FT’s article on Egypt’s new capital includes misinformation, ignores real economic situation: Government sources

Amr Kandil , Tuesday 8 Jun 2021

The sources said Egyptian private sector companies are the ones carrying out the projects in the new capital, with the armed forces only being tasked with supervising some of the projects

 New Administrative Capital
File photo of the parliament building in the New Administrative Capital

An Egyptian government source have responded to a Financial Times article on Egypt’s new capital, saying it included misinformation and inaccurate speculations and ignored the real situation of the Egyptian economy.

The article was published on Sunday, titled ‘A new capital in the Egyptian desert: Sisi’s military model for the economy.’ It accused the current Egyptian economic policies under President Abdel-Fattah El-Sisi of expanding the military role and stifling the role of the private sector.

The article used the New Administrative Capital being built east of Cairo since 2015, set to be inaugurated later this year, as an example of the expanded military role.

Last year, the government announced that more than 52,000 employees are planned to be relocated to the 700-square-kilometres city.

Government offices were due to be relocated there by mid-2020, but the step was delayed due to the coronavirus pandemic.

The FT article described the new capital as a “project out of thousands the military has taken charge of”.

‘Vanity project’

“Sisi insists it represents the ‘declaration of a new republic’ even as sceptics consider it a vanity project a country with more urgent priorities it can ill-afford,” the article says.

The source slams this conclusion, saying the new capital was established to achieve a breakthrough in terms of providing governmental services to citizens.

The source added that there is a need to build new cities to keep pace with the future population growth, noting that the Egyptian population is expected to jump from 100 to 160 million by 2050.

The source also cited the real-estate tycoon Hisham Talaat Moustafa as saying that Egypt needs one million housing units annually.

Egypt sought to build the new capital a year after the European Bank for Reconstruction and Development (EBRD) found in a 2014 study that LE 47 billion is wasted annually due to traffic congestion in the Greater Cairo area, according to the source.

The study expected this waste to rise to LE 501 billion by 2030 in case the problem is not solved.

‘Fictious employment’

The FT article said construction and real estate, as well as energy, have enabled Egypt to record more than 5 percent of growth in GDP per annum in the two years before the coronavirus.

It, however, cited an Egyptian academic as saying that 2.5 percent of this growth is represented in real estate and construction, saying that it is “fictitious employment. Once you stop building, there are no jobs.”

The source highly questioned this assumption, saying “it is inaccurate to speculate that the progress of real estate and construction will stop in light of expectations of a rise in population by 60 million over the coming 30 years.”

“If the Egyptian market’s need for a million housing units per year requires [building] new cities, roads, and huge infrastructure projects, then how could the sector be comprised of fictious employment?”

Military grip, private sector

The FT article cited sources as saying that the president distrusted the private sector when he became president and “wanted to use the military in project management and as a tool for large infrastructure projects.”

“At the core of the concerns is that the expansion of the military’s role in the state and the economy is crowding out the private sector and scaring away foreign investors,” the writer said.

The source responded, saying that the role of the military, along with the Ministry of Housing and the New Urban Communities Authority is limited to supervision, monitoring, and sometimes planning.

“Execution of the projects is the responsibility of companies not owned by the military, which means that the private sector plays a major role in real estate investment,” the source said.

The military intervention in the economy came in the wake of political and economic instability in Egypt after the 25 January Revolution, the statement noted.

The instability caused fears for the private sector to pump investments, the statement said, noting that there was a desperate need for the implementation of construction and infrastructure projects to provide for the needs of citizens and investors.

“The intervention of the military and the public sector in economic activity came to ease the implications of the economic reform programme,” the source said.

El-Sisi on several occasions has invited the private sector to join the state's efforts in implementing national developmental projects.

Economic reform, new capital

The source added that the economic reform programme treated the “economic distortions” but also led to a decline in the citizens’ purchasing power, a rise in interest rates to control inflation, which led to a decline in private investment.

The source also said that the economic reform programme and the state’s policies to encourage investments and restore security and stability have contributed to the signing of many agreements in the natural gas sector.

The Egyptian Centre for Strategic Studies (ECSS) also responded to the FT article, which described the new capital project as “a vanity project” according to sceptics and said it was carried out by the armed forces.

The ECSS said a sole institution cannot establish such a massive city that is built on 170 feddans (176.4 acres).

It added that the Egyptian private sector’s companies are the ones carrying out the projects in the new capital, with the armed forces being tasked with supervising some of the projects.

The new capital project treats the old capital’s outstanding issues represented in poor planning and weak infrastructure that is not qualified for Egypt’s 2030 vision, the ECSS said.

This vision aims to transform Egypt into a country with a digital economy that is based on knowledge and that is able to provide special services to citizens and investors, the ECSS added.

The new capital was designed to be 45 kilometres away from the capital so that it can be located between Cairo and Suez and embrace the internationally significant Suez Canal trade route, the ECSS noted.

The ECSS also noted that the real-estate sector contributes around 15.2 percent of the country’s GDP and creates job opportunities for 3.4 million workers, representing 13 percent of Egyptian workers.

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