Egyptian Economy under Sisi-Mega Projects

In two public appearances this week President Abdel-Fattah Al-Sisi unveiled major development schemes.

On Tuesday, in Ismailia, Al-Sisi outlined an ambitious plan to develop the Suez Canal. Addressing a mixed audience of military personnel and civilians, Al-Sisi announced that a new waterway is to be dug parallel to the existing canal. The work will be carried out by a consortium of 37 Egyptian companies, with the army in overall charge. The entire project will be financed domestically “because I know Egyptians are very sensitive to foreign finance when it comes to projects of relevance to national security,” said Al-Sisi.

The first phase of the project, Al-Sisi added, will be completed by 26 July 2015, the 59th anniversary of Gamal Abdel-Nasser’s nationalisation of the Suez Canal. “It is a tough challenge but we will race against time,” said the former army chief.

Government estimates put the cost of work on the new canal at LE 60 billion, according to sources, though Mohab Mamish, chairman of the Suez Canal Authority, is on record as saying it could cost half that amount. The financing, Al-Sisi said on Tuesday, will be generated by a public share issue.

Double-routing the waterway is just one part of a more ambitious scheme to develop the Suez Canal. Road networks accessing the canal will be expanded and an air terminal built. The aim is to complete all additional infrastructure projects within three years at a projected cost of LE150 billion. The financing is expected to come from the private sector. The United Arab Emirates and Saudi Arabia are expected to be major partners.

“Studies have been completed and we will be moving ahead quickly,” said a government source. He insisted that the “influential participation” of both Abu Dhabi and Riyadh would not compromise “national security interests … and [the project] will remain under the direct supervision of Military Intelligence”.

Developing the Suez Canal was originally the brainchild of former prime minister Kamal Al-Ganzouri, who was seated in the first row of the audience during Al-Sisi’s Tuesday speech. Al-Ganzouri first suggested the scheme to Hosni Mubarak, along with ambitious plans to reclaim desert land for agriculture in Toshka. Mubarak opted to pursue the second project, though even this was suspended in its early stages after Al-Ganzouri was replaced as prime minister.

Now the Toshka project is to be revived. On Tuesday Al-Sisi told his audience that after taking advice from experts the project was being resurrected.

The government estimates new work in Toshka will cost around LE15 billion, most of it generated by direct foreign investments, with the United Arab Emirates and Saudi Arabia again being expected to be major partners.

A presidential source told Al-Ahram Weekly that Al-Sisi also plans to discuss the Toshka development scheme during his official visit to Russia, scheduled to take place at the end of this month. China’s foreign minister, who visited Cairo this week, has already been briefed on the project.

Ambitious development projects, said the source, are key to Al-Sisi’s thinking. “He is convinced that they are the way forward, that they are crucial national security matters,” the source added.

Campaign advisors who attended meetings with the former army chief after he put himself forward as a presidential candidate confirm this.

 “He spoke at length about development during campaign meetings,” said one. “He always said it was a mistake to have left land with vast development potential untouched. And he always argued that such huge development schemes required close supervision, and would be best if they were partially executed by the army.”

In meetings held ahead of the announcement of the launch of the two schemes, sources report, Al-Sisi highlighted their importance in redistributing population away from the Nile Valley and in creating new jobs.

“He is particularly concerned about unemployment and the shanty towns which he refers to as ticking time bombs,” said the campaign team member.

On Tuesday Al-Sisi also expressed confidence that the LE100 billion target for the Long Live Egypt Fund, intended to finance smaller scale development projects, would be met. So far just LE5 billion has been raised, the bulk of it from business tycoons.

“Those from the business community who are able and willing to make donations have already done so,” one businessman supportive of Al-Sisi told the Weekly. “And I am not convinced there is an appetite among the general public to make donations, especially given the recent increase in the price of energy and other basic commodities.

 “Nor am I sure the foreign direct investments that the state is counting on for the Suez Canal and Toshka projects will be easily forthcoming due to the lack of legislation encouraging investors. The legislative climate hardly encourages investors and so far the state has been reluctant to adopt the necessary amendments. It seems that the president is inclined to have these laws, which could well be controversial, adopted by a Parliament that might not be elected before the first quarter of 2015.”

Arab Gulf businessmen, he added, are hesitant to commit to investing in Egypt in the absence of a “more investor-friendly atmosphere”.

Meanwhile, Cairo-based western diplomats are unwilling to encourage members of their business communities to invest in Egypt as long as question marks remain over political stability.

“In view of what we see in terms of repression of freedom of expression, and given what can only be qualified as hard to understand judicial verdicts against opposition figures, we cannot suggest to investors they come to Egypt,” said one European ambassador. “We hear from Egyptian officials that things will improve and we are waiting to see is this happens. We hope so because the fact is Egypt has such a high potential for investment.”

This week 20 members of the committee of 50 that drafted the constitution sent a joint letter to the president voicing concerns over the repression of freedoms and the incompatibility of some recent laws with the text of the constitution adopted earlier this year. But in his statements on Tuesday Al-Sisi warned against what he said were “attempts to undermine state security”.

According to a security source, “threats to Egypt’s borders — especially given developments in neighboring countries — are a daily cause of concern to the president and his security aides”.

This week Egypt beefed up security along its western borders with Libya, southern borders with Sudan and eastern borders with Gaza and Israel.

The security official revealed border security was being re-examined and that new plans would be in place to ensure the safety of megaprojects to the east and west of the Nile valley.

Egyptian diplomats say Cairo is working with regional and international partners to promote stability in Gaza and Libya. It is also working on contingency plans to accommodate any political hiccups in Sudan in view of political “complications” there, and the drought that is expected to hit the east of the country in the next few months, which could generate “a big wave of refugees”.

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About angelajoya

Assistant Professor, Middle East Political Economy, at the University of Oregon. Currently writing on the Egyptian revolution and the Syrian crisis.
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