17 - 23 May 2001
Issue No.534
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Al-Ahram Weekly On-line 17 - 23 May 2001 Issue No.534 |
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Pumping development
An ambitious plan has been announced for Egypt's petrochemicals industry, the eventual aim being to maximise the benefits that can be accrued from the domestic production of oil and natural gas. Egypt must, as President Mubarak told an extended cabinet meeting held this week, "realise aspirations within the [domestic economy's] limited means".
The plan intends to capitalise on Egypt's natural gas reserves -- 53 trillion cubic feet in proven reserves, 67 trillion cubic feet in projected reserves, according to Minister of Petroleum Sameh Fahmy. It seeks too, to build on the fact that Egypt possesses the basic foundations -- infrastructure, skills, the proximity to important international markets in Europe -- on which a world class petrochemicals industry might be erected.
Oil and gas are to be used, it seems, to fuel growth in domestic industry rather than be exported, i.e. they are to lend added value to the local economy. At the same time, the ambitious development plan, in the first of its projected nine phases, will generate an anticipated 100,000 jobs.
A new national body is to be established by presidential decree to oversee the implementation of the massive plan which envisages the establishing of at least nine major petrochemical complexes across the country. The initial complex, according to projections, will be completed within five years, at a projected cost of $1.3 billion. Its annual production 300,000 tons of propylene and 900, 000 tons of ethylene is expected to generate profits of $450 million.
The plan seems to indicate a growing recognition of Egypt's potential competitive edge within the petrochemicals sector, and suggests a hardening of political will to formulate a strategy that will allow natural gas resources to be exploited within the framework of overall development plans. As such, it marks a reversal of earlier strategies that sought simply to export reserves in one way or another.
For such an ambitious plan to succeed, however, and avoid the pitfalls that have dogged several previously announced mega-projects, strenuous attempts must be made to convince an understandably cynical public of the viability of the venture. Without convincing feasibility studies it will be almost impossible to generate the necessary investment to finance the project. And its success, in the end, will almost certainly depend on public subscription.
Feasibility studies for the first phase of the petrochemicals complex are expected to concentrate on matters of finance, on the ratio of foreign versus domestic investment and other thorny questions. The level of involvement of the banking sector, and the possibility of a bond issue, will also be examined. Generating the necessary domestic funding will obviously necessitate the formulation of strategies capable of encouraging local private sector involvement, and will also require measures capable of rebuilding confidence in the capital market.
The eventual success of the project will require, too, the imposition of complete transparency if the problems that have plagued projects such as Toshka and the Aswan Iron scheme are to be avoided. Unanswered questions as to the financing of the first, and the fog of corruption that has hovered over the second, effectively undermined public confidence.
In mobilising public support for its new project, which will naturally entail the involvement of several ministries, the cabinet should perhaps contract an international public relations agency, though the terms of the contract should ensure that whoever is contracted behaves in accordance with international accounting standards and operates without undue political interference.
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