Egypt spends billions of dollars on a new lavish capital

Spread across an expanse of desert four times the size of Washington, D.C., a lavish new capital is emerging in Egypt.

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A general view of buildings and a mosque in the New Administrative Capital (NAC) east of Cairo, Egypt, December 26, 2023. REUTERS/Mohamed Abd El Ghany

Spread across an expanse of desert four times the size of Washington, D.C., a lavish new capital is emerging in Egypt, displaying an imperial scale and style that reflects the ambitious vision of President Abdel Fattah el-Sisi, who stands as the undisputed ruler of the nation. Egypt is preparing to spend billions doubling the city it is, where the first residents are trickling in.

Around 48,000 Government’s employees are coming every day, the Administrative Capital for Urban Development (ACUD) announced in the beginning of the year.

Built on virgin land, the city, known as the New Administrative Capital (NAC), is designed to serve as a high-tech model for Egypt’s future away from the chaos of Cairo.

Phase one of the city already includes a 70-storey tower – the tallest in Africa – an opera house with five halls, a crystalline pyramid, an expansive, disc-shaped palace for Mr. el-Sisi, inspired by symbols associated with an ancient Egyptian sun god, a mega mosque and the Middle East’s biggest cathedral.

Situated just outside Cairo, constructed over a period of six years at an estimated cost of $59 billion, it represents the most ambitious among a series of massive projects undertaken by a president determined to transform Egypt.

However, amid Egypt’s severe economic downturn and strained finances, growing skepticism is voiced about the feasibility of Mr. el-Sisi’s grand aspirations. Over the past six years, the International Monetary Fund has granted Egypt three loans totalling around $20 billion, alongside ongoing American aid. Despite this financial support, the nation finds itself once again facing challenges.

Critics argue that the president is “borrowing money from abroad to build a massive city for the rich.” They underline that the cost of this megaproject is borne by the poor and middle-class citizens through taxes, reduced investments in social services, and subsidy cuts, even as the economic justification for such developments comes under scrutiny.

Despite the lack of transparency in the financing of these new projects, they are partially funded by Chinese capital and involve high-interest bonds that pose a significant financial burden for Egypt in the years to come. Additionally, some Emirati developers are contributing to the development of the new capital.

Egypt’s financial situation was precarious even before Russia’s invasion of Ukraine in February. President el-Sisi had taken on substantial loans to finance the megaprojects and billions of dollars in international arms purchases, resulting in a quadrupling of the national debt over a decade. The country is struggling to generate sufficient revenue to cover its debts.

Foreign investors have largely stayed away due to the military’s firm control over the economy. Combined with a lack of emphasis on developing domestic industries, the private sector, excluding oil and gas, has been contracting for nearly two years.

Russia’s invasion of Ukraine exacerbated Egypt’s financial challenges. Soaring interest rates and food prices led to such strain on public finances that the government mandated rationing of air-conditioning and dimming lights in malls, stadiums, and public facilities to sell more energy abroad.

Despite facing criticism for the ambitious megaproject, President el-Sisi remains adamant about its continuation. While the government assures that the new city will generate hundreds of thousands of jobs and address the urgent housing needs, economists argue that a majority of the jobs created so far are low-paying positions in construction.

For the benefits of the new project to endure, analysts suggest that President el-Sisi must implement more substantial changes, such as reducing the military’s economic control and revitalizing private industry. Ordinary Egyptians, grappling with rising prices and declining living standards, have previously borne the financial burden of el-Sisi’s ambitious projects. In 2015, an $8 billion extension to the Suez Canal, hailed as the “rebirth of Egypt,” failed to yield the promised windfall, with canal revenues reaching only $6.3 billion last year, far below initial government projections.

The envisioned new Egyptian capital was intended to provide relief from Cairo’s overcrowded chaos. Initiated by Hosni Mubarak and expanded by el-Sisi, the city features the Iconic Tower, a Chinese-built skyscraper standing at 1,293 feet, the tallest in Africa. However, despite tens of thousands of built apartments, the city resembles a vast construction site, lacking furnishings and paint.

Computer renderings depict lush boulevards, efficient tram lines, and extensive use of digital technology, including 6,000 cameras monitoring the streets and artificial intelligence optimizing water use and waste management. Residents are expected to submit complaints through a mobile app.

Initially, el-Sisi pledged that foreign and local investors, along with the sale of government land in central Cairo, would fund the new capital. Pressure on Egyptian developers, some with military ties, resulted in their involvement. However, with waning investor interest, the president announced that the government would pay the military-owned Administrative Capital for Urban Development approximately $203 million annually to rent ministries and official buildings in the new office district, placing a direct burden on taxpayers.

Up to 100,000 housing units have been finished and 1,200 families have moved in. Major banks and other businesses will move their headquarters by the first quarter of 2024. Phases one and two of the implementation plan will each have a projected 1.5 million residents.

However, the extent to which ordinary Egyptians will feel a connection to the new capital is questionable. Many construction workers expressed doubts about ever returning to the city, where the cheapest apartment is priced at $80,000. They perceived the development as more for the president than for the common people.

While acknowledging Egypt’s urgent need for more housing, urban planners argue that President el-Sisi should focus on fixing existing cities rather than constructing new ones. The new capital’s impact extends beyond financial concerns, as the construction threatens to deplete water from the already-strained Nile, the country’s primary water source. Additionally, the development has led to the destruction of trees in the old neighbourhood of Heliopolis to make way for new highways.

The new city is poised to symbolize President el-Sisi’s increasingly imperialistic rule, especially with the changes in constitutional term limits allowing him to potentially stay in power until 2030 or longer. The sprawling Octagon military complex, seven times the size of the Pentagon, reinforces the concentration of military power far from the revolutionary Tahrir Square.

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