Ayman Khattab, CEO of General Electric (GE) in Egypt and North Africa, said that his company sees huge potential in the Egyptian market, making it possible to turn Egypt into a centre to manufacture its products.
Khattab told Daily News Egypt that the reforms recently implemented by the Egyptian authorities, including restructuring of subsidies and the liberalisation of the exchange rate have put Egypt on the right path.
He demanded the Egyptian administration to act quickly and achieve the reforms needed by investors to start an activity or expand in the Egyptian market.
What are the details of the latest agreement with Egypt to supply 100 locomotives to the Egyptian Railway Authority?
The agreement was the result of competing against other companies, where out company gave the best offer, price and technology wise.
Our company is ready to provide the first batch to the Egyptian government, but we are still waiting for the completion of other administrative and legal procedures.
I expect the first batch of locomotives to be supplied during the first half (H1) of 2018 where 50 of them will be entirely manufactured in the US, and the other 50 will be assembled in Egypt in cooperation with the Arab Organization for Industrialization (AOI) and other bodies. I expect supplying the 100 locomotives to be done within two years since the date of manufacturing.
What are the terms of the agreement?
It was signed with the Egyptian Ministry of Transport and the Egyptian Railway Authority. It stipulates that 100 locomotives of the GE ES30ACi Light Evolution Series model will be provided for multi use.
There is also a 15-year maintenance agreement in order to provide spare parts and technical support for the current and new locomotives within the authority’s fleet for $575m.
The agreement includes providing technical training to more than 275 engineers and technicians.
The new GE locomotives are equipped with 12 cylinder engines with 3,200 horsepower. This model provides high production capacities, in addition to flexibility in the process of transporting heavy weights. They can also be used to transport passengers or goods.
The company is also interested in a long-term maintenance contract of 15 years, thanks to its experience in maintenance and the provision of spare parts to 1,400 tractors worldwide.
What are your funding sources and profit margins?
Our profit margin is really weak. We are mostly focusing on supporting Egypt, which is why we negotiated with the Canadian export development agency, and we managed to obtain financing worth $575m and a long grace period.
GE’s offer included technical and financing solutions and enabled it to win against its competitors.
GE is committed to its partnership with Egypt for more than 40 years with more than 700 employees in the country. The company works with its partners in the public and private sectors to bring the latest technologies and solutions to transport, aviation, oil, gas, energy, and healthcare.
The importance of this partnership is due to its comprehensive nature. We have worked with the Ministry of Transport on all the aspects of the project, including providing sustainable financing solutions and manufacturing trains as well as providing long-term services.
What about your future plans in Egypt?
We see large competitive potential in the Egyptian market, and we plan to turn Egypt into a hub to manufacture our products over the upcoming period. Egypt is a large consumer market that needs businesses and expansions in all economic sectors, including health, energy, and electricity.
GE has about 22,000 tractors across the world, working with high efficiency. The company has the experience and ability to supply any quantity of locomotives to any destination across the world.
We have noticed that you pay special attention to transport especially railway. What is the reason for that?
Railway has major expansion opportunities to meet the growing demand. Depending on railways to transport goods is no more than 1% of the goods transport market in Egypt.
In our negotiations with the Egyptian government, we learned that the Egyptian Railway Authority still needs about 300 locomotives, and we are interested in cooperating with them in this if they like, through providing technical and financial solutions and maintenance.
Switching to transporting goods through railways reduces the pressure on Egyptian roads, which suffer from the large amounts of goods and accidents.
Transporting goods through railways will reduce the consumption of Egyptian fuel as well.
Our company will provide Egypt with the latest technologies to develop the Egyptian railway’s infrastructure, and we will work to increase the efficiency of transporting passengers and goods.
The agreement also included the maintenance and upgrading of old tractors supplied in 2008 and are unutilized. Workshops will also be established to train Egyptian labourers to maintain tractors and provide spare parts.
During the signing of the agreement, Hisham Arafat, the Minister of Transport, said that this contract will help maximise the authority’s role in the transport of goods via railway within the ministry’s plan of developing railway transportation to reduce the pressure on roads. The aim is to transport about 25 million tonnes of goods through railway by 2022.
Minister of Investment and International Cooperation Sahar Nasr said that such an agreement contributes to highlighting Egypt’s real potential as an investment market. Our goal is to help together with international institutions create investment opportunities that meet the needs of the country and would be based on the concept of partnership.
The minister added that the partnership between the Ministry of Transport, the Egyptian Railway Authority, and GE shows the clear potential within the transport sector and the serious commitment by the private and public sector to benefit from the potential. This strategic agreement reflects the keenness of GE to develop transport and be present globally to meet the needs of its clients as well as study the opportunities of development in global markets to achieve joint success.
What are your new projects in Egypt?
We are highly interested in working with the Egyptian government in the field of new and renewable energy, especially through wind, solar, and coal energy.
We have open communication with officials in the Ministry of Electricity to come up with a vision that enables us help them in this regard, especially that Egypt is strongly headed towards diversifying energy sources and generating energy from renewable sources instead of the traditional ones which will run out soon.
Our company does not mind partnering with Egypt in any form, whether through providing companies with technical solutions, working as a developer, or providing financial solutions, whatever the negotiations with the Egyptian government result in, we will be fine with.
Do you plan to invest in the Suez Canal Economic Zone (SCZone)?
The SCZone is a special zone with large competitive advantages, most importantly, the fast completion of procedures and land licensing. We are greatly interested in investing in this area, but the idea is still under consideration. We are looking into the possibility of launching an integrated factory to manufacture components and equipment of a wind power plant, including turbines, generators, or blades, which will be manufactured in Egypt.
How do you view Egypt’s economic reform programme?
A large part of this programme has already been implemented, which was able to reassure business communities, whether local or global, and let them know that Egypt is ready for their investments.
With the New Investment Law and the infrastructure projects taking place, Egypt is returning to being an important destination for investment in the global business market.
The truth is that the recent reforms are finally beginning to leave a positive impact. Foreign exchange reserves are currently estimated at $28.5bn. There are investments worth billions of dollar received by the EGX and government debt instruments, which is an indicator of the confidence restored in the Egyptian economy.
Companies have started to transfer their profits to mother companies abroad, something that did not happen before due to the lack of currency crisis. Currently, there is more ease in the availability of dollars for companies that request them from banks.
What challenges will the Egyptian economy face over the upcoming period?
The recent reforms are good, but the Egyptian administration needs to speed up the pace of the procedures related to starting investors’ activities and enhancing the business community in order to attract more investments. Attracting funds has become difficult and extremely competitive with the surrounding markets that have large competitive potential, such as Jebel Ali in Emirates and other African markets.