It is almost as though the Egyptian transport industry has taken its theme tune from a children’s film. The sign out song of “Madagascar” is “We like to move it, move it”, and that is what everyone connected with transport in Egypt seems on a mission to achieve.
From a collection of ideas to cut the number of commuters who use their cars to go to work, to multibillion-dollar plans to speed up ships using the Suez Canal; from establishing giant logistics depots to mastermind food supplies to the country, the region and maybe further afield as well, to the futuristic notion of having a two-tier train service with a 350-km per hour (kph) train travelling over the top of regular services, there is an urgency to the many plans to get the country on the move.
According to the state-run Egyptian Holding Company for Airports and Air Navigation (EHCAAN), which is responsible for 10 international and 19 domestic airports, the 31.9m passengers passing through its airports in 2013 was 6% fewer than the 33.9m of the previous year. The fall in aircraft traffic was a similar 6.2%, with the numbers over the same period down from 331,700 to 311,100. “The decrease is expected, and most likely due to the wave of violence following the June 30 revolution,” the former Tourism Development Authority chairman, Serag El Din Saad, told The Cairo Post.
Expansion and upgrades at Cairo International Airport in anticipation of the return of the good times are a constant work in progress. Terminal 3 was opened in 2009, giving the leeway for a major rehabilitation on Terminal 2. A third – and longer – runway was completed in 2010, enabling the airport to handle the Airbus A380. Terminal 3’s two symmetrical concourses spread over 211,000 sq metres are designed to cope with up to 11m passengers per year, around half the airport’s current total capacity.
However, not all the news was good. Work on revamping Terminal 2 has fallen behind its timetable. In May 2014, the payments schedule of a World Bank loan of $280m to the Egyptian government for the terminal contract was itself postponed. The building covers 200,000 sq metres with an apron area of 500,000 sq metres and 23 gates. The work will see the terminal’s capacity doubled, making it capable of handling up to 7.5m passengers a year.
The World Bank said in a statement, “Completion of the Terminal Building 2 is now foreseen by October 2015, nine months behind the contractual completion date of January 28, 2015.” The expiry date of the loan is November 30, 2015. Renovation work is also going ahead at Alexandria International Airport, which is temporarily closed. Flights have been transferred to Borg El Arab, 40 km from the city, until the work is complete. Borg El Arab handled almost 2m passengers in 2012, a figure that, according to EHCAAN, grew by 15% to 2.26m in 2013.
Sharm El Sheikh
The Islamic Development Bank approved a $230.2m loan in September 2014 for the second development phase of Sharm El Sheikh airport, having previously allocated $226.8m to the project, which seeks to raise the airport’s capacity from 7.5m passengers a year to 18m.
In 2013, more than 99% of international passengers into Sharm El Sheikh arrived on charter flights, while the figure for Hurghada was 86%. EHCAAN data shows that April was the peak month in 2013 for Hurghada (688,000 passengers). Sharm El Sheikh peaked in March (684,000) and is now the main Red Sea gateway being considered for expansion. In February, it received 70 flights in one 24-hour period.
The national carrier, EgyptAir, was reported in January 2014 to have incurred losses of almost LE7bn ($994m) since the revolution which took place three years earlier. Two suggested rescue plans have been floated, one approaching the problem by merging some of its businesses to cut costs, the other to rejuvenate its ageing fleet by leasing much more modern aircraft. The Ministry of Civil Aviation said that the merger option was currently being studied by “experts in economics and aviation”.
Apart from pursuing ideas such as consolidating the maintenance and cargo arms into the main business, another suggestion was for the state to provide an equity injection. That would essentially make the government a partner. However, the idea of the state taking on the burden of a major loss-maker seems incompatible with its overall policy of trying to phase out subsidies and make the books balance.
Outline plans were published in 2013 for the carrier to rejuvenate its aged fleet by leasing new aircraft, or at least planes that are more modern than those it has now. That, it was argued, would make the airline much more attractive to potential passengers. It was reported that EgyptAir suggested increasing the size of its fleet from 81 to 125 by 2022, as well as acquiring 17 further aircraft to replace current models that are more than 15 years old.
