Moody’s raised its rating of Egypt’s economic outlook from “negative” to “stable” in October 2014. In May 2015, Standard & Poor’s upgraded its outlook for the country from “stable” to “positive.” During the first nine months of the 2014-15 fiscal year, Egypt’s economy achieved a growth rate of 4.7%, compared with 1.6% during the same period the preceding year, according to reports from the Ministry of Planning. The Egyptian government expects to attract foreign investments ranging from USD8 billion to USD10 billion by the end of the current fiscal year, which ends in June 2016.
The Egyptian Railway is one of the largest railway markets in the Middle East and Africa, with a railway network that is almost as old as that of Great Britain. Due to lack of investment and appropriate maintenance, the Railway finds itself in a difficult situation lately. A number of serious challenges have already started to be tackled in order for this strategic sector to reach its full potential, and the network already started a Transformation Program.
The Railways Network has a length of approximately 5,000km, a third of the lines are double track, while the majority of the network is being operated through single track. The fleet is composed of 597 passenger locomotives, 224 freight locomotives, 3,738 passenger coaches and 11,613 freight cars. Rolling Stock reliability has increased during the last years, but is still under benchmark ratios.
“The overall fiscal impact of the organisation of the railways sector is significant. Without fundamental reform, the public burden of operating the Egyptian Railways is estimated to remain at least at the level of recent historical averages—between 0.10 and 0.50 percent of public expenditures (and 0.10 and 0.30 percent of GDP), if only operating deficits are considered”, a report of the World Bank says.
“Restructuring the relationship between the Government and ENR is a main element of any reform. Restructuring financial relations between the Government and the railways sector is a key element in any restructuring scenario”, the same report states.
Restructuring the railways sector is a far-reaching exercise that implies a new perception of the role of the railway by decision makers and by the public. As part of the overall restructuring program, investments should be financed that upgrade the fixed infrastructure, as well as rolling stock—but under the new principles of the railways sector: a clear distinction between Public Service Obligation (PSO) and commercial operations, and a clearer view of what the public sector should finance.
The Egyptian National Railways has received financing from the World Bank toward the cost of the “Consultancy Services for advisory services – Definition of the Strategy for the Reform of the Railway Sector in Egypt”.
The Egyptian National Railways now invites eligible consulting firms (“Consultants”) to indicate their interest in providing the services.
The objective of the Technical Assistance is to assist the Government of Egypt and the chairman of Egyptian Railways to define the strategy (goals, components, costs, roadmap of implementation) for the comprehensive reform of the railway sector. To pilot the reform process, the Government of Egypt is establishing a High Level Working Group (HLWG) for Railway Sector Reform including representatives of the Ministry of Transports, the Ministry of Finance and the Egyptian Railways. The consultant will support the HLWG and provide advice and supporting analysis to allow the HLWG to develop and endorse the strategy, the most important output being a “Railways Reform Policy Note” to be sent by the Government to the World Bank.
The main targets to be addressed by the strategy for railway restructuring are:
*Liberalisation of the market for railway transport services and increasing of competition at the relevant market;
*Increasing of the competitive power of the railway transport sector in relation with other modes of transport;
*Predictability of the amount of financial obligations of the Government regarding the railway transport;
*Enhance significantly the operational performance (more efficient management and better work organisation), and financial indicators of the railway company(ies);
*Transport modernisation in accordance with the market needs and the levels of investments affordable for the government;
*Stable and friendly legal and institutional framework for encouraging the private investments and PPP’s in the railway transport sector
The project implementation period is about 8 months and is expected to start early 2016.
Plans for rolling stock purchase (up to 2022)
* Passenger transport – long distance: there are plans to buy 20 power coaches, 212 air conditioned coaches, 20 complete high capacity trainsets and 50 sleeping coaches for passenger long distance. Additional 390 new coaches are planned to increase the offer per train (composition from 11 to 13 coaches)
* Passenger transport – short distance: 336 new coaches for regional services, 20 high capacity trainsets for urban and suburban services, and 700 new coaches to complete the fleet renewal.
* Rail freight transport: investment is planned to acquire 250 wagons for clay, 150 open high side wagons, 50 tankers wagons, and 250 flat wagons. In a second phase, the plan is to accquire other 752 wagons.
* Locomotives: it is planned to start the fleet renovation in 2020.
Better railway connections
The Egyptian Ministry of Transport announced that it could launch an initial public offering to finance the construction of a high-speed railway. With total investments estimated at EGP 70 billion (EUR 7.6 billion), the high-speed railway could be built in three phases and will connect the cities of Alexandria and Aswan crossing Cairo, Assiut and Luxor.
The first phase of the project includes the construction of the line connecting Cairo to Alexandria. This section could have the capacity to carry 10 up to 18 million passengers per year. The estimated duration of works is three years and the section could become operational in 2017.
In accordance with these plans, the Egyptian Railways will tender contracts to improve the railway transport services between Egypt’s capital, Cairo, and Alexandria. Tendering for the new contract is expected to begin in the Q 4 of 2015.
Egyptian National Railways intends using the proceeds of a loan from the European Bank for Reconstruction and Development for a project to improve the quality of train services between Cairo and Alexandria and potentially also between Cairo and Aswan by providing new, energy-efficient rolling stock to replace the existing ageing fleet.
The proposed project, which has a total estimated cost of EUR 126 million, will require the procurement of the new train sets (locomotives plus carriages) and incidental services (supply and maintenance contract).
The second phase of the project consists in the development of works for the construction of the Cairo-Luxor line. It could have the capacity of carrying 25 up to 30 million passengers per year. Works to this phase could take eight years. Phase three includes the railway connection of Luxor and Aswan and the execution duration of works could be of five years. The annual transport capacity of passengers was estimated at 25-30 Million.
Consequently, the high-speed railway could connect five of Egypt’s provinces, linking the north coast to the far south. The main objectives representing the foundation of the railway project initiation refer to attracting investments and developing tourism.
Moreover, Egypt’s Ministry of Transport also plans to build another railway to pass through the Red Sea coast resorts.
by Elena Ilie
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