Egypt scores below average for the region in our Infrastructure Business Environment ratings. Overall,

the country is ranked in second to last place, ahead of only Yemen, in our 10-country index. Egypt is let

down by a poor score for the Infrastructure Market variable, due to its limited sector growth prospects.

This undermines relatively good scores for Country Structure, Market Risks and overall Country Risk.

Real growth in the country’s construction sector slowed from nearly 16% in 2007 to 0.5% in 2008, before

a real contraction of nearly 14% in 2009, according to our current estimates. The substantial sector

contraction in 2009 came despite the fact that the economy as a whole managed to continue growing

during the year, illustrating the highly cyclical nature of the construction sector and its sensitivity to the

global economic downturn. It was widely reported in October 2009 that Egypt was looking to implement

a second financial stimulus package worth EGP10bn (US$1.83bn), which will focus on improving the

country's transport sector, in addition to other infrastructure projects. However, BMI believes that the

latest spending package will have only a limited impact on overall construction sector growth. Indeed, we

forecast that the sector will expand by only 0.2% in real terms in 2010. Furthermore, we are also cautious

about the prospects for the period 2011-2013, expecting annual real growth in a range of 1%-3% per year.

Combinations of risks which present throughout a project’s life cycle make Egypt one of the riskier

Middle East markets for project finance operations. Overall, the country is placed eighth out of 10

countries. The presence of significant regulatory risks creates an uncertain environment for private

operators, in a market where government activity in the economy maintains a high weighting, relative to

private sector activity.

Egypt's Holding Company for Building and Construction signed a memorandum of understanding

(MoU) with Sudan-based Zawaya for the construction of an important section of the Cape-to-Cairo

highway, reported Reuters (January 2010). The 400km-long highway, to be constructed between Aswan

in Egypt and Dongola in Sudan, is expected to cost US$500mn. The project aims to link Egypt's

Alexandria and Cape Town in South Africa.