The plan also envisages evaluating the Boeing 787 Dreamliner and the 777, plus the Airbus A350 and even the A380 double-decker jet. Leasing is seen as a much more likely option because it involves smaller sums of money initially than buying.
There is even said to be a taker for some of the aircraft that EgyptAir would dispose of. Air Leisure plans to lease an undisclosed number of A340-200s from EgyptAir, according to the aviation consultancy ch-aviation. Air Leisure intends to use the aircraft to open up long-haul flights to East Asia from Egyptian resort towns such as Hurghada, Aswan and Luxor. The national carrier has returned three of its A340s to active service, although one, SU-GBO, is said to be in storage at Cairo Airport.
There is another option that has so far not received any public mention. At a time when airline numbers in passengers and flights have been declining, the Central Agency for Public Mobilisation and Statistics (CAPMAS) noted that at least one figure had risen for the year – the number of state employees on national airlines. The figure rose in 2013 by 1.4% to 34,479 compared with 34,009 in 2012. And the salary bill, including benefits and social insurance contributions, went up at an even higher rate, 6.9%, from LE2.7bn ($383m) to LE2.8bn ($398m). However, the prospect of jettisoning thousands of airline employees before the economy has grown enough to create many more jobs has its obvious drawbacks. The government is trying to strengthen the current stability, not foment unrest, and the time to tackle over-staffing at EgyptAir may not yet be ripe.
Meanwhile, in a bid to boost tourism, the airline has started three direct flights a week to Delhi, adding to its four weekly flights to Mumbai. Mohamed Kamel Al Mostafa, the chairman of Cairo Airport, told OBG, “In order for Cairo to become a regional hub, both the capacity of infrastructure and quality of services must be enhanced. Better connectivity – in terms of flight frequency and destinations – and increased storage capacity are necessary requirements.”
The World Bank is preparing a four-year strategy to contribute to Egyptian projects, at an initial cost of over $1bn, according to an investment advisor to the minister of transport. Mahmoud Gamal El Din told the online news service Amwal Al Ghad that the World Bank was expected to provide loans and investments into railway and river transport projects. It will also cover the provision of technical assistance. El Din said that he anticipated a $400m loan would be included in the World Bank’s new strategy, to be used to enhance train safety by upgrading the automatic controls.
By far the biggest railway project envisaged is a 1087-km, two-tier link between Alexandria and Aswan, with the lower level, 180-kph train stopping at every major station. Above it the high speed train would halt its 350-kph journey in only three places – Giza (to serve Cairo), Assiut and Luxor.
The request for proposal for the project stipulates that there would be three construction phases involved: Alexandria-Cairo, Cairo-Luxor and LuxorAswan. The first stage of the project will take five years, and will cost around $3.5bn (see analysis).
Though it may be the most spectacular rail project, the double-decker link is by no means the only important scheme in the works. According to the General Authority for Investment and Free Zones, Egyptian National Railways (ENR) is also focusing on enhancing safety measures and service provision by developing 20 stations; increasing the current 500m passengers a year who use trains, simultaneously reducing road traffic; reshaping the ENR’s financial structure; and studying the possibility of private sector participation in sector development.
The minister of transport, Hany Dahi, told a conference in September 2014 that the railway sector needed around LE60bn ($8.52bn) in investment over the coming three to five years. Dahi said that the system had operational problems and safety issues. Some of the recently supplied trains had suffered overheating in August, he said, adding that the Ministry of Transport had come to an agreement with several European countries to import 25 new trains.
Apart from the 1087-km route, Egypt also has ideas to extend its future high-speed rail network into the Gaza Strip, Israel’s coastal cities, Beirut and other cities on the Lebanese coast, before continuing north to Syria and Turkey. However, as this project would require several major peace agreements, there is no precise plan at present. Another extension envisages a link to Eilat and Aqaba, joining the route Jordan plans northwards to Iraq. That is another plan on hold for the time being.
An application by the logistics firm Aramex to enter the train business for delivery purposes in several governorates is still on hold. Samir Ghariba, the company’s Egypt and Africa manager, said a plan had been sent to the railway authorities and the Ministry of Transport earlier in the year. Ghariba said Aramex had offered to foot the bill for the infrastructure costs as well as the attendant technology, but no agreement had been reached.
