Qatar To Invest In New East Port Said Complex
BMI View: BMI believes that a Qatari investment in the Egyptian ports sector will provide a boost to facilities such as East Port Said, and will be welcomed by the government. The country has been struggling with particularly low levels of foreign investment since the overthrow of former president Hosni Mubarak in March 2011. For Qatar meanwhile, the investment is in keeping with its increasingly visible presence on the world stage.
Following a meeting in Cairo in September, Qatari prime minister and foreign minister Sheikh Hamad bin Jassem bin Jaboor al-Thani and Egyptian president Mohammed Morsi announced a five-year investment plan which would see Qatar invest US$18bn in a range of projects in Egypt. US$10bn of this is to be directed towards tourism projects on the Mediterranean coast and a marina on the west bank of the Suez Canal. The other US$8bn will be invested in an integrated industrial complex at East Port Said.
Al-Thani said of the meeting: 'We spoke with His Excellency President Morsi and agreed to invest US$8bn on a power plant, natural gas and steel.' According to reports this will likely be accompanied by liquid bulk, LNG and multi-cargo terminals alongside. BMI believes that East Port Said is the perfect location for such an investment. Located at the northern mouth of the Suez Canal it is Egypt's largest port in terms of both total tonnage and container volumes handled. The Suez Container Terminal at the port is controlled by international operator APM Terminals, which helped East Port Said to see 3.2mn twenty-foot equivalent units (TEUs) pass through the facility in 2011.
|Long-Term Upside From Qatari Investment|
|East Port Said Throughput, Tonnes '000|
East Port Said manages to secure such large volumes through having positioned itself as a transhipment hub, the largest in the region. Its location near the Canal's mouth means it can secure volumes from vessels passing through the waterway, and the new industrial complex will be able to count on the same, sitting right on top of the major Asia-Europe trade route. This will give scope for growth in LNG and dry and liquid bulk shipping from the port. This gives long-term upside potential for total tonnage volumes at East Port Said. Over our medium-term forecast period, from 2013 to 2017, we project that annual growth will average a robust 11.0%, and this could be exceeded once the complex is completed.
BMI believes that Qatar's investment will be particularly welcomed by Egypt in this time of low foreign investment coming into the country. Foreign reserves are dwindling, and we expect the country to sign an IMF Stand-By Arrangement at some point in late 2012 or early 2013, and that further foreign aid from the Gulf will also be necessary to avoid a full-blown balance of payments crisis. The development of the new complex will generate new jobs both in its initial development and in ongoing operations once completed. Further, should the new complex, once fully operational encourage further volumes to pass through the Suez Canal then this will also help boost Egyptian coffers; fees from vessels transiting the waterway are one of the most important sources of foreign reserves in Egypt.
For Qatar's part the investment is one of a series made around the globe by a state with coffers swollen by gas revenues. Qatar Holdings LLC, the investment unit of the country's sovereign wealth fund, has in the past year played a highly active role in the M&A market, embarking on a flurry of asset purchases across all major economies and industry sectors. These include its first foray into the airport sector, via the purchase of a 20% stake in BAA, owner of London's Heathrow airport; the acquisition of a 22% stake in Chinese private equity firm CITIC Capital Holdings, partly owned by China's sovereign-wealth fund; and its first major investment in a US public company, through the purchase of a 5.2% stake in high-end jeweller Tiffany.
Qatar's investment in Egypt's ports sector can be seen not merely as an investment, however, but also as a diplomatic bid to secure a strong ally as the Gulf state seeks to play an ever larger role in the international affairs of the region.