Push for privatizing transportation grows, though tempered by some worries

Alex Dziadosz
5 Min Read

CAIRO: A glance at the decrepit trains running to Ismailia or at the clogged byways of Cairo’s downtown make one thing clear: Transport has not recently kept pace with a swiftly-growing population and economy in Egypt.

Many businessmen, officials and the citizens who use Egypt’s trains and buses agree that the country’s transport system needs work. But in many cases, the state lacks the funding and expertise to lead the projects, spurring many to turn to the private sector for funding and management.

This trend was on full display at the Arab Transport Forum, a conference attended by about 350 public and private transport officials from throughout the region last week, with many speeches focusing on promoting public-private partnerships (PPPs).

“Without a modern transport sector, the industrial development of the country will be significantly hampered, said Ulrich Kögler, a principal specializing in transport with the consultancy Booz and Company. Policies throughout the region must be updated and many transport firms “direly need revamping to compete in a “real, liberalized market, he said.

“Restructuring, modernization and engagement of the private sector are, I think, the key elements for a nicely-growing transport sector, he said. It will take about three years to see “strong development in the region, he added.

From the state’s side, optimistic outlooks are easy to come by: In October, Minister of Transport Mohamed Mansour said Egypt should garner $8.9 billion of private investment in ports, roads and other transport over next three years; earlier in the year he said he expects $16.3 billion to come into the sector over the next five years.

He said this will include LE 50 billion of private investment in ports over three years, LE 30 billion in public and private in roads over five years and LE 10 billon in railways, quoted Reuters.

Transport already garners 13 percent of investment in Egypt, making it the third most popular sector, according to state statistics.

In the past few months, talk of an impending global recession and tightening credit has fueled the discussion over Egyptian transport’s future.

“People are now extremely reluctant to invest in paper, Mansour said at an investment conference last month. “Now is the time to invest in the real economy, now is the time to invest in infrastructure, he said.

In the coming years, the state will begin seven road projects and expand a project in East Port Said, Mansour said. The East Port Said project, a 25,000-acre development which Prime Minister Ahmed Nazif called “a keystone of the government’s economic development plan, should draw LE 30 billion in investments by 2030, officials said.

Since the opening of the Suez Canal, Egypt has hosted a treasured shipping route. Many officials tout Egypt’s ports as a lure for foreign wealth, drawing on country’s proximity to African, Middle Eastern and European markets and the Canal’s ability to provide nearly “zero deviation, meaning ships can maintain relatively straight routes.

Spreading cash into other sectors, like roads and rail, is trickier. One threat is currency risk, or the danger of investing in projects that bring in Egyptian pounds, a relatively unstable currency. And despite earning some reform awards, Egypt has been slow to rise in the World Bank’s annual “Ease of Doing Business ranking, mostly due to low efficiency and transparency.

Skepticism toward privatization has also bred visible public anger recently, as with protests last week at the Ghazl El-Mahalla spinning factory over rumors the factory would be sold.

For his part, Kögler shrugged off the threat of currency risk. Major investors “have been, over decades now, investing in emerging markets, and of course you always have the foreign exchange risk, he said. “But they have learned to deal with it.

Still, “it is important for the government to make sure the currency is as stable as possible, he said. “Stable currency is a key lever to FDI.

It is more important that the state boost transparency and provide a structure for fair risk-sharing in PPPs, especially as tighter credit is bound to make investors more discerning in the next few years, he said.

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