For a city the size of Cairo, the current metro system is small, but this will not be the case for long. The two lines are going to be joined by lines 3, 4, 5 and perhaps 6, as well as by a possible upgrade to some of the carriages to provide, for example, an internet connection while travelling.
Younis Ibrahim, of the Egyptian Company for Metro Management and Operation, said the company was considering introducing a “premium service” that would also allow seats to be reserved using a smart-card. Ibrahim said that there were 100,000 potential customers from the business community alone, and that tourists might also accept the projected price – LE10 ($1.42) or 10 times the normal fare.
Another route to increasing revenues will come through selling advertising space inside metro stations. Ibrahim said Egypt was in the process of signing contracts with advertising companies and it hoped to raise enough money to commission 20 new trains by the beginning of 2015.
The new plans include a proposal to put up the price of standard metro tickets, which now cost LE1 ($0.14). The government subsidises the tickets, the true cost of which was LE8 ($1.14), said Ibrahim. Any increase on regular fares would be at least 50%.
Work is already under way to complete a third metro line, and a tender process has begun for a section of the fourth, which involves building a 24-km underground line. The fourth line is being implemented in multiple phases. The first of these comprises the construction of a 18-km underground metro line from El Malek El Saleh Station ( interchange at Line 1) to the October-Oasis Highway Station, along with 16 stations. Its completion date has tentatively been set for the fourth quarter of 2019, The Ministry of Transport is reported to be considering a fifth metro line, Nasr City-Heliopolis-Rod El Farag, which would encompass 17 underground stations, and a sixth line – connecting El Khosous City, near the ring road, to New Maadi – which will include 24 stations. Estimated costs of the projects have not yet been determined.
Given the success of the campaign to raise money from Egyptians for the expansion work on the Suez Canal – LE64bn ($9.1bn) in eight working days (see Construction chapter) – the Ministry of Transport is pondering whether to issue similar investment certificates to try to raise the funds needed for the metro upgrades in Cairo and other governorates.
In its desire to discourage car owners from using their vehicles for travelling to work, the government is supplementing the expansion of the metro with ideas for a 26-km light railway from 6th of October City to Imbaba Station.
Cabinet spokesman Hossam El Kawish told reporters that “a global company presented a comprehensive offer to the Egyptian government to implement the project”. He refused to name the company, saying only that it had similar projects in Saudi Arabia, the UAE and Brazil. This company said a monorail link, capable of travelling at 80 kph, would cost around $1.5bn, El Kawish added. The train would be driverless, like the Dubai Metro, and would have the capacity to transport 1m passengers per day.
Underpinning all of the steps to encourage commuters to use public transport are the findings of a 2012 World Bank report. It said that congestion in Cairo alone cost LE50bn ($7.1bn) per year, quite apart from the damage caused to the environment from carbon and gas emissions.
One company founded on the premise that energy efficiency was the key to financial success in the future is the National Holding Company for Multimodal Transport (NHCMT).
Mohamed Mashhour, the company’s chief operations officer, explained that its backers had calculated that the high fuel subsidies in Egypt would one day have to go. When that time arrived, the businesses that were using a model predicated on fuel efficiency would come out ahead. That decision was made in 2008, but NHCMT had to wait it out until 2014 for its prediction to come true.
NHCMT’s business is to shift bulk cargoes in barges up and down the Nile. It also established eight inland ports between Alexandria and Aswan to store its cargoes. “We calculated that the government would restrict gas to the cement industry, which would then switch to coal,” said Mashhour.
In fact the gas was cut off but permission to use coal did not come straightaway, and as a stopgap some cement companies imported clinker, which NHCMT moved from Alexandria by barge. The decision to allow coal was followed by a partial lifting of the fuel subsidies, which left NHCMT – which claims an 80% share of bulk transport by river barge – in an unrivalled position. With barge capacity of 25,000 tonnes, it was able to ease into coal deliveries alongside its existing contracts for grain.
“There is a bulk market already there,” Mashhour told OBG. “Egypt imports 8m tonnes of grain a year and we are doing just 500,000 tonnes. Now that fuel prices have risen we have a cost advantage over trucks.” As far as grains are concerned, the idea seems to be catching on. The Ministry of Transport is currently studying the establishment of four new ports as part of river transport development plants, said El Din. The new ports – in Sohag, Assiut, Qena and Mit Ghamr – will serve as logistics areas for the grain trade in both Damietta and the canal area, and should be built within two years.
