Lease of life for petrochemicals in Egypt

11 October 2012

Eighteen months into post-Mubarak Egypt and the petrochemicals sector is set for an influx of funding

The crossing of the Suez Canal by Egyptian forces six years after their humiliating rout by Israel in 1973 was a vindication for President Anwar Saadat. His successor Hosni Mubarak described the attempted liberation of Sinai as breathing new life into Egypt.

Almost four decades on, the date also marks the first 100 days in office for Mohamed Mursi, Egypt’s first democratically elected president. The revolution in 2011 has been another breath of air, prompting an outpouring of debate on every issue from the role of religion to job creation.

By almost every macroeconomic measure, the past 30 years under Mubarak have been a disaster for most of Egypt’s industrial sectors, from manufacturing to petrochemicals. One of the most basic is the Lewis Curve, which measures years of industrialisation against GDP. After pushing ahead with steel production, Egypt is now well below that curve.

Egypt’s steel industry was born in the 1960s, at a time of incredible change in the Middle East as the Arab nations confronted Israel. Steel had immediate applications as a show of strength. The choice of steel over petrochemicals as the catalyst for industrial growth arguably set the country on a different industrial path.

Many in Egypt have looked east for inspiration, particularly at South Korea, which has become a model for the rapid industrialisation of a nation. The common feature in developing Asian economies has been early investment in petrochemicals, which have fuelled innovation.

Egypt’s petrochemicals and chemicals sector looks set for a boost, which could push Egypt down the long-delayed path to industrialisation. Two new projects have received international financing, just 18 months after the fall of Hosni Mubarak, a sign of the country’s potential.

Attempts were made by the former regime, but failed to match up to its ambitions. With growing interest from international investors, and a more vigorous approach to projects, Mursi’s new government will have a much better chance of success. 

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