Environment & Water Sector in Egypt
Environment & Water Sector in Egypt
Egypt is a major trade destination strategically located at a crossroad between Europe, the Middle East, Africa and South Asia and has an area four times the size of the UK. It is a growing market with a multitude of opportunities for business for UK Companies. It is a very large market, with a population of nearly 85 million (source CIA Fact book, July 2013 estimates) of which 50% are under 25 years of age and size is expected to double in the next 25 years.
Egypt is the fourth largest economy in the Arab world after Saudi Arabia, and has a good business environment with regards to infrastructure, climate, costs, language and geographical location.
In May 2011, the UK government added Egypt to the list of top 20 key High Growth Markets in the new UKTI strategy.
On 25 January 2011, Egypt was rocked by an unprecedented popular uprising, which ultimately toppled President Hosni Mubarak, whose nearly 30-year rule was marked by political oppression, allegations of corruption and growing poverty. The Islamist Muslim Brotherhood won elections July 2012 but was ousted by popular mass protests and was backed by the army.
Late on 3rd July 2013 the head of the armed forces, General Abdul Fattah Al-Sisi, announced that the constitution had been suspended and that the Head of the Supreme Constitutional Court, Adly Mansour would oversee an interim period with a technocratic government until presidential and parliamentary elections are held. The new government of Prime Minister Hazem al-Beblawy was sworn in on Tuesday 16th of July, 2013 in front of interim President Adly Mansour.
Mr. Mansour issued a constitutional declaration outlining the different phases of the transitional period, starting by amending the 2012 constitution followed by parliamentary then presidential elections by 2014.
There will be a period of economic and political uncertainty until stability is restored. However, the fundamentals of the economy are still strong: a large population, a strategic geographical location, favourable demographics and a well-diversified economy.
Ernest & Young has placed Egypt as the second most attractive market in Africa for FDIs since 2003 in its annual report of promising markets with high potential for FDIs in Africa. Egypt is the focal point of around 10.5% of Africa’s FDI, given its unique geographical location & being a destination for sub-regional hubs.
For companies looking to invest in Egypt, now is a time for assessing, performing due diligence, and looking closely at market development in relation to your particular sector. The business to business trading relationship will be less affected by recent events and will continue, though instruments such as letters of credit will gain in importance as a higher risk profile is encountered in the market. Egypt will remain heavily import-dependent for the foreseeable future and Egypt-UK business relations are very healthy.
The UK is Egypt’s largest foreign investor based on cumulative FDI figures since 1970. Cumulative UK investments in Egypt are estimated at around $20 billion. There are over 900 UK invested businesses, including companies such as British Gas, BP, Shell, Vodafone, Barclays, HSBC, GSK, AstraZeneca and Unilever.
Egypt is signatory to many regional and international Free Trade agreements. These agreements give Egypt certain customs and access advantages to the surrounding markets, namely all Arab, EU, Mediterranean Sea and African countries. Egypt is also signatory to the main Intellectual Property Conventions (Rome, Paris, Berne & Washington).
The market for water, wastewater and environmental goods and services in Egypt is promising. Analysts expect it to increase by 40% in parallel with the improvement of the economy. There is real scope for introducing new technology and solutions in the water and environment sectors. There are various projects down the pipeline and the government is seeking private sector participation. Egyptian authorities are looking for the latest foreign technology but are unsighted on the latest UK developments & expertise.
The Egyptian Minister of State for Environmental Affairs has been implementing serious reforms with successful steps for abating all types of pollution, but these are still considered in its embryonic stage. Hence opportunities are numerous.
The Egyptian government is determined to tackle environmental issues such as water scarcity, declining water quality, land degradation, increasing air pollution, untreated urban and hazardous waste disposal, poorly protected cultural and natural heritage by reinforcing legal and institutional framework and increasing its budget expenditure on environmental projects.
Most of the government expenditure goes towards funding of environmental equipment, various environment programmes, capacity building and technical assistance to polluting industries. Funding also comes from international donors such as the World Bank, United Nations Development Programme, USA, EU, Japan, Germany, Denmark, Netherlands, and several other countries.
Egyptian regulations increasingly put pressure on businesses to comply with environmental laws. Businesses exporting to the EU, North America, and other developed regions, where compliance with environmental standards can constitute an explicit non-tariff barrier; is also urged to prove their compliance with international environmental standards.
