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Infrastructure in Egypt- Ambitious development projects

David Morgan

Saturday, 19 September 2009 22:03

“People will invest in what they can see and feel: infrastructure…There is no sustainable growth without transportation,” Mahamed Mansour, Egypt’s Minister of Transport, has stated.
Mansour, the country’s transport minister since 2005, has pointed to massive growth in the country’s rail sector. Egyptian National Railways (ENR) has plans to increase rolling stock and convert stations into shopping malls to generate revenue.

Egypt is encouraging various types of contractors—from electrification to signage, Intelligent Transportation Systems, and design and engineering firms—to form joint ventures with Egyptian organizations and start breaking into the market. Opportunities exist for businesses of all sizes, Mansour told a meeting of the American Chamber of Commerce in Egypt (AmCham). He said even though money is tight in many parts of the world, spending continues in Egypt.
According to Mansour, the infrastructure and transport sector in Egypt recently attracted $3.5 billion in foreign direct investment and will continue to grow. As in any country, he said, infrastructure is the backbone of Egypt’s economy.

A recent report into the country’s infrastructure sector published by Business Monitor International (BMI) sees Egypt’s GDP growing at a real 3.7% in 2009, a marked slowdown from the 7.2% in 2008 and 7.1% in 2007.

Infrastructure activity has slowed even more sharply, the report says. The Egyptian government said earlier this year that it would double its stimulus spending to EGP30bn ($5.4bn), with the intention of spending half of that in the first part of the year.
BMI expects the construction sector to show 1.73% real growth in 2009, down from 10.32% a year earlier. Despite, the slowdown, however, the report highlights opportunities for investors in the sector. For example, the transport network is in need of an upgrade and the many project announcements from the Egyptian Ministry of Investment make clear how much work needs to be done.

Two major road contracts were awarded in the latest quarter, one for another phase of the third Metro line in Cairo and a second for a section of the Cairo to Alexandria Highway.
The transport minister announced in February 2008 that an investment of EGP90bn ($16.3bn) would be made in the country’s road, rail, port and waterway infrastructure over a five-year period. Mansour estimated that the road network will receive an investment of EGP30bn ($5.46bn) through PPPs. The rail network will receive EGP10bn ($1.82bn). Upgrades to Egypt’s port sector, estimated at EGP50bn ($9.11bn), will be funded through the private sector – Chinese and UAE companies are already involved in expansion projects.

One of the most important aspects of Egypt’s transport infrastructure is its ports. Maritime vessels are catered for by nine ports and harbours across Egypt, principally at Alexandria, Port Said, Damietta and most importantly, Suez. The share of Egypt’s freight carried by sea is estimated at 28.64% for 2008, and this looks set grow slightly to 29.80% by 2012. The volume of freight carried by sea also looks set to increase, with a growth rate of 6.92% forecasted between 2008 and 2012. This highlights the importance of Egypt’s ports to its economy.

The Suez Canal was opened in 1869, and connects the Mediterranean and the Red Sea via a 190km passageway. It is one of the busiest waterways in the world, and one of Egypt’s main sources of revenue. The government-run Suez Canal Authority claims that 7.5% of the world’s sea trade passes through the canal.

Railways
Egypt has a major investment programme in the railways being implemented since 2007. A budget of EPG9bn ($1.7bn) over three years is being invested with contributions from government, the World Bank and the private sector. However, the priority is to modernise the existing infrastructure and therefore address the pressing safety issues, before adding more capacity or extending the rail network. There are plans for new lines around the Nile Delta and also a 225km line running from Ismailia to El Arish (in Sinai) and Rafah (in Gaza). Investors who are in for the long haul will benefit from these investments.

Tenders submitted in July for the rebuilding of 1,300 level crossings exceeded the budget of Egyptian National Railways (ENR), which had estimated the tender price to be $402mn.
One casualty of financing problems is the proposed line between Obour City and the Tenth of Ramadan City, which is expected to cost $4.69bn. Egypt and Italy are jointly studying a high-speed rail link between Cairo and Alexandria and a government official said he expected the study would find the project to be feasible.

Vinci Construction Grand Projects and Orascom Construction Industries Ltd. are part of a consortium that received a €323mn ($465.12mn) contract for phase two of Cairo’s third metro line. Arab Contractors Bouygues, Colas Rail of France, Alstom and the Thales Group are also involved in the project.

The project involves 7.2km of tunnel and four stations. A Vinci subsidiary was part of the consortium that won the contract for laying the rail, Egypt said it expects a study by September into the feasibility of a high-speed railway line on the 200km stretch from Cairo to Alexandria. The study is being jointly by Egypt and Italy. An Egyptian official told Reuters that the country believes the study will find the project to be feasible.

Airports
Egypt has 88 airports as of 2007, 72 of which have paved runways. Improvements to the country’s airports – both expansions and upgrades – are being made to cater for increased airline passenger numbers.

According to Daily News Egypt, the Egyptian Ministry of Investment has announced several ambitious airport projects. The plans include an EGP2bn project for a new Mubarek Airport in Cairo, an allocation of EGP6bn for other new airports and EGP5bn towards airport improvements.
The 76-page Egypt Infrastructure Report Q4 2009 is published by Business Monitor International Ltd.

Global Arab Network

Report appears in Arab-British Business, fortnightly of the Arab-British Chamber of Commerce.

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Last Updated on Saturday, 19 September 2009 23:01

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