, if you were president of Egypt, what's the first thing you would do?

Onsi Georgious, a “chief of party” or program leader for Catholic Relief Services (CRS) in Egypt, thought for a moment.

“My first decision would be to close the universities for five years,” he said.

It was a sunny Monday morning in early March, and Georgious was in a van crawling back to the CRS Cairo office through the city’s perpetual, but surprisingly civil, traffic. Here, a honking horn only occasionally translates to, “Get out of my way, you idiot.” More often, it’s a quick pair of toots signaling something along the lines of, “Just a heads-up, I’m seeing a good six feet of space between you and the car on your left and thinking what a waste, extra lane, so I’m just going to squeeze through … here … and … done.” This is happening literally every second.

Six members of Mendoza College’s unique Business on the Frontlines course shared the vehicle with Georgious that morning. They were people one might expect to object to any suggestion of shutting down universities, but no one uttered a word. Maybe they couldn’t hear him over the traffic. More likely, after all he’d said already, they could see the logic of the idea.

The Notre Dame delegation consisted of four graduating MBA students—Cory Engwicht, Rob Morris, Meghan O’Neil and Joe Sweeney (’06)—one third-year Notre Dame Law School student, Manasi Raveendran, and the group’s faculty adviser, Joe Queenan, a serial entrepreneur and client-services director at Notre Dame’s Innovation Park business incubator in South Bend. They’d come to investigate business conditions in Egypt and suggest possible job-creation strategies for CRS, the international humanitarian agency of the U.S. Conference of Catholic Bishops.

That’s how Business on the Frontlines, a graduate-level course, works. Students start out by learning about development economics, politics in the developing world, and how businesses can help or hinder recovery in societies that have been through violent conflicts.

At the midway point of the course, they hit the road in teams to investigate conditions on the ground. For two weeks, they interview government officials, factory managers, bankers, employees of non-governmental organizations (NGOs), politicians, farmers—anyone who can help them understand the dynamics of the situation.

The meetings are typically arranged by the local office of Catholic Relief Services. Viva Bartkus, course instructor and Mendoza associate professor of management, is on the CRS board, and former Mendoza College Dean Carolyn Woo became the organization’s president and CEO in January. The two developed the course together in 2008-09.

As part of their final project, the teams provide a report to their host organization that includes practical management advice and suggestions for development strategies. One recommendation from the team that went to Bosnia the first year led to the creation of business incubators on the ground floor of six low-cost apartment buildings constructed by CRS. The incubators provide a safe place for returning refugees—mostly widows and orphans—to start businesses. Bosnia was the site of genocide in the 1990s.

This is the fourth year for the course, which in 2010 was named by Forbes.com as one of the “Ten Most Innovative Business School Classes.” It’s become one of the most popular MBA courses offered by Mendoza. More than 120 students applied for the 24 slots in this year’s class. In addition to the four MBAs and (new this year) one law student, the project teams normally include a master’s student from Notre Dame’s Kroc Institute for International Peace Studies. (A visa issue kept Team Egypt’s peace student from making the trip.)

In addition to Bosnia, past classes have traveled to Lebanon, Kenya, Rwanda, Uganda and Mindanao in the Philippines. This year, in addition to Egypt, the two-week journeys of discovery took students to “post-conflict” areas of Guatemala (36-year civil war, drug trafficking), Ethiopia (border wars with Eritrea and Somalia) and back to Mindanao (violent Muslim separatist movements). 

In Egypt’s case, the country is still finding its way after the massive demonstrations in early 2011 that led to the resignation of the country’s president for nearly three decades, Hosni Mubarak. Hundreds died and thousands were injured during clashes between protestors and government authorities.

Since last fall, the country has been ruled by a military council, its appointed cabinet and an elected parliament. A presidential election is expected to take place in May or June. But unrest remains, largely because of a struggling economy. Egypt has a population of about 80 million, half of whom live on less than $2 a day, according to CRS. 

Team Egypt’s van ride with Onsi Georgious came on Day 2 of the group’s visit and provided an early indication of how much more complicated the economic situation is in Egypt than it appeared on paper—where it appeared plenty complicated enough. 

In advance of their trip, the students had read broad references to Egyptian “youth”—sometimes defined as anyone 30 or younger—being educated but poorly prepared for the workforce. Georgious spelled out what was meant by that: For decades, the country’s centrally controlled public universities have been functioning largely as diploma mills, turning out graduates for jobs that hardly exist.

