Egypt’s economic development conference, Egypt The Future, held this month in Sharm El Sheikh, brought a flood of Arabian Gulf investments, with several multibillion-dollar deals signed across the property and energy sectors.
The scope of the projects suggests growing economic and political integration between the military backed Egyptian government and Arabian Gulf countries, with the UAE taking a leading role in this region.
Chief among the joint UAE-Egypt mega-projects unveiled at the conference is a US$45 billion administrative capital city to be developed by Capital City Partners, led by Emaar Properties’ chairman Mohamed Alabbar.
The idea for a smaller facility had been around since the latter part of the rule of former president Hosni Mubarak a few years ago, and came to the fore again in July last year before concrete steps were taken to launch the project.
Marketed at the summit as Egypt’s “bridge to the future”, the development plans to offer 1.1 million residential units over 700 square kilometres, full of ambitious features such as the tallest tower in Africa, a public park six times the size of London’s Hyde Park, and a theme park four times larger than Disneyland.
But the proposed scale of the project should come as no surprise. Mr Alabbar, who founded Capital City Partners specifically for the mammoth undertaking, is well-known for his superlatives. As the chairman of Dubai’s largest property development firm, Mr Alabbar has overseen construction of the Burj Khalifa, the world’s tallest building, and the Dubai Mall, the world’s largest shopping precinct.
However, the importance of the new capital city proposal goes far beyond its impressive size and price tag.
The plan to transfer Egypt’s ministries and government institutions out of crowded Cairo represents part of the current government’s war on the country’s notoriously cumbersome bureaucracy.
“The bureaucratic system needs to be totally destroyed,” said Egypt’s minister of investment Ashraf Salman during a panel discussion at the Sharm El Sheikh event.
Measures to leap-frog the country’s web of bureaucracy were at the centre of conference preparations, which were led by Egypt’s ministry of investment and a special UAE task force.
Primary is a new “unified investment law”, which bypasses numerous pieces of existing legislation and government authorities.
“The law is part of an executive revolution to completely overhaul the investment climate,” says Alaa Ezz, the secretary general of the Federation of Egyptian Chambers of Commerce.
The legislation, ratified by the Egyptian president Abdel Fattah El Sisi immediately ahead of the conference, offers a portfolio of investor-friendly amendments from tax reforms to creation of a one-stop shop to streamline investor paperwork.
“You cannot take the new investment law as a single element. It’s a complete package,” says Mr Ezz.
Indeed the multi-purpose law also provides a number of protections for investors, strengthening government commitment to contracts, removing restrictions on exiting the market and introducing out-of-court committees to expedite dispute settlements.
Major Gulf property investors will welcome the strengthening of protection; several faced unsubstantiated accusations of unfair land acquisition including Dubai’s Damac Properties and Saudi Arabia’s Kingdom Holding following the January 25 Revolution in 2011.
The wave of UAE property investments announced at the economic conference this month suggests a vote of confidence for the El Sisi government and its recent reforms.
In addition to the $45bn Capital City Partners-led project, the Abu Dhabi Government-owned Aabar investment firm signed a deal with Egypt’s largest property development firm, Palm Hills Developments, to build a new city to the west of Cairo, expected to cost $20bn.
Meanwhile, the Dubai-based developer Majid Al Futtaim Group announced a $500 million increase to its existing $2.46bn Egyptian portfolio for the development of four neighbourhood centres in new residential cities and four shopping malls in greater Cairo.
These projects come in addition to Majid Al Futtaim’s ongoing investments including, among others, $660m for the development of the Mall of Egypt, featuring a ski park and 17-screen cinema, as well as $660m for the expansion of its Carrefour supermarket network.
The firm’s chief executive Alain Bejjani attributed the additional projects to the Egyptian government’s success in creating an “encouraging investment environment”.
Other plans unveiled by the Egyptian government at the Sharm El Sheikh event included a high-speed train link from Ain Shams through the new city and beyond, as well a new airport.
As for the new administrative capital itself, Mr Alabbar says he is confident of the support of the Egyptian government and the viability of Capital City Partner’s land acquisition.
“We’re in a partnership with the government. They will offer the land, we will invest, and we will split the profits,” he says. “The government is with us and the issue is easy.”
Mr Alabbar’s confidence is no doubt bolstered by his position as a leading adviser to Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. Sheikh Mohammed, who led the Emirates delegation at the economic conference, opened the event with the announcement of an additional $4bn aid package.
The capital city project has huge symbolic importance signalling the El Sisi government’s solid alignment Gulf-wards.
And this orientation is not just figurative.
The proposed capital, situated to the east of Cairo and nestled between two major motorways leading to the Red Sea coast, would enable easier access to important Egyptian connections to the Gulf, namely the Ain Sokhna and Suez ports.
These plans complement the huge state-led Suez Canal Area Development Project, launched last August by Mr El Sisi with the aim of transforming Egypt into an international logistics centre and trading hub.
The national project, which is designed to increase Suez Canal annual revenues from $5bn to over $13bn by 2023, is expected to account for 30 to 35 per cent of Egypt’s GDP upon completion. Along with the creation of a parallel canal, the mega-project includes the expansion of six sea ports and three major industrial zones in Port Said, Ismailia and Suez/Ain Sokhna.
The new capital would bring Egypt’s administrative centre closer to the economic hubs – including the Ain Sokhna Port, referred to at the economic conference as the “gateway to the GCC” by the general authority for the Suez Canal Economic Zone.
Just 40km south of the Suez Canal, the Sokhna Port offers a vital passage for Egypt-Asia trade and constitutes an important element of the Suez Project plans. Also at the Sharm El Sheikh conference, a $415m deal with DP World, the Dubai-based global ports operator, was signed to construct liquid bulk terminals at the Sokhna Port, to handle the anticipated increased demand for the storage and shipping of fuel and petrochemicals.
Meanwhile, Sokhna industrial zone, surrounding the 80 sq km area adjacent to the port, has been designated as the hub of the Suez Project’s heavy industrial ambitions such as in petrochemicals, oil refining and building materials.
Sherif Fawzy, the former advisor to the Egyptian ministry of petroleum and a group monitoring director at Egyptian Steel, expects the Sokhna area to experience a considerable increase of activity as the capital city construction and Suez Project progress.
“The outcome of these two projects will create incentives for us and others to pour more investments into the sector,” says Mr Fawzy whose firm has a steel plant with a 1.1 million tonne production capacity in the Sokhna zone.
Sokhna Port is majority owned and operated by DP World, which is a subsidiary of Dubai World. The UAE’s role in Mr El Sisi’s national projects for a new Egypt suggests a long road of collaboration between the two countries’ leadership.
And if the new capital does end up serving as a “bridge to the future”, the future of Egypt appears to lie en route to the Gulf.
* business@thenational.ae