THE CONSTRUCTION SECTOR IN EGYPT DEVELOPMENT …

1 THECONSTRUCTIONSECTOR INEGYPT: DEVELOPMENT ANDCOMPETITIVENESSSEPTEMBER2003 2003 Business Studies & Analysis Center. All rights reserved. Unauthorized reproduction, copying, re-mailing, storage or Web-site posting is information in this report is verified to the best of the Author s and the Publisher s BSAC 2003 ACKNOWLEDGMENTThe researcher wishes to express deep appreciation and gratitude to the following expertsfor their support and valuable comments throughout the preparation of this study:Ahmed Abdel Warith (Dr.), Senior Vice President, Ahmed A. Warith Consulting Eng. (AAW)Ahmed H. Sabbour (Eng.), Partner & Managing Director, Al-Ahly Real EstateDevelopment Mohamed El Sayed (Eng.)

2 , Chairman, National Company for CONSTRUCTION & DEVELOPMENT (NCCD)Gamal El-Saeed (Dr.), General Manager, Sadco Engineering WorksHussein Khattab (Eng.), Country Manager, BechtelHussien Sabbour (Eng.), Chairman, Al-Ahly Real Estate DEVELOPMENT Hassouna, Expert and Supervisor, Valuation and Financial Analysis Unit,Public Enterprise Office (PEO).Mohamed Said Azmy, Financial Consultant, Azmy Associate Consulting ServicesMohamed Salah Hegab (Eng.), Chairman of the Board, Parsons Brinckerhoff Sabbour (PBS)Mohamed Shaker (Dr.), President, SHAKER Consulting GroupMoustafa M. Rizk (Eng.), General Secretary, egyptian Federation for CONSTRUCTION andBuilding Contractors (EFCBC)Nehad Ragab (Eng.)

3 , Chairman, SIAC Industrial CONSTRUCTION & Engineering Fahmy, Vice Chairman, Export DEVELOPMENT Bank of Hafez (Dr.), Chairman, Phoenix Contractors & Real Estate DEVELOPMENT Yehia M. Zaki (Eng.), Managing Director, Dar Al-Handasah ConsultantsThe American Chamber Of Commerce In EGYPT would like to thank Dr. Naglaa El-Ahwany, Professor of Economics, Faculty of Economics and Political Science, CairoUniversity, for her valuable review of this CONSTRUCTION SECTOR is one of the most dynamic sectors in the egyptian economyand has been growing rapidly since the 1980s. In 2000, the egyptian constructionmarket ranked 36thin the global CONSTRUCTION market, constituting of this mar-ket, for a value of $ billion.

4 Despite its fall from its 1998 ranking of 33rd, theEgyptian CONSTRUCTION market actually increased in size by 23%. The SECTOR has a significant impact on GDP, employment and investment. In2001/2002 its GDP share reached a value of ($ )*billion, of the total GDP. It also employed of the workforce in the same investments reached ($ ) billion in 2001/2002 which repre-sents of the country s total investment. The DEVELOPMENT and competitiveness of the egyptian CONSTRUCTION SECTOR in the localand international markets is affected by factors that can be classified under five maincategories: CONSTRUCTION companies, government policies and strategies, availableresources, institutional backing and supporting industries.

5 Modifications and devel-opments within these categories will lead to further growth and greater competitive-ness for the SECTOR . Official forecasts indicate that the egyptian CONSTRUCTION SECTOR is expected to experi-ence higher average annual growth rates, at , than those of the total GDP ( )and of the total commodity SECTOR ( ) during EGYPT s fifth five-year plan from2002/2003 through 2006/2007. The forecasted total investment in CONSTRUCTION forthat period is LE257 ($ ) billion. iiiAmCham BSAC 2003* Dollar values are based on the 2001/02 Central Bank of EGYPT average rate of to the IV: INVESTMENT OPPORTUNITIES1.

6 Local Investment BOT and BOOT Public Tenders2. Trade and Investment Opportunities with the International Business OpportunitiesPART V: CONCLUSION1. Human Resource Information Resource Financial Resource Administrative and Regulatory Local Firms Export Government Institutional CONSTRUCTION Companies Developments2. Future OutlookSelected ReferencesAppendix ICompanies Operating in the egyptian Cement MarketAppendix IICompanies Operating in the egyptian Steel MarketAppendix IIIO wnership Structure of Companies with NBE Stakes Offered for SaleAppendix IVContract for the Guarantee of Payment of Services Against Commercial andNon-Commercial Risks (Constructions And Engineering Consultancy)TABLE OFCONTENTSList of FiguresList of TablesPART I: CONSTRUCTION SECTOR OVERVIEW1.

7 Historical Background2. Economic Impact on Impact on Impact on Investment3. Market StructurePART II: FACTORS AFFECTING THE DEVELOPMENT AND COMPETITIVENESS OF THE CONSTRUCTION SECTOR 1. CONSTRUCTION Companies and Market Factors2. Government DEVELOPMENT Privatization Export International Regional Agreements-The Common Market for Eastern andSouthern Africa (COMESA) Bilateral Agreements3. Policy Administrative Regulatory Customs and Taxation4. Human Financial Information Resources5. Role of The egyptian Federation for CONSTRUCTION and BuildingContractors (EFCBC) Engineers SyndicatePART III: SUPPORTING INDUSTRIES1.

8 Building Steel2. Machinery and EquipmentivAmCham BSAC 2003vAmCham BSAC 2003vivii1133345668810121718191919202021 2122232323252828283234353536363839404242 424243434344444545454850515254 LIST OFFIGURESF igure 1: Regional Shares in the Global CONSTRUCTION Market (2000)Figure 2: CONSTRUCTION SECTOR Average Annual Growth RatesFigure 3: Growth of the CONSTRUCTION SectorFigure 4: Sectoral Distribution of GDP in Current Prices (2001/02)Figure 5: Employment by Economic SECTOR (2001/02)Figure 6: CONSTRUCTION InvestmentsFigure 7: Share of CONSTRUCTION Investment in Total InvestmentsFigure 8: Breakdown by Grade of Activities Performed by EFCBC MembersFigure 9: Activities Performed by EFCBC Members (2002)Figure 10: Total and CONSTRUCTION InvestmentFigure 11: Distribution of CONSTRUCTION Investment on Economic Sectors (2001/02)Figure 12: DEVELOPMENT of CONSTRUCTION Investment in Various Economic SectorsFigure 13: Public and Private CONSTRUCTION InvestmentFigure 14: Private/Public Shares in Total CONSTRUCTION Investment byEconomic SECTOR (2001/2002)Figure 15: Private/Public SECTOR Shares in Total Cement ProductionFigure 16: Local Production and Imports of CementFigure 17.

9 Share of Production and Imports in Local DemandFigure 18: Cement ExportsFigure 19: Steel Production and ImportsFigure 20: Private/Public SECTOR Shares in Steel ProductionFigure 21: Average Growth of CONSTRUCTION by SECTOR (1998/1999-2001/2002)LIST OFTABLEST able 1: Privatization Achievements in the Cement SectorTable 2: Strengths and Weaknesses in Human Resources of the CONSTRUCTION SectorTable 3: CONSTRUCTION Companies Offered for PrivatizationTable 4: BOOT Projects in ElectricityTable 5: Airport BOT ProjectsTable 6: Road & Railway BOT ProjectsTable 7: Sample Tenders Offered in the CONSTRUCTION SectorTable 8: Planned Growth of the CONSTRUCTION SectorviAmCham BSAC 2003viiAmCham BSAC 2003122344568899101128292930333335112136 3737383946