From the addition of a third line to Cairo’s metro to the construction of six new wastewater treatment plants, Egypt’s construction sector remains buoyant. Annual population growth of 2 per cent along with a government stimulus package, which committed an additional EGP10.5bn ($1.9bn) for infrastructure spending, has ensured the country’s construction sector has remained busy, despite the global downturn. According to the Central Bank, the sector’s gross domestic product (GDP) contribution grew 11.4 per cent to $7bn in 2008-09.
“Water and wastewater is on top of the list, followed by roads and housing,” says Gamal Abu Taleb, chairman of British Engineering Institutions of Egypt, a non-governmental organisation. “There is some new build, but there is also a lot of capacity enhancement.”
Key fact: The construction sector contributed $7bn to Egypt’s gross domestic product in 2008-09
According to its five-year plan from 2007-12, the government intends to invest $6.2bn in water and wastewater services to ensure access to sanitation and water is available to the whole country. Much of the new capacity, and some refurbishment of existing treatment plants, is set to be delivered through the Ministry of Finance’s public-private partnership (PPP) programme led by its PPP Central Unit. The programme, launched in 2006, aims to deliver $15bn of infrastructure improvements using the private sector. These include up to 230 schools, three hospitals, two major roads and nine water schemes.
Despite Egypt’s lack of previous PPP experience, there was no shortage of bidders for the first project – the New Cairo City wastewater treatment works .
The 250,000 cubic metres a day (cm/d) plant, which will serve the areas of Madinaty and Al-Mastakabal, was awarded to the Orasquaila Consortium in June 2009. Orasqualia is a joint venture of the local Orascom Construction Industries with Spain’s Aqualia.
Orasqualia beat two locally led consortiums and two international teams to win the contract. The other bidders included Kuwait’s Al-Kharafi & Sons; France’s Veolia with the local International Environmental Technologies; German/UAE Metito Berlinwasser with local Engineering Consultants Group and Hassan Alam & Sons; and local contractor Samcrete with Spain’s Befesa and Emasesa.
Contractors say they expect activity in housing and the wider construction sector to increase further
Orasqualia and Al-Kharafi have been prequalified for the next two PPPs, the Abu Rawash and the 6th October City wastewater treatment works, along with contractors from South Korea, Japan, Spain and Greece.
Unlike the New Cairo City project, which is a new build, the Abu Rawash scheme involves an upgrade to the existing 1.2 million cm/d treatment facility that will see the quality of effluent discharged into the Nile River improved from a primary treatment to secondary standard. Primary treatment allows heavy solids to settle out of the sewage effluent before the liquid is discharged. Secondary treatment uses micro-organisms to remove biological matter and pathogens.
The 6th October project involves construction of a new 150,000 cm/d wastewater treatment works, along with the operation of an existing 100,000 cm/d plant.
Invitations for the prequalifiers to bid for the projects are due to be issued in May. However, this may be delayed until the PPP law is approved by the cabinet of ministers. It was referred to the cabinet in November and is expected to be passed in July. The current legislation, the Egyptian Procurement Law 89 of 1998, does allow the use of PPP mechanisms, but it is considered to be restrictive, containing conditions such as limiting private sector profitability to 10 per cent.
It is understood that once the law is passed, concept papers for future wastewater projects at Alexandria West, Nahia in Giza Governorate and Helwan near Cairo, will be pushed forward by the Ministry for Housing, Utilities and Urban Development. The ministry is also working on plans for desalination plants at Hurgadah, another on the west coast of the Gulf of Suez, and a third at Sinai.
Outside the PPP programme, major investments continue in the transport sector with ports, airports and railways a priority as the country seeks to improve links with regional countries and become a global transport hub. Already the second busiest airport in Africa after Johannesburg in South Africa, plans are under way to further increase capacity at Cairo International. The Egypt Holding Company for Civil Aviation and Air Navigation (Ehcaan), through its subsidiary Cairo Airports Company (CAC), wants to increase overall capacity at the airport’s three terminals to 25 million passengers a year, and key to this is upgrading the existing terminal 2 from its 3 million capacity to 7.5 million a year.
