AFD in Egypt

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Agence Française de Développement

EGYPT

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AGENCE FRANÇAISE DE DÉVELOPPEMENT

EGYPTAGENCE FRANÇAISE DE DÉVELOPPEMENT

Egypt Although Egyptian cities and their peripheries are already home to more than 50% of the country’s population, rapid demographic growth continues to take place in urban areas. Over the next 20 years, the population should grow about 20 million people. To reduce poverty, the State has decided to invest in new infrastructure and related public services with the goal of creating at least 700,000 new jobs per year.

With more than 18 million inhabitants accounting for almost 50% of the country’s GDP, Greater Cairo is a megacity accommodating a hyper-dense central area, new towns built in the desert in the 1970s and 1980s to relieve pressure from the centre, residential enclaves and ‘informal’ or ‘unplanned’ areas. Forty percent of the urban population is concentrated in such areas and their number is rising significantly.

Faced with these urban challenges, AFD with its Egyptian and European partners is positioning itself in two areas:

Developing efficient and less polluting urban transportAFD is co-financing Cairo’s Metro Line 3 and, in coopera-tion with FFEM (Fonds français pour l’environnement mondial, French Global environment facility), is providing technical support and expertise for pilot urban public transport projects.

The aim is to slow the growth in greenhouse gas emissions from individual vehicles by implementing an appropriate public transport policy.

In Alexandria, AFD alongside the Egyptian authorities is overseeing a public transport improvement study financed by the European Union.

AFD’s team in Egypt is committed to Supporting sustainable development

Distribution of approved projects by sector

Cairo © AFD, Thierry Latreille

11%

2%

5%

45%

7%

13%17%

Agriculture

Transport

Energy

SMEs- employment

Environment

Heritage-tourism

Water and sewage

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Support companies and job creationWith the Arab Spring, the political class has begun to take notice of the importance of micro, small- and medium-sized enterprises (SMEs).

They account for more than 99% of the companies and two-thirds of the jobs in the country; their development is essential to fight poverty and preserve social cohesion. The Egyptian authorities have therefore asked the Social Fund for Development (SFD) to draw up a new SME support strategy for autumn 2013.

This study aims to help the authorities make intelligent and early stage decisions, before the Alexandria mass transport project is implemented and in coherence with choices made for Greater Alexandria’s strategic development.

This ‘urban transport’ strategy is crucial for the city’s balanced develop-ment. In the long term these actions will reduce urban congestion, pollution and unequal use of space.

Improve living conditions in poor parts of Cairo and the other Governorates:AFD is providing a credit line for microfinance and is creating basic infrastructure in order to improve living conditions for the population and encourage revenue-generating activities.

The objective is twofold: contribute to urban regeneration by funding high labour intensive public works and support access to finance for micro and small-scale enterprises, which are the biggest creators of jobs in Egypt.

With limited access to financial services and in particular to bank credit, these companies struggle to fund their growth (86% of equipment purchases for MSEs are self-financed).

As a result, since 2006, AFD has been developing partnerships with local financial actors to boost Egyptian companies in order to support competitiveness and employment.

A first project worth €30 million, implemented in 2010 with the National Bank of Egypt, the country’s top local bank, aims to promote funding for SME investments, particularly in health and education.

This project is accompanied by a skills reinforcement program for the bank related to its funding and support services to SMEs.

AFD is considering launching new initiatives in partnership with these public and private actors supporting productive investment and job creation in Egypt.

These initiatives could make use of PROPARCO, the AFD subsidiary dedicated to funding the private sector, via direct finance for public and private enterprises and via SFD and local banks in order to increase SME access to financial services. In 2013, AFD approved an SME fund-ing project with SFD destined for the country’s poorest areas.

SME © AFD, Didier Gentilhomme

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Promote renewable energy and energy efficiencyEgypt is Africa’s biggest energy consumer, with demand that has increased by 7% a year for the past 10 years. Energy intensity (1.8 times that of Turkey) and average consumption per person (double that of Morocco) are higher than in neighbouring countries. Furthermore, massive subsidies are given to the primary energy sources to the detriment of public investment in renew-able energy or energy efficiency.

In terms of production and transport, Egypt already has an installed production capacity of 31.1 GW and the network has more than 42,000 km of power lines. The current energy mix relies on hydrocarbons (almost 90%), even though the country has limited resources of this type. However, the country has a potential wind and solar energy that are yet to be exploited.

Because of the difficulties surrounding primary energy supply to power sta-tions, the supply of electricity struggles to meet the demand.

The country is actively trying to tackle these challenges thanks to a regulatory and institutional structure that is being overhauled and national strategies involving the private sector. The aim is to make use of wind and solar power potential, improve the energy efficiency of power production and transport facilities, as well as reform the modes of energy consumption.

