Wednesday,24 October, 2018
Current issue | Issue 1412, (4 - 10 October 2018)
Wednesday,24 October, 2018
Issue 1412, (4 - 10 October 2018)

Ahram Weekly

Developing Port Said

Changes are afoot in the Suez Canal city of Port Said, with the city’s traditional commercial character giving way to an increasing emphasis on tourism and industry, writes Sara Mohamed

Developing Port Said

The Suez Canal city of Port Said has long stood as a witness to heroic periods in modern Egyptian history, from the 1956 Tripartite Aggression to the 1973 October War, as a result of which is has been dubbed the “Valiant City”. Visitors walk down the jetty in Port Said to pay their respects to Ferdinand de Lesseps, the 19th-century builder of the Suez Canal, and standing at the base of his statue they can gaze towards the horizon at the long lines of ships travelling to and from the Suez Canal.

At the beginning of the jetty, they can also board the ferry that takes them to the eastern shore of the canal, where the city of Port Said sits composedly with its stately 19th-century European buildings. One of the city’s blue-and-white taxis will take them on a tour of the markets for LE6 to LE10, and the city has also become a famed destination for Egyptians on the lookout for products at cheaper prices than in their home towns.

Today, Port Said is a city that is brimming with markets, with thousands of goods on display everywhere from the main streets to narrow back alleyways with their merchants waiting to welcome customers. Especially in the city’s European quarter there are historic buildings with decorated faҫades transporting visitors back to over a century ago and giving a whiff of an earlier time and spirit.

The buildings display the architectural heritage of diverse cultures, and they reflect French, Italian and English architectural styles. However, in spite of the heritage value of Port Said’s old wooden houses these are gradually being demolished after having been left unmaintained for decades. This is taking place even as this marketing hub is making the shift from trade to industry and tourism.

Amr Shiha, chairman of the Young Businessmen’s Association in Port Said, is responsible for the city’s 58 Factories Project that aims to turn small merchants into manufacturers.

“Port Said really began to shift from its dependence on commerce to industry and tourism following the success of the 58 Factories Project,” he said. “The idea took off in 2016 when 1,400 young people from the Port Said governorate applied to take part and establish their own factories in the framework of the promotion of small and medium-sized enterprises (SMEs). About 840 young people were interviewed. The governorate selected 128, who were given the chance to run factories as joint projects.”

To qualify, candidates had to be natives of Port Said between the ages of 21 and 45, and they had to have a background in the one or more of the Project’s manufacturing fields, including readymade clothes, leather goods, cardboard manufacture, and plastics. They also had to have at least some of the financial capacity to establish a project.

“The government handed the factories to us in March 2017,” Shiha continued. “The participants in the project included young traders who had decided to get into manufacturing. There are factories that are already exporting their products, such as readymade jeans, to Germany, Turkey and the US. This experiment has also created jobs. Some products are destined for the domestic market from Alexandria to Aswan, and the factories have also taken part in trade fairs in Port Said and Cairo where they displayed their products at cost price,” he said.

The participants had benefited from a “five per cent initiative” the government had introduced to encourage SMEs, he said. Each of the factories came with a five-year lease that the participants have committed to renew for another five-year period. Built on sites averaging 180 square metres, the factories were constructed and made ready for use using up to LE3 million worth of construction materials and equipment. The young entrepreneurs have a common aim, which is to serve their country by manufacturing high-quality products that can match imported counterparts for the average Egyptian.

The 58 Factories Project, which has no fewer than 20 employees per factory, has generated around 1,200 job opportunities. The approximately LE25 million construction costs were footed by the Port Said Free Zone.

“The main problems the manufacturers face are the high costs of raw materials and the high cost of obtaining a manufacturing licence and a manufacturing registration number,” Shiha said, adding that he had appealed to the Ministry of Trade and Industry to help the owners of SMEs to market their products abroad.

At the same time, he proposed repeating the 58 Factories Project on a larger scale with 500 factories on 200 square metre sites. This would be another step towards transforming the merchants of Port Said from being traders to manufacturers and generating more jobs for Port Said residents.