Environmental Policy Formulation
The establishment of an Egyptian Environmental institutional and legal framework was implemented in 1994, with the issuance of the Environment Protection Law 4/1994. The Law established the Egyptian Environment Affairs Agency (EEAA) followed by Ministry of State for Environmental Affairs (MSEA) in 1997. EEAA is the Ministry’s executive arm and main governmental regulatory body.
Environmental Protection Fund (EPF)
EPF was established in 1995, with the objective “to stimulate environmental investments and support the environmental, social and economic policies in the pursuit of sustainable development”. EPF assists polluting enterprises to reduce pollution by providing them information, resources and financial incentives. EPF funding mechanism was designed and tested in the World Bank’s Egypt Pollution Abatement Project I (EPAP I) (1998-2005).
The environmental legislation framework in Egypt constitutes of numerous sectoral laws. The main laws are as follows:
Law 93/1962 regulates wastewater discharge to public sewage systems
Law 48/1982, protecting all surface waters and groundwater
Law 4/1994 (environment law) established the Egyptian Environmental Affairs Agency (EEAA) and created an intricate web of standards and monitoring, record-keeping, and enforcement mechanisms with respect to air pollution, hazardous and solid waste management, and environmental impact assessments (EIAs).
Law 9/2009, an update to the prominent Law 4 of 1994.
Egypt has benefited from various aid programmes from international donors such as the World Bank, Kreditanstalt fur Weideraufbau (KFW), Danish Int’l Development Agency (DANIDA), European Investment Bank (EIB), Canadian Int’l Development Agency (CIDA), United States Agency for Int’l Development (USAID), and the governments of Germany and Japan.
These donors’ programs helped the Egyptian Government establish several instruments to reduce pollution, create public awareness about environmental implementations, provide expertise for assessing and addressing different environmental problems. Most schemes focused on the energy and industrial sectors due to the fact that they emit pollutants with the highest health damage effect, reduction of pollution and waste, increasing energy efficiency and minimising environmental damage.
To achieve these results, the government of Egypt still needs to exert more effort in the enforcement of environmental laws.
Water & Wastewater Sector:
The water and wastewater sector is very large and growing rapidly. The Egyptian government has allocated funding to upgrade/build modern irrigation systems and improve the infrastructure in order to enhance water and sanitation coverage throughout the country.
The current economic and social development five-year plan focuses on infrastructure projects, including water and sanitation projects. The total number of projects in the 5-year plan (2007-2012) is 31 water and 40 wastewater projects.
Daily production of potable water in Egypt is now 21 million cubic meters with daily losses due to leakage from the network or to unauthorised access ranging 30%-40%. An increase of 40% in the amount of clean water produced daily is essential.
The main aim for the Egyptian Government is to raise production capacity from 20 million cubic metres per day to 28 million cubic metres per day. It costs about 80 piaster to produce a litre of clean water and each litre is provided to the citizen at no more than 40% of its actual cost.
The government’s target is to achieve 100% water coverage by the year 2017 and 100% wastewater coverage by 2022 as well as upgrade the capacity, service standards and cost recovery of operation & maintenance services.
Total investment is expected to be LE 65 billion which will be financed by the government, private sector, and foreign sources. The aim is to provide water and sanitation services to 217 cities and 4600 villages in Egypt. This target means increasing potable water production to 28 million m3/day, and wastewater treatment to 16m3/day.
Egypt needs to invest LE 80 billion over the next 10 years to complete its sanitary drainage sector. Chairman of the Holding Co. for Potable Water & Sanitary Drainage, announced that the service currently covers only 55% of the governorates requirements.
The key issue for the authorities is the selection of technologies, which saves on land & energy and maximises local manufacture component.
In order to attract more private investment, the government established the Egyptian Water Regulatory Agency (EWRA) to supervise water and wastewater provision, and the Holding Company for Water and Wastewater (HCWW) to provide water and sanitation services in a more streamlined structure.
HCWW awarded contracts for the operation and maintenance of 19 potable water and sanitary drainage stations in both Sharkiya and Gharbiya Governorates. Contracts include 14 stations in Sharkiya Governorate and 5 stations in Gharbiya Governorate.
Another issue is the future operation and maintenance of such facilities upon completion. Recent developments in Egypt are also concerned with private participation processes. Egypt is engaged in several mega projects like Toshka, North Sinai and South Valley.
Recently, Egypt launched its first public-private partnership (PPP) project in the New Cairo Wastewater Treatment Project.
