What’s Happening
Egypt has announced that 35 billion USD in investments from the UAE would be flowing into the country over the next two months. The investment is in order to develop a 170km2 area of Ras El Hekma into a “next generation city” according to ADQ, the Emirati investment fund which is working on the project in cooperation with the Egyptian government.
Ras El Hekma lies approximately 200km (124 miles) west of Alexandria, and is already a hotspot for wealthier Egyptians and other tourists who vacation in the areas tourist resorts. Construction of the new city is supposed to begin in early 2025, however no expected completion date has been mentioned. Upon completion, Egyptian Prime Minister Mostafa Madbouly says the city is expected to draw in eight million tourists a year.
Madbouly also stated that the project could attract a total of 150bn in investments throughout the time it is being worked on. The city is to feature it’s own airport, a marina, both residential and tourist developments, technology and light industry, schools and universities, and investment zones.
The Egyptian government will have a 35% share in profits made from the project, with the remainder of shares belonging to Emirati private investors.
Residents already within the area which is to be developed will be relocated and compensated, according to Madbouly.
Desperately Needed
While there have been criticisms on the development mostly taking place at the hands of foreign companies, the project as a whole is expected to have profound effects on the Egyptian economy, which has been in a years long crisis. Already after the project was announced, Egypt’s sovereign dollar bonds soared.
For the last several years, inflation in Egypt has been high, foreign investment distinctly low, Egypt’s foreign currency supply has been low, and the government has increasingly become buried in debt. As things currently stand, debt servicing makes up most of Egypt’s annual expenditures.
The crisis has resulted in a significant portion of Egypt’s 109 million people falling either below or close to the poverty line.
Things have been made worse by the Israel-Gaza war, which takes place upon Egypt’s border, as well as Houthi attacks in the Red Sea reducing profits from the Suez Canal, as some companies seek other routes of transport.
The Egyptian government claims the project will do much to solve Egypt’s economic crisis. Not only does it bring in lots of foreign direct investment, the largest such in the nations history, but it will also serve to create a significant amount of jobs, and assist with lowering inflation.
The projects announcement also comes as negotiations between Egypt and the International Monetary Fund (IMF) for a bailout deal. While exact amounts of the deal are unknown, it is expected to be above 10bn.
Madbouly said, following the announcement of the project, that Egypt is “very, very few steps away” from securing the deal with the IMF. Both the Ras El Hekma project and the IMF’s bailout deal are expected to have very positive effects on Egypt’s economy, primarily in the medium term, and assist greatly with ending their economic crisis.