Construction and real estate players are looking abroad: Egyptian construction and real estate players are ramping up efforts to expand abroad as domestic opportunities shrink, industry leaders told Enterprise. Part of these efforts are seeing local players look to capitalize on the significant international support to developing infrastructure in nations affected by wars and conflicts.

Where are they going? While local developers are looking almost everywhere, there seems to be a particular appetite for the Iraqi, Saudi, and Libyan markets.

TO IRAQ-

Demand is high in Iraq: The Iraqi construction market is expected to grow significantly over the coming ten years, our sources said, adding that they expect demand to exceed the USD 500 bn market over the next decade. Housing, electricity grids, and drinking water projects are particularly in demand.

But, competition is also high: Industry players are looking at the government for support to help them compete with their Turkish and Chinese counterparts, which have already established a name for themselves in the Iraqi market, industry players told Enterprise.

Some local players are already preparing to penetrate the market: Last month, Talaat Moustafa Group (TMG) announced that it is carrying out the legal and technical procedures needed ahead of carrying out investments and projects in Iraq. And earlier this year, Sawiris-owned Ora Developers inked an agreement with the Iraqi government to develop a new residential city in Iraq — dubbed Ali Al Wardi New City — which will house 120k residential units and is set to be the biggest residential complex in Iraq.

Another chance to enter the market: The Iraqi-Jordanian Company for Industry, a joint venture between the Jordanian and Iraqi governments, has launched a tender for construction companies to develop, establish, fund, manage, and maintain the first phase of the Iraqi-Jordanian Economic City — a city on the borders of the two countries that aims to boost trade ties between the two sides and create jobs. Companies can submit their bids on 29 September, according to the tender’s booklet (pdf).

But there’s a catch: Shams El Din Youssef, member of the Egyptian Federation for Construction and Building Contractors (EFCBC) and chairman of AlShams for Contracting, told Enterprise that while his company got the tender’s conditions booklet, a USD 750 mn letter of guarantee requirement caught him by surprise. “We approached several banks for the letter, but it's a huge amount that requires government backing,” he said.

HEADING TO KSA-

A lot of projects are also up for grabs in the Saudi market: The Saudi National HousingCompany is offering a whole lot of projects to Egyptian construction companies — expected to have a combined value of USD 200 bn, government sources told Enterprise.

Remember: TMG is setting up a mixed-use project in Benan City in eastern Riyadh’s Al Fursan in partnership with the Saudi National Housing Company. The SAR 65 bn city will house nearly 28k residential units and it marks the Egyptian real estate giant’s first overseas project. Real estate developer Palm Hills also set up a Saudi branch last month.

A promising regulated market: The Saudi market is large, stable, and welcoming to Egyptian construction companies, EFCBC head Mohamed Sami Saad told Enterprise. This makes it a particularly attractive market for Egyptian firms whose operations have been impacted locally over the past two years.

Companies are lining up for a piece of the Saudi market: Sources told us that 16 companies are preparing to submit offers to the projects on offer, but securing the required letters of guarantee remains an obstacle in the face of finalizing these agreements. The EFCBC is in discussions with the Central Bank of Egypt regarding a solution to this problem, potentially allowing branches of Egyptian banks abroad to guarantee the companies.

MOVING WEST TO LIBYA-

Local firms already have a Libyan presence: Egyptian construction firms have already secured contracts worth about USD 15 bn in Libya. Youssef believes Libya sits on USD 300 bn of potential projects as the country looks to develop its infrastructure. The Central Bank of Libya and another local bank have been supporting Egyptian construction companies working in Libya and facilitating the issuance of letters of guarantee, Youssef told us, adding that this support needs to continue even with Libya preparing to welcome a new central bank governor.

Where things currently stand: Of the 23k contractors registered with the EFCBC, only 40 are currently able to secure construction work abroad, according to Saad. Egyptian firms have gained significant experience in unprecedented projects in recent years, including skyscrapers, seawater desalination, waste management, and housing, Contractors Union member Mamdouh Morshedy told Enterprise.

Local firms have invested bns in expanding and buying the necessary equipment: “In the past, Egypt exported labor and engineers, but now the volume of work, expertise, and tech advancements allow for exporting company operations, especially with domestic projects declining by at least 70%,” said Morshedy.

The market is highly competitive: Morshedy emphasized that there is strong competition from Turkish, Chinese, and Israeli firms for contracting work in Africa and the Arab region.

CHALLENGES FACING EGYPTIAN CONTRACTORS-

A contracting sector: The contracting sector is working to regain balance amid changes in economic conditions like the recent FX shortage and many companies’ shift from now-scarce government projects to those led by the private sector, Saad previously told Enterprise. This comes on top of the letters of guarantee issue, which if resolved could pave the way for hundreds of companies executing major projects abroad.

What’s causing the letters of guarantee headache? Morshedy stated that participating in foreign tenders requires USD-denominated letters of guarantee, and with the decline in the credit rating of local banks, obtaining these guarantees has become very difficult.

A breakthrough on the horizon? EFCBC Secretary General Hesham Yousry told us that the main obstacles facing construction exports were presented to Housing Minister Sherif El Sherbiny, who promised effective solutions.

Your top infrastructure stories for the week:

  • The National Railway Authority (NRA) will issue a tender in November for civil works to develop and modernize the signals on the Tanta-Mansoura-Damietta railway line. (Al Borsa)
  • EGPC wants to boost the country’s refining capacity by nearly 10% this fiscal year: The Egyptian General Petroleum Corporation (EGPC) aims to ramp up the capacity of the country's oil refineries by to 34 mn tons of crude oil in the fiscal year 2024-2025, up from 31 mn tons the previous fiscal year. (Al Arabiya)
  • Egypt and Cyprus have “begun serious steps” to reach an agreement to build a 90-km marine natural gas pipeline to connect the two countries, unconfirmed reports claimed earlier this week. The pipeline will reportedly connect the Aphrodite gas field in Cypriot waters to the Zohr field’s production facilities in Egypt, carrying 1 bn cubic feet of gas per day.
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