Relentless in its campaign to reduce the number of car drivers, the Ministry of Transport is trying to persuade some to keep travelling by road – just not in their own cars. It aims “to motivate citizens to forego their personal vehicles for daily commutes and use the public transit system instead”, Mustafa Hosni, of the ministry’s development sector, was quoted as saying. Under the plan, private mini and microbuses will operate on the same daily routes and schedules as regular buses.
Private tour companies have been allowed to operate inside greater Cairo and in the new cities to ease the transportation crises. Tickets for the buses with air conditioning, internet and GPS capability will cost EGP10 ($1.42), the same as the proposed special metro carriages.
The 20 buses of that kind in service will be increased to 50 if the experiment is successful, said Hani Salah, of the Ministry of Local Development’s directorate of roads and transport.
Proving that there are opportunities for everyone to help, the minister of tourism, Hisham Zaazou, announced a new transport project between Cairo and the new cities. The scheme is being sold as “drive from home to a safe spot to leave the family car and get on an urban bus while you are there”. Officers have been told to issue temporary licences for the buses until legislative amendments are made to put the buses officially in service, said Zaazou.
So that there can be no practical snags in routing or choosing stopping points, three parts of the administration – the Ministry of Tourism, the Ministry of Local Development and Cairo City Hall – are coordinating on that kind of detail, said Zaazou. The three routes proposed in the first phase will each have 10 buses operating at 10-minute intervals.
Route A will link New Cairo’s Ring Road and eastern Cairo’s Nasr City. It will have seven stops and the journey will take nearly 50 minutes. Route B will start from Qalubiya’s Obour City and end at the main bus stop in Nasr City, taking the Ring Road and passing by Cairo Airport, also with an expected time of 50 minutes. Finally, Route C will start from the main stop in Nasr City and end in Shorouk City and will pass by Al Rehab City, all in 40 minutes.
Despite all the effort going in to persuade individuals not to use roads, there is an acceptance that there are limits to how much can be achieved. Around 94% of all freight inside Egypt is carried by road, and the Ministry of Transport recognises that the roads need $8bn in investments over the next five to 10 years. It therefore proposed a Safaga-El Quseir-Marsa Alam road costing $85m, a Ras SudrSharm El Sheikh road with a price tag of $71m and a $640m road from Alexandria in the north-west of the Nile to Abu Simbel in the south. In addition to those projects, the Ministry of Transport has allocated LE8bn ($1.14bn) to develop 365 km of the current road network and add 450 km of one-way roads.
Aware that, populous though it is, Cairo is home to less than one-quarter of Egypt’s total population, Dahi is ensuring that road improvements are also on the agenda for areas well away from the capital. Equally conscious of the need to show some results quickly, he has modified the timelines on LE2bn ($284m) worth of projects stretching 320 km, so that they will be completed within three months.
Dahi said that the Ministry of Transport had ordered repairs to 12 roads in the Nile Delta, Upper Egypt and Suez Canal governorates where most road accidents occur. A report from CAPMAS said that more than 8% of accidents took place in the Nile Delta’s Sharqiya governorate, which ranked the highest nationwide. A total of 50,051 accidents were recorded in 2013, marginally higher than in 2012, according to the report, with the highest monthly number, at 5105, occurring in December.
Prime Minister Ibrahim Mahlab took up the theme of timeliness, and stressed the need for “commitment to meeting deadlines to finish projects on time, as well as extending work hours and starting work early, with attention to safety factors on work sites”. Mahlab said that Dahi should check to see whether firms are keeping to timelines and work schedules, adding that work should be taken away from companies that fail to abide by the rules. International and local reports estimate that Egypt has the unenviable record of leading the Middle East when it comes to road accidents and related deaths. According to the World Health Organisation, road accidents are one of the main causes of death in Egypt.
The Egyptian government has decided not to renew the roll-on-roll-off (RO-RO) agreement with Turkey after it ends in April 2015. The deal involved the arrival of trucks filled with Turkish goods to Egypt’s ports on the Mediterranean Sea, then securing those goods while they are transferred by land across Egypt to Red Sea ports, from which they are shipped on a Turkish ferry to Gulf Arab countries.
