Rolling forward: New investments are expected to revive the rail segment

With nearly 10,000 km of track, more than 700 stations and around 500m passengers on an annual basis, Egypt’s national rail network is one of the largest in the Middle East. Due to low levels of public investment in rail infrastructure since the late 1970s, as of mid-2013 the system was in a state of disrepair. The widespread lack of network upkeep and equipment maintenance over the past three decades has contributed to steadily rising accident rates on Egyptian railways, which in recent years has led to a public outcry. With these issues in mind, the government has announced a number of potentially transformative rail investment programmes.

With the aim of improving safety standards throughout the system, the Ministry of Transport (MoT) and the Egyptian Railways Authority (ERA), which manages Egyptian National Railways (ENR), are working to ensure rail infrastructure is able to meet passenger and freight transport needs for the foreseeable future.

HISTORY: Egypt has been home to rail services since the early 1850s, when Abbas I, the wali, or Ottoman-appointed governor, of Egypt and Sudan contracted English civil engineer Robert Stephenson to construct a standard-gauge rail line stretching from Alexandria, on the Mediterranean coast, to Kafr El Zayyat, an agricultural city located about 100 km north-west of Cairo. The project, which came into operation in 1854, was the first railway in both the Middle East and Africa. Over the next few decades Abbas I’s successors extended this line to the capital and completed work on a number of additional trunk and branch lines elsewhere in the country. By 1900 the ERA had connected most major cities and economic centres in Egypt by rail.

For the first three-quarters of the next century the government continued to invest in the rail network as needed and worked to ensure that the system’s signalling and other communications systems were up to date. Beginning in the late 1970s and 1980s, however, public investment in the sector dropped off, and the national network and ENR’s equipment began to deteriorate. This process has continued largely unabated until the present day. In comments delivered in mid-January 2013 after the derailment of a train carrying military recruits that killed 19 people, Hatem Abdel Latif, the minister of transportation at the time, told local press, “We have to admit that the railway system is decaying.” Speaking before a parliamentary committee dedicated to transport financing a week after the accident, Abdel Latif said, “We have 3000 carriages and the life span of 80-85% of them has already expired. The major problem is mainly down to maintenance services.”

IN FIGURES: According to data from ENR, an estimated 500m passengers and 6m tonnes of freight travel by train every year. The 9570-km rail network is made up primarily of single-track lines, and 85% of ENR’s signalling systems are mechanical, as opposed to electrical. The network includes 705 stations – including 22 main stations and more than 600 small and medium-sized stations – and 885 bridges and tunnels in total. Trains are pulled by a fleet of around 820 locomotives, which have been purchased from countries including Germany, Canada, Spain and the US.

ENR has operated at a loss for more than a decade. According to a 2005 policy note published by the Ministry of Finance, in 2004 the organisation posted losses of around LE1.4bn ($200m), while World Bank data shows that between 2000 and 2007 the railway ran a deficit of LE6.53bn ($929m). The losses can be attributed primarily to the fact that freight traffic, which is more profitable than passenger traffic, accounts for less than 10% of ENR’s total volume. Meanwhile, passenger traffic, including a handful of heavily subsidised ticketing categories for low-income Egyptians, makes up the remaining 90%. The recent political unrest in Egypt, which began in 2011, has further complicated the considerable challenge of upgrading the rail network. In August 2013 the Ministry of Interior shut down the national network for more than a month, citing national security concerns. The stoppage, which ended in late September with trains running on a limited schedule, cost ENR an estimated LE5m ($711,500) per day.

PAST PLANNING: Over the past decade the government has launched a number of projects with the goal of upgrading Egypt’s railways. In 2006 the MoT took steps to implement a World Bank plan to privatise various parts of the system, which ended up having very little impact. In 2008, after a two-year study carried out by the US-based consulting firm Booz Allen Hamilton and in conjunction with Italian state-owned railway firm Ferrovie dello Stato Italiane, the MoT launched the ENR Transformation Project, a five-year Italian-funded project focused on improving technology usage, revenues and safety throughout Egypt’s rail network.

In 2009 the World Bank financed a $600m rail modernisation programme, currently under way, with the aim of reducing accident rates and boosting safety by modernising signalling and central control systems, improving business practices at ENR and replacing track. In a paper released in conjunction with the loan, the World Bank called for ENR to commit to investing LE20bn ($2.8bn) in rail infrastructure, new carriages and locomotives, and education over a 10-year period.

NEW INVESTMENTS: While some of these projects have had a positive impact on a number of key areas, none have yet managed to effectively transform Egypt’s rail segment. Many of the issues that ENR was dealing with a decade ago – dilapidated infrastructure, outdated rolling stock and a lack of new technology – persist today. Since early 2013 the MoT and ENR have announced major investments in the sector. In January 2013 the MoT announced it had signed deals to purchase 221 new passenger carriages, with an option to buy 336 more in the future. Additionally, the ministry announced plans to spend LE470m ($66.88m) on maintenance services for locomotives and general spare parts. In Egypt’s 2012/13 budget some LE835m ($118.8m) was allocated to repair and automate rail crossings on major highways, purchase spare parts, and design and implement more effective safety mechanisms. Egypt’s Treasury and the National Investment Bank will fund these projects.

ERA is also in the midst of planning a number of new lines, including a $270m Cairo-Alexandria electric link, which is set to be completed by 2017, and a $600m Beni Suef-Assiut link, expected to begin in 2014. Another new line, which would stretch 85 km from Cairo to Zagazig in the Nile Delta region, is currently in the initial planning stages. Some of these recent investments are connected to an LE45bn ($6.4bn) package of planned rail sector upgrades announced by Mohamed Sadek Sherbini, the chairman of the transport committee of Egypt’s upper house of parliament, in mid-January 2013. This raft of financing, which had yet to be finalised as of late 2013, would potentially include LE15bn ($2.13bn) to be spent on the automation of safety equipment; and LE30bn ($4.27bn) for new rolling stock and track. These projects constitute major components of a five-year rail development plan, which was announced in 2013, though details remain scarce.