Egypt's vantage geographical position enables its logistics market to thrive
Egypt's vantage geographical position enables its logistics market to thrive, says Frost and Sullivan
The Egyptian logistics market is in the growth phase. The government has been unleashing initiatives to make Egypt a global logistics hub and encouraging foreign investment in various sectors. Efforts are ongoing to facilitate business processes by reducing legal bottlenecks and red-tapism.
The built-in (established domestic) market provides a broad customer base and variety of opportunities for logistics service providers planning to start up in Egypt.
New analysis from Frost & Sullivan (www.automotive.frost.com), Strategic Analysis of the Logistics Market and Contract Logistics in Egypt, finds that the market revenues touched $17.04bn in 2010, and it is expected to grow at a Compound Annual Growth Rate (CAGR) of 12.7% between 2010 and 2015.
Egypt is located on a key international logistics route, with close proximity to regional and major export markets. It takes less than one week for ships leaving Egypt to reach the major ports of Europe and the Arab World. The Suez Canal, which is the world's most important transcontinental passage for ships moving between Asia Pacific, Africa and Europe, is located in (and owned by) Egypt. The growing export and import volumes in Egypt all bring in huge opportunities for logistics service providers (LSPs).
"The Suez Canal handles around 10 percent of the world's maritime trade, contributing to a significant share of Egypt's economy in the form of passage charges," says Frost & Sullivan Transportation and Logistics Program Manager Srinath Manda. "With the outlook for global trade becoming positive again, after recovery from the recent financial crisis, the Suez Canal's contribution to Egypt's logistics sector is likely to grow consistently."
However, transport infrastructure is a major issue in the country. The roads are narrow and of poor quality, network capacity is inadequate and the vehicles used are mostly outdated. The current road transport industry comprises approximately 743,000 trucks, most of which are not capable of carrying containers, thereby hampering port-hinterland container transport. These trucks have also been found unsuitable for carrying specific commodities, mainly agricultural products. Another aspect is the increase in the number of long trailer vehicles, which are not built to standard international specifications and jeopardize road safety.
The rail freight sector's network too is limited and undeveloped. Existing laws do not allow privatization of railway services and have provision only for the private sector to build new railway networks and housing and industrial communities around Cairo and other major cities such as Alexandria. Moreover, the railway network does not cover new important origin/ destination flow zones. The absence of direct links to dry ports and factories and storage terminals is another hindrance.
Port infrastructure is weak, and suffers from lack of maintenance of equipment; evidence points to inability to meet the requirements of shipping lines due to insufficient space and water depth to accommodate containers.