Egypt Freight Transport Report Q2 2009

Revenue and traffic levels through the Suez Canal have fallen for the sixth consecutive month, with revenue down by about 26% in February 2009 compared to February 2008. Canal revenues have hit their lowest levels in almost three years with revenue falling to US$301.8mn in February 2009, compared to US$407.7mn in the same month in 2008. Vessel numbers are also down to 1,272 from 1,676 and volumes passing though the waterway have fallen from 73mn tonnes to 53mn tonnes. This is due to the global slowdown in trade, seasonal factors, the rise in pirate attacks in the Gulf of Aden and, perhaps most importantly, shipping companies trimming costs and avoiding Suez Canal tolls by going the long way round the Cape of Good Hope.

In our latest Egypt Freight Transport Report, BMI concludes that total freight traffic, measured in million tonnes-km (mntkm) will rise by an annual average of 3.8% in the 2009-2013 forecast period, a little ahead of Egypt's general rate of economic growth. Various factors support this prediction. Egypt is taking a hit from the global slowdown - more so than we expected in last quarter's report - but GDP growth over the next five years will show some resilience at an average of 3.6% per annum. This compares with 5.9% over the preceding five years. Going forward, the poor state of the country's transport infrastructure will remain an important factor, and we doubt whether the investment flows hoped for the transport ministry will materialise. Overall, BMI is forecasting no more than moderate growth in domestic freight transport sectors between 2009 and 2013. While the government has declared its intentions to improve all aspects of the transport infrastructure, these plans are long term and the benefits are unlikely to make a major difference to the freight transport industry until beyond the forecast period. As a result, the industry will have to continue to make use of the existing facilities for several years.

Egypt scores a total of 58.6 (out of a theoretical maximum of 100) in our freight ratings. The country's strong points are economic risk and the competitive environment, at least with reference to its peers.

Areas for improvement include infrastructure, freight growth, transport intensity (a measure of the dynamism of foreign trade) and the regulatory environment. The total value of transport and communications GDP will rise to US$27.2bn in nominal terms by 2013, representing 9.9% of Egypt's GDP. The transport and communications sector employed 1.28mn people, or 6.4% of the labour force, in 2008. We see the figure rising to 1.40mn people by 2013, although it will remain stable as a proportion of the total workforce at 6.4%.