{"id":586027,"date":"2023-05-03T00:00:00","date_gmt":"2023-05-03T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/domestic-headwinds-have-real-estate-construction-firms-looking-for-business-abroad\/"},"modified":"2023-05-03T00:00:00","modified_gmt":"2023-05-03T00:00:00","slug":"domestic-headwinds-have-real-estate-construction-firms-looking-for-business-abroad","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/domestic-headwinds-have-real-estate-construction-firms-looking-for-business-abroad\/","title":{"rendered":"Domestic headwinds have real estate + construction firms looking for business abroad"},"content":{"rendered":"

<\/span>With headwinds in the local market, real estate + construction players are looking for<\/span> business beyond our borders:<\/span> Egypt\u2019s real estate developers and contractors have been struggling for the past several months amid a tough macro environment, leading to a slowdown in the delivery of projects in the sector. In a bid to bring in more business \u2014 particularly in foreign currency \u2014 several players have begun to seek out contracts in regional markets, where our sources tell us there is plenty of demand for Egyptian companies\u2019 work. This push beyond our borders also coincides with a pickup in Egypt\u2019s infrastructure diplomacy drive, particularly in Iraq. <\/span><\/p>\n

Iraq is starting to tap Egyptian companies for infrastructure projects:<\/span> The Contractors<\/span> Union has received offers from Iraq for Egyptian companies to work on 12 different projects under an infrastructure diplomacy mechanism the two countries set up in 2020, union member Shams Eldin Youssef told Enterprise. The offers include infrastructure and roadwork projects, Youssef said, noting that <\/span><\/p>\n

REFRESHER-<\/span> Back in <\/span>November 2020<\/a><\/span>, Egypt and Iraq agreed to set up a mechanism that<\/span> would see Egyptian companies work on development projects in Iraq in return for importing Iraqi oil. Under the \u201coil-for-reconstruction\u201d agreement, Egyptian companies will be contracted by our government to both advise and execute some key projects for Iraq, with the agreements set to cover everything from oil and water resources to construction, housing, and transportation. Iraqi officials <\/span>had also said<\/a><\/span> they want Egyptian firms to work on rebuilding Iraq\u2019s electricity grid, as well as rebuilding the country\u2019s road network. <\/span><\/p>\n

Despite being a relatively well-thought out mechanism, we haven\u2019t seen much come out<\/span> of the infrastructure diplomacy agreement with Iraq.<\/span> Last we heard, officials were still working out the specifics of the mechanism, including how companies will be paid and which of the two countries would be responsible for payment. However, we haven\u2019t seen much development on that front, nor have there been any contracts offered to Egyptian firms to start working on infrastructure projects in Iraq. Orascom Construction, Arab Contractors, Petrojet, and local contractor Samco Egypt already operate in the country. Arab Contractors has for years worked on water infrastructure projects in Iraq, while Orascom Construction helped to rebuild a 1.6 GW power plant there <\/span>in 2019<\/a><\/span> alongside Siemens. <\/span><\/p>\n

Industry players are looking at several other markets in the region beyond Iraq:<\/span> Elsewedy<\/span> Electricity subsidiary Rowad Modern Engineering, for one, is eyeing expansion in Gulf markets, after successfully expanding its operations to Africa, CEO Mohamed Mahlab told Enterprise. The company plans to expand in Saudi, where it is looking to lock down a portfolio worth somewhere between SAR 500 mn and SAR 1 bn this year, Mahlab said. Several Egyptian contracting firms have also signed contracts for projects in Libya but have yet to begin work, head of the Egyptian Federation of Construction and Building Contractors Mohamed Sami Saad told Enterprise.<\/span><\/p>\n

There\u2019s also significant potential in Africa<\/span>, Youssef said, with a large number of Egyptian<\/span> firms landing contracts to work on infrastructure projects in different countries across the continent. Our friends at Elsewedy Electric, for example, built the Julius Nyerere Dam in Tanzania under a USD 2.9 bn contract with Arab Contractors, with Tanzanian officials kicking off the first filling for the dam <\/span>late last year<\/a><\/span>.<\/span><\/p>\n

But there are risks that come with these expansions \u2014 and some regulatory tweaks that<\/span> need to be made to truly create momentum:<\/span> Some markets where there is real potential for Egyptian firms to land business and generate foreign currency income also come with sizeable risk, making it crucial for there to be a risk mitigation framework in place, Sami Saad tells us. This includes hedging against security risks in countries where there is political turbulence, such as Libya and Iraq, as well as risks related to payments and arrears, he said. In Iraq specifically, the two countries must agree on and announce a clear mechanism for how participating Egyptian firms would be paid under the oil-for-reconstruction agreements, which Sami Saad said could be the key for contractors here at home entering the promising Iraqi market.<\/span><\/p>\n

The upside remains significant:<\/span> With plenty of potential business for our companies in<\/span> regional markets, these players can secure liquidity that would help them finance further expansions, as well as their existing operations here in Egypt, Sami Saad noted. Securing income in FX would also help these companies hedge against future currency fluctuations. <\/span><\/p>\n

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