18 Sept 2019
Closer China-Egypt Ties See Deal Agreed for BRI-Backed Port Project
With mainland investment in Egypt now totalling some US$23.4 billion, a major new container terminal gets greenlit.
Early last month, the Egyptian government signed a Memorandum of Understanding (MoU) with Hutchison Ports – a subsidiary of CK Hutchison, the Hong Kong-listed port operator / developer – with regard to the construction of a container terminal at the port of Abu Qir on the country's Mediterranean coast. This, however, is just the most recent example of the increasingly close China-Egypt ties, with the relationship having blossomed since the launch of the Belt and Road Initiative (BRI) – China's ambitious international infrastructure development and trade facilitation programme – in 2013.
As a sign of the significance of this latest deal, Abdel-Fattah al-Sisi, the Egyptian President, attended the signing of the MoU, along with a number of other senior government officials and Eric Ip, the Group Managing Director of Hutchison Ports. Indeed, since Sisi took office in June 2014, the level of Chinese investment in Egypt has grown steadily, as has bilateral trade.
The Egyptian President has made six state visits to China and met with Xi Jinping, the Chinese President, seven times. During his first official visit, in December 2014, he signed 25 bilateral agreements, primarily related to energy and transport issues. Since then, he has formally pledged to co-operate on the implementation of the BRI and, during a September 2018 visit to Beijing, signed deals worth about US$18 billion with a number of Chinese companies with regard to a range of projects, including rail, real estate, energy and oil-refinery developments.
As a result, according to fDi Intelligence, the Financial Times' research division, as of late last year, cumulative Chinese foreign direct investment in Egypt was about $24.3 billion. A considerable proportion of this related to two high profile BRI-backed projects – the construction of the country's new administrative capital and the expansion of the Suez Canal Economic Zone.
In the case of the former, a $20 billion investment was announced by Shanghai-listed China Fortune Land Development, while the China State Construction Engineering Corporation has been contracted to build 20 towers in the new city, with Chinese banks expected to finance about 85% of the $13 billion of the towers' construction costs. The new city, which is yet to be officially named, is being developed on a 700 sq km site 45km east of Cairo and is expected to ultimately be home to about seven million people.
With regard to the latter project, the Suez Canal Economic Zone, Tianjin Economic-Technological Development Area Holdings committed to spending about $5 billion on expanding the facility. It is envisaged that, once completed, the zone will function as one of the region's primary logistics hubs and be fully integrated with a number of existing BRI projects.
Focusing back on the Abu Qir project, Hutchison Ports has considerable experience when it comes to running marine freight-handling terminals in Egypt. One of the giants of the global industry, it operates 51 ports in 27 jurisdictions and has an 11% share of the global marine cargo trade. In Egypt, it currently has overall responsibility for two ports – Alexandria and El Dekheila.
Alexandria is a large, 2,000-year-old historic port, which extends across 16 sq km and handles almost 60% of Egypt's foreign trade. At just 3.5 sq km, the nearby El Dekheila terminal is much smaller. Both ports, however, are on the Mediterranean Sea and will benefit from access to the proposed new Abu Qir terminal, which will be able to handle up to one million containers a year while also providing employment for about 1,500 local workers.
The key driver of port throughput growth, of course, is expanding trade – another area where China is taking a lead. In 2017, Egyptian container volume rose 20% year-on-year to 7.9 million TEUs. The following year, Egypt-China trade climbed 27.6% to $13.8 billion. Although Egyptian exports to China are dwarfed by its imports from the country, they have also enjoyed significant growth – rising 60% to $408 million in 2017 compared with $255 million in the previous year.
Geoff de Freitas, Special Correspondent, Cairo