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Egypt: Furore over railway privatisation

The government is seeking a partnership with the private sector in order to improve Egypt’s railways

Gamal Essam El-Din , Thursday 29 Jul 2021
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Minister of Transport Kamel Al-Wazir announced two weeks ago that the private sector would be involved in managing and operating some of Egypt’s national railway network’s activities.

He revealed that nine private Egyptian companies would be contracted to manage and operate Egypt’s railway system under a cooperation protocol signed with the Egyptian Railways Authority (ERA).

The protocol includes private-sector behemoths Orascom Construction, Al-Sewedy Electric, Samcrete, Arab Contractors, Concord Engineering, Hassan Allam Holding, Al-Gharably Group, Alkan Investments, and the Triangle Group.

Al-Wazir indicated that these companies will also be in charge of managing “modern means of transportation” in Egypt, including two monorail lines, fast track electric trains, a light-rail train system connecting Al-Salam city and 10 Ramadan city and the Sokhna and Alexandria ports, Alexandria’s Al-Raml tram system, the Abu Qir underground metro, and the new Bus Rapid Transit (BRT) system.

“Another eight companies will be set up to invest in managing and operating cargo and tourist trains, integrated services, maintaining passenger train carriages and locomotives, and upgrading railway track,” Al-Wazir said one week ago, explaining that a foreign or multinational company would manage trains imported from Spain, Russia, South Korea, and China.

“The ministry will also work in partnership with Iratrac, a unit of Egypt’s Mantrac Group, to upgrade and maintain the rail lines,” Al-Wazir said.

He indicated that the protocol also states that an international consultancy firm will be contracted to conduct research on the transfer of the operation of railway services from the ERA to the private sector.

He said he expected the partnership with the private sector to create a competitive environment that will lead to improving the train services offered to the public, preventing accidents, preserving the railway sector’s assets, and increasing profits.

The minister’s announcement came against the backdrop of a number of deadly train accidents that have hit the railway sector over the last two months, leaving dozens dead and injured. Al-Wazir came under fire in parliament, with many pressuring him to resign.

A number of opposition MPs have also voiced concerns in recent days that Al-Wazir’s privatisation drive will hurt millions of ordinary people who use trains every day. Diaaeddin Dawoud, a Nasserist MP, warned that Al-Wazir’s policy of privatising Egypt’s railways would lead to increases in ticket prices.

“Introducing higher-class and VIP trains will place them beyond the financial means of most ordinary Egyptians,” Dawoud said, asking Al-Wazir to increase the salaries of railway employees and improve their standards of living instead of leading the sector into private hands.

“I think that most railway employees are capable of managing the sector efficiently, and all they want is higher salaries and rewards,” Dawoud said.

Atef Meghawri, a leftist MP, warned in a statement against Al-Wazir’s recent move that “this is a very dangerous step because it will lead to liberalising the prices of train transport, ultimately making it very difficult for the majority of Egyptians to travel by train.” He added that “the private sector looks to make profits by its very nature, and this will come at the expense of the state’s obligation to support low-income citizens and provide essential services to them at reasonable prices.”

In response, Al-Wazir indicated that the move to privatisation was limited and did not mean that the ministry was about to start the large-scale privatisation of the railway sector in Egypt.

“This sector will remain fully owned by the state, and the government will be the one authorised to set ticket prices,” he said, adding that the price of tickets would remain affordable to most citizens.

He said that taxpayers would not bear the costs of modernising and upgrading the railway system, adding that the aim was to bring in revenues appropriate to maintaining the system at high standards and with excellent operations.

Privatisation was when private companies own the railway network, but this would not be the case under the ministry’s moves. “The mission of private-sector companies will be limited to managing and operating the railways to the highest possible standards and using the most up-to-date technology,” Al-Wazir said, also arguing that the government had had to raise ticket prices over the last few years in a bid to cover costs, “but the service as a whole is still largely subsidised.”

But Meghawri said that when Al-Wazir had delivered a statement before parliament in April, he had not said a word about privatisation but only about importing new passenger carriages and locomotives from different countries, particularly Spain and Russia.

He had said that the ministry would focus on introducing a modern signalling and communication system for the system’s operation, Meghawri said.

In his statement before parliament on 26 April, Al-Wazir said the government planned to spend LE225 billion ($15.5 billion) on railway projects until 2024.

“We plan to import a fleet of 110 modern locomotives from the US company General Electric, 1,300 air-conditioned passenger train carriages from the Russian company Transmash Holding, and six trains from the Spanish company Talgo,” Al-Wazir said.

He complained that some railway employees were combating the reforms. “I have repeatedly said that the introduction of the private sector is part of the necessary reforms, and for those who object to these, I say please go away,” Al-Wazir said, also complaining that some railway employees affiliated with the Muslim Brotherhood had been using social media “to cause problems and incite other employees to oppose any role for the private sector”.

Al-Wazir complained that there was a problem of negligence among some railway workers. “More worryingly, there is also drug use, and this is another reason prompting me to resort to the private sector,” Al-Wazir said.

He announced in a statement on 23 July that time would be needed for the modernisation of the railways to bear fruit. “We will need to install a modern signalling system and an integrated network of closed-circuit TV cameras in order to reach zero accidents, and in this respect we will largely depend on the private sector,” he said.

“The introduction of the private sector is in line with Article 32 of the constitution, which allows the private sector to operate public utilities for no more than 15 years,” he added.

Giving the private sector a role in Egypt’s railway system has been on the table since 2018, when the House of Representatives, the lower house of Egypt’s parliament, gave the green light to private investment in the railway sector.

The House approved amendments to Law 152/1980, which regulates the performance of the debt-laden ERA. They allow the ERA to invite private investors to build, manage, operate and maintain railway utilities by public tender and for no more than 15 years.

The amendments to Article 4 of the 1980 law also give the ERA the right to establish joint-venture companies whose shares can be traded on the stock market.

 *A version of this article appears in print in the 29 July, 2021 edition of Al-Ahram Weekly.

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