Egypt's mega projects: Thinking big

Niveen Wahish , Friday 16 Feb 2018

Economic mega-projects have been a main characteristic of the past four years, with much debate surrounding them

New Suez Canal
File Photo: New Suez Canal (Al-Ahram)

The New Suez Canal, the New Administrative Capital, thousands of kilometres of roads connecting various parts of the country, fisheries and agricultural projects are some of the mega-projects executed by the government since 2014.

The launch of the mega-projects was intended to be a means of reviving of the economy, stagnant since 2011 since it involved pumping in investment.

Experts believe that government investments have been among the main drivers of growth in the economy in recent years. Egypt’s GDP growth rate is expected to reach around five per cent in the current fiscal year, compared to 3.5 per cent in 2015-2016.

The New Suez Canal was the first mega-project to come to life. Executed in the record time of one year, rather than three, the canal expansion project is targeted to bring in $13 billion annually by 2023 instead of $5 billion, the current average annual income of the canal.

The project involved expanding the canal to accommodate two-way traffic with the aim of increasing existing capacity and boosting revenues.

The cost of the New Canal, which came to around $8 billion or LE60 billion, was collected in the record time of eight days through investment certificates opened for subscription to the public at an annual interest rate of 12 per cent.

Raising the money for the New Canal was considered a great achievement for the project, but it also meant that the government could have been crowding out the private sector in its quest for funding.

The vibe set off by the inauguration of the canal raised expectations of what it can now contribute to the economy. The canal is one of Egypt’s main hard-currency earners. However, given the slowdown in global economic trade, the New Canal is unlikely to change things significantly in the short term. In the long run when global trade recovers, things could change.

Nonetheless, the New Canal could make major contributions even before an improvement in global trade when the area surrounding it, namely the Suez Canal Special Economic Zone (SCSEZ), is developed.

The government is working on transforming the area into a logistical and industrial hub, which would transform the canal cities of Suez, Port Said and Ismailia, as well as benefit the whole economy. Some one million jobs are expected to be created in the SCSEZ within a 15-year period.

The New Canal is only one of several major projects the government has embarked on in the past four years. Work is afoot on the New Administrative Capital located 60 km from Cairo. This mega-project is being built on an area of 184,000 feddans (one feddan is 1.038 acres) and is expected to be completed in 2020.

The first phase of the New Capital was inaugurated in October 2017 by President Abdel-Fattah Al-Sisi. It is part of a comprehensive development plan to expand the country’s urban areas to meet Egypt’s rapid population growth and improve the country’s infrastructure.

Greater Cairo’s population is set to grow from 18 million to 40 million people by 2050.

The New Administrative Capital will include 20 residential districts, a government district, a justice district, a central business and financial district, an international airport, an exhibition city and convention centre, an educational district, a diplomatic district, a medical district and a recreation centre including public gardens and parks.

The New City will accommodate seven million people in its first phase. Some 30,000 housing units have been built so far.

However, some critics of the project have failed to see the logic behind the building of a New Capital and have accused the government of carrying out a project in the absence of social dialogue and without demonstrating that it has carried out the necessary feasibility studies.

Reservations about the government’s mega-projects have been stated because of the pressures they put on the country’s budget at a time when it is already suffering from a deficit. Egypt’s budget deficit is expected to come to 9.4 per cent of GDP in the current fiscal year, a marked improvement from the 12.5 per cent registered in fiscal year 2015-16.

Moreover, critics say that the funds used for these projects would be better invested in job-creating sectors such as industry or in much-needed infrastructure such as water and sanitation.

However, supporters of the mega-projects argue that the government can work on multiple fronts and the need for infrastructure should not keep it from planning for the future.

In fact, the government, with the help of the Armed Forces, has worked on more than one front with equal zeal. Thousands of kilometres of roads have been built in recent years to provide the infrastructure needed to move people and goods and attract investment.

The first and second stages of the National Road Project, during which some 8,000 km were completed, have included 5,000 new roads and the renovation of 3,000 km of old ones. The roads are aimed at facilitating people’s lives and making transport safer.

In agriculture, President Al-Sisi recently inaugurated the first phase of a national project to create 100 thousand feddans of greenhouses. The project aims to increase agricultural output while saving on water consumption and is part of a larger plan to add 1.5 million feddans of agricultural area.

When complete, the project could change the demographic map of the country, some experts believe. The population currently lives on only seven per cent of the country’s one million square km area, and the agricultural projects could change this.

The government has also invested heavily in the electricity sector, creating huge power stations that have helped solve the chronic shortages of electricity that were a major concern in 2014.

And it has also ventured into the production of fish. Huge farms have been inaugurated in the Suez Canal area and in Kafr Al-Sheikh on the west branch of the Nile. The farms, with a projected output of thousands of tons of fish, aim at covering local demand. Egypt produces around 1.8 million tons of fish and imports around 300,000 tons.

* This story was first published in Al-Ahram Weekly 

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