In Egypt, as in many parts of the world, high school seniors take a comprehensive exam that determines which, if any, university they’ll get into. The difference in Egypt is that the government uses the scores to assign people to specific career paths. Those posting the highest scores are most frequently sent to the public medical or engineering schools. (Egyptians pay little or no tuition to attend public universities.) The next tier goes to law school, then comes commercial studies and so forth down the ladder of perceived prestige professions.

The system doesn’t take into account whether the students actually want to study in these fields. Nor is there much thought given to whether the Egyptian labor force needs more professionals of that type.

Georgious, who has 28 years of experience in training and development, said this top-down approach to admissions made some sense in the 1950s, when Egypt gained independence from Great Britain and the country was desperate for home-grown professionals. But after 50 years, it’s resulted in a growing mismatch between labor supply and employer needs.

At the beginning of 2012, Egypt’s unemployment rate stood at about 12 percent, no worse than Nevada’s. But by most estimates, the rate was double that for Egyptians 29 and younger. Georgious said a survey two years ago found that 80 percent of medical-school graduates weren’t employed as doctors; they were working as marketing professionals for pharmaceutical companies. Thousands of Egyptians educated to be lawyers are driving taxis.

Against this oversupply of college graduates, Egypt faces a labor shortage in lower-prestige, but vital, skilled technical professions, Georgious explained. That’s why he suggests completely rethinking the state universities. Cut off the flow of unprepared college graduates with unrealistic expectations, he believes, and more people would study to become technicians and trades people.

If only it were that simple.

If only an oversupply of college graduates were Egypt’s only issue.

‘No reason to feel comfortable’

In deciding whether a country is safe to visit, course organizers are guided by security assessments of the U.S. State Department and CRS, who have first-hand knowledge of the conditions on the ground. But it’s impossible to foresee every eventuality.

During a January 2009 trip to Bosnia, students had to shiver  alongside the locals when a dispute between Russia and Ukraine resulted in Russia cutting off all natural gas to Eastern Europe. Last year, security concerns forced the class to cancel its field work in Lebanon and switch to northern Uganda at the last minute. In the East African country refugees finally were being resettled after 20-plus years of conflict with the Lord’s Resistance Army rebel group.

For a while, the Egypt trip appeared to be in jeopardy. Five weeks prior to departure, 19 American employees of two pro-democracy NGOs operating in Egypt were barred from leaving the country. The detainees included the son of U.S. Transportation Secretary Ray LaHood. A week later, a riot at the end of a soccer match in Port Said on Egypt’s Mediterranean coast left 73 people dead and more than a thousand injured.

On the team’s first full day in Cairo, Hani el-Mahdi, acting country representative for CRS, informed them that no one had been brought to justice yet for the soccer riot or for many other incidents resulting in 10 or more deaths in the past year. Egypt, he told them, is in a “very fluid” situation. With the authoritarian former regime gone and nothing known for certain about its replacement, lawlessness has been increasing.

“There is no reason to feel comfortable,” he said solemnly, “particularly for Egyptians.”

He meant that the authorities have a strong incentive to protect foreigners. Tourism accounted for 30 to 35 percent of the Egyptian economy before the revolution but nosedived because of the violence and uncertainty. You’ll be safe, he assured the group, if you stick to the itinerary worked out by CRS.

After the security briefing, it was on to a discussion of the work that lay ahead: figuring out business development ideas for CRS, which has been in Egypt since 1956. Staff members talked about how as recently as 10 years ago, international NGOs (INGOs) such as CRS didn’t engage much with business. The organization’s mission is to help the poorest of the poor, and in many parts of the world that has entailed assisting the victims of labor exploitation, pollution and other harmful business practices.

“INGOs often had this temptation to see business as not a real partner,” admitted Britton Buckner, head of programming.

El-Mahdi said CRS is committed to standing with the Egyptian people during a difficult but exciting transition and Egypt’s part in the Arab Spring has been seen by everyone—especially foundations and other funding organizations—as an opportunity to break from the past, he told the team from Notre Dame. These organizations realize how important a healthy economy is to the success of the new Egypt, so they’re interested in one kind of project above all else: whatever will create jobs.

“It’s the one message (we’re hearing): ‘The funds are there, give us innovative ideas,’” he said, eyes bright with excitement.

‘Informal’ businesses

Bartkus, the course instructor, is a former Rhodes Scholar who was elected as a partner in the global consulting firm McKinsey & Co. In a class prior to the trip, she talked about a visit she made to Haiti in 2010, not long after she joined the board of CRS. The country was still recovering from its devastating earthquake, and CRS had launched a cash-for-work program.

