Egypt Infrastructure Report Q2 2008

The Arab Republic of Egypt is home to a vibrant construction industry. The sector has witnessed strong growth in the recent past on account of growing investments from the Gulf countries and state-led programmes of economic reform. With major privatisation and investment activity expected in the Egyptian infrastructure sector during 2007-2008, this uptrend is likely to continue. This report forecasts Egypt's domestic construction industry to log an average growth rate of 10.0% over the 2008-2012 period.

The government has embraced build-operate-transfer (BOT) schemes as a means of shifting the burden of its massive infrastructure plans to the private sector. This is rapidly becoming the procurement method of choice for new power stations, airports, roads and water schemes.

Recent state initiatives to evolve an integrated transport strategy, boost industrial production and implement new oil and natural gas projects, have added impetus to the rising infrastructure investments. It is however the country's ports that have been in the spotlight lately, with major international port operators looking to exploit the country's strategic asset, the Suez Canal. The growing tourist arrivals to Egypt - expected to reach 15mn visitors per annum by 2010 - has also made the local hotels and resorts industry a hotbed for foreign investment. Further, investments in development projects under the State Development Plan 2007-2012 are soon expected to top US$2bn. Last but not least, developments are also taking place in the residential side, as Egypt's growing middle class is (timidly) beginning to increase demand for more housing.

All, however, is not well with Egypt's construction industry. Though most construction requirements are satisfied locally, rising fuel costs and removal of subsidies have resulted in soaring costs and irregular supplies. Moreover, with past attacks such as the one on the Red Sea resort of Sharm el-Shaikh in July 2005, the threat of terrorism continues to impact tourism revenues.

Notwithstanding these factors however, a mix of right policies and state-led infrastructure projects will continue to drive the Egyptian construction sector and also encourage foreign investment in the country.

BMI forecasts the industry to rise from an estimated US$6.7bn in the year 2007 to approximately US$7.03bn by 2008 and further to near US$16.17bn by the year 2012.