Cairo - Mubasher: Around 2,000 of 30,900 construction companies exited the Egyptian market in 2016, said Hassan Abdul Aziz, president of the Egyptian Federation for Construction and Building Contractors.
This was due to the increase in the cost and prices of construction materials after floating the exchange rate of the US dollar, Abdul Aziz said in a press conference, highlighting that companies were unable to continue their operations with the new prices.
On 3 November 2016, Egypt decided to float the exchange rate of the Egyptian pound against the dollar in accordance with the mechanisms of supply and demand. It also increased interest rates by 300 basis points.
Speaking at the opening session of the third round of the Builders of Egypt Forum, held Tuesday, Abdul Aziz stated that the delay in the issuance of the price difference act "compensation" will cause more companies to exit the market in the coming period.
The Egyptian Parliament is currently studying the contractors’ compensation law, which will likely be approved in the coming weeks.
This law will allow the government to compensate companies for price differences resulting from floating the EGP, including contractors’ and construction companies’ contracts before floating the exchange rate.
The construction sector witnessed several problems after the flotation, including a rise in prices, the value-added tax (VAT), and banks’ interest rates, Abdul Aziz said, noting that the flotation had the largest impact on the sector, which does not need compensations, but rather rights.
In 2003, Egypt’s construction sector suffered a crisis following a partial flotation of the EGP, which resulted in many companies exiting the market, and several company owners going to prison.
At the time, the government decided to compensate contractors by 10%; however, this has been cancelled by the State Council, resulting in more problems for a large number of contractors, according to Abdul Aziz.
It is very important that the government take interest in national contracting companies, especially after the sector succeeded in acquiring around 99% of small and large national projects, the official highlighted.
He added that the sector was capable of expanding to other Arab and African countries, which depend on foreign construction companies by 80% for their projects.
