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15 July 2013
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Arab summer

Revolution 2.0 has hit Egypt, and Aaron Weinman ponders whether political instability will hinder the progress it’s made in infrastructure projects over the last 18 months.

After ousting former leader and dictator Hosni Mubarek all but 18 months ago, Egypt has successfully removed the man it elected to replace him, Mohammed Morsi from central government, much to the chagrin of the Muslim Brotherhood and its conservative followers.

Egypt’s independent PPP unit’s pipeline, which includes an upcoming tender for the Safaga Port redevelopment, the Abu Rawash wastewater clinic currently at shortlist stage and a series of social infrastructure PPPs were expected to take off this year. However similarly to the uprising of 2011, the country’s projects are in danger of stalling, yet again.

Following the initial uprising, bidders involved in projects requested a three month pipeline suspension, in order to re-evaluate the risks involved. However Laughlan Waterston of SMBC says this time around, investors would have included political instability in their risk.

"When the Arab Spring initially sprung, the Export Credit Agency, which was involved in Egypt’s projects from earlier on included political risk insurance," Waterston says.

Egypt’s pipeline to date has mainly attracted interest from local investors and Islamic financing, according to Waterston, who says that Egypt’s PPPs predominantly use local currency. Therefore, investor appetite, which has grown significantly in Egypt, shouldn’t diminish too much.

According to Atter Hannoura, the head of Egypt’s PPP unit, the country’s PPP model provides a sovereign guarantee from the Ministry of Finance, designed in order to ease the risk and relationships between the private and public sectors.

In addition to the above-mentioned projects, Hannoura has earmarked a further 12 projects to be procured under the PPP framework, but questions remain over just how long it will take to roll out said projects.

In addition to increased deals with political risk insurance, Egypt’s Ministry of Finance has entered into agreements with several multilaterals such as the European Bank for Reconstruction and Development, the International Finance Corporation and the European Investment Bank, in a bid to sure up private finance.

The future of the pipeline is still very much in doubt, and until a new government makes a decision on the future of its infrastructure projects, it’s anyone’s guess as to which direction things will head. But what’s certain is the finance. Egypt has managed to obtain the backing of local and multilateral financiers, all of which are willing to throw their weight behind the country’s future infrastructure. 

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Arab summer

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