Hailed as the most significant public-private partnership in Egypt, and considered by some the most exciting industrial project of any kind in the country, Sokhna Port is emerging as the standard bearer of the new, investor-friendly Egypt that the government wishes to portray. While the authorities still have a considerable way to go to convince investors that the country no longer deserves its reputation for unhelpful regulations and red tape, Sokhna, in contrast, is an undeniably modern and efficient facility. And with growing interest from investors to establish operations in and around the port, it is showing early signs of becoming a catalyst for increased foreign interest in the country.
Located 40km south of Suez on the Red Sea, Sokhna is Egypt’s first deep-sea port. It is designed to handle containers, liquids and bulk cargoes, break-bulk and general cargoes. It is also a logistics hub, employing state-of-the-art systems to streamline port and logistics operations. These in turn sit at the centre of the 9000-hectare North West Suez Special Economic Zone, an industrial free zone offering investors good infrastructure as well as tax and customs incentives.
Sokhna is thus being billed as an investment gateway to Egypt. With the luxury of a greenfield site, effectively a blank canvas to its designers, the port is being developed in a number of phases to create an optimum manufacturing, warehousing and shipping environment.
“The entire project aims to be a major catalyst for long-term economic impact in Egypt and throughout the wider region,” says Ossama Al Sharif, CEO of the Sokhna Port Development Company (SPDC) and the man credited as the driving force behind the project.
Significantly, Sokhna is the first privately managed port in Egypt, and in a short time it has differentiated itself from the country’s other main ports. Built to incorporate best port operating practice, Sokhna has set new standards for efficiency. Its two super-post panamax gantry cranes currently average 30 container moves per crane hour, which is high by international standards.
The port’s integrated information processing system minimises bureaucratic procedures and speeds up customs clearance (and is close to yielding a paperless work environment). Substantial investment in security – obligatory in the post-September 11 world – means that Sokhna is on its way to being accredited a ‘white port’ under the Container Safety Initiative, allowing it to ship containers directly through US ports. Faster throughput of vessels and cargo, bureaucratic efficiency and competitive tariffs combine to position Sokhna as a leading international port.
Aim to automate
“We have invested heavily in our infrastructure and infostructure to ensure we have a totally integrated service solution to offer our clients,” says Captain Al Sharif. “Our immediate goal is to automate everything we can manage at the port soon, resulting in a totally paperless environment for normal business transactions. Our security, human resources, port planning, customs procedures, banking, testing and inspection, customer service and a host of other services all make use of our efficient infostructure to increase productivity, interoperability and transparency.”
Such as been the port’s early success that Egypt’s president Hosni Mubarak has instructed his cabinet it should be used as a model for future infrastructure projects.
Strong management and first-rate facilities complement Sokhna’s excellent strategic location close to the Suez Canal, which is the natural convergence point for the majority of shipping traffic moving from Asia to Europe.
“Our strategic location, on the major East-West shipping route gives us a leading edge compared to other ports in the region, which are sometimes situated two or three days’ deviation from it. This costs shipping lines a lot of money. Add to that the fierce competition to offer better rates and Sokhna suddenly makes a lot of sense,” says Captain Al Sharif.
The port is a logical transshipment hub to serve the growing economies of the Middle East as well as smaller East African ports. It is also well positioned to serve the Egyptian internal market as the 130km to Cairo is connected by a newly surfaced multi-lane highway. Additional transport links, including rail, are scheduled for construction or expansion. For a number of commodities, specific pipelines and conveyor systems will be constructed to minimise logistical costs and environmental impact from the goods transported to and from the Suez Special Economic Zone.
The port has already attracted a number of international shipping lines, including APL, PIL, CMA CGM, Evergreen, Hapag-Lloyd and MSC. Inaugurated in 2002, it is being developed according to a detailed master plan that stretches to 2020. By then it is estimated Sokhna will handle more than 90 million tons of cargo, necessitating more than 12km of berth-length. (Port authorities estimate in 2005 more than 20 million tons of cargo was handled.) In all, €1.5bn will be spent on development.
Currently, the access channel into the port is 350m wide and 17m deep, enabling Sokhna to receive container vessels of more than 8000 twenty-foot equivalent units (TEUs) and bulk-carriers of up to 150,000 dead weight tons – in effect the largest vessels at sea today. Facilities include a container terminal, a fertiliser terminal, a general cargo/RoRo (roll on roll off) terminal and a bulk terminal. Immediate expansion plans include an ammonia export terminal, a liquids tank farm and a livestock terminal.