Developing Port Said

ENHANCING TOURIST PROSPECTS: According to Mohamed Duya, an expert on the tourist industry and tourism development in the Port Said governorate, the Port Said Beach Development Project was first proposed in 2011, but conditions in the country at the time were unfavourable.

However, it was set into motion several years later after Adel Al-Ghadban became governor of Port Said. Work began in late 2015 and was completed the following year.

The development plans included unifying the styles of beach furniture and constructing wooden pergolas that match the maritime atmosphere. Two years ago, facilities were introduced for aquatic sports such as windsurfing and sailing. The beach area was divided into plots measuring 50 to 300 square metres, which were made available to young entrepreneurs as well as existing operators. Those selected to obtain a plot would pay the costs for constructing beach facilities, introducing water, electricity and wastewater linkups. The rent for these, paid to the governorate, ranges from LE50,000 to LE60,000. Each beach project employees 40 to 50 workers.

Extending 3.5km from the Sharq district of the city to the Gamil customs point at the beginning of the road to Damietta, project beaches are interspersed with those belonging to the Armed Forces and the police.

“In order to attract people during the winter season, we’re equipping the cafés overlooking the sea with windbreakers and large outdoor heaters,” Duya said, adding that the number of visitors to Port Said has increased significantly since the completion of the project. The majority come from Alexandria, Mansoura, Cairo, Damietta and Ismailia, and Duya said he hoped hotel rooms, chalets or beach cabins could be made available on a rent-by-the-day basis in summer because of the growing popularity of the beaches.

Noting that workers on the newly discovered oil and gas fields in the area now occupy more than 50 per cent of hotel rooms in Port Said, he said it could be a good idea if the oil firms built their own housing for their employees outside the governorate cordon to free up hotel space for visitors.

Duya feels that even if trade forms the backbone of Port Said’s economy, this should not keep the city from becoming a tourist hub. Six months ago, the governorate launched a drive to turn Port Said into a major tourist destination. Projects include Tower Bay, which will add 500 new hotel rooms, and Porto Said, which will add another 400 rooms over the next three years. Duya also recommended reviving the idea of creating a world-class yachting marina on the Mediterranean near the juncture with the Suez Canal.

“A decade from now, Port Said will have become the largest logistics centre in the Middle East,” he said. “After the completion of the Eastern Canal Zone projects, the construction of the container berths and the creation of the new industrial zones and storage yards, Port Said will be the largest warehouse facility in the world.”

“It will attract major economic powers as an alternative to Dubai that currently serves as an assembly area for East Asian industries. Port Said will win the lion’s share of the logistics services used by international manufacturing firms as it can offer freight services on large freighters reducing shipping costs,” he said.


Developing Port Said

NEGLECTED CLOTHING SECTOR: Mohamed Al-Ashri, who owns a freight firm in Turkey, said that many businesspeople in Port Said had begun to shift from trade to other fields like construction after the slump in commerce in the city.

The city’s clothing sector had been particularly hard hit, he said, and Port Said had begun to turn from a consumer to a production-oriented city.

Al-Ashri, who at the time of the slump decided to close his shipping firm in Port Said and move to Turkey where he founded a similar firm in 2013, said that “traders in Port Said used to make decent profits, but they failed to keep pace with trends on the ground, namely the emerging factories and the move by some towards industry.”

His own freight business in Turkey is an indicator of the decline in the clothing sector in Port Said. “In the past, I would ship over three containers of clothes a week. Now, it’s a container every two weeks,” he said. One of the main reasons for this decline had been government regulations introduced in March 2016 requiring all factories to be officially registered with the General Organisation for Export and Import Control (GOEIC), he said.

“The factories are registered and have had all their paperwork done. But they have not yet obtained accreditation with the GOEIC so that they can import. Plus, there are a number of restrictions that the government has imposed on imports in the clothing sector,” he added.

“Many clothes containers have entered Egypt via Port Said through the Free Zone and then been smuggled to places outside the city, especially those coming in through the Qantara area. Before the decree introducing restrictions on imports [in the clothing sector], the government charged import taxes of some LE400,000 on containers that left Port Said. After the decree, a portion of this amount was paid in the Free Zone and another portion was used by merchants to have the containers smuggled out of Port Said.”