Cash for work is a relatively new concept in relief efforts. Instead of simply handing out food or money, the organization hires locals for clearly defined, short-term projects. The work gives people whose routines have been disrupted constructive daily activities, and they can use their wages to buy exactly what they need. That helps the local economy recover.

In this case, the Haitians were being paid to operate machinery designed to crush concrete debris into material for new concrete. It seemed like a great idea, but one of the administrators of the project told her that progress had been disappointingly slow.

Bartkus, who also teaches a course in business problem solving, asked how the workers were being paid. He said it was an hourly wage. She suggested paying by the ton of debris crushed instead. The change worked wonders. Before, the workers had no incentive to work quickly. Now, the more they accomplished, the more they made, so they accomplished a lot.

It’s a great illustration, and as Bartkus told the story, one could almost see the students imagining themselves stepping off the plane in their assigned country, asking a few questions, and then dispensing an elegant solution to whatever problems exist; their grateful hosts are amazed.

As the students inevitably discovered, this was not reality.

In the developing world, the best-thought-out solutions fall victim to many uncounted-on realities. Probably the most common spoiler is corruption.

In Egypt, the team heard often about corruption. Multiple officials told them that about 70 percent of businesses operate “informally,” meaning they usually have no title to their property or license to operate. They don’t pay taxes, for their businesses or employees.

One of the MBA students, Meghan O’Neil, the team’s liaison with CRS, relayed an explanation after a meeting with a member of the business faculty at the private American University in Cairo. Business people know that if they operate legitimately, “something like 16 agencies” will show up demanding a bribe, she said the faculty member told her. This is often a matter of necessity, as the typical public employee in Egypt is paid about 100 Egyptian pounds a month, $16.56.

During her time at Notre Dame, O’Neil visited a variety of countries, including an internship in Capetown, South Africa, and a study-abroad program in Santiago, Chile. The complications of everyday life in Egypt seemed to her more challenging than the others.

 On their fourth day, the team traveled to a model organic farming complex outside of Cairo. As usual, the traffic was horrendous and the group arrived later than planned.

One might wonder how so many people are able to drive in a country where half the population lives on $2 or less a day. The answer is that the government subsidizes energy costs along with some food. Gasoline in Egypt sells for about 70 cents per gallon.

Part of the reason for the traffic congestion this day was that there were trucks lined up for miles outside of gas stations waiting to purchase diesel fuel. Sulah Ashush, an engineer at the farm, offers a theory as to why: People are known to buy extra quantities of the fuel at the subsidized pump price. They then transport it to Red Sea and sell it to ships at market price.

Ashush also describes corruption in some agricultural cooperatives. Like the gasoline black-marketers, poorly paid low-level co-op staff sometimes sell off part of their seed allotments at market price and pocket the difference. 

Small victories 

Business on the Frontlines is not only a journey of discovery, but an opportunity to apply problem-solving skills on the frontlines. Students are challenged to find ways to kindle commerce in societies warped by violent conflict. Every situation is different.

In Bosnia four years ago, students encountered a country deeply segregated among Croat Catholics, Christian Orthodox Serbs and Bosnian Muslims. The Muslims were the survivors of massacres and “ethnic cleansing” in the 1990s—carried out mostly by the Serbs. Antipathy remained. One factory, they discovered, would hire only Croat Catholics.

One of the reasons the team recommended establishing business incubators—in Srebrenica, no less, site of the most infamous massacres—was they believed new businesses could be a force for healing. Keith Flatley (MBA ’09) was one of the team leaders four years ago.

“One of the best things about money,” said Flatley, now a business development manager for Precision Partners Holding Co., “is that money doesn’t care what your race is, what your gender is, what your creed is. So, say you’re looking for a machinist, and this guy’s skilled but you’re Catholic and he happens to be Muslim. What do you care? They’re helping you, you’re working together, they’re your company.

“You then actually care about this guy’s well-being, because if he doesn’t show up tomorrow, you could be out of business. And if you don’t show up tomorrow, he’s out of a job.”

Religious divisions also persist in Egypt, which is 90 percent Muslim, as the Coptic Christian minority has suffered added violence since the revolution. But the day they visited the organic farm, Team Egypt’s members were focused more on supply-chain issues. The farm’s organizational structure offered encouragement.

