Analysis and forecasts for the construction market in Venezuela
Construction spending analysis and forecast for Egypt
Category: Egyptian Construction Market | 17/09/2010 - 11:59:08
Egyptian Construction Market from Global Insight, Inc.
- Spending in the construction sector will increase at a CAGR of 3.9%, from US$5 billion to US$7.3 billion during 2005-15. Increasing foreign direct investment (FDI) coupled with various government-initiated development programs, such as healthcare development, will boost the economic development of the country, which will drive the growth in this sector.
- Spending on residential construction will increase from US$443 million in 2005 to US$606 million in 2015 at a CAGR of 3.2%, owing to such factors as increased disposable income, the development of new residential regions, such as villages, and the formulation of government policies to develop the housing finance system during 2005-15.
- Spending in the nonresidential construction sector will grow at a CAGR of 4%, from US$4.6 billion in 2005 to US$6.7 billion in 2015. Government policies to encourage private investment in business as well as infrastructure development will encourage expenditure in this sector.
- Egypt is a high-risk country as its one-year risk score is above the world average and five-year risk score is comparable with the world average score. High bureaucracy and corruption levels, low income, rising unemployment, and continued security threats have increased the country risk.
|Total Construction (Billions of US$)||3.9||4.3||4.5||4.7||4.9||5.2||6.4||5.8||4.2|
|Total Construction (Billions of 2000 US$)||5.0||5.2||5.5||5.7||5.9||6.2||7.3||4.4||3.5|
Market Segments: Residential
Current Environment: Expenditures in the residential construction sector increased by 4.1%, from US$426 million in 2004 to US$443 million in 2005. This growth in spending can be attributed to government efforts to improve the housing finance system by introducing new housing laws in 2004.
Outlook: Expenditures in the residential construction sector will increase at a CAGR of 3.2%, from US$443 million in 2005 to US$606 million in 2015. Moreover, the government plans to implement the New Village program, which focuses on creation of 400 new villages in the Nile valley over the next six years. This will increase spending on residential construction in the near term. This program is estimated to create 70,000 new job opportunities annually for the next six years. These new jobs will increase disposable income, thereby raising the demand for residential facilities over the next decade.
- The Alexandria Growth Pole Project, which includes the construction of low-income residential facilities to reduce impoverished areas in the Alexandria region, is estimated to cost US$140 million, but its timelines are yet to be finalized. The project will spur government expenditure in the residential sector in the near term.
- The Egyptian government, in association with the U.S. Agency for International Development, has planned to develop the mortgage finance system of the country at a cost of US$35 million in the next five years. The improving mortgage finance system will lead to easy availability of finance for residential construction, thereby increasing the spending on residential construction in the long term.
Market Segments: Nonresidential Structures
Current Environment: Spending on nonresidential structures grew by 4.3%, from US$2.3 billion in 2004 to US$2.4 billion in 2005. Mega-projects, such as the Port Ghalib Marina Expansion, with a total cost of US$1.2 billion and project duration of 2004-07, increased expenditures in the nonresidential structure segment during 2004-05.
Outlook: Spending on nonresidential structures will increase at a CAGR of 3.8%, from US$2.4 billion in 2005 to US$3.5 billion in 2015. The growth is due to the government-planned development activities in education and healthcare. In addition, the government is promoting private participation in these development activities to minimize its expenditure. Public-private investment in the development programs will contribute to spending on nonresidential structures such as hospitals and universities, in the long term.
- As part of the Education Enhancement Programme to improve educational facilities, the Egyptian government, along with the Delegation of the European Commission in Egypt, has initiated the construction of 23 schools, which will be operational in 2007, at a cost of US$6.4 million (EGP 37 million at the average exchange rate of 2005). The program will boost the growth in spending on nonresidential structures in the near future.
- The government, in association with private entities, plans to construct 1,000 new factories in the country at a cost of US$17.4 billion (EGP 100 billion). This will not only generate more employment opportunities, but also create demand for more office space, thereby increasing expenditures on nonresidential structures over the next five years.
- The government has streamlined its business registration procedures to reduce the average processing time from 34 days to 72 hours. In addition, it has also improved taxation- and customs-related procedures to provide a better business experience in Egypt. This will encourage new companies to set up business in the country, thereby increasing the construction of offices and commercial buildings in the near term.
Market Segments: Nonresidential Infrastructure
Current Environment: Spending on infrastructure increased at a rate of 4.8%, from US$2.1 billion in 2004 to US$2.2 billion in 2005. The increase is due to the initiation of various infrastructure development projects, such as the Integrated Irrigation Improvement and Management Project worth US$303 million, initiated in April 2005.
Outlook: The Egyptian government has undertaken a number of projects to improve the infrastructural setup of the country to attract foreign investors for public-private partnerships. This will increase the expenditure in the nonresidential construction segment at a CAGR of 4.2%, from US$2.2 billion in 2005 to US$3.3 billion in 2015.