In general, the commercial sector in Port Said has been moving from bad to worse, or, as Al-Eshri put it, “purchasing power in Port Said has eroded.” This is why the governorate needs to shift from a consumerist to a productive footing and encourage industry, he added.

Towards this end, and also to stimulate trade, Al-Ashri believes that the government should abolish import tariffs on production materials, as is done in Turkey. In addition, workers in the clothing sector should receive professional training in sewing and finishing. He also recommended the creation of a body specialising in fashion and the latest designer lines, incentives to encourage SMEs to complement one another, and efforts to regulate the market.

In general, Al-Ashri welcomed recently introduced measures to combat corruption in the customs sector and to regulate import activities. “They will serve the national interest in the long run,” he said, adding that “it was previously impossible for any official to take such decisions.”

For Youssef Al-Azzam, a member of the board of directors of the Port Said Chamber of Commerce, “commerce in Port Said is virtually non-existent.” There has been a proliferation of customs outlets outside Port Said, in Ain Sokhna and Alexandria, for example, in view of the smuggling that has helped reduce the prices of goods in these areas. The result is that import revenues in Port Said have sunk to only LE160 million. Customs officials should tighten up inspections on customs outlets, Al-Azzam said.

“At the outset, the Free Zone in Port Said encouraged the growth of manufacturing industries in Egypt. It was the kernel for new factories launched in the 6 October and 10 Ramadan Industrial Zones. Products manufactured in Port Said were also exported abroad,” he added.

The government should exempt these factories from taxes and reduce the costs of other operating expenses such as water and electricity, Al-Azzam said. It should also should offer incentives to SMEs involved in manufacturing and activate its “one-stop window” to simplify financial transactions, he added.

“The unemployment rate is high in Port Said due to the stagnation in trade,” he said. “But there are many new fields opening up that will create jobs, such as the processing industries, the oil and gas fields and the East Suez projects.” At that same time, he underscored the need to equip young people to take part in such projects through relevant training programmes.

In Port Said, which has at least 20 major markets and a population of 757,077 according to figures from the Central Agency for Public Mobilisation and Statistics (CAPMAS), average purchasing power is still weak, according to Al-Azzam. The city’s Chamber of Commerce is working to stimulate commerce in the markets it organises, in which prices are 20 to 30 per cent lower than in other markets. 

 

TWO-THOUSAND HOTEL ROOMS: Ali Gabr, vice-chairman of the board of the Style Hotel Management Company in Port Said, said that there were around 2,000 rooms in the hotels and tourist villages in the area and that occupancy rates in the summer were up to 100 per cent.

However, there are only a handful of five-star hotels and only four tourist villages operated by the governorate (Fairouz, Nawras Paradise, Kenary and Karaouan). Port Said also lacked important tourist draws such as an aqua-park, cinemas, attractions and shopping malls, Gabr said.

One of the most promising projects developing Port Said’s tourist potential is Style Square, a sports and entertainment complex located on the beach. It is equipped with two gyms, a swimming pool, three squash courts, children’s playgrounds and a football pitch, and it organises water games, fireworks displays, foam parties and concerts featuring musicians and performers from Port Said.

“It’s hard to engage very famous performers from outside the area because they cost too much,” he noted. Other major tourist projects are also emerging in Port Said. Perhaps the most important is the Porto Said tourist village being constructed on a 90-acre plot in the governorate by the Amer Group. More than LE3 billion have been invested in this project.

According to Badri Farghali, a former MP for the city, Port Said’s economic life is primarily based on maritime services and trade. It was a governorate dedicated to trade and industrial activities and would never alter its intrinsic commercial character, he said. After all, more than 100,000 families in the governorate are engaged in trade.

Unfortunately, there are problems, the most pressing being the economic stagnation due to the decline in visitors to Port Said because, as Farghali pointed out, “imported goods are now available everywhere in Egypt, whereas they used to be a strong point of Port Said. People came from everywhere in the country to buy domestic goods at low prices. The abolition of the free-zone status also began to affect trade years ago, as did the freer importation.”

Like others interviewed by Al-Ahram Weekly, Farghali remarked on how the recession in trade had driven many merchants to engage in other trades, such as the restaurant and café business, or fishing and maritime services. He added that the oil and gas companies that now operate out of Port Said do not help solve the governorate’s unemployment crisis since most of their staff come from other governorates.