Sokhna’s development takes place within the context of rapid globalisation, which has seen cargo volumes rising steadily. In 2004, the volume of world merchandise exports ballooned by more than 13%, more than doubling the rate of growth seen the year before. According to the United Nations Conference on Trade and Development (UNCTAD), this was also considerably faster than expansion of world output, which it said grew by 4.1% compared to 2003. World seaborne trade (goods loaded) reached a record high of 6.76 billion tons, up 4.3% on 2003.
Global measures mask regional trends. According to UNCTAD’s Review of Maritime Transport 2005, growth in containerised freight traffic on the Asia-Europe route easily outstripped other routes, shooting up 10.6% in 2004 on the previous year. This reflects the deepening trade relationship between China and the EU, set to top $200bn this year and making the EU China’s biggest trade partner. Sokhna, of course, has a plum position on this route. It also stands to benefit from growing trade to and from the Middle East, which is enjoying an economic surge on the back of high oil prices.
From the start, Sokhna was designed around the concept of a warehousing and distribution hub, a base from which multinational companies would ship their products to regional and international destinations.
“We offer multinationals and shipping lines an exceptional opportunity to be closer to their target markets by using Sokhna as a strategic storage for their goods,” says Captain Al Sharif. “This enables them to offer tighter market delivery times and become more competitive in the process.”
To realise this ambition, SPDC has partnered with the Wim Bosman Group, the full-service European logistics company. Having designed and built the port to seamlessly integrate sophisticated information systems, Royal Wim Bosman – as the newly established company is called - is able to offer clients specific supply chain management solutions to provide them with real-time follow-up of orders, suppliers and transport; real-time visibility of inventory; and improved order fulfilment. These services will be supported by Royal Wim Bosman’s extensive use of IT technologies, rigorous employee training and ‘intelligent logistics’ concepts.
“Egypt has not yet experienced the values of an integrated logistics service provider,” says Captain Al Sharif. “Traditionally, we did not have the infrastructure or the technology to offer such a service. Our warehouses were not automated, we made little or no use of EDI and our ports were inadequately equipped. Today this has changed. At Sokhna Port, our warehouses are fully computerised and we know at any given time how many items are stored, when they were delivered, and when they are due out.”
Altogether, 200 hectares will be set aside and developed for logistics operations by 2020. This will be in the direct vicinity of the shipping terminal for ease of operation and minimising internal transport costs. Specific terminals which make use of logistic services are the general cargo and container terminals.
Sokhna is proving not just attractive to shipping lines and investors; it is also on the radar screen of cruise lines. The port is the closest to Cairo and its many tourist sites, and is connected by a modern highway that delivers visitors from the port to the pyramids in less than two hours. Just as important, the port’s security and clean, environmentally-friendly facilities appeal to discerning cruise line operators.
“Cruise lines have certain important prerequisites, which are vital to their choosing a certain port over another,” says Captain Al Sharif. “Security and facilities, including basin water depth and proximity to major tourist attractions, are among the most important. And Sokhna passes each with high marks. We have created a model which other ports in Egypt and the region are now emulating. We are proud to be the benchmark against which many are measured.”
MAIN PLAYERS IN THE SOKHNA STORY
Sokhna Port is being developed by the Sokhna Port Development Company (SPDC), which is controlled by Cairo-based Amiral Corporation and Cairo-listed Orascom Construction Industries. The main shareholder in Amiral is Ossama Al Sharif (who is SPDC’s CEO).
Captain Al Sharif, a Jordanian, has been in the shipping business since he graduated from Alexandria Maritime Academy. In 1992, he joined forces with global shipping line APL, a leading logistics and container transportation company, to establish a presence in both Egypt and Jordan. In 1997, he founded the Egyptian Container Handling Company, the first authorised private container handling company in Egypt.
Orascom Construction Industries is Egypt’s largest construction and building materials conglomerate.
In February 2005, the African Infrastructure Fund acquired a 15% minority stake in SPDC, a strong show of confidence from the fund’s investors, which include principal sponsor American International Group (AIG) and others such as the International Finance Corporation, the African Development Bank, an association of European development finance investors led by Proparco and the European Investment Bank, and El Paso Energy Corporation.
The fund, which is managed by US-headquartered Emerging Markets Partnership, is the largest private equity fund investing in Africa, and a leader in the rapidly developing field of private investment in infrastructure services in Africa.
AIG has described Egypt as “a major investment opportunity”. It has invested in two insurance companies, AIG Egypt and Pharaonic American Life Company, in its own right.
In AIG’s opinion, Sokhna is a port “in line with the best in the world relating to technology, equipment, security and quality of services”.