EGYPT: New valley plan draws the crowd

28 March 1997

A NEW era of grand public construction projects is beckoning in Egypt. The debt crisis of the 1980s, and the economic retrenchment of the early 1990s meant that Egypt's planners had to trim their ambitions. But now, with Egypt showing signs of restored economic health, the appetite for major projects has been revived.

When President Mubarak came to power in 1981, he inherited a number of great-works-in-progress, which had been initiated by his assassinated predecessor Anwar Sadat. They included the Greater Cairo Wastewater Project, financed by the US, the UK and the EU, and now nearing completion. Unglamorous, and largely out of sight, this scheme is sure to be recognised in years to come as one of the great achievements of the Mubarak era, bringing sanitation to a city whose streets were often knee-deep in foul, stinking sludge.

However, Mubarak has now set his sights on a more salubrious epitaph. In a whirl of energy last autumn, he set in motion a project to create an entire new community in the oasis region of the Western Desert. Within weeks of the go-ahead being given, contractors were on site at Lake Nasser, behind the Aswan High Dam, starting work on a 30-metre wide canal that will take some 10 per cent of Egypt's annual entitlement to Nile water to irrigate the new areas.

By the end of 1996, the Ministry of Public Works & Water Resources had completed basic designs for a giant pumping station to lift the water into the canal, and international companies were invited to prequalify for the estimated $300 million-400 million contract to build it.

Overwhelming response

The response was overwhelming: no fewer than 88 prequalification dossiers were bought, at £E 500 ($147) each. Forty-five applications were submitted by the 18 February deadline. Three weeks later, shortlisted companies were invited to bid by 14 July for the contract to build the plant. The basic shortlist consists of six pump suppliers: Sulzer Pumps of the UK, JM Voith of Austria, the Anglo/French GEC Alsthom, ITT Industries of the US, and Hitachi Corporation and Mitsubishi Corporation, both of Japan.

There are eight other shortlists of firms prequalified for other elements of the project. The most important list is that of 24 international construction firms. They will be required to form consortia with one or more of the pump suppliers. The other elements are local civil works, local procurement, motors, distribution equipment, valves and tools.

Beyond the immediate requirements of the project itself, the decision to develop the oasis region has opened the way to a host of new investment opportunities. Already, private investors are drawing up plans for cement plants in the region, dubbed the New Valley, as well as for irrigation pipe factories and fertiliser plants. The government is also working on plans for extra power facilities in the region, as well as roads and airports. Such is the importance of the scheme that Mubarak is soon to appoint a specially designated minister to oversee it, Cairo political sources say.

Contractors have welcomed the prospect of new business created by the New Valley project. But they have reservations about the impact it may have on other construction schemes. 'We think some of the funds allocated for projects like Terminal Three at Cairo airport may now have been switched to the New Valley,' says one contractor, trying to interpret delays by the Civil Aviation Authority (CAA) in inviting bids for the airport scheme.

The CAA received some 20 prequalification bids in May 1996, but has yet to issue a definitive shortlist, let alone invite bids to build the estimated $400 million terminal. One theory that had been circulating among contractors was that the government may be considering switching to a build-operate- transfer (BOT) approach.

That theory has now been discounted, and project sources say invitations to bid will now go out in July. Nevertheless, the role that private finance can play in large public projects has now been fully appreciated by the Egyptian government. A group led by Kuwait's Mohamed Abdulmohsin Kharafi & Sons is negotiating for a BOT airport at Mersa Alam, on the Red Sea, and international groups are preparing to bid for Egypt's first independent power project, on the build-own-operate-transfer (BOOT) model.

For other schemes, such as the media city project south of Cairo, government agencies are forming private companies, with local institutions and publicly subscribed capital, which are then in a position to raise commercial loans. The media city studio complex is being built by a European consortium headed by Sony Broadcast & Professional Europe and Kvaerner Construction of the UK, in a contract valued at $314 million.

However, the days of aid-financing are not completely over. Japan has selected a number of prestige schemes in Egypt to back with grants, notably the Cairo Opera House, which is now firmly established as a feature of the capital's cultural and architectural landscape. The next big Japanese- aided project will be a suspension bridge across the Suez Canal. It will be a four-lane cable-stayed bridge, which will rise 70 metres above the navigation channel. The tender for the 730-metre long elevated section will be restricted to Japanese firms. This section will be paid for by a Japanese grant, expected to be about $100 million. Egyptian contractors will build the approaches to the bridge.

Most of the other project aid Egypt is set to receive is being targeted on social sectors, in particular education and health. The World Bank and the EU are financing a major schools construction scheme, linked to programmes to modernise the curriculum and administration of the sector.

Water and wastewater schemes also retain an important position in the aid-financed project programme. Contractors are preparing to bid for two new wastewater projects in Cairo: a Kuwaiti-financed contract to build a rock tunnel linking the central Cairo system to Maadi, south of the capital; and an expansion of the Gabal el-Asfar treatment plant, northeast of the city, for which France has allocated aid protocol finance. The US Agency for International Development (USAID) has also allocated substantial funds for further wastewater projects in Alexandria and for an estimated $215 million secondary cities sewerage programme.

The long-term efforts to introduce proper wastewater systems throughout Egypt will provide improvements in the quality of life that will start to become apparent in the coming decades. These schemes are also making an indirect contribution to the New Valley project, which is grabbing all the headlines: the better use of water associated with proper sewerage facilities is one of the reasons why the government calculates that it can draw water from the Nile and pump it into the Western Desert without increasing its total consumption of water from the river.

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