In a bid to boost Egypt's economic growth, the government is looking to develop a long-neglected region of the country - Upper Egypt. Plans are in motion to improve the area's infrastructure, develop existing industrial zones, train local labor, provide utilities and offer incentives to attract investors.
In addition to extending a natural gas pipeline to Upper Egypt, one of the most important developments taking place in the area is the establishment of reliable transportation networks, the lack of which has been a major deterrent to potential investors.
A new road connecting Upper Egypt to the Red Sea is currently under construction. Divided into two development phases, the LE 3 billion project is financed by the Ministry of Investment's privatization proceeds. The first phase of the road's construction, costing LE 1.6 billion and involving the construction of a dual-lane road connecting the cities of Assiut, Sohag and Qena to Safaga, is slated for completion by the end of the year. The project is expected by the government to be a vital step in spurring investment in Upper Egypt.
The second phase of the Upper Egypt-Red Sea Road, a LE 1.4 billion investment, will double the number of lanes, says Magdy El Dahan, chief of the Central Directorate of Investment Roads at the General Authority for Roads, Bridges & Land Transport. An additional phase will see the road's development into a freeway, he notes, though the details have yet to be finalized.
El Dahan says that "Upper Egypt has the lion's share of the authority's work" and that the development of transport networks in the area is part of a comprehensive development plan involving various ministries, including those governing investment, transport, electricity and water resources. "The goal is to turn Upper Egypt into an area that draws rather than expels investors," he says.
Sherif Oteifa, adviser to the minister of investment, asserts that "transportation is key to developing the area." He explains that the new 415-kilometer road is being designed, built and financed by the Holding Company for Upper Egypt Investment, a special purpose vehicle established by the Ministry of Investment to operate the road for 49 years through a concession contract with the Ministry of Transport. He notes that the new road will shorten the distance from Assiut to Safaga from 420 to 336 kilometers, reducing travel time and ensuring faster and cheaper movement of freight by trucks. The road will also help ease congestion on the roads currently connecting Upper Egypt and the Red Sea, such as the Qena-Safaga road, notorious for accidents, and the Al Sheikh Fadl-Ras Gharib road.
"I think most of the opportunities that lie in Egypt lie in the south," says Husam Awad, chairman of Fruitex, a company involved in the production, packing and export of fruits and vegetables with a farm in Wadi Al Noqra, 70 kilometers northeast of Aswan. Awad explains that transport remains a big obstacle to conducting business in the area, noting that trucking from Upper Egypt is expensive and sometimes unavailable. "The road systems are very poor. As an export company, we need good transport routes to make sure we can sustain quality."
The construction of the Upper Egypt-Red Sea road will also serve the government's plan to develop Safaga port, notes Oteifa. He explains that while the passenger port mostly transports pilgrims between Egypt and Saudi Arabia, "in the future it can become a container port," facilitating exports from Upper Egypt to the Gulf and Asia. The new road will connect exporters in Upper Egypt with Safaga. Awad notes that most businesses presently operating in Upper Egypt transport their products north across long distances to the ports of Alexandria, Damietta, Port Said and Ain Sokhna to ship their products. "Due to lack of goods produced [in] and shipped [to and from] Upper Egypt, international shipping companies do not call on ports on the Red Sea, such as Safaga... With development and the increased production of goods in the south, this should change."
Among other economic benefits expected from the Upper Egypt-Red Sea road project is a stimulation of tourism in Upper Egypt. "Some of the historical areas in Sohag are isolated," says Oteifa. "No one goes there. With the construction of the road, tourists can take one-day trips to visit Abydos temple in Sohag or the monasteries in Assiut." He adds that the road will allow tourists to move easily between the leisure activities of the Red Sea and the cultural tourism of the Nile Valley.
The region offers many benefits to draw in investors, affirms Awad, who explains that his choice to set up a farm in Aswan was driven by the low-wage labor pool in search of job opportunities, the abundance of good weather and soil in the area, and the accessibility of canal water. "Obviously the [labor] pricing is better because there is no competition for farms here," he says.
Awad contends that, owing to a lack of work opportunities in the area, the Upper Egyptian labor pool is highly driven; "I think worker loyalty is better [in Upper Egypt]... The motivation to work is better," he notes. The Upper Egypt-Red Sea road project alone has employed 2,139 workers thus far, 70 percent of whom are from Upper Egypt. This is in addition to 1,500 seasonal workers employed on road base works, says Oteifa.
The Ministry of Investment hopes to recover its contribution to the project through the development of land adjacent to the road. Some of the potential investment initiatives in Upper Egypt, says Oteifa, include land reclamation projects, the setup of dry ports (inland terminals operating as transshipment centers of sea cargo to inland destinations), touristic establishments and logistics centers, as well as industrial and mining projects.
The mining opportunities appear to be especially promising. "The road is being built in a mountainous area, rich in mineral resources," Oteifa says. "There is great potential for mining projects as well as quarries in the region to extract building materials such as marble." He notes that this is a lucrative area of investment at a time when "Egypt is witnessing a construction boom."
As for servicing road users, Oteifa says that a total of 100 meters will be devoted to the establishment of projects such as gas stations, restaurants and rest stops. These projects will be open for tender during the first quarter of 2010, and "feedback has been positive," he states.
El Dahan is confident that with the completion of the Upper Egypt-Red Sea road at the end of the year, investment in the area will grow. "People have typically moved away from Upper Egypt to Cairo. We're trying to stop that, but it won't happen until there is development. Transport networks have to be available," he says.
Though there is still a long way to go in terms of developing Upper Egypt, the construction of the Upper Egypt-Red Sea road may be the first chapter in a new era for the area. "We have seriously untapped opportunities in the south," asserts Awad.
By Shaimaa Fayed
© Business Monthly 2009