AFD will participate in sectoral dialogue with the Egyptian authorities and focus its interventions on renewable energy production, infrastructure upgrades and energy efficiency. This includes a commitment of €50 million to improve Egypt’s high-tension power line network. The agency is also, alongside other funding bodies and the Egyptian government, studying wind and solar power projects. In the medium term, AFD could help promote energy efficiency in the industrial sector.


A project emblematic of the partnership with AFD:

Cairo Metro Line 3Since 2012, AFD has co-financed the third phase of construction for Metro Line 3 for an amount of €300 million on top of the €44 million already allocated in 2009. This third metro line will transport 2.5 million passengers every day. The expected benefits are both social (increased access for low-income passengers), economic and environmental (reduction in pollution and greenhouse gas emissions). In the future, AFD will be able to participate in the funding of new extensions of Line 3.

Since 1980

The Cairo Metro has steadily increased its overall passenger share:

Line 1: 1.4 million passengers per day;

Line 2: 1 million passengers per day;

Line 3: 2.2 million passengers per day.

As a point of comparison, the Paris Metro lines number 14 carries 3.9 million passengers per day.

Construction of the Cairo Metro © AFD, Thierry Latreille

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Access to water and wastewater servicesWhile there has been real progress in extending drinking water provision, access to sanitation remains a problem. The wastewater treatment rate in rural areas remains very low (just 20% in 2012). This situation is particularly worrying in areas with high population density such as the Nile Delta.

Wastewater pollution in the Nile and the irrigation canal network is threatening intensive agriculture and drinking water production, endangering the health of nearby populations.

AFD therefore wishes to make this sector one of its priority inter-vention areas in the country. It is thus funding, alongside other European donors, two major Improved Water and Waste Water Services Programmes (IWSP). Allocations of €40 million and €57 million will be provided to the Nile Delta and Upper Egypt respectively, both essentially rural regions.

The expected impact will be social and environmental as much as institutional. Overall water and sanitation service improvement in these governorates will enable a reduction in surface water pollution and the health risks that result from it. These two programmes also aim to build water and wastewater companies’ capacities and consolidate reforms in the sector that have already been begun by the Egyptian authorities. These programmes are made up of dozens of sub-projects with a wide range of goals. Some aim to rehabilitate existing facilities; others envisage construction of new treatment stations.

Improving rural living conditionsRural poverty has continued to increase over recent years (17% in Lower Egypt and 51% in Upper Egypt). Developing the agricultural sector (which employs more than 30% of the population and sustains almost half) is a crucial lever for increasing incomes and reducing poverty. However, this development is held back by the vulnerability of land in the Nile valley (threatened by spreading urbanisation) and water shortages. AFD has decided to intervene in Egypt in three areas that form part of the country’s agricultural strategy to 2030:

Small-scale producers and agricultural SMEs

in order to support investment and employment

Certain industries (aquaculture, milk)

to improve product quality and commercialisation

On parcels of land themselves

to achieve greater water efficiency and increase revenues for producers

Cofinanced with other donors such as the EU or the World Bank, AFD’s interventions enable increased revenues for rural populations.

Damietta Governorate, El-Rahamma station, @AFD, Ahmad Badr


5 rue Roland Barthes 75598 Paris Cedex 12 – France Tel. +33 1 53 44 31 31 Fax +33 1 44 87 99 39 www.afd.fr

AFD EGYPT

10 rue Srilanka, Zamalek, Cairo – Egypt Tel. 00 (20) 2 27 35 17 88 Fax 00 (20) 2 27 35 17 90 [email protected] egypte.afd.fr

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Agence Française de Développement (AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Provinces for seventy years. It executes the policy defined by the French Government.

AFD is present on four continents where it has an international network of seventy agencies and representation offices, including nine in the French Overseas Provinces and one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth and protect Earth, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change.

In 2012, AFD approved EUR 7 billion to finance activities in developing countries and the French Overseas Provinces. Main outcomes of AFD’s funding are monitored every year. For instance, money delivered will help get 10 million children into primary school and 3 million into secondary school; they will also improve drinking water supply for 1.79 million people. Energy efficiency projects financed by AFD in 2012 will save nearly 3.6 million tons of carbon dioxide emissions annually.

FFEM

FFEM is a bilateral public facility set up by the French Government in 1994 following the Rio Summit. It aims at promoting global environmental protection via sustainable development projects in developing or transition countries. The French Global Environment Facility supports physical projects in recipient countries. Its operations are learning-based and support experimental, innovative or exemplary approaches.

www.ffem.fr

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

www.proparco.fr


The river Nile © AFD, Laurence Wunderle

Documents

AFD in Egypt