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AmCham Egypt held a conference on “Public-private partnerships in the transport sector” on February 18 at the Semiramis InterContinental Hotel in Cairo. The event highlighted the development strategy of the Ministry of Transport (MoT) and opportunities for private sector investment in the transport sector using the public-private partnership (PPP) model. More than 600 government officials, investors, and AmCham members and guests attended the one-day event.
In his keynote speech, Minister of Transport Mohamed Mansour underlined the importance of transportation infrastructure, which he described as the “key to economic growth.” An efficient, modern infrastructure allows for the cost-effective movement of goods, thereby serving as a driver for exports, internal trade, foreign direct investment and tourism, he said.
The minister noted that Egypt is endowed with a natural competitive advantage: its strategic location at the junction of Europe, Asia and Africa. The country has been translating this potential into reality over the last few years, propelled by new investment laws and reform measures that have led to rapid economic growth.
Public-private partnerships are integral to the move forward, he said. In a PPP, the government contracts the private sector to operate or manage public infrastructure projects. The term is often misunderstood, as it is the umbrella for more familiar concepts such as build-operate-transfer (BOT), build-own-operate-transfer (BOOT) and long-term lease agreement (LTLA).
The advantages of PPPs to the government and private sector are clear, he said. The private sector benefits from the government’s support in fast-tracking the project’s permits and continued support during the management phase. Meanwhile, the government benefits because the private sector provides the capital for the projects, allowing the government to use its resources in other areas.
In the three panel discussions that followed, experts discussed the current state and future plans for Egypt’s transportation networks, particularly the PPPs that will be offered to investors. The first session, on roads, began with an outline of the government’s plan to create a safe, efficient road network linking Egypt’s cities to newly developed industrial, commercial, agricultural and residential areas. It is vital for these roads to accommodate increasing traffic volume given estimates of future population growth.
MoT has plans for 1,197 kilometers of new roads that will require nearly LE 8.3 billion in investment. Speakers highlighted five roads in particular due to the scale of the projects. The 231-kilometer Cairo-Alexandria Highway, linking Egypt’s two biggest and most populous cities, will be awarded to a private firm under the PPP model in January 2009. It has an estimated cost of LE 1.9 billion. Also, the 562-kilometer Mediterranean Coastal Highway runs from Marsa Matrouh to Alexandria and on to Port Said. The project is valued at LE 1.5 billion. Other important roads include the 40-kilometer Shobra-Banha Highway (LE 710 million), the 95-kilometer Cairo Ring Road (LE 1.5 billion) and the 110-kilometer Kafr Al Zayat-Alexandria Highway (LE 1.5 billion).
Panelists highlighted several successful examples of PPPs in building roads in the Middle East and North Africa region. Revenue generators for the private sector come in the form of toll fees, advertising concessions, commercial service areas and stations, they said.
The second session focused on maritime and river transport, highlighting Egypt’s strategic geographic location on the main East-West shipping route, and the role of the Suez Canal. Panelists discussed the potential for expanding traditional services such as cargo handling and container transshipment, as well as value-added activities such as logistics and specialized distribution centers. The government is also working to apply the “landlord concept,” whereby the government owns and regulates projects and the private sector operates them.
The panel outlined opportunities for the private sector, such as developing a tourist area and passenger terminal at Alexandria Port, Egypt’s largest port. Other ports highlighted were Port Said East Port, Sokhna Port and Adabiya Port. There are also opportunities for operating ferries on the Red Sea between Egypt and Saudi Arabia to transport millions of migrant workers and Muslim pilgrims between the two countries.
Opportunities to improve the under-utilized river transport system were also discussed. Panelists noted that just 1.3 million tons of goods are shipped by river each year, representing less than 1 percent of total domestic trade. The government has worked hard to improve the river’s infrastructure, which consists of 1,850 kilometers of navigable waterways, 11 locks and 5 ports.
The private sector was encouraged to get involved in building new river ports, or revitalizing old ones. There are also opportunities in cargo and passenger service and to develop a river transport fleet to serve passenger and commercial demand.
The day’s third session focused on opportunities for PPPs in the railway sector. Egypt has the second oldest railway in the world. State-owned Egyptian National Railways (ENR) oversees a network of over 9,000 kilometers of railways, carrying more than 1.5 million passengers a day. Panelists stressed the need to upgrade ENR’s assets to ensure safe and efficient operation given its recent history of fatal mishaps. ENR must also improve service quality, and develop freight services and logistics by increasing freight capabilities.
MoT is seeking private sector involvement for the development of several proposed new rail lines, such as the Cairo to 10th of Ramadan City line, which is expected to cost LE 4 billion. The awarding of the contract is expected by early 2010. Other lines include Alexandria to Borg Al Arab and Cairo to Sixth of October City.
The private sector can also play a role in station commercialization. Stations earmarked for commercialization include Alexandria’s main station, Sidi Gaber, Tanta, Ramses, Giza, Luxor and Aswan. The marketing potential of these stations is enormous given that more than 500 million passengers ride the railways each year.
Following the panel discussions, a luncheon was held during which AmCham honored its past presidents and former boards of governors. The transport minister then spoke on the topic, “Transport on the move.”
Mansour reminded the audience of the importance that transport plays in people’s everyday lives. He said that Egypt was blessed by its location, its extensive road and rail network, and high economic growth. PPPs fit into the plan to align the country’s transport infrastructure with international norms, he said, conceding that it would not be a quick fix.
In the question and answer session that followed, the minister responded to the audience’s queries on a number of topics, including lessons learned from PPPs in the telecom sector and ways to change the mindset of public employees.
The conference would not have been possible without the support of the business community. The conference’s platinum sponsors were Citadel Capital, HSBC Bank Egypt, Piraeus Bank, Sokhna Port Development Company/Amiral Management Corporation, Suez Canal Container Terminal and USAID/TRAC; and gold sponsors were AEDCO, Bavarian Auto Trading Company, Booz Allen Hamilton, General Electric and National Navigation Company. Silver sponsors were Arab Bank, Hitachi Ltd. Egypt Office, M.A. Kharafi Group and Rafimar International Multimodal Transport.
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