Africa Real Estate

Geoeconomics of Egypt’s new capital

For over a thousand years, Cairo has served as the heart of Egypt, yet some 40 km in the east. The government is constructing a new city. and if all goes to plan, it will act as the new seat of Egypt’s.

Government. It promises to be bigger, better and newer, but a project of this magnitude also carries significant geo economic implications, im your host … .., and welcome to the caspian report, Provisionally known as the new administrative capital.

The construction project was announced in march 2015 during an International Investment Conference in Egypt. The new Capital serves as the … Of President Abdel Fattah el-Sisi, And it is scheduled for conclusion by 2022.

Moreover, it aims to house about 6 million people in an area of 700 square km, That is the size of Singapour and nearly twice as large as Cairo.. The idea is to move most of Egypt’s, government institutions to the new capital in June 2019, including the presidency, the Cabinet, the Parliament and 34 ministries.

4 embassies are also encouraged to relocate.. Meanwhile, the fourth ( ) of its residents are expected to move there somewhere by mid-2019. Looking at the blue-print of the new capital, it features large green spaces, along with a new Parliament, a Central Bank and a Business District with 20 sky scrapers, including Africa’s, tallest tower.

. What’s more is that the alternative capital will include a teen park, ( ), larger than Disneyland an airport larger than London’s Heathrow and a presidential palace that will be 8 times the size of the White House.

Taken together. The other taking ( ) is slated to be one of the most ambitious engineering projects in modern history. At the cost of 45 billion dollars. It’s. Also one of Egypt’s most expensive expenditure.

. How exactly this price tag was calculated? Is unknown? The spokesman for the mega-project stressed that the budget for the new capital will be settled on a case by case basis, as each part is constructed Still.

History shows that projects of this dimension often inflate it costs sometimes by a multitude of factors. What we do know is that the project’s. Supervision was assigned to the administrator of capital for urban development, A joint entity that is owned, 51 % by the Egyptian military, while the remaining 49 % is controlled by the new urban community’s authority.

The involvement of the Egyptian military indicates that the construction of the new capital is not merely urban or commercial in nature. Other … include businesses from China, Saoudi Arabia and the United Arab Emirates.

As for the motive for the new capital, it is … in the geopolitics of Egypt, About 96 % of Egyptians live on just 4 % of the soil, with the remaining of the country being uninhabitable, and considering the fact that Egypt’s, population will Climb from 95 million in 2017 to 151 million by 2050.

, The existing cities will get increasingly crowded. Since there isn’t much space to move around in the country. For Cairo. The demographics surge is even more pressing In terms of population. The city ranks as one of the world’s fastest growing cities, with an annual growth of about half a million.

As such, Cairo is one of the most crowded and congested cities on earth. Evidently, this has taken a toll on the city with traffic congestion and air pollution being the prime examples. For comparison, the traffic costs in 2010 accounted for about 4 % of Egypt total GDP.

However, the population of the greater Cairo metropolitan area is expected to climb to 40 million by 2050. This would not only depreciate the quality of life for the residents, but the existing infrastructures simply cannot absorb more people.

. So there is no doubt that Egypt’s, demographic surge. The country is in desperate need for housing in this sens. One of the primary objectives of the mega-project is to ease congestion and over-population in Cairo over the next decades.

Beyond demographics. There are economic considerations for the construction of the new capital, Since Cairo lacks infrastructure to handle 40 million people by 2050. Housing will also be insufficient.

, which will skyrocket. Real estate prices in the existing capital by mid-century.This would create all sorts of social tensions and to avert such a scenario. El-Sisi has given the green light for the mega-project.

Another point of study is employment. The new capital will include thousand of housing units various shopping malls, as well as hundreds of educational facilities and medical centres. Building this facilities will boost the construction sector and thereby increase GDP growth.

Moreover, it is believed that this commercial features will create more than a million jobs. Yet perhaps the most compellant geo-economic consideration is the new capital’s, location which seats between Cairo and the Suez canal.

Having recently expanded the Suez canal, vassal … both direction at all time. The Egyptians are now working on an industrial zone along the banks of the newly expanded canal of the industrial hub. A corridor of human ressources would stretch from Cairo to the new capital to the new industrial park until finally entering by the expanded Suez Canal.

. It’s, not hard to imagine that such a physical connection will encourage substantial economic opportunities in shipping, banking, insurance, etc.. The final motive for the new capital is to catapulte Egypt back into the geopolitical chess part For the .

.. decade. The attitude of the egyptian government toward regional affairs has fluctuated according to its security at home. At the same time, regional contenders, like Saoudi Arabia and Turkey, have been making head ways towards the Red Sea and the eastern Mediterranean, where they are increasingly competing for influence.

Now, with the Arab springs behind it and with the military back in power, the Egyptian leadership is feeling confident enough to push back and reclaim its seat of power at the heart of the Arab world With the new capital.

El-Sisi hopes to do just that by giving Egypt a much needed face, lift However, Egypt’s. New capital must also be examined in the context of Saoudi Arabia’s, Neom city, which is an ambitious hi-tech hub sitting on the opposite side of the Red Sea.

Watch, our report of the geoeconomics of Neom city for more. Economically-speaking, the Saoudi and Egyptian Projects compete and complement one another. Foreign investors may opt to finance one instead of the other, but if the two projects can coordinate their efforts, it could forge a mutual beneficial, economical relationship.

Yet, while the Egyptian project is ambitious on paper, the scale defies historical norms.. Critics call it a white elephant project., arguing that the multi-billion dollar plan was initiated with little debate and that the funds could have been better put to refurbishing Cairo.

What’s more? Is that many Egyptians question the wisdom of embarking on the massive construction project at the time where the lower and the middle-class are being hit by new taxes and high inflation, while the State is taking out a 12 billion dollar loan from the IMF? If anything, the construction of the new capital sense a conflicting sign from the LCC administration.

. In addition, if the idea of constructing cities from scratch is not new, Egypt has at least 22 unfinished settlements in the desert, some dating back 30 years.. Collectively, this settle act. Towns hold about one million people, but most of the housing remains empty.

One example is New Cairo, a suburb to the east of its name sake.. Initially, it was meant to house 5 million residents yet a decade after completion. It only holds a population of roughly two hundred thousand.

New Cairo and artificial cities like it fail to attract residents because the settlements largely lack infrastructure and employment., But also because most Egyptians cannot afford to relocate to such cities, Even if they wanted to.

. Looking at the new capital mega-project, the same issues are coming up. Mainly housing prices remain beyond the reach of the middle class due to the real estate bubble. Thus, even if the government is aware of this older lying issue, reducing the housing costs will require managing the real estate bubble for the time being without more affordable housing prices.

The new capital is unlikely to be populated, even if people do relocate to the new city. Its likely to be the upper-class of Egypt society, whereas middle-class households will remain in overcrowded Cairo.

On that account. The new capital risks becoming a symbol of social economic inequality In general. It is true that Egypt is in need of a new capital, but if the mega-project is to succeed, the government must stay close from its past, failed settlements and seek for ways to attract not just wealthy communities, but also the middle-class.

. Since he came into office. El-Sisi has eliminated food, water and energy subsidies in order to improve the country’s public finances. The plan has been successful in correcting Egypt’s balance, but it has also generated a lot of resentment towards the presidency.

If the project of el-Sisi fails, he will feel the back lash as such. The new capital is a gamble that the president cannot afford to lose..
Source : Youtube