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National megaprojects: economic growth stimulus or political propaganda? - Daily News Egypt

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National megaprojects: economic growth stimulus or political propaganda?

Major projects have reduced unemployment and increased economic growth, says Al-Sisi


Egypt is in a race against time to implement a group of national megaprojects that are claimed to stimulate economy and create jobs; however, some economists believe that these projects are not a priority at the moment, but rather a form of political promotion for the regime.

Economist Hany Tawfik said that the feasibility studies of national projects, like the 1.5m-acre land reclamation project and the New Administrative Capital, were not announced by the government yet. “Priority must be given to improving education quality, healthcare services, or projects with strong feasibility studies,” Tawfik said.

During his meeting with the editors-in-chief of national newspapers a month ago, President Abdel Fattah Al-Sisi said that the major national projects have reduced unemployment from 13.8% to 12.5% and increased the GDP growth rate to 4.5%.

“The establishment of the New Administrative Capital and other new cities turns empty areas into real value. The price per single square metre in the desert has reached a minimum of EGP 1,000,” Al-Sisi had said. He stressed that the value of the land added to the state’s assets is larger than the cost of the projects already implemented and those to be implemented.

Prime Minister Sherif Ismail said during an economic conference on Sunday that the government is seeking to accelerate the pace of national projects. He noted that they have provided 3-4m jobs during the past period.

Egypt is holding a conference on the national megaprojects on Tuesday, media-sponsored by Daily News Egypt. The conference will focus on how these projects can provide short- and long-term growth to the Egyptian market, and the initiatives that would promote the existing relationships between Egypt and investors and project’s developers on both the local and international levels.

The conference also discusses financial reforms, the policy that should be adopted to attract investors, and the several projects that will be delivered in the next 3-5 years in different sectors. The conference is important to the sectors of housing, real estate, transport, energy, manufacturing, and industrial development.

It sheds light on how the Ministry of Industry and Trade will work on the development of major areas, such as the Golden Triangle, how the Central Bank of Egypt has launched the initiative of supporting innovation in small- and medium-sized enterprises (SME) through coordination between those enterprises and banks, and the already existing industry opportunities that would make profits in the short-term in different sectors.

The conference sees the participation of the ministers of industry, planning, transport, international cooperation, and finance, besides representatives of major private companies operating in the Egyptian market.

The conference aims at supporting Egypt in developing its economy and projects’ sector, head of the company organising the conference said.

It discusses how to achieve the Sustainable Development Strategy: Egypt Vision 2030 through discussions between representatives of the private sector and Minister of Planning Ashraf El-Arabi.

 

roadsEgypt’s National Roads Project to offer great economic benefits

In 2014, the Egyptian government announced the National Roads Project with the goal of adding 32,000km in new road networks. The new network is expected to cost EGP 36bn.

The first phase of the project is to be implemented by the Ministry of Transportation. It will include 15 1,200km-long roads. The ministry announced in October 2015 that 57% had been completed. The rest of the network is to be completed by the Ministry of Housing in collaboration with the Ministry of Defence.

The planned road network includes the construction of 33km from Ismailia to Banha, 180km from Sohag to the Red Sea, and 134km from Wadi El Natroun to El Alamein which is key to connecting with neighbouring Libya.

The new road network will connect governorates, help in building new cities, facilitate transportation, and increase the population expansion across Egyptian land, according to official cabinet spokesperson Hossam El-Kawish.

Given that currently more than 90% of the Egypt’s freight moves by road, this project is extremely important. The two-phase mega project will enhance the efficiency of existing roads in addition to building new ones, and will help in paving the way for investment, improving infrastructure, connecting governorates, and raising the national income.

The value of investing such a significant amount, particularly in light of the country’s tight fiscal situation, is clear: a good road system will bring a wide variety of benefits. The quality of roads affects the cost of transportation, as well as the speed of travel, delivery, and productivity, according to Oxford Business Group’s Egypt 2016 report.

“We are seeing a lot of improvement in the roads,” said Ahmed Elfangary, DHL country manager in Egypt in the report.

On the other hand Aliaa El-Mahdy, professor of economics at Cairo University, expressed her doubts. Without setting a detailed schedule for the project’s phases, this endeavour like so many others may fail. She emphasised the importance of setting a time frame for the project’s completion.

One of the main challenges facing the Egyptian government is securing the funds required for such projects, which can have a negative effect on both foreign and domestic liquidity.