Egyptian authorities are now looking for foreign companies to introduce new technology in this sector. International firms are monitoring these developments, so as not to miss out on what appears to be a highly promising area for investment.
Various projects will be announced shortly and the Government will seek private sector participation in operating, maintenance, replacement of plants & networks in different provinces, and in connecting houses with networks.
Egypt financed most components of projects through grants and loans provided by foreign countries as UK, USA, Italy, Canada, Holland and France. This trend is likely to continue until other means of finance for projects is developed.
The water and wastewater sector receives several financial aids and loans from the World Bank, the EU and different countries as support in order to implement their projects. Donor countries include the Italy, USA, Japan, Spain, Germany, Netherlands, France and Denmark.
There are opportunities for UK companies in the Egyptian environment, water and wastewater sector in the following areas:
Main equipment & services needed in the environmental sector:
Design and construction of sanitary landfills
Solid Waste Management, Equipment and Operation
Composting Programs for agricultural waste
Recycling plants, equipment & relevant training.
Hazardous waste treatment technologies and incinerators
New and renewable energy technology and equipment especially solar energy and wind farms.
Industrial Filters and air pollution equipment
Emission measuring instruments especially for vehicle exhaust.
Recycling technology for industrial waste
Kits For Converting Motor Vehicles to Use Natural Gas
Equipment and Filters to reduce pollution from power plants and particle emissions from cement factory smokestacks
Industrial wastewater treatment plants and equipment.
Marine pollution removal equipment and consultancy
Education and training in new agriculture technologies to address the use of fertilisers and pesticides.
Coastal protection equip, consultancies to prevent shoreline erosion
Education and training in protecting water rivers, canals, coasts and preventing shoreline erosion.
Clean Development Mechanism (CDM) Projects under the Kyoto agreement
Water and Wastewater opportunities:
Opportunities for UK companies in the water and wastewater sector in Egypt are broad, covering every area of expertise from technology and equipment supply to consulting and project management.
Potential areas include:
Water and wastewater treatment plants
Equipment for filtration and purification
Equipment for leak detection
Coastal protection equipment
Chemicals and sludge treatment
Desalination and irrigation systems
Irrigation systems and infrastructure
Know-how to produce electromechanical parts
Pumps and valves
Education and vocational training in operation, maintenance and water resource management
Cooling towers for water
Education and training in protecting Water Rivers, canals
The Egyptian government is studying a Feed-In Law and Feed-In Tariff to prepare for private investment for the first time in this sector. These regulations will shortly be raised with legislative authorities. Some specialists expect the law to be issued in one year’s time.
There is real scope for UK companies but they need to invest in research and cultivating relationships now. Egyptian authorities are looking for the latest foreign technology but are unsighted on the latest development.
International firms should consider looking at Egypt, so they do not miss out on what appears to be a highly promising avenue for investment.
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Getting into the market
Egypt is an attractive market that can offer major business opportunities to informed traders and investors. Trade and investment between the UK and Egypt is promising. However it is not always an easy market. A successful entry into Egypt will be determined by the quality of the information and advice upon which the decision to enter is based. Continued success is also dependent upon the ability to navigate the laws and practices in Egypt.
The Egyptian market requires careful study and a sustained sales effort. There is strong competition from other exporting countries. Price and credit terms are a deciding factor when obtaining contracts, though quality is increasingly important. Back-up servicing facilities and the supply of spare parts is also important.
Having a local partner can be vital to successful penetration of this market. There are several reasons for this. Firstly, given the continuing bureaucracy, a local partner can shepherd the foreign business through the delays and obstacles. Secondly, foreign companies require a local agent to bid for government tenders. Thirdly, as the Egyptian market becomes more sophisticated there is a growing demand for after sales service, which a local agent can convincingly provide.
In general, British products and services are very highly regarded in Egypt for their quality. The main obstacle facing the growth of British involvement in the Egyptian market is that British products have a reputation as being expensive compared to some foreign products, though this has lessened slightly over the past year as exchange rate fluctuations have been in favour of UK exporters.
British companies wishing to develop their business in the Egyptian market are advised to undertake as much market research and planning as possible in the UK.
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists in country – or contact your local international trade team.
Yasmin Montasser, British Embassy Cairo. Tel: (00202) 2791 6125 or email: email@example.com
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.
AQUATHERM 2013 (Dates TBC)
The BIG Four 2013 (Dates TBC)