The government of Egypt’s long-term strategy for transport is based on maintaining a reliable logistics value chain by increasing the efficiency and competitiveness of its infrastructure. The Covid-19 pandemic affected global supply lines and caused disruptions to transport connections and cross-border travel from 2020 into 2022, with demand shocks being felt across multiple sectors. Moreover, the February 2022 Russia’s invasion of Ukraine caused a worldwide surge in commodity prices – including food and oil – putting further pressure on logistics chains and increasing headline inflation. With around 90% of Egypt’s trade dependent on maritime transport, the government has been upgrading its ports, digitalising trade services to optimise Customs procedures and developing multi-modal logistics facilities to combat challenges.
Disruptions
The interconnectedness of global supply chains meant that disruptions due to the pandemic caused logistics bottlenecks around the world, with the shutdown of service sectors such as accommodation and catering heightening demand for consumer goods. This, in turn, increased costs for storage, transport, energy and labour, and contributed to rising inflation in Egypt. A shortage of materials due to logistics issues saw non-oil private sector activity contract in the second half of 2021 and the beginning of 2022 as companies were forced to scale back output. Amid rising food and energy prices and logistics challenges, headline inflation reached a 20-month high of 6.6% in September 2021 and rose to 13.5% as of May 2022.
In response, in March 2022 the government placed a three-month ban on the export of strategic food commodities, including legumes, beans, wheat and flour. These problems, along with the grounding of the Ever Given in March 2021 – which blocked the Suez Canal for six days and cost an estimated $95m in lost transit fee revenue – prompted the government to re-evaluate supply chain management processes, strengthen logistics infrastructure and improve transport capabilities.
Upgrades
A comprehensive plan to upgrade and develop Egypt’s ports on the Red Sea and the Mediterranean Sea is under way, with the aim of leveraging the country’s strategic geographic location. Worth an estimated LE63bn ($4bn), 58 different port projects are scheduled to be completed by 2024. These include building new berths, trading yards, wharves and logistics areas; dredging shipping lanes and port docks; and connecting them to the rail, road and air networks, Included in the projects is the expansion and upgrade of Alexandria Port, the country’s largest, which includes a new multipurpose terminal for imports, exports and transit goods that will see an increase in annual container processing from 1m to 2.5m units and shorten wait times for ships. Plans are also in the works for the eventual integration of the El Dekheila and El Max ports with Alexandria Port, making it the largest port on the Mediterranean Sea, with more than 87 terminals and extending almost 25 km once completed.
A $10bn mega-project is also under way to expand, widen and deepen the Suez Canal in order to minimise passing time, reduce operational costs, and attract more ships and cargo. This is part of the wider development of the Suez to promote the Suez Canal Economic Zone as a centre for multi-modal logistics and transport.
Digitalisation
The pandemic increased demand for flexible, resilient and precise logistics systems that are able to adapt to a variety of disruptions. Key to this is modernising technological and administrative infrastructure at ports, which includes the automation of services and Customs procedures.
The government has been working to incorporate digital transformation across all national departments and services, and for the sector prioritised the development a one-stop shop at the country’s largest ports to facilitate international trade. The sector’s long-term digital transformation strategy involves linking seaports, dry ports and internal ports with manufacturing and consumer centres via road and rail networks.
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