Egypt Freight Transport Report Q4 2009

In July 2009 the Egyptian transport minister, Mohamed Mansour, said that the results of the feasibility study for a high-speed rail link between Cairo and Alexandria were expected in the next two months, reported Reuters. The Egyptian and Italian governments had allocated EUR0.55mn (US$781,300) for the study, which would investigate the route for the proposed railway, the number of passengers, and estimated cost. The government will tender the project to the private sector. Egypt's transport minister, announced in February 2008 that an investment of EGP90bn (US$16.3bn) would be made into the country's road, rail, port and waterway infrastructure over a five-year period. Mansour estimated that the road network would receive an investment of EGP30bn (US$5.46bn) through public private investments (PPIs). The rail network would receive EGP10bn (US$1.82bn).

We have again adjusted our macroeconomic forecasts for Egypt. We now expect the economy to grow by 4.7% growth in 2009 (up from 3.7% previously) and envisage 2.5% growth in 2010 (was 1.8%). As a result the forecast for 2009-2013 is for an annual average GDP growth rate of 4.1% per annum, down on the average of 5.9% in the preceding five-year period in 2004-2008. The effect on our freight traffic forecasts for the period as a whole, compared with the preceding five years, is therefore negative. We maintain and have fine-tuned some adjustments to existing mode-specific forecasts. We have trimmed the airfreight forecast after 2008. While the government’s commitment to consider ‘open skies’ policies is positive, the force of the global downturn in the sector in 2009 is clearly a negative factor. Likewise, we have trimmed the mode-specific forecasts for shipping, given the slump in Egyptian and world trade levels. Taking this into account, our forecasts for freight carried across all modes and measured in million tonne kilometres (mntkm) stand at an annual average of 3.7% in the 2009-2013 period, just behind the expansion of the economy as a whole. The fact that freight traffic is lagging behind general economic growth sets Egypt apart from many emerging economies, and highlights the fact that the sector remains something of a bottleneck.

According to our latest estimates, transport and communications GDP rose by 7.4% in 2008, just ahead of overall GDP, which grew 7.2%. For the 2009-2013 forecast period, we expect the transport and communications sector, measured by value, to remain ahead of the wider economy. It will achieve average annual growth of 4.4%, compared to the 4.1% overall GDP growth rate. The total value of transport and communications GDP will rise to US$27.8bn 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 1.39mn people, still representing 6.4% of the total, by 2012.

The report is forecasting no more than moderate growth in Egypt’s freight transport sectors between 2009 and 2013. This is partly because foreign carriers account for much of the expected growth in foreign trade.

Moreover, although the government has declared its intentions to improve all aspects of the transport infrastructure, these plans are long term and their accruing benefits are unlikely to help 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. A significant current feature of the Egyptian freight and logistics sector is that while volumes may be exhibiting slow growth in some areas, the value of the business was boosted by high oil prices. However, this factor went into reverse in the second half of 2008 and in 2009 as the real level of international oil prices fell back.

We expect pipeline throughput to be the fastest growing transport mode, on the back of the development of Egypt’s plentiful natural gas deposits and strong export demand. Pipeline throughput will grow by an average of 6.0% across the forecast period. It will be followed by air freight at 4.7%, inland water transport at 4.5%, road freight at 4.0% and sea cargo at 3.0% and. Rail freight will be the slowest growing at 2.7%.