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Cairo Cash for Clunkers

Holly Krambeck's picture

 

Vehicle scrapping and recycling programs are not new. In fact, last year, The Economist put together a neat comparison of subsidies provided for vehicle scrapping programs across the world.  

What is new, is how the Egyptians have organized their own national scheme. Rather than place the onus mostly or entirely on a government agency to provide incentives for participation, the Egyptian scheme is – I dare say – a model of public-private partnership innovation.In the fall of 2008, Prime Minister Ahmed Nazif charged the Ministry of Finance with organizing vehicle scrapping scheme, initially targeted at taxis and other mass transport vehicles.

 

  

Average Vehilce Scrapping Subsidies in 2009 [1]

 

 

The Minister envisioned that the program would accelerate fleet turnover (the average age of a registered taxi in Egypt is 32 years old), thereby improving emissions and road safety, as well as promoting local vehicle assembly industries.By January 2009, the Ministry of Finance, in collaboration with the Ministry of Interior (responsible for traffic police and vehicle licensing and registration), had signed a Protocol with five vehicle dealers, three banks, an insurance company, and an advertising agency. Each signatory voluntarily agreed to contribute to the incentive scheme – whether through low-interest loans and discounted vehicle prices, or through agreements to reduce the amount of time and paperwork involved in each transaction. For example, the insurance company agreed collaborate with the banks, so that loan payments for the purchase of new vehicles would automatically include insurance payments, and the advertising agency agreed to forward ad revenues to vehicle owners’ lending banks directly, thereby automatically reducing vehicle owner’s monthly installments. The World Bank Carbon Finance Unit is working with the Ministry of Finance to leverage carbon finance to support the development of a recycling facility that would ensure scrapped vehicles are permenantly taken off the roads. Beginning in March 2009, the program was widely advertised in local media, including price and loan installment schedules, as well as a question-and-answer hotline, to help make the program terms clear and accessible.

Participating Vehicles in the Greater Cairo Region Taxi Scrapping Projects (as of March 2010)

The one-stop cash for clunkers shop opened for business in April 2009. To facilitate ease of transactions and transparency, all activities associated with the program – inspection and scrapping of the old vehicles, receipt of subsidies, loan and insurance applications, new vehicle purchase, insurance payments, licensing and registration – all take place on one site, about 20 km west of downtown Cairo.

Of the 49,000 eligible registered vehicles in the Greater Cairo Region (taxis that are greater than 20 years old), more than 20,000 have already been registered since program inception -- half of the eligible fleet in only one year.

The speed and success of the program, to date, may be laregely attributable to the ingenuity of the Ministry of Finance team, drawing in dedicated government and private sector partners from the very beginning, widely publicizing the program and continuously inviting and incorporating feedback from participants, and establishing a one-stop shop mechanism to facilitate fast delivery and to enable close program management.

Since this is the first program of its kind in Egypt, there has been a good amount of learn-as-we-go spirit among the project team members -- each month brings new challenges, and with them, improvements to the efficiency of the program.

As a relatively new addition to the Bank team, what has struck me most about this program is the degree to which its success is client-driven. The program design, the day-to-day management, the planning for the future -- all of these are directly attributable to the Egyptian government, and I know that moving forward, we will share lessons learned from Egypt with other countries developing their own scrapping programs.

I am excited to be a part of a project that takes us beyond transfers of knowledge and experience from developed to developing countries, where we can spread experiences in new and, in many ways, more interesting directions...

 [1] Extrapolated from: The Economist. 19 November 2009. “Vehicle-Scrapping Subsidies.” (Original Data Source: OECD; Egypt scrapping subsidy adjusted for PPP using PPP conversion factors from: The International Monetary Fund. October 2009. “World Economic Outlook Database, October 2009.”)