The farm was run by Sekem, an Egyptian food conglomerate that has won acclaim for turning portions of the country’s desert land into productive acreage. Egypt is about the same size as Texas and New Mexico combined, but only about 4 percent of the land is arable, the area flanking the Nile.

Sekem (the name comes from a hieroglyph meaning “vitality”) is a pioneer in “biodynamic” agriculture, a holistic, sustainable approach to food production. At the company-operated farm visited by the team, manure from chicken, cattle and even pigeons (the bird is considered a delicacy by Egyptians) is combined with plant waste to produce compost, which is then spread over the barren desert soil. Higher-value crops such as chamomile for tea and guava leaves for cough syrup are planted in the compost and watered precisely using drip-irrigation systems fed by deep wells.

Even before they arrived in Egypt, the students had decided to focus on agriculture as the area with the best potential for job growth. Among Egypt’s largest industries, agribusiness is rivaled only by tourism. But tourism’s future, they concluded, will depend largely on the nature of the next government. A strict Islamic state could make Egypt a considerably less appealing place for Westerners to visit.

Could the Sekem farm be a model for improving economic opportunities for Egypt’s small, impoverished farms? Not without a huge infusion of assistance in training—at least 40 percent of the population can’t read—along with loans or grants for the sophisticated cultivation technology. The deep wells alone cost the equivalent of $16,700, according to Sulah Ashush, the Sekem engineer.

Long term, organic farming still seemed like a winner to the team, given the increasing popularity of organic foods in developed countries. But the students realized that any initiative would have to start small. A relatively new CRS project pointed to a possible way.

On the same morning Georgious summed up the college-graduate problem, he took them to two cash-for-work projects he’s overseeing in the city.

One was in a slum in a Coptic Christian neighborhood. The main economic activity here was scrap materials, and the narrow rutted alleys smelled of garbage and animals. In two buildings, however, women were busy making sterile, plastic overshoes and gloves for use in hospitals and pharmaceuticals factories.

Georgious explained that the project was the idea of a small NGO formed by the local Coptic church. He agreed to grant the organizers money for the project on the condition they first obtained purchase commitments for their output, which, to his surprise, they did.

Still skeptical, he supplied the group with only enough money to buy raw material for the first two weeks of production. When he returned two weeks later, the group had already purchased more raw materials using its profits from the first orders. The women were now working on a huge new order from a pharmaceuticals manufacturer.

One of the other MBAs, Cory Engwicht, a muscular Montanan bound for a position as a client representative for IBM, was impressed with how the women, living under such difficult conditions and with precious few resources, found a way to make their ideas work. 

In their remaining days in country, the team learned more about Egypt’s customs, problems, resources and potential, but the experiences of the first few days stayed with them. Before returning to South Bend, they presented several initial findings to CRS Cairo, who asked them to focus on the so-called “value-added” issue plaguing Egyptian agriculture. 

The term refers to how individual farmers earn money only on the basic crops they harvest like wheat. They generally don’t benefit from the higher-value products the crops are turned into, such as bread. Team Egypt learned that Egypt is the world’s fifth-largest producer of tomatoes and that virtually all fruit and vegetables grown in the rural areas are transported long distances to Cairo for processing. Up to 60 percent of the tomato harvest is lost due to spoilage in transport because of traffic and other issues.

The team suggested CRS invest in a cash-for-work pilot project like the one with the plastic overshoes and gloves. Working within a co-op structure, groups of small farms could supply tomatoes to small groups of women working together in mini-factories to “can” the tomatoes (in jars) locally. The packaged, better-preserved tomatoes could then be transported to a central collection site. That would allow the operation to scale and sell to regional or even export markets.

That’s the theory, anyway. As the team knows, the experts at CRS will weigh the recommendation against the reality of Egypt as they know it.

That’s one of the main takeaways from the course, the students said—that the world is a much more complex place than it sounds in a classroom.

“You realize how fast-paced and ... intertwined the real world is,” said team member Rob Morris. “One small thing over here can throw something completely out of whack on the other side of a country, and you won’t even know it was the reason it happened.”

Fellow team member and MBA student Joe Sweeney is a third-generation double Domer from South Bend who is headed to a job in Seattle as marketing manager for the wine importer Winebow. He said that for all the challenges and frustrations the course presented, it was the best he’s ever taken. It was the most real.

“A favorite Yogi Berra quote that pops into my head almost every single time we have a class is, ‘In theory, there’s no difference between theory and reality, but in reality, there is.’ The class is a perfect example of that. The world is our classroom. So we actually see reality as opposed to sitting in a room here in Indiana talking about theory.”