After a series of high-casualty accidents, the Ministry of Transport finally gota promise for the cash it needs to fix the nation's aging transportation infrastructure
One year ago this month, Minister of Transportation Mohamed Mansour has had to grapple with a string of deadly accidents, underscoring the simple fact that the high-profile business leader who rose to fame with the family-owned Mansour Group has taken charge of one of the country's most overburdened industries.
Mansour's year of worsts began in February, just weeks into his term, when Al-Salam Boccaccio 98 sank in the Red Sea, claiming the lives of nearly 1,000 of the 1,414 passengers on board. The passenger ferry was on route from the Saudi Arabian town of Duba to the Egyptian port city of Safaga.
It was one of the nation's worst-ever maritime tragedies. Mamdouh Ismail, owner of the ferry and a member of the Shura Council (the upper house of Parliament), was stripped of his parliamentary immunity in March and saw his assets frozen a month later. In June, he reportedly paid LE 330 million to compensate the families of victims. The official report on the disaster revealed that the ferry was overloaded by 232 people, had forged safety certificates, unfit life rafts and fire extinguishers, and lacked enough winches to lower rafts into the sea in the event of an emergency.
Water transport suffered another blow in September, when an Egyptian dredger sank in the Suez Canal due to a technical fault, killing two of the 45 crew members and resulting in a brief closure of the international waterway that is Egypt's number-two source of foreign currency at LE 19 billion in revenues per year.
In light of the ferry tragedy, the government announced it would consider construction of a suspension bridge linking Egypt to Saudi Arabia across the Gulf of Aqaba, creating a new route for trade and tourism. According to the ministry, the 15-kilometer bridge will take five years to complete at an estimated cost of $3 billion. In addition, Saudi Arabia, Libya and Qatar pledged last March to donate two ferries each to Egypt. President Mubarak told reporters that the $70 million ferries would operate in the Red Sea and be used primarily to transport Muslim pilgrims and Egyptian expatriates in the Gulf.
The rails fared no better than shipping. In March, a signal failure caused one train to rear-end another, injuring 20 people in the Delta. That accident was eclipsed by an August collision in Qalyoub, north of Cairo, in what was Egypt's worst railway accident in four years. At least 58 people were killed and 144 injured when a passenger train slammed into the back of another waiting on the same track at the train station platform. Barely two weeks later, another passenger train collided head-on with a freight train traveling in the opposite direction on the same track, killing at least five people and injuring 28 others.
On the heels of these accidents, Mansour fired the head of Egyptian National Railways, acknowledging grave problems in Egypt's aging rail system. The government approved a grant of LE 5 billion and another LE 3.5 billion in loans to develop the railway infrastructure after Mansour publicly said he felt his ministry deserved a share of the LE 16.7 billion the UAE's Etisalat paid for the right to operate Egypt's third mobile network.
The new funding is earmarked for upgrading equipment and signaling systems, improving maintenance, revamping old engines or buying new ones. The funds will also be used to install automated rail networks and crossings, a project that will take about two years to complete.
The ministry has also been looking into ways to financially restructure the Railway Authority, upgrade its locomotives and tracks, as well as make its human resources better qualified.
"This issue has not been tackled for over 25 years, but the minister has given it top priority ever since his appointment," says a senior ministry official who spoke on background for this story. At the moment, the official says, the authority operates 280 locomotives of the 701 available. "The rest are either obsolete or need spare parts and maintenance. Imagine 280 locomotives used to transport 1.4 million passengers a day, half a billion each year."
The official also notes that the authority records losses of around LE 1.8 million each year, primarily due to subsidized services provided by the authority alone. Outsiders say ENR is now in debt to the tune of LE 3.5 billion.
The yearly losses, the official says, "is why the ministry wants to establish the railway authority as a separate entity that receives money in return for its services. If some governmental body wants low-priced tickets, it still has to pay the authority in full." The official says that syndicates and other institutions, whose members receive discounts, should be obliged to pay the authority the difference in price.
The year's disasters did not distract Mansour from his plans to improve the country's transportation infrastructure and services as well as to increase Arab and foreign investments. One achievement was the intercity public transportation network to connect all of Egypt's governorates via land routes.
"Last July, the minister signed three contracts that would connect Daqahliyyah, Beni Sueif, and Munufiya governorates. This LE 95 million, public-private partnership project will include 189 buses and employ around 1,000 people," says the official, adding that Mansour will sign another three contracts with three different governorates in January.
To further enhance the country's transportation system, Mansour amended in July railway legislation by ministerial decree to allow private sector participation in new railway projects for the first time. Moreover, he has tried to attract investors to establish new highways, ports, terminals and services via public-private partnerships.
