By Abdel Razek El-Shuwekhi
The timing for the elimination of diesel subsidies, which the government intends to start in November 2014, is inappropriate for the tourism sector, according to deputy chairman of the Chamber of Hotels Hany Al-Shaer.
Al-Shaer said the sector has suffered various crises for the past three years and criticised the lack of coordination with the chamber despite its sponsorship of hotels.
The Minister of Tourism did not notify the Egyptian Chamber of Hotels of the government’s intention to remove diesel subsidies , according to Al-Shaer.
“This should have been coordinated with the Chamber of Hotels. All that we know is that there is a serious desire to remove the subsidy but no coordination is taking place regarding the timing, which puts us in a tough spot with foreign marketing companies,” he said.
The Ministry of Finance plans to eliminate diesel subsidies beginning in November and has allocated EGP 2bn to counter the negative effects of removing the subsidies.
Minister of Tourism Hisham Zaazou said in previous statements that “the elimination of subsidies will take place in two phases beginning in November.” The ministry will bear the price difference incurred by companies and hotels for one year, according to the National Accounts Division of the Ministry of Tourism.
Hotels and companies currently obtain a liter of diesel fuel for EGP 1.10. The price is expected to rise to EGP 2.5 per liter during the first phase of removing subsidies.
Al-Shaer argued that the solution is not to eliminate diesel subsidies, as this would not solve the problem. Instead, a parallel black market would appear.
“The government should have thought about a solution that addresses the root of the problem, which would include allocated financial resources to deliver natural gas to hotels and converting buses to run on gas instead of diesel,” he said.
Tourism is one of the Egyptian economy’s main sources of income, along with remittances from Egyptians working abroad and Suez Canal revenues.
According to the National Accounts Division, approximately 3.8 million workers are directly and indirectly employed by the tourism industry.
Abdelrahman Anwar, vice president of the Floating Hotels Investors Association, said that “removing subsidies on diesel fuel is necessary to combat the budget deficit and tourism will not suffer from the burden, but it must be done gradually over a period no less than 5 years.”
Floating hotels are the most affected by the elimination of subsidies, according to Anwar, who said that raising the price of a liter of diesel from EGP 1.10 to EGP 2.5 would raise room rates by 100%. Foreign marketing companies will refuse to pass this on to consumers, harming Egyptian companies with great losses.
There are 286 floating hotels operating on the Nile between Aswan and Luxor in Upper Egypt, including 17,000 rooms.
According to Anwar, only six of the floating hotels are working. “The switch to natural gas will cost floating hotels EGP 1m to install tanks,” he said.