- The government plans to build three nuclear power plants with a cumulative capacity of 1,800 megawatts by 2020. One of the power plants, which has a capacity of 1,000 megawatts, is planned to be constructed near Alexandria at a cost of US$1.5 billion. These energy projects would contribute to the expenditure in the nonresidential infrastructure segment over the next 14 years.
- The communications industry saw a boost, as a 20% stake of Telecom Egypt, the leading telecommunications company in the country, was opened for public subscription in 2005. The positive business sentiment in the industry, coupled with the rising number of cellular subscribers, will fuel growth of the industry, thereby increasing the spending on the construction of communications infrastructure in the near future.
- The National Authority for Tunnels has planned to construct a 34-kilometer-long metro line stretching from Imbaba to Cairo International Airport. The project will be conducted in four phases. The first two phases cost US$1.1 billion and are estimated to be complete by 2011, while the details of the other two phases are yet to be finalized. Similar transport projects will lead to an increased expenditure in infrastructure projects in the long term.
Construction Market Risk
- Egypt is a high-risk country as its one-year risk score is above the world average and five-year risk score is comparable with the world average score. Shortcomings in the legal and political system, accompanied by terror threats and scarcity of skilled labor, have amplified the country risk in the past few years.
- The bombings in 2004-05, the rise of Muslim Brotherhood movement, the increase in demand for representative politics, and the uncertainty about the abilities of the successor to current President Hosni Mubarak are influencing the political scenario in Egypt, leading to an increase in the political risk of the country.
- Poor infrastructure, low productivity, scarcity of skilled labor, growing unemployment, and other factors are adversely affecting the economic activity in the country, which in turn increases the economic risk of the country in the long term.
- The operational risk of the country is high due to a bureaucratic tax system, high level of corruption, rising security concerns, and time-consuming legal procedures.
- Overall, the country scenario seems risky for smooth operation of businesses. However, the government is taking initiatives to relax regulations for private investment to attract foreign investors and to improve the business environment. This will lead to the growth of business units, thereby encouraging more construction activity to match the growing infrastructural demands of these business units.
|Total Construction (Billions of US$)||3.9||4.3||4.5||4.7||4.9||5.2||6.4||5.8||4.2|
|Electrical and Electronic Products||0.0||0.0||0.0||0.0||0.0||0.0||0.0||5.9||6.7|
|Total Construction (Billions of 2000 US$)||5.0||5.2||5.5||5.7||4.9||6.2||6.2||4.4||3.5|
|Electrical and Electronic Products||0.0||0.0||0.0||0.0||0.0||0.0||0.0||4.5||6.0|
|De0.9flator (2000 = 1.0)||0.8||0.8||0.8||0.8||0.8||0.8||0.9||1.3||0.6|
|General Construction Drivers|
|Real Per Capita Income (000's of 2000 US$)||1.6||1.7||1.7||1.8||1.8||1.9||2.2||3.5||2.8|
|Real Per Capita Income Growth (%ch*)||3.3||3.5||3.6||3.5||3.5||3.5||3.0|
|Population Growth (%ch)||1.6||1.5||1.5||1.4||1.4||1.4||1.2|
|Rate of Urbanization (%**)||43.6||44.0||44.3||44.7||44.9||45.2||46.8||44.5||46.0|
|Residential Construction Drivers|
|Number of Households (Millions)||16.8||17.2||17.7||18.1||18.6||19.0||21.3||2.5||2.3|
|Nonresidential Structure Drivers|
|Manufacturing Growth (%ch)||4.1||4.9||4.5||4.6||4.6||4.4||4.4||4.6||4.5|
|Service's Growth (%ch)||5.8||5.8||6.2||6.0||5.8||5.8||5.8||5.9||5.2|
|Industrial & Commericial Output Growth (%ch)||5.5||4.8||5.5||5.1||5.1||5.0||4.6||5.1||4.6|
|World Industrial & Commercial Output Growth (%ch)||3.7||4.0||3.4||3.7||3.7||3.6||3.4||3.7||3.5|
|Infrastructure Industries' Outgrowth (%ch)||6.0||6.1||6.4||6.3||6.0||5.8||5.1||6.1||5.0|
|World Infrastructure Industries' Outgrowth (%ch)||3.9||3.6||4.1||4.0||3.9||3.8||3.4||3.9||3.4|
|General Economic Drivers|
|Real GDP (Billions of 2000 US$)||117.9||123.9||130.3||136.8||143.5||150.5||184.5||5.0||4.2|
|Real GDP Growth (%ch)||4.9||5.1||5.1||5.0||5.0||4.9||4.3|
|Consumer Price Index (%ch)||4.9||4.2||3.3||3.5||3.9||4.4||4.2||3.9||4.3|
*%ch = Year over year Percent Change.
** Values under the 'CAGR' heading are the averages of the urbanization rate over each period (2005-10 and 2010-15)