'GO - Utt tr: in. -BYI .. :s oa~ by'. Management of the Construction Industry in Egypt Seminar Proceedings January 19-20, 1980 Cairo, Egypt THE JOINT RESEARCH TEAM ON THE HOUSING AND CONSTRUCTION INDUSTRY CAIRO UNIVERSITY/MASSACHUSETTS INSTITUTE OF TECHNOLOGY ACKNOWLEDGEMENTS 3 ACKNOWLEDGEMENTS The Seminar was sponsored by the Cairo University/M.I.T. Particular Techno- recognition is given to His Excellency Dr, Abdel Planning logical Program, Joint Research Team on Housing and the Con- Razzak Abdel Meguid, Minister of Planning; His Excellency Dr. Hassan struction Industry; PrincipalInvestigators:Professor Ahmed EZ-Erian Ismail, Chairman of the Academy of Scientific Research and Technology; and Profecsor N. John Habraken. and His Excellency Engr. Osman Ahmed Osman, Chairman of the Syndicate These proceedings are a part of a series of publicatiors of Engineers, for their support of the seminar, which describe various activities and studies undertaken in the Acknowledgements should also be given to His Excellency Dr. Ibrahim Technology Adaptation Program at the Massachusetts Institute of G. Badran, President of Cairo University; His Excellency Dr. Aly El Salmi, Technology. Director of the Development Research and Technological Planning Center; The seminar was sponsored by the Cairo University/M.I.T. and Dr. Yehya H. Kabil, Dean of the Faculty of Engineering, for their Technological Planning Program, zunler the auspices of the M.I.T. continuing support of the housing project. Technology Adaptation Program, which is funded on an interim basis The assistance and cooperation of Mr. Fouad Sultan, GeneraZ by the United States Age.cy for International Manager, Development (USAID), Misr iran Development Bank; Mr. Nabil Azmi, General Manager Cairo, Egypt. The views and opinions expressed in these proceedings, of Finance and Supply, Arab Contractors; Mr. Hani Salem, Read of however, are those of the authors and do not necessarily reflect those Mechazical and Electrical Department, Arab Contractors; and Dr. Amina of the oponsore. El Hefny, Secretory General, Egyptian Society of Management Engineering, In 1971, the United States J:-i-zrtment of State, through the are highly appreciated. Agency for InternationalDevelopment, awarded the Massachusetts In- Participationof M.I.T. Faculty members Professors Fred Moaven- stitute of Technology a grant, the purpose of which was to provide zadeh, Nazsi Choucri, Donald Lessard, and Robert Logcher; and Senior support for the development at M.I.T., in conjunction ' th institu- Lecturer Harry Sutcliffe greatly enhanced both the Seminar and Project tions in selected developing countries, of capabilities Management Workshop. useful in the adaptation of technologies and problem-solving techniques to Engineer Omar El Gamal. with the support of the MIT Liaison Office, the needs of those countries. At M.I.T., the TecenologJ Adaptation was responsible for the effective coordination of the seminar and the Program provides the means by which the long-term objective for workshop. which the A.I.D. grant was made, can be achieved -- P4 CONTENTS 5 Contents INTRODUCTION 7 PAPtRS PROJECT FINANCING IN EGYPT 11 Mr. Fouad Sultan CONSTRUCTION PROJECT AND COMPANY FINANCING 21 IN DEVELOPING COUNTRIES: A PEVII-W Dr. Donald Lessard Mr. Daniel C. Vogel CORPORATE FINANCE OF THE CONLSTRUCTION I?,T0USTRY 39 IN EGYPT Mr. Nabil Azmi RESOURCES AND CONTRACTORS IN EGYPT: A REVIEW 45 Mr. Tarek Selim Dr. David B. Ashley CONSTRUCTION AND DEVELOPMENT: THE EFFECTS 75 OF LABOR MIGRATICN Dr. Nazli Choucri BUILDING MATERIALS PRODUCTION AND REQUIREMENTS 89 IN EGYPT Engr. Abdallah El-Mosallamy EQUIPMENT AS A RESOU'ZCE OF CONSTRUCTION 95 Engr. 1iani Salem ON MODERN CONCEPTS OF MANAGEMENT AND PRODUCTIVITY 103 Dr. Amina El-Hefny CONTRACTS IN EGYPTIAN CONSTRUCTION 113 Mr. Tarek Selim Dr. David B. Ashley APPENDIX List of Seminar Participants 129 Technology Adaptation Program (TAP) 132 Technological Planning Program (TPP) 132 Housing and Construction Industry Research Program 133 Joint Pesearch Team on Housing 133 INTRODUCTION 7 Introduction constraints, tendering methods and management techniques these individuals significantly contributed to the ongoing research effort. These discussions are represented by the background papers and seminar proceedings contained During in this the first two years of the Housing and Construc- volume. tion Industry Research Project, the subproject "Organiza­ tion and Operation of the Construction Industry" investiga­ ted the various participants and their interactions and the role of the everchanging regulatory environment within which the construction industry operates. Findings from this re- SEMINAR LOCATION AND DATES search efficiencypointed out the need to increase the capaci.ty and of the construction industry, especially the pri- Registration and meetings were held at the ARAB SOCIALIST cUNION BUILDING, Cairo, Egypt; January 19-20, vate sector, if long term devulopment plans are to achieved. 