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Abu Dhabi, UAEThursday 21 June 2018

Egypt's $20bn new capital city plan enters a critical juncture

Egyptian officials are studying the latest offer from Chinese developer China Fortune Land Development

The new administrative capital in Egypt is one of several mega-projects launched by Abdel Fattah Al-Sisi since he became president in 2014.  Handout via Reuters
The new administrative capital in Egypt is one of several mega-projects launched by Abdel Fattah Al-Sisi since he became president in 2014. Handout via Reuters

Chinese city-builder China Fortune Land Development Company's planned $20 billion project in Egypt’s new capital is at a critical juncture after nearly two years of tough negotiations.

Shanghai-listed CFLD this month sent Egyptian authorities its latest proposal to develop 15,000 acres over 25 years in the administrative capital under construction to the east of Cairo. Egyptian officials said they were studying the offer, which would amount to one of the biggest foreign investments Egypt in recent years.

“All I can say is that we are in the last stage of negotiations and hoping that this will be settled soon,” Allen Ma, president of CFLD Egypt, told Bloomberg. He declined to elaborate, saying the negotiations were confidential.

The new administrative capital is one of several mega-projects launched by Abdel Fattah Al-Sisi since he became president in 2014 in an effort to reboot the economy and leave his mark on the most-populous Arab nation.

Egypt has struggled to attract major foreign investments outside the oil and gas industry, even after floating its currency in November 2016 and taking painful measures to clinch a $12bn loan from the IMF. foreign direct investment fell about 16 per cent on the year in the third quarter, to $1.6bn.

A person with knowledge of the deal said much of the wrangling had centered on how sales revenue from the development would be shared. The negotiations had been protracted as they involved a number of stakeholders including the housing and investment ministries, the company responsible for developing the capital as well as the Chinese city-builder and its local partner.

The three-phase new administrative capital project envisages transforming a 700 square kilometer swath of desert into a modern hub for government buildings, foreign embassies and major companies, easing pressure on traffic-choked Cairo, the sprawling 1,000-year-old city that is home to 23 million people. The first phase is due to be completed by mid-2019.

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CFLD began talks with the Egyptian government in June 2016 and signed a memorandum of understanding in October that year agreeing to plan, develop, manage and market a section of the new city.

Egypt’s housing ministry confirmed they had received CFLD’s latest offer as did the Administrative Capital for Urban Development (ACUD), a joint venture between the military and the housing ministry which was created to oversee the city’s construction. They declined to comment on the details, citing confidentiality.

But a copy of the proposal obtained by Bloomberg shows that CFLD commits to bringing in FDI worth $2bn in the first five years. After 25 years, CFLD will hand the whole area to ACUD. The project is expected to create 230,000 jobs over its lifetime, the document shows.

With the exception of the business district, which is being developed by another Chinese company, work on the new capital has so far been undertaken by the housing ministry, military and Egyptian contractors who have bought smaller parcels of land outright. CFLD’s proposal covers a much larger area with a different business model.

“This is a huge project,” Khaled Abbas, an assistant housing minister and ACUD board member, said. “We should take our time to study the project well and ensure it will benefit the country".