With 3,000 kilometers of shoreline on the Mediterranean and Red Sea, a canal that has witnessed up to 12% of global trade traverse it, and a location that connects Europe, Asia, and Africa, Egypt has all the makings of a regional trade hub.
However, the country is not capitalizing on its full potential. It ranked 84th out of 88 nations in the International Trade Barrier 2023 report published by the Tholos Foundation, a U.S. educational nonprofit. The World Bank’s Logistics Performance Index 2023 ranked Egypt 57th out of 138.
A report by the Information and Decision Support Center (IDSC) in September 2023 highlighted some factors that could enable Egypt to realize its full cross-border trade potential. At the core is the government’s “comprehensive strategy to transform the country into a center for international trade and logistics,” the IDSC said.
Local infrastructure
Last year, more than $105 billion worth of imported and exported goods moved through Egypt. According to the IDSC, the busiest local trade route was the Sokhna-Alexandria railway, which passes through several distribution hubs, including the 10th of Ramadan Dry Port, Greater Cairo Metropolitan Area (GCMA), and the industrial zone and dry port in Sixth October City.
Another busy route is the Arish-Taba railway, which connects “industrial areas in Sinai.” The IDSC said it is part of an under-construction rail line that will eventually connect Al-Ferdan and Bir Al-Abd with Arish.
In the Delta region, the main commercial railway links Tanta, Mansoura and Dammietta, passing through New Damietta’s dry port. The route mainly moves vegetables and fruits.
The Cairo-Alexandria logistics corridor passes through the dry ports of Sixth October City and 10 Ramadan City. Finally, there is the Gargoub-Salloum railway route.
The IDSC report said those major routes, as well as lesser-used ones, suffer from a lack of investment in trade-related facilities and services, making local transportation and logistics increasingly inefficient.
It calculated the financial cost of such inefficiencies at 20% of GDP, nearly double the global average. Meanwhile, low digitization means logistics and transport are still labor-intensive, “employing millions of workers, particularly those in informal work circles.”
Another problem is most local modes of commercial transport use fossil fuels (diesel, mazut, natural gas) that “contribute heavily to local air pollution and [are] considered the second-largest and fastest-growing source of carbon emissions,” the IDSC said. Also, rising fuel prices directly increase transportation costs.
Fixing transport
Revamping the local transport and logistics sectors started in 2014 with the announcement of a “comprehensive strategy [until 2030] to transform the country into a center for international trade and logistics,” the IDSC report said.
The first component of the strategy is developing infrastructure, including roads, railways, ports (sea, river and dry), logistics, warehouses, and transport and cargo equipment.
The plan is “to achieve several comprehensive developmental logistics corridors [rail and river] connecting several types of production areas (industrial, agriculture, mining, [and] services).” Those channels would link to “seaports through clean, speedy and safe modes of transport,” the report said.
Those infrastructure developments will mainly focus on Greater Cairo, “which accounts for about two-thirds of Egypt’s GDP and half the country’s jobs.” The second priority region is Upper Egypt, which “accounts for a significant percentage of the population and share of agricultural production,” the IDSC noted. Projects will mainly be “developing dry ports and logistics centers.”
The government’s strategy also includes capacity-building training courses focusing on developing better management skills and employee competencies, the IDSC said.
It will introduce regulatory reforms “for safe and punctual delivery goods at the right price, improvement of customs procedures, [digitization, and] effective administrative systems, etc.” The plan also includes “enhancing the role of the General Authority for Land and Dry Ports in managing and controlling all logistics activities.
The Ministry of Transport also will facilitate access by private sector companies, particularly SMEs, to provide services for the transportation and logistics sectors.
It aims to upgrade existing “second-generation ports” — receiving only incoming and outgoing goods — to “fourth- or fifth-generation ports,” the IDSC said. These ports integrate into supply chains and offer real-time data sharing and coordination with other parts of the network. Fifth-generation ports use artificial intelligence, incorporate eco-friendly technologies and are ultimately more digitally secure.
The strategy’s second target is to build more logistics centers and transport channels to ease overcrowding, as those facilities have “reached their designated capacity, which inflicts many losses on the state … because of the demurrages paid in hard currency to the shipping lines and ship owners.”
Hitting the targets
The strategy’s first phase, which concludes this year, focuses on “increasing the efficiency of [existing] ports and their hinterlands” through state-led investments, said the IDSC. That would be achieved by “developing transport networks, including roads, railways and inland water navigation. The goal is to ensure the smooth transport of people, raw materials and final products while amending the related legislation if necessary.”
The second short-term target is “increasing the capacity of the main Egyptian commercial ports by [improving] the work environment of the customs system, regulation and clearance.” The plan also targets simplifying navigation for arriving and departing freights and docking procedures, updating the equipment on berths and docks, and digitizing procedures.
The IDSC said the government’s focus until 2030 will be “sustainable and green infrastructure simulating international standards.” Achieving that requires “strategic partnerships with the best shipping lines and terminal operators willing to invest in Egypt’s logistics development plan.”
Another long-term target is merging “Egyptian logistics corridors … into the global supply chains. Eventually, this will create integrated logistics corridors connecting the production areas (industrial, agricultural, mining, services) with the seaports and dry ports.
International ties
Being a signatory on international trade agreements is vital. “Egypt’s accession to and endorsement of bilateral, trilateral and multinational agreements … give it a tremendous competitive advantage from an economic and trading perspective,” the IDSC said.
The report noted one important agreement is the Vienna Convention on Road Traffic, which Egypt signed in 1968. It “facilitates international road traffic [by] obligating signatory states to recognize the legality of vehicles from other signatory states.”
That agreement is the foundation of the roll-on, roll-off system (RoRo), where loaded trucks from one country can “roll off” the freight once it arrives at a transit destination and drive directly (without any stoppages or inspections) to another local seaport, where it “rolls on” another cargo transporter.
Ship Universe, a specialized publication, says RoRo’s advantages include “increased loading efficiency, lower labor costs, improved safety, enhanced cargo capacity and reduced environmental impact.”
The IDSC noted other important agreements, including the Customs Convention on the International Transport of Goods, which Egypt signed in 2020. It unifies procedures for dealing with broken customs seals and damaged products.
Other international trade-related agreements include the European Agreement concerning the Work of Crews of Vehicles Engaged in International Road Transport, the Agreement on the International Carriage of Perishable Foodstuffs and on Special Equipment to be Used for such Carriage, and alternatives for dispute resolution.
The IDSC sees the government “aiming to magnify competitiveness with neighboring ports.” That could increase domestic and foreign trade-related investments, ultimately “transforming Egypt into a global center for … trade and logistics, regionally.”
This article first appeared in September’s print edition of Business Monthly.