1980. Increasing construction output requires: 1) an under- ADVISORY COMMITTEE standing of constraints limiting company growth and entrance Professor Ahmed Ei-Erian of new firms, and 2) full appreciation of the applicability Cairo University or non-applicability of modern project management techniques. Professor N. John Habraken From Massachusetts this additional base of information, it is possible to Institute of Technology explore policy alternatives directed toward enhancing con- COORDINATORS struction sector contributions to development. The initial review-related research has thus evolved into Dr. David Ashley a policy ana-- Massachusetts Institute of Technology lysis orientation; "Management of the Construction Industry Engr.Arab Omar Contractors El Gamal in Egypt" subproject is the evolutionary product. Mr. Tarek Selim A combination seminar and workshop, inviting top con- Massachusetts Institute of Technology struction industry managers to review, discuss and debate Mrs. CairoSoraya University Abdullah important industry issues and modern management tools was thought to be one of the more effective means of developing SECRETARIAT the required understanding of constraints and applicability All correcpondence should be directed to the following: of management techniques. This input from Egyptian con­ struction executives, project managers and ministry cffi- P.O. Box 39 cials focused and further ranked research alternatives. Giza, Egypt The seminar held January 19-20, 1980, in Cairo attract­ ed a broad spectrum of knowledgeable and talented people; PROCEEDINGS their diversity reflected the various needs and roles of Dr. David B. Ashley, editor participants in the construction industry in Egypt. Mrs. Sally T. Brunner, editing Through discussions on construction financing, Mr. Reinhard Goethert, design and production resource Mr. Nezar Al-Sayyad, assistance in preparation PAPERS Management of the Construction Industry in Egypt Seminar Proceedings January 19-20, 1980 Cairo, Egypt PROJECT FINANCING IN EGYPT Mr. Fouad Sultan Chairman and Managing Director Misr Iran Development Bank Pr'vious Pagoon-I PAPERS 13 PROJECT FINANCING INEGYPT to private sector initiative. The implementation of the open door policy was aided by the reopening of the Suez Canal and the return of the Sinai oil fields, the resur­ gence of tourist activity and the sharp rise of private remittances from Egyptian workers. This improvement in foreign exchange receipts assisted the reactivation Introduction of the idle capacity in industry, augmented the low level of The Egyptian economy has been suffering during the domestic savings and accordingly substantially improved last 20 years from a multitude of problems: the continu- the rates of capital formation. Consequently, rates of ous decline of domestic savings due to the increasing growth in real terms since 1975 have been substantially pressure of consumption in comparison to the growth in higher, averaging about 9% p.a. Gross National Product, the impact of successive wars and the burden of extensive military outlays, the large The 1980 Development Plan expenditures involved in reconstruction, the substantial The five year plan 1980 - 1984 development rise plan aims in the internal price level brought about by import- at a growth rate of real GDP and GNP of 10% annually. ed inflation and the continuous reliance of the authori- The relative high growth rate assumed in the plan was ties in financing their deteriorating fiscal budget predicted on continued high rates of growth through of investment the banking system. Therefore one can say that to be financed by considerably higher rates of national the above structural problems were aggravated by domestic savings and by decreased reliance on foreign resources. financial and pricing policies. This scenario implied a substantial squeeze on domestic The aveiage rate of growth of real GDP in the consumption to raise domestic savings from around 14% in period 1966 ­ 1974 was on the order of 3%, slightly above 1977 to 26% of total resources in 1982. that The 1978 and of population growth. The Egyptian authorities in 1979 figures indicate that both investment and consump­ full knowledge of all of the above-mentioned problems, tion expenditures have turned out to be higher than felt the urgent need to adopt the appropriate reforming implied by the plan. For instance the rate of measures, the overall basis of which were clearly spelled out in consumption to gross national product rose from 86% in the paper drawn by the President known as the "October 1977 and