He stressed that the lack of appropriate job opportunities has been driving Port Said’s young people to leave the governorate.

However, among the factors that still make Port Said attractive to investors are the city’s strong infrastructure and unique geographical location, said commentator Magdi Kamal, who suggested establishing a company with a large capital base to channel investments in various fields such as the automotive industry.

Egypt exports 42 per cent of its clothing exports from the Free Zone, Kamal said. Investments in this industry have surpassed the LE1 billion mark, and its annual exports now exceed $676 million with exports from the private sector at $528 million. The public-sector Free Zone receives imports totalling $222 million, while $342 million worth of imports enter the private Free Zone. Investments for the public sector come to $932 million and for the private sector $1.448 billion. The Free Zone is staffed by 40,000 employees, of whom 7,000 come from governorates other than Port Said, such as Damietta, Kafr Al-Sheikh and Sharqiya.

Kamal furnished other interesting figures. The Port Said public Free Zone occupies 468,824 square metres of land hosting 67 factories with 30 specialising in readymade clothes. There are three factories in the private Free Zone. Their sizes range from 10,000 to 30,000 square metres.

One of the chief problems facing investors in the Free Zone, according to Kamal, is the high cost of gas. Factories are charged on the basis of their maximum consumption at full operation as opposed to their actual consumption, he said. In addition, the wastewater system that is currently being installed will cost some LE40 million.

Former president Anwar Al-Sadat declared Port Said a Free Zone in 1976, thereby triggering an economic and tourist boom. Imports coming into Port Said were free of customs tariffs which gave it a competitive edge over other governorates.

In 2002, former president Hosni Mubarak issued a law abolishing the city’s duty-free status. Because of the outcry precipitated by this decision, the law was quickly amended, and it underwent further changes in 2006, 2009, 2011 and 2012. In 2013, former president Mohamed Morsi issued a degree rescinding the law entirely.

 

MAJOR PROJECTS: Five major projections are under construction in the South Port Said Industrial Zone today. The land was handed over to investors in November last year and the construction work is expected to be completed in three years.

The projects include the Pyramids Tyre Factory with a base investment of LE3 billion. Standing on a 68,000 square metres plot, it is scheduled for completion by the end of this year. Occupying a 25,000 square metres plot is an oil plant with an investment cost of LE25 million. The Egyptian-American Group, investing LE125 million, has founded a factory to manufacture cooking utensils on a 130,000 square metres plot of land. The Port Said Company for Oil Production and Packaging has set up an oil refinery, a plant for extracting oil, and another to produce animal fodder. The total investment is about LE600 million. Finally, there a food and fish processing factory with an investment of LE50 million.

The South Port Said Industrial Zone was established in 2002 on 797 acres of land and houses 286 factories operating in the petrochemical, readymade clothes and food sectors. The area initially took the name of the Fish Basin Zone. Then in accordance with cabinet decrees, Areas C7, C8, C9 and the Fish Basin were added to the Industrial Zone.

More projects are underway in Eastern and Southern Port Said: another free zone on a 40 million square metres site, a logistics zone on a 30 million metres site, and the Axial Port with a 5.3km wharf east of Port Said that is nearing completion. On top of all this there are new industrial zones in West Port Said as well as a Special Investment Zone. This is not to mention Port Said’s offshore Zohr Gas Field, which is producing 350 million cubic metres of natural gas a day.

Nevine Al-Baz, the director of a tourist village in Port Said, told the Weekly that the petroleum firms operating in the Zohr Field now account for more than 60 per cent of the occupancy of the city’s hotels and tourist villages. According to contractual arrangements with the firms, a chalet lets out for LE9,000 a month, while in the summer units in the governorate’s tourist villages go for LE605 per day and even LE810 during the holidays, and separate villas rent for LE1,200.  

The average rent for a chalet during the winter season is LE500. This climbs to anywhere between LE600 and LE900 during the summer season. The governorate-run tourist villages operate 728 chalets. The projects in East and West Port Said will help revive the governorate economically, Al-Baz said.

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