Al-Ahram Weekly Online   3 - 9 August 2006
Issue No. 806
Economy
 
Published in Cairo by AL-AHRAM established in 1875

Privatisation on track

Before adjourning for summer recess, the People's Assembly approved a law giving the government the green light to privatise Egyptian rail. Gamal Essam El-Din inspects the decision

Plans to overhaul Egypt's 152-year-old railway network were given a jump start recently when the government surprised members of parliament on 11 July with a new law proposing to privatise railway services. According to its explanatory note, the law grants private investors certain concessions to build new and expensive railway tracks, particularly those planned for new housing communities around greater Cairo.

According to Article 2 of Law 152 of 1980 regulating the performance of the Egyptian Railway Authority (ERA), the building of new railway tracks should come through competitive and transparent bidding among private investors. Also, the concession granted to any of the selected private investors should by no means exceed a maximum of 99 years. The law continues, that upon the recommendation of the transport minister the government will be entrusted with laying down the mechanisms of pricing and maintaining the services f the new railway tracks.

According to Transport Minister Mohamed Lutfi Mansour, the law does not allow the privatisation of the existing railway services, but rather is concerned with a new network. "This law is primarily concerned with giving the private sector the privilege of building railway networks in new housing and industrial communities around Cairo and other major cities like Alexandria," explained Mansour to MPs. He argued that the cost of building new railway tracks in new industrial communities such as 10th of Ramadan, 6th of October and Borg Al-Arab is too high for the government to afford. "The building of a one-kilometre of railway track now costs more than LE5 million, while the cost of building an integrated network of railway tracks in the new housing communities could cost more than LE8.5 billion," argued Mansour. "This figure is beyond the financial capacity of the government."

Alerting the attention of MPs to the importance of the new law, Mansour also indicated that Egypt boasts a wide-scale railway network of 5,000 kilometres which is now "in dire and constant need for maintenance." ERA also possesses 700 locomotives, 335 of which are either partially or entirely dysfunctional, and 3,000 passenger coaches in "a very dilapidated condition and in urgent need for refurbishment," according to Mansour. All of these worrisome facts, noted the minister of transport, require the government to share the financial burden of improving railway services.

Mansour's stress on the distressing condition of railway services, however, did not strike a chord with leftist and Muslim Brotherhood MPs. In their fiery opposition, these MPs argued that the law is the first step towards privatising Egyptian rail. According to Mustafa Bakri, a leftist firebrand, the appointment of Mansour as transport minister in Prime Minister Ahmed Nazif's government was clearly aimed at privatising ERA gradually. "While the first step is privatising new railway tracks, the second one will automatically include privatising the existing tracks at the expense of the poor and limited- income citizens," stated Bakri. He told Al-Ahram Weekly that the inclusion of many business tycoons such as Mansour in Nazif's government was a clear signal that this government is determined on moving the privatisation programmes forward by leaps and bounds. Mansour, a former president of the American Chamber of Cairo, had long been a major agent of American transport companies.

In their initial debate of the law, the MPs of the ruling National Democratic Party (NDP) surprised the government by joining forces with the opposition. NDP spokesman Abdel-Ahad Gamaleddin said the law is very serious "because the privatisation of railway services could be very bad for poor and limited- income people." According to Gamaleddin, railway services receive an annual state subsidy of LE1.4 million and that privatisation could "unleash the prices of these services to astronomical levels." Kamal El-Shazli, a veteran NDP deputy and a former minister for parliamentary affairs, said rather than privatising its railway services, ERA has the option of selling its large number of assets and lands throughout Egypt.

Gamaleddin in fact proposed that the discussion of the law before the assembly be postponed until the next session, but the suggestion was met with vehement anger from NDP's secretary for organisational affairs Ahmed Ezz. Ezz, a steel and iron magnate and chairman of parliament's budget committee, stressed that Gamaleddin's proposal is a big mistake "because the law extends an urgent helping hand to ERA, and enables the government to implement its ambitious programmes in new housing communities." Ezz told MPs that ERA losses in 2005 hit a staggering LE1.8 billion, and that the draft law was "the first step towards reforming ERA and relieving it of its tremendous debts and losses." Ezz also revealed that the law would enable the government to receive $500 million in loans from the World Bank to restructure ERA as a whole, and put it on a sound financial track.

On the initiative of parliament speaker Fathi Sorour, the law came under further discussion in the transport committee. NDP MPs insisted that the law be amended to state that privatisation of railway services will be confined to new housing communities, while opposition MPs insisted that the selection of private railway investors be through competitive and transparent bidding. MPs of all political colours agreed that the cabinet should have a say in setting the prices of private railway services in new communities. Only after meeting these amendments, the law was overwhelmingly approved by MPs on 12 July. Sorour said the law, like many previous ones that gave the private sector a role in building airports, seaports and electricity stations, will help in getting ERA out of the gutter.

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