A model of the planned new capital of Egypt. The development is expected to have 20 residential districts with mixed-income housing for about seven million people.PHOTO:HASSAN AMMAR/ASSOCIATED PRESS
Deal to build new capital near Cairo is part of Beijing’s plans to boost business in emerging markets.
Cairo—When PresidentAbdel Fattah Al Sisiannounced an ambitious plan to build a new administrative and business capital for Egypt on 270 square miles of desert land, many were understandably skeptical about the $45 billion project.
Today some of the skepticism over that March 2015 announcement has eased. One reason: an alliance announced in January between Egyptian authorities and China State Construction Engineering Corp. giving the Chinese-state owned business a major role in the project.
Neither side announced details of the agreement and it remains unclear whether the Chinese construction company, one of the world’s largest, has made a major financial commitment. But state media in Egypt reported that the deal was worth $15 billion in loans, grants and memorandums of understanding.
Moreover, there is now movement at the desert site about 30 miles east of Cairo. In early April, Egyptian construction companies commenced work to develop roads, sanitation and communication infrastructure that will underpin the massive undertaking, according toMostafa Madbouly,the minister of housing.
“We will overcome any obstacle to implement this project,” Mr. Madbouly said in a written statement on the day the project broke ground.
The early stages of the planned new capital show how Chinese businesses eager to expand overseas are taking advantage of opportunities created in emerging markets where leaders are eager to boost political support through economic development.
Mr. Sisi, who took power through a bloody military coup in 2013 after a popular uprising unseatedHosni Mubarak,has been trying to use megaprojects to inject confidence in his regime. The president’s political stock has been badly hit since by a series of international and domestic problems, while the economy continues to struggle as tourism and foreign direct investment remain sluggish amid concerns about security after a spate of recent terror attacks.
Sensing a need to inject confidence in his regime, Mr. Sisi last month said he has directed his cabinet “to prioritize stalled projects and projects currently being implemented.”
To be sure, the plan’s immense scale still sounds too good to be true to many experts. It calls for some 20 residential districts with mixed-income housing for about seven million people and tall skyscrapers adorning a planned downtown financial district.
The planned development will also include an international airport set to be larger than London’s Heathrow, a public park dwarfing New York’s Central Park and an amusement park four times the size of Disneyland to serve its residents and visitors.
At the same time, other Egyptian attempts to build new towns on Cairo’s outskirts have been mired by inefficiency and produced underwhelming returns, saysDavid Sims,an economist and urban planner who wrote two books studying urban development in Egypt. “Egypt needs a new capital like a hole in the head,” he said in an interview. “But the government is looking for investment and being able to announce an achievement.”
Another model of the planned new capital of Egypt, which has yet to be named. Tall skyscrapers will be a part of the downtown financial district.PHOTO:HASSAN AMMAR/ASSOCIATED PRESS
Still, the Chinese are making the Egyptian project a showpiece for PresidentXi Jinping’s “One-Belt-One-Road” program to strengthen the country’s global position through overseas logistics and infrastructure projects. As part of this effort—named partly after the historic “silk road” trade routes—China State Construction has accelerated its international contracting jobs in recent years, building stadiums, housing apartments, roads, highways, hotels and bridges in Africa, the Middle East and other parts of Asia.
Chinese involvement in the new capital project was one of numerous announcements made in January when President Xi visited Egypt. During that visit, officials discussed the possibility of financial support from the new Beijing-based development bank Asian Infrastructure Investment Bank, according to the Chinese government website. The new Asian investment bank has yet to announce details of its first project.
According to a stock exchange filing by China State Construction, the first phase of the new Egyptian capital will include a national meeting center, a building for the parliament, conference and exhibition halls and office premises for 12 government departments. The construction time is estimated to be three years, and the total size of the contract is $2.7 billion.
“This project indicates that the company is achieving substantial results in its push for One-Belt-One-Road projects,” the firm said in the January filing.
China State Construction has completed many big projects, including the expressway from the Bahamas International Airport to downtown Nassau and Terminal One of theHouari BoumedieneAirport in Algeria.
But one of its high-profile failures abroad is the $3.5 billion Baha Mar hotel and casino project in the Bahamas. The project has suffered from a series of missed deadlines, complaints about shoddy materials, a bankruptcy filing and bitter clashes with the developer over pay to imported Chinese workers. The resort, which is nearly completed, is currently in limbo and has been a blow to the local economy.
The planned new Egyptian capital, which hasn’t yet been named, was designed to provide a lifeline to Cairo, which is home to some 18 million people. Officials expect that number to grow to 40 million by 2050.
New megaprojects on the scale of the Egyptian new capital plan have a spotty track record around the world. Many have never gotten off drawing boards. But there are several examples of new capitals being created in the middle of nowhere, including Canberra in Australia; Islamabad in Pakistan; and Brasília in Brazil.
Mr. Sims said Egypt faces more hurdles than most of these other countries did when they embarked on their new capital projects. For example, foreign investment in Egypt has been limited since the coup, with the country’s economy being propped up largely by donations from Gulf countries. Government funds will inevitably have to be allocated to more pressing concerns, he said.
— The Wall Street Journal and Dahlia Kholaif contributed to this article.
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