Background

With the exception of airport infrastructure, upgraded to support the development of tourism, Egyptian transport infrastructure has suffered from lack of maintenance and investment. However, since 2007, increased funding has been allocated to roads and railways, and PPPs are now being used to finance the development of transport infrastructure.

With a population of more than 80 million and a backlog of un-awarded projects approaching USD 150 billion, the Egyptian infrastructure market has considerable potential. To begin address this backlog the country needs to increase investor confidence and tap private, multilateral and bilateral sources of funding.

Planned major projects include:

• the further development of Cairo's metro system,

• the modernisation and expansion of the country's rail network and,

• the proposal to expand and develop the Suez Canal as well as the land around the waterway through two megaprojects: the Suez Canal Development Project, aimed to developed a Master Plan for a logistics hub on 76,000 square km of land along a 160 km corridor, including further expansion of capacity at East Port Said, the creation of a technology investment zone on the canal's east bank and an extension of the industrial zone along the west bank of the waterway from Suez City; USD 8.5bn project to construct a 34 km waterway parallel to the existing canal to allow more ships to pass through, reducing waiting times and increasing revenues from the canal.

Policy Framework

• A liberalised, well-functioning air transport sector

Airport infrastructure offers state-of-the-art facilities. Cairo International is becoming a regional hub directly linked to 91 domestic and international destinations served by 65 airlines. Egypt is a signatory to the Open Skies Agreement, which considerably liberalised international air travel. Air freight rates are competitive.

• Dense networks and low costs in road and rail

Egypt's road and rail networks are relatively dense: its rural accessibility index is above the MENA average. The rail network serves most large urban areas and is dense in populated area of Egypt. Road tolls and railway fares are very low compared to the MENA region and other countries. Egypt's 40% modal share of railway passenger transport is among the highest in the world.

• High levels of current investment

Investment in roads is currently adequate, representing 0.7% of GDP. The figure is higher than in some comparable countries (e.g. Belarus, Ecuador and Ukraine which range from 0.16% to 0.5%), but lower than in Morocco with 1.24%. Railways have seen investment in signalling systems and rolling stock.

• A decentralised, partially reformed road and highway sector and railway reform in progress

Road authorities have been decentralised, with public-private consultations being held in advance of reforms. A highway agency (GARBLT) is responsible for supervising all planning, construction, operating, maintenance, and safety works for main roads and bridges in the Egyptian intercity network. Railway reform has been undertaken, with internal restructuring of Egyptian National Railways (ENR) preparing the ground for future corporatisation.

• Port infrastructure is competitive and the private sector is driving investment in new capacity

Egyptian freight rates are highly competitive for Mediterranean container traffic. Efforts have been made to simplify port procedures and one-stop shops have been introduced. Egypt has been successful in attracting private investment in new port terminals through PPP schemes.. There has been partial unbundling of regulatory and operating activities, with some port services being opened up to the private sector.

The Ministry of Transportation is studying establishing four new ports as part of river transport development plans.

Challenges

• Safety is a major concern in road, rail and maritime transport

Egyptian roads are very dangerous: 156 fatalities per 100 000 vehicles, compared to the OECD average of 15. This poor record is due primarily to the non-enforcement of existing road safety regulations. The rail network also has safety problems, as evidenced by major accidents in 2002, 2006 and 2009, in spite of ongoing investment in rail signalling and a twinning project with French railways to improve safety. Ferry accidents also occur all too often, the latest being in December 2009 on the River Nile.

• The infrastructure is in disrepair due to inadequate financing

Road maintenance has long been neglected. The road maintenance budget is currently approximately 0.15% of GDP, compared to 0.24% in Morocco, Ecuador's 0.23%, and 0.45% for Ukraine. In addition, the highway authority (GARBLT) monitors the quality of maintenance work inadequately, according to industry experts. The railway tracks are in a poor state, and rolling stock has only been partly upgraded. Even after recent increases, investment levels in the rail network remain modest: EUR 350 million per year in contrast to Morocco which spends EUR 400 million per annum on its conventional rail network and another EUR 400 million annually on its high-speed train system.

• Congestion is an increasing problem due to the lack of an intermodal transport scheme

Congestion is an increasing problem, especially in Greater Cairo where commutes of 60 to 90 minutes force companies to allow work from home. The situation is bound to worsen with increasing car ownership in a country where the population density of the most heavily inhabited areas is 1 500 inhabitants/km². Even though Cairo boasts the continent's only metro, public transport is not sufficiently co-ordinated or convenient to be attractive. For freight, there is not yet an integrated scheme that would encourage intermodal rail-road- river transport. Roads account for 97% of freight traffic, while rail carries just 3% and barge traffic on the River Nile amounts to less that 1%.

• Regulatory reform is still at an early stage

Although there are port and highway regulatory agencies in place, they are not independent. The blurring of lines between the government's roles as policy maker, regulator, and shareholder in operating companies is not conducive to good governance or to private sector participation. For example, GARBLT is both the highway regulator and the holding company of the four largest road and bridge construction companies. Similarly, the state acts simultaneously as landlord, regulator, and operator in most ports. Currently, EU- funded technical assistance programmes for the reform of Egypt's Transport Sector are ongoing, as is the case for the River Transport Authority (RTA)1.

Project Pipeline

• Suez Canal Development Project, including Second Waterway

• Cairo Airport City, including upgrading existing passenger terminal and building new departure hall and airside pier

• Heliopolis / New Cairo Metro extension (phases 3 and 4 of Line 3 and Line 4)

• Rod El Farag Axis Highway

• Nile River Ports Project

• Nile River Bus Project

• Ain Shams/10th of Ramadan Railway

• Shubra/Banha Highway

• Safaga Industrial Port