Role of the Construction Industry in the Egyptian Economy Essay

Chapter 2.Literature ReappraisalPage|1

Chapter 2. Literature Reappraisal

Definition of Construction

The building sector is a cardinal sector for Egypt’s economic system and it comprises of a broad scope of merchandises, engineerings and service classs with specified market characteristics. In the thesis, we define the sector in three wide countries: building, services and stuffs.

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  1. Construction proper:this country includes project direction and edifice by contractor companies. Firms in this country can either be responsible for the complete fulfillment of a undertaking ( after tendering procedure takes topographic point ) or take portion in one of its phases ( as a subcontractor ) .
  1. Servicess:this country includes companies that produce drawings, computations, designs, execute architectural and quantity-surveying activities, manage cheques, supervising, advice and gross revenues.
  1. Materials:companies that provide the existent edifice stuffs or the equipment that is necessary for the whole undertaking to be executed. The stuffs can be divided in to primary stuffs ( such as steel, cement, glass, etc. ) , downstream merchandises ( such as steel frames, Windowss, concrete parts, woodworking, etc. ) , and complete systems ( e.g. , air-conditioning, lifts, security, etc. ) that are put in topographic point by certain companies or system suppliers.

It is fiddling for the companies engaged in this market to keep certain criterions in the above-named merchandises and services, besides including technology and design every bit good as the supply and the installing of equipment.

Categorization of Construction Industry Undertakings

Construction undertakings in Egypt and in any state in the Earth can be classified in to five classs.

  1. Residential lodging undertakings:
  • Includes single-family & amp ; multi-family houses and high-rise flat edifices.
  1. Institutional and commercial edifice undertakings:
  • Include a great assortment of undertaking types and sizes such as schools and universities, infirmaries, bowls, big shopping centres, skyscrapers for offices and hotels.
  • Normally necessitate more sophisticated technology professionals and adept laborers.
  1. Industrial undertakings:
  • Comprises of really large-scale undertakings with a high grade of technological complexness, such as oil refineries, steel Millss, chemical processing workss and electrical power Stationss.
  • Those undertakings require a huge sum of planning and building clip. Besides, governmental ordinances and the long-run demand can greatly affect determinations on these undertakings.
  1. Infrastructure and heavy civil building undertakings:
  • Most of these undertakings are publically owned and they are characterized by the use of monolithic equipment.
  • Include main roads, tunnels, Bridgess, grapevines, drainage systems and sewage intervention workss.
  1. Environmental building undertakings:
  • Undertakings where pollution control and protection of natural resources are a concern.

Role of the Construction Industry in the Egyptian Economy

The building industry in Egypt is a major subscriber to the Egyptian economic system and one of its fastest turning sectors. Harmonizing to Ministry of be aftering latest publication ( 2013 ) , building and existent estate sectors contributes around 120.2 billion ( EGP ) to the economic system which is 7.17 % of the entire GDP, comprises of over 10,527 companies offering plentifulness of occupation chances, which is tantamount to approximately 24 % of Egypt’s entire work force which shows that the building is a labor-intensive industry in Egypt.

The building sector has been affected disproportionately since the recession of 2008.Afterwards, the first revolution that occurred in 2011. Since so, Egypt has witnessed a deficiency of political and economic stableness.

Despite recent economic and fiscal crisis, which affected most developed economic systems every bit good as political instability, Egypt’s building industry remains one of the largest in the MENA part, measured by employment, figure of endeavors, and gross value added. However, Egypt’s building industry is confronting major challenges that affect the end product degrees and activity of the building sector. These challenges include:

  • Withdrawal of Middle Eastern and foreign investors.
  • Addition of the monetary values of indispensable edifice stuffs ( due to Egypt’s latest moving ridge in illegal edifice )
  • Unstable political issues.
  • A globally unsteady economic system.
  • Low degree of work-force accomplishments.
  • Fiscal obstructions confronting little building companies.

Over the last decennary prior to 2011, high building activity was witnessed in the different building classs whether substructure, residential or industrial undertakings. Therefore, big investings took topographic point by both theprivatesector in all existent estate sections including commercial, industrial development, cordial reception, lodging, and thepopulacesector in the field of public public-service corporations and societal services. As a consequence, high demand on edifice stuffs in the local market has been created doing addition in the stuffs production and monetary values.

The building activity in Egypt is non limited to the assembly of different kinds of edifices, but it besides comprises of all substructure developments, such as H2O plants, roads and electricity installations.