Abou Bakr Imam, head of the research department at Prime Holding, believes that the best way to fund these ambitious government plans is through partnership with the private sector. This is in order to reduce the inflation risks that come from depending only on public sector and investment certificates to fund the projects without achieving any real growth.

 

sisiThe era of mega projects echoes of the past

Egypt has a questionable history when it comes to mega projects. Under the administration of the former president Hosni Mubarak two mega projects were presented as the solution to Egypt’s economic and demographic challenges. The Toshka project began in 1997, and Cairo 2050 was proposed by the government in 2008.

The Toshka New Valley project was meant to develop agricultural production and reclaim new agricultural lands, in order to relocate up to 20% of the population and create new jobs away from the Nile Valley by creating a second Nile Valley.

In order to implement such a plan, it was required that water be redirected from Lake Nasser to irrigate the western desert of Egypt via canals. The project—considered by many experts to be a little too ambitious even at its inception—was meant to help Egypt deal with its growing urban population and was touted as the “New era of hope for Egypt”.

Toshka was supposed to be completed in 2020, but as many technical requirements were not taken into consideration, the plan to increase Egyptian agricultural lands by 10% was a colossal failure. It was subsequently marked as the ill-informed political project, with no real economic feasibility.

In December 2015, Al-Sisi announced the 1.5m-acre reclamation project. This project aims to expand Egypt’s agricultural lands by 20% in two years, to be completed in three stages of 500,000 feddans [acres] each. The Egyptian Rural Development Company will be responsible for land sales and distribution.

To accomplish such an ambitious target the government intends to drill up to 5,000 groundwater wells to irrigate 85% of the project.  As of yet, no pre-feasibility or feasibility studies for the project have been released.

All consecutive governments have the goal of “making the desert green”. All of these have woefully missed the mark. The Egyptian government has obsessed over how many feddans of land have been technically reclaimed, while ignoring how much land is actually cultivated, or the extent to which development goals such as increasing food production and employment have been achieved, according to David Sims, a Cairo-based economist and urban planner, in his book Egypt’s Desert Dreams: Development or Disaster?

The 1.5m-acre project does not include studies on water consumption or the extent of economic feasibility, Gamal Seyam, a professor of agricultural economics at Cairo University, told Daily News Egypt.

The feasibility of Egypt’s $45bn New Administrative Capital

In March 2015, the Egyptian government announced its plans to rebuild a new capital from scratch. The proposed capital is planned to be as large as Singapore (stretching over 700 sqkm) and include 1.1m new residential units to house 5 million residents, along with 660 hospitals and clinics, and an airport larger than Heathrow in London. The first phase of the project is expected to cost $45bn.

The construction in Egypt’s new proposed capital is in full swing, largely funded by Chinese state-owned companies, China State Construction Engineering Corporation and China Fortune Land Development, after the government failed to reach an agreement with Emirati Alaabar.

Minister of Housing Mostafa Madbouly announced earlier in June that work on the ministries district inside the New Administrative Capital has started and construction will be completed within two years.

He added that 30,000 residential units in the first phase of the New Administrative Capital are expected to be completed over the course of the next year.

The theory behind the new capital is not a new idea; over the years, Egypt has tried to build new satellite cities, in order to release the pressure on the major cities and drive the population away from the Nile Valley into desert frontiers. The first attempt to achieve that goal was in the 1970s when former president Anwar Al-Sadat started building “Sadat City” which was supposed to include an administrative district.

“For over five decades, desert schemes have consumed massive public funds and private investments and continue to do so. Yet, the Egyptian desert is virtually littered with still-born, anaemic, and failed projects,” said Sims in his book.

He explained that despite some successes, most cities and settlements remain ghost towns or playgrounds for the rich, and most industrial areas remain as sand-blown empty lots. Moreover, these many efforts have hardly attracted anyone to live in the desert, and thus the national project of populating the desert and relieving the crowded Nile Valley remains a fantasy.

Although population shift is the most consistent and overarching justification for desert development, the failure of desert cities to attract residents or industry is indubitable, Sims said.

By 2006, after a few decades of building new cities, the combined population across 23 new cities was lower than 800,000—just 3.8% of the combined population target of 20.5 million. In that time, the population of already congested areas in the Nile Valley increased by more than 12 million. Vacancy rates in new desert cities for housing and business units stands at 61-79%.

 

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https://wwww.dailynewssegypt.com/2016/11/14/596202/
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