The terms of the deal, which was no more than a rumour two weeks ago, turn out to be better than what was originally speculated. In addition to this sum, the company will convert a total of $11 billion of UAE deposits with the Central Bank of Egypt, to be utilised in other investments across Egypt.
The government said this project was a partnership with the developers. According to the ADQ statement, the Egyptian government will retain a 35 per cent stake in the Ras Al-Hikma development, receiving 35 per cent of its revenues throughout the duration of the project.
“This is one of the greatest ways to maximise the use of state assets,” as Prime Minister Mustafa Madbouli put it, following the signing of the deal on Friday. Most importantly, the project offers a solution to the hard currency shortage the country has been enduring for two years.
Critics of the deal condemned the fact that such a prime location, one of the most beautiful spots on the Mediterranean, is being sold to foreign investors. But the government’s 35 per cent share counters that argument. Moreover, with ADQ’s track record, the project promises to transform the North Coast into a magnet for tourism. Since investment in the North Coast began in the 1980s, first by government entities and later by the private sector, it has failed to deliver a comprehensive development of the area. Through more than 250 kilometres of beautiful sandy beaches west of Alexandria, only upscale gated communities were created. They are used only during the summer, for three months a year at the most. The establishment of New Alamein City was another attempt at making the North Coast a year-round destination, but the success of that step has yet to make itself felt. Hopes are high that the development of Ras Al-Hikma, and the $150 billion prospective investment ADQ said the project will attract, will have a spillover effect across the whole coast. According to ADQ, plans are to make Ras Al-Hikma a “leading first-of-its-kind Mediterranean holiday destination, financial centre and free zone equipped with world-class infrastructure to strengthen Egypt’s economic and tourism growth potential.”
The path is certainly clear for the project to take off. It will benefit from existing infrastructure the government has put in place such as new roads that cut the travel distance, and the high-speed electric train which is still in the making but is scheduled to reach New Alamein City as well as Marsa Matrouh.
The project, slated to begin in early 2025, will create millions of jobs according to the prime minister. Understandably, the construction sector should boom on the back of the project, but what is important is the creation of sustainable jobs that survive beyond the initial few years. Strict supervision should be implemented to ensure that the project does not damage or alter the environment and ecosystem in the pristine waters of the area, as happened with another project in Sidi Abdel-Rahman, close to Alamein.
It also comes as a rescue to the economy amid one of its hardest ever dollar crunches. Banks stopped meeting importers’ demands for foreign currency, leading to the piling of food and medicine cargo in ports fuelling an unprecedented inflationary wave.
All this fed the speculation on the currency in the parallel market where the dollar peaked at LE72 two weeks ago, before retreating to hover between LE60 and LE62 before the deal was announced. On Monday it changed hands at LE48-LE49 in the black market. The official rate has been stable around at LE30.9 for months now. These factors combined make reaching a new agreement with the IMF and the devaluing it entails a question of when, not if.
That is why the timing of the deal is perfect. The inflow of $24 billion in the course of two months should calm down the speculation on the dollar and tighten the gap between the official and parallel market prices, and the price of the dollar at which the devaluation will take place may be around LE40-45 compared to the 55-60 range previously expected by many investment banks.
Together with an expanded IMF loan, the Ras Al-Hikma deal will secure foreign currency inflow covering Egypt’s foreign currency needs for four years, according to the American investment bank Goldman Sachs.
* A version of this article appears in print in the 29 February, 2024 edition of Al-Ahram Weekly
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