Gulf Governments are right to be supporting the mega-projects now being rolled out by Egypt’s President Abdel Fattah El Sisi. There’s to be a new $45 billion capital city just outside Cairo, increased capacity for the Suez Canal, many more power stations and a million new homes.
At the Sharm El Sheikh conference to promote the plan last weekend the Prime Minister and Deputy Ruler of the UAE, Sheikh Mohammed bin Rashid Al Maktoum tweeted that the UAE has already donated $14 billion to Egypt over the past two years and promised to do much more.
Power projects
President El Sisi told the same conference that he had negotiated a revised deal with Siemens to speed up the construction of three proposed power plants with a combined output of 13,200 megawatts to 18 months from 36 months as well as a lower cost and better financing terms, and that he’d done the same with a power plant to be built by General Electric.
That’s all fine, although the two multinational companies involved may not be quite so pleased, and a huge advance on the previous government that achieved almost nothing in terms of new mega-projects.
However, in order to make such infrastructure investment really take-off then the state needs to act as a seed financer only and secure the support of private investors to multiply that investment many times.
Multiplier effect
For example, the Dubai Government got the property boom of 2003-8 rolling but it was only by attracting huge amounts of foreign and private capital that the building achieved such a huge scale. Egypt wants around $300 billion to complete its largest construction program since the pyramids and that is going to need more than the generosity of regional doner states.
How to win private investment confidence is rather a more ticklish problem. Yes interest rates are very low around the world but there is enormous competition for the available capital. Private foreign investors are going to be as worried about the return of their capital as the return on that capital.
Even the issuing of Islamic sukuks is something of an issue for the new regime because of the religious associations of its predecessor. That is surely something that it ought to get sorted out quickly.
Fast action
Indeed, Egypt needs to act rather faster than is its normal custom or the momentum that now exists behind this huge endeavour will begin to fade. There are signs that this is happening and a lot of enthusiasm about the direction that the government is taking.
Perhaps global institutions like the World Bank and International Monetary Fund will prove supportive. But if Egypt really wants to build a future it needs to embrace the private sector and not just try to squeeze it for every cent. Emaar Properties has just denied media reports and says it has no involvement with the ‘New Cairo’ project. It ought to be there.
One private investor from Dubai, Majid Al Futtaim has just announced a boost in its five-year investment plan for Egypt to $3.2 billion. It’s developing the Mall of Egypt with Africa’s first indoor ski slope, and the expansion of its Carrefour hypermarkets and supermarkets network to 55 branches by end of 2019. Others will follow if they can see the business case.