The scope of works includes renovation and expansion of the passenger waiting areas, gates, customs and baggage claim area. It also involves installation of a new IT system; construction of a new check-in hall, which will be linked to terminal 3 by an existing pedestrian bridge; construction of a new pier with 14 connecting bridges; construction of a new apron with 16 parking contact stands, which can accommodate two Airbus A380s and a flexible combination of wide-body and narrow-body aircraft; and four parking remote stands.
According to the Washington-headquartered World Bank, which is providing a $280 million loan to the scheme through the International Bank for Reconstruction and Development, the procurement process will begin on 1 May. The invitation to bid (ITB) is scheduled to be issued before the end of June, with an award made by the end of the year.
“The construction of a new terminal on the site of the existing second terminal, with a capacity of up to 7.5 million passengers a year, increases the overall capacity to 25 million passengers a year,” says Michel Bellier, task team leader at the World Bank. “The new second terminal and existing third terminal will be operated jointly as one integrated terminal, thus, strengthening the role of Cairo International airport as a regional hub.”
Boosting the role of Cairo in international travel is one of several projects aimed at improving the economic growth of the transport sector. “There are all sorts of advantages in increasing the handling capacity. If traffic significantly increases, the airport will attract lots of new firms and create more jobs,” says Bellier.
With a $2bn budget up to 2012, Echaan is also funding a new passenger terminal and 3.5-kilometre runway at Borg el-Arab airport, 40km from Alexandria, and a new runway and terminal at Hurgadah. The Hurgadah project has yet to be tendered with an ITB planned for June, but the Borg el-Arab airport works are close to being finished by the contractor joint venture of Orascom and Belgium’s Besix. Echaan hopes the upgrades at Borg el-Arab will absorb traffic from the more central, but dilapidated, Al-Nozha airport and at the same time provide stimulus to the New Alexandria City housing project.
Echaan, along with the World Bank, is also tendering five, $560,000 aviation consultancy contracts. A request for proposal (RFP) will be issued for the first, an analysis of the fee and tax structure of Egypt’s air transport sector, at the end of May, and an award is expected by November. The RFP for the second contract, a review of the planning of Cairo airport area, will be issued in July, with an award scheduled for mid-December. The third is a review of the Civil Aviation Authority’s compliance with international aviation standards and a RFP will be issued in July for award in January 2011. The fourth contract, a review of Egypt’s air transport policy will be issued in August, with an award due by the end of January 2011. The RFP for the final consultancy contract is for an air traffic control and air traffic management development strategy, and will be issued in October, with an award expected in April 2011.
Other tenders expected later this year include four contracts for the third phase of Cairo’s metro Line 3. The first two phases are already under construction, with Orascom and France’s Alstom working on a 5.5km section, with five stations, and France’s Vinci Construction Grands Projets building on a 7.2km section, with four stations. The client, the National Authority for Tunnels, has split the remaining 27km into four contracts. The first of these, a 4km stretch from Attaba Station to Kit Kat Station with four underground stations, is expected to be tendered in July. France’s Systra is working on the designs.
Meanwhile, the Ministry of Housing, Utilities and Urban Development is four years into a six-year programme to build 85,000 housing units a year, using its $4.5bn budget. By the end of 2011, the ministry plans to have constructed an additional 500,000 low-cost homes, with an estimated 300,000 completed to date. However, this is still insufficient to meet demand, which is estimated at 300,000 units a year.
Private developers are helping by donating a proportion of their properties to the government for social housing in return for low-cost land parcels.
One of Egypt’s largest developers, Talaat Moustafa Group (TMG), through its own contractor Alexandria Construction Company, is currently building 120,000 units, forming the Madinaty development in New Cairo City. About 7 per cent of the units will be handed over to the housing ministry.
Looking ahead, contractors say they expect activity in housing and the wider construction sector to increase further as economic growth improves. There are signs that this has already started. In its first quarter update for 2010, Orascom reports accelerated local bidding activity, while developer TMG reported an 172 per cent increase in sales to $217m, compared to the first quarter of 2009.
The approval of the PPP law in July will act as a further catalyst for Egypt, ensuring its construction sector continues to offer a range of growth opportunities for contractors and consultants.