Can privatization save Egypt’s railways?

CAIRO — After three train accidents in Egypt within one month left dozens of people wounded or dead, Egyptian Transportation Minister Kamel al-Wazir said in a press release April 21 that there are plans for a number of new trains on Egypt’s railways to be managed by international companies. The plan, he added, aims to provide better services and bring modern expertise to Egypt.

Wazir explained that a foreign or multinational company will manage trains, including six that will be purchased from the Spanish company Talgo. The operation of 200 sleeper cars will be assigned to another foreign company yet to be unveiled.

On April 27, Egyptian President Abdel Fattah al-Sisi met with CEO of the Korean company Hyundai Rotem Lee Yong-bae accompanied by Wazir and Prime Minister Mostafa Madbouly. The presidency said in a press statement, “The meeting discussed joint cooperation with Hyundai Rotem for localizing the train industry, including the signal and communication systems as well as command and control equipment.”

During the meeting, Yong-bae presented the projects that his company is to carry out in Egypt. They include manufacturing subway cars, signal systems and control and command equipment and railway engineering work.

It is not the first time that the Egyptian government has spoken about partnering with the private sector to manage and operate its railway network. In February 2018, the Egyptian Parliament approved a bill to allow the Egyptian Railway Authority to establish companies in cooperation with the private sector.

The bill allows individuals and corporations to take part with the ERA in developing, managing, operating and maintaining railway networks.

As the railway network grows more obsolete by the day, in January the state presented a comprehensive plan to develop the railways at a cost of 220 billion Egyptian pounds ($14 billion), with 257 projects scheduled to be completed by 2024. But the recurring accidents have revived controversy over its feasibility.

Engineering consultant Emad Nabil told Al-Monitor that the railway network will have to be managed and operated by foreign companies, as the current administration has failed to do so as the population grows and rail traffic increases.

Nabil’s statements align with railway privatization proposals that emerge following each railway accident. However, Nabil explained, “Allowing foreign companies to manage the network is not considered privatization. Privatization is when companies own the network and this will not be the case. These companies’ mission will be limited to operating the railways.”

He said that having the railways run by specialists would avert the network’s collapse. He said previous effort did not produce long-term solutions and help is needed compensate for the technological gap between Egypt and the countries of the developed world.

According to a study issued in 2019 by the Egyptian Institute for Political and Strategic Studies, based in Turkey, the high debt of the railway network, about 250 billion Egyptian pounds ($16 billion), set the stage for international companies to own large shares in and manage the railway system.

The study added that local and international partnerships are part of a new model of partial privatization as the state works to lessen its financial and rental burdens and state obligations toward citizens.

Among the results of this pattern of privatization, according to the study, is the liberalization of prices and new, more profit-centric policies. This orientation works against the state’s obligation to support low-income citizens and provide services at reasonable prices. The study pointed to the United Kingdom's experience with privatization, which only reduced employment and increased service prices, despite government support estimated at 6 billion pounds ($8.3 billion) and a level of oversight that is not possible in Egypt.

Salma Hussein, writer and economic researcher at the Egyptian Initiative for Personal Rights, shares the same opinion. In a 2017 article for the local Shorouk newspaper about efforts to privatize the Egyptian railway network, she gave the example of Britain’s experience with privatization and said that it “only benefited international companies and was of no benefit to government budgets, taxpayers and poor citizens.”

She added that the British experience should not be compared to the failed experiences of developing countries.

Nabil, for his part, supports a partnership with the private sector. He said, “If the service provided does not reflect the real market price, then the sector will collapse. There is no such thing as a subsidized ticket price. The support will go to the poor through welfare programs developed by the Egyptian state.”