The decision was taken after a meeting of all the parties involved in the agreement, including representatives of the Ministry of Foreign Affairs, which will inform the Turkish government of the decision. Egyptian ports’ profits from the RO-RO line were $4.8m, said Ahmed Amin, maritime transport sector adviser to the minister of transport. Dahi said that less than $13m had been spent on transport fees since the agreement started three years ago.
The government intends to more than triple the annual level of trade handled at the ports. To help achieve this, a national ports development plan has been drawn up, calling for investment of at least LE87bn ($12.4bn). This will be split into two main parts. The first phase has been given a price tag of LE50bn ($7.1bn) with the target of raising total port capacity by 2030 to 370m tonnes annually by handling 24m containers, up from the current 120m tonnes and 6m containers. In the two decades of phase two – up to 2050 – the other LE37bn ($5.3bn) is intended to raise total tonnage to 600m annually and 40m containers (see analysis).
As part of this plan, the government has begun taking steps to convert Egypt into a global logistics centre for the handling and storage of grain and food commodities, according to the prime minister. Damietta has been identified as the first site at which logistics operations will begin. The ministers of planning and supply will be responsible for working on integrated studies for the scheme, said Mahlab, adding; “This is a large national project that is no less important than the Suez Canal project.” Mahlab said that the total area for the proposed project is 3.35m sq metres, of which 0.56m fall within the boundaries of the Damietta Port. The remaining 2.79m sq metres comprise a portion of the untapped industrial area north-east of the port, and are owned by the New Urban Communities Authority.
Plans in place to broaden the Suez Canal will allow northbound and southbound ships to pass for more of its length, eliminating the need for one-way convoys and increasing the number of ships that can navigate the canal simultaneously (see analysis). However, Peter Sand, chief shipping analyst at the Baltic and International Maritime Council, the largest of the international associations representing ship-owners, cast doubt that the $13.5bn forecast for Suez Canal revenues by 2023 could be achieved by higher tolls alone.
“I don’t see that number being reached by only raising canal fees, due to the competition with the Panama Canal,” he said. “If the Suez Canal Authority were to, say, double the fees, it would be a no-brainer for shipping companies to use the Panama Canal instead.”
That said, the Suez project is part of wider redevelopment plans under way in Egypt. A 75,000-sqkm logistics hub around the canal is intended to attract more ships and income to the area, taking full advantage of Egypt’s geographical position between Asia and Europe. Sand said that the increased revenue of $13.5bn may be feasible if it were a reflection of the wider redevelopment of the area around the Suez Canal as a shipping hub.
Yehia Zaki, director of operations in Egypt for Dar Al Handasah, told OBG, “Areas outside Cairo and Alexandria offer huge opportunities for further development, and the current trend is towards construction around the canal and Upper Egypt areas.”
The scale and breadth of transport improvement schemes announced and planned in 2014 is breathtaking. Irrespective of the meticulous planning and forethought, it is virtually impossible to expect everything will run smoothly. However, what is more important is that the momentum that has been created means that even if only half of the targets are met the total achievements will still be among the largest in Egypt’s history. The measures are all demonstrably of practical value but there also seems to be a deep understanding in officialdom that the public wants to see results and see them quickly, even if they are relatively minor.
What is less reassuring is where the funds are going to be sourced for these projects. The country’s finances are being brought back into order, restoring confidence to the markets and the international financial institutions on which Egypt will ultimately need to rely in order to pay for these programmes. To maintain the confidence and trust that has been built up, it will be necessary to extend the discipline of 2014 to the government accountants who need to pay the bills. Even if it is not possible to pay everything in full immediately, a proportion delivered early will help to maintain the momentum.
That sentiment was well expressed by Ahmed Abouamin, the deputy general manager of Arab Maritime Petroleum Transport Company, who told OBG, “One of the key challenges involved in working with the government has been delayed payments, although firms can certainly rely on the government to eventually make them.” With scarcely a foot wrong all year in the mammoth task of planning Egypt’s economic and social recovery, it seems unlikely that a basic act like paying the bills will be overlooked.
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