"The minister's general policy is to transform the ministry from an owner-manager to an owner-regulator only," says the ministry official. "So, instead of owning and managing assets, the ministry owns assets but invites investors to operate and manage them. This will give room for the private sector to invest in projects that will result in providing better services to citizens.
"[From that perspective,] the minister finalized [last summer] a $750 million deal with the Al-Kharafi Group to establish new intercity roads across the country over the next five years," she adds.
Mansour also signed last August a memorandum of understanding with a consortium of Emirati and Bahraini investors to invest $30 billion within the next five years in a number of projects including construction of highways, railroads, and seaports.
Under the MOU, the consortium and the government established a $1 billion holding company, with primary shareholders including the Abu Dhabi Investment House, Bahrain's Gulf Finance House, and Egypt's National Holding Company for Transportation, in addition to other investors from Kuwait and Saudi Arabia who joined later. The newly established company announced in December that it would begin construction on an $8 billion Borg El-Arab-Aswan highway. Future projects will include a new railway network connecting Hurghada to Safaga, Qena, and Luxor; new passenger ferry lines between Saudi Arabia and Egypt and a seaport in Port Said.
Cairo's long-awaited third Metro line also broke ground this year, when a consortium comprising Orascom Construction Industries, Arab Contractors and a number of French companies began excavating the tunnel, after submitting the lowest bid of 400 million. The 34-kilometer line will connect Imbaba to Cairo Airport passing through Mohandiseen, Ataba, Abassiya and Nasr City.
The line will be built in four phases, with phase one costing LE 3.6 billion and phase two another LE 2.8 billion; each phase will take an estimated three to four years to complete. Some 13 international bids are currently being evaluated, and an announcement of the winner is expected in January. France's Vinci Construction Group is believed to be in the lead with the lowest offer.
Friendly Skies
March: In an exclusive interview with Business Today Egypt, EgyptAir Holding Chairman Atef Abdel-Hamid announces the holding company is considering a 20% IPO on the CASE. "It's not selling, it's a capital increase," Abdel-Hamid says. "The end result is there will be people joining the government in ownership. We're adding to the company, we're not selling any of the company's assets." EgyptAir holding is under contract with several European insurers that stipulate the government maintain at least 80% ownership for a 12-year period beginning in 2004 to guarantee loans the state used to finance its most recent airplane purchase from Boeing.
After years of red ink on its balance sheet, EgyptAir Holding will close the fiscal year with more than LE 400 million in profits.
May: Orascom Hotels and Development (OHD) launches two joint-venture charter airlines with Tunisian Karthago Group. Sun Air, with a fleet of three aircraft, began operation in May flying to all domestic airports; regional routes to Lebanon, Jordan, Cyprus, Greece and Turkey are expected to start this year. Koral Blue, starting with two planes, announces plans to fly routes to Europe starting in March 2007.
July: In a small step toward open skies, Minister of Aviation Ahmed Shafiq allows non-Egyptian companies to fly directly into and out of airports at Luxor, Hurghada, Aswan, Sharm El-Sheikh, Taba, Marsa Alam, and Al-Alamein.
August: The Egyptian Airports Company unveils a LE 15 million plan to improve efficiency of the Taba Airport's runways.
September: The government announces a $155 million project to increase the capacity of Hurghada Airport from 4.5 million passengers to 7.5 million per year, starting with the construction of a LE 75 million passenger terminal. Also, Shafiq inaugurates the LE 320 million Luxor Airport terminal, accommodating 7 million passengers each year.
EgyptAir Holding Company signs a $170 million deal with Brazilian aircraft manufacturer Embraer to buy six mid-range aircraft to be used by EgyptAir's ninth subsidiary EgyptAir Express. EgyptAir Express, a low-fare airline expected to start services in April 2007, will service domestic and some Mediterranean Basin routes including Lebanon, Syria, Saudi Arabia, Libya, Greece and Cyprus.
October: Aviation authorities announce that construction on Cairo International Airport's new terminal 3 has been delayed. Originally scheduled to be completed by mid-2007, the new terminal is now expected to be inaugurated by the end of 2007.
November: Low-cost carrier Air Cairo receives the first of four Airbus A320 aircraft for use on its charter routes to the Middle East and Europe. The Airbus deal, worth $220 million, was signed in March to augment Air Cairo's existing fleet of two A321 aircraft on lease from EgyptAir, which owns 40% of the company. The remaining 60% is held by a consortium of Egyptian banks.
Mohamed Tabal, head of the Civil Aviation Ministry's planning department, says that national carrier EgyptAir will increase its fleet from the current 50 to 64 aircraft by 2010. The ministry, he adds, also plans to allocate LE 50 million to improve security in all Egyptian airports in line with the most advanced technologies. Another project will finish covering all of Egypt's airspace with navigational radar; some parts of southwestern Egypt currently lack coverage.
By Sherine El-Madany
© Business Today Egypt 2007