The building market in Egypt is extremely dependent on edifice stuffs used such as cement, steel and ready-mix concrete, etc. Building stuffs are non merely used by the local Egyptian market as they comprise about 23 % of entire Egyptian exports lending 13.9 billion ( EGP ) to the economic system. The taking market participants in the edifice stuff industry are Beshay Steel & A ; Ezz Steel ( taking manufacturer of high quality long and level steel in the Middle East ) , Cemex and Lafarge ( taking manufacturer of cement, concrete and sums in Egypt ) .

Construction Market Players

Construction market participants in Egypt can be sorted in to four groups:

  • Constructing stuffs companies.
  • Contracting companies.
  • Consulting companies.
  • Real estate companies ( includes private and international companies ) .

Building stuffs are cardinal to any building undertaking ; edifice stuffs include steel, cement, concrete, gypsum and others. General Authority for Free Zones and Investments ( GAFI ) stated that, there were 2288 companies working in the edifice stuffs sector with entire investings amounting to 7.8 $ US billion. In add-on, the sector ranks the first in non-oil exports adding 22.7 billion ( EGP ) and stand foring 23 % of the entire exports of the state.

Contracting companies are responsible for physically building the undertaking and they are usually chosen through unfastened or closed stamp. After they are chosen harmonizing to proficient and fiscal rating, the company starts presenting the complete undertaking in conformity with the contract footings. The taking catching houses in Egypt are Orascom Construction Industries, Arab Contractors, Hassan Allam, SIAC and the international companies include Amalgamate Contractors Company ( CCC ) and Vinci.

Consulting companies are responsible for planning, planing edifices and their related landscape gardening. Consulting companies have specialized applied scientists in civil, electrical and mechanical plants as they assist in developing the project’s budget, range and agenda. After the completion of the undertaking, the company conducts trials to verify that the undertaking is done harmonizing to the contract paperss. The taking consulting houses in Egypt are SIAC, Shaker Consultancy Group, Ehaf Consultancy Group and Engineering Consultants Group ( ECG ) .

Real estate is the belongings consisting of land and anything for good fixed to it. Although, people frequently refer to the existent estate sector form the chance of residential life but existent estate includes office edifices, mills, retail shop edifices and town places. Real Estate in Egypt can be characterized by four different periods:

  • ( 1981-1995 ) : Real estate industry started in 1981 and it resulted in increasing the monetary values of land, building stuffs and labour force. The building was concentrated on high-ranking countries as Misr Al Gadida, Maadi and new metropoliss like Borg Al Arab and 6th of October.
  • ( 1996-2002 ) : In this period, the sector faced many troubles as the Asiatic fiscal crisis in 1997, recognition crisis of the Egyptian banking sector ensuing in a recession in the existent estate sector.
  • ( 2003-2010 ) : Real estate development has regained its strength due to uninterrupted addition in oil monetary values as a consequence investors from gulf states directed their fiscal investing to the existent estate sector in Egypt. Furthermore, GDP growing rates increased to make 7 % in 2007/2008. Unfortunately, this development was hit in 2008 by the fiscal crisis.
  • ( 2010-2013 ) : The eruption of the 25Thursdayof January revolution in 2011 had a negative consequence on the existent estate sector. From ( 2011-2013 ) , Egypt was enduring from both political and economic instability and agitation.

The Real estate sector market participants are either private sector companies as Talaat Mostafa Group, Sixth of October for Development and Investment Co. ( SODIC ) , Palm Hills Development and Amer Group or international companies as Emaar Misr, Damaac and Diar Real Estate.

Macroeconomic Indexs and Foreign Direct Investment

The thesis reviews the Egyptian GDP and analyzes the consequence of the building and existent estate sectors on the Egyptian GDP over the last decennary from 2003-2013. Foreign Direct Investment ( FDI ) is a critical component and a major beginning of finance that helps lower-income economic systems to develop and cut down poorness or it means having finance beyond national boundary lines from wealthier economic systems as USA and China.

USA is the world‘s largest economic system so it is a critical investor for any underdeveloped state. Harmonizing to General Authority for Investments and Free zones ( GAFI ) , the U.S. foreign direct investings for FY2011 were 1.8 $ US billion of the sum FDI which was 2.2 $ US billion, hence US portion in FDI ( 2011 ) was 82 % of the entire foreign investings. Egypt’s entire foreign direct investings in 2009/2010 was transcending 10 $ US billion. An analysis of the Regional and International states lending to Egypt’s FDI is portion of the thesis.

Regional & A ; International Markets

Regional building markets of United Arab Emirates, Saudi Arabia, Kuwait and others ; in add-on to international markets of China, USA, Germany and others are compared to Egypt’s market in the undermentioned facets:

  • Construction volumes.
  • Building stuffs.

Future Developments

The thesis reviews the options that can heighten Egypt’ building sector, the developments planned by the authorities and the public private partnership ( PPP ) undertakings.


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