Egypt’s economy: where are we today?

14-02-2018 03:13 PM

Fady Labib


Egypt’s economy: where are we today?

Prior to the Arab Spring uprising in 2011, Egypt had a thriving economy. Investment flourished, tourism boomed at some USD11 billion a year in revenue, foreign reserves stood at some USD38 billion, and economic growth ran at some 5.8 per cent; an all-time high was 7.7 per cent in 2007.
All this crashed with the political turmoil that gripped the country in the wake of the Arab Spring. The economy continued to nosedive as Egypt’s rule passed into the hands of political Islam in 2012, and through till the military decided to back the massive 33-million-strong revolution on 30 June 2013 and succeeded in overthrowing the Islamists; Egypt went back to being a secular State in July 2013.
In 2014, conditions stabilised as Egyptians approved a new Constitution and elected Abdel-Fattah al-Sisi as President. Despite momentous challenges on the security and political fronts: Egypt had to battle Islamic terror inside and outside the country, even as it attempted to nurture homegrown democracy, the country had to rebuild its economy which was by then in tatters. This was definitely the biggest challenge of all. Foreign reserves had dropped to less than USD15 billion, investment and tourism had ground to a halt, and growth stood at an average 2 per cent during 2011 – 2013.
President Sisi vowed the country would manage the upturn required.

Egypt’s economy: where are we today?

Turnaround
Today, Egypt’s economy is up and running. True, the country has not attained its full economic potential yet, but according to International Monetary Fund Egypt is on the right path to economic reform.
Legislation has been enacted to encourage investment and draw foreign investors, and the State has for its part launched a number of megaprojects intended to kick-start the economy.
In its 2016 / 2017 report on Egypt, the Oxford Business Group cited economic growth at 4.2 per cent, which exceeded the International Monetary Fund’s expectation of 3.5 per cent growth. The report said that growth in the communications sector reached 12.5 per cent; in the construction and transport sectors 9.5 and 5.3 per cent respectively; in the agriculture and industry sectors 3.2 and 2.1 per cent respectively; and inflows in capital investment reached USD29 billion. The balance of payments recorded a surplus USD13.7 billion, and foreign reserves reached some USD38 billion in January 2018. This, however, came at the expense of huge sacrifices by the Egyptian people who had to sustain the painful outcome of economic reform, major among which was floating the Egyptian Pound and a partial lift of subsidy on fuel. Inflation ran up to 30 per cent, and the country’s debt amounted to Egypt’s full gross domestic product.
In the Egypt Economic Development Conference (EEDC) in March 2015, President Sisi said that reviving the Egyptian economy would cost an estimated trillion and 40 billion Egyptian Pounds. During the fiscal year 2017 / 2018, some EGP6 billion have been allocated to complete the national road network; EGP32.88 billion to build 250,000 new units within the national housing social project; EGP8.68 billion to expand the underground metro network; EGP458 million to connecting the New Administrative Capital to towns in the East Delta.

Egypt’s economy: where are we today?

New capital and governorates
Egypt now has a new capital underway. With Cairo over-congested and its infrastructure overstretched and overburdened owing to the rapidly growing population, Egypt needed a new capital with improved services. Successive governments had called for moving the Egyptian capital, toyed with the idea, but succumbed to pressure from the public and public servants against the move. In 2015, the project for the new capital was launched. The capital will be home to a huge Medical City that will boast state-of-the-art services; and is also housing, side by side the biggest cathedral and the largest mosque not only in Egypt but in the Middle East. The cathedral, named Cathedral of the Nativity of Christ, opened partially on Coptic Christmas Eve, 6 January 2018, to a lot of fanfare and rejoicing. Housing projects are already underway, as well as public facilities and a modern transport system.
Plans for a new capital, however, did not mean that Egypt’s slum districts would be overlooked. Substantial infrastructure projects were executed to upgrade them in numerous districts. New housing units and public facilities were constructed to offer residents a decent quality of life. Where such projects were achieved, the old slums became a thing of the past.
New administrative divisions have been proposed for Egypt’s 27 governorates, so that the borders of each governorate would be redrawn to include resources or economic zones that would allow sustainability and self-sufficiency. It would also set the stage for decentralisation, a requirement which, according to the Constitution, must be supported by the State. The new divisions allow Upper Egypt governorates to expand into the nearby Western Desert in what is known as the desert flank, and eastwards until the Red Sea coast. The project is being finalised, after which it will seek approval by parliament and the relevant authorities to go into effect.

Egypt’s economy: where are we today?

New Alamein: portal to Europe
The name ‘Alamein’ quickly brings to mind the site of the Battle of Alamein in which the Allied armies defeated the German army led by Rommel in WWII, thereby turning the tide of the war in favour of the Allies. The war cemeteries still lie close to the small town of Alamein.
Now Alamein, which lies on Egypt’s North Coast some 120km west of Alexandria, is set to grow into a thriving port. Under the name New Alamein, it is among the projects underway to build new towns based on sustainable development, to draw part of the population outside the overcrowded Nile Valley.
New Alamein is part of the mega-project to develop Egypt’s Northwest Coast some 40km inland. There are plans for inland agriculture that would depend on rains and underground water, both of which occur in the area in quantities that allow sustainable development. According to Minster of Housing and New Urban Communities Mustafa Madbouli, New Alamein is set to be a portal that ties North Africa to South Europe. “It will turn Egypt’s North Coast on its head,” Dr Madbouli says.

Into Africa
Mention of Africa evokes the Cairo – Cape Town projected highway that should connect the northernmost point in Africa to its southernmost tip. Africa is a continent that holds plentiful untapped resources and boundless opportunity. In the COMESA … Africa 2017 conference held in Sharm al-Sheikh last year, President Sisi talked of the plan Africa 2063 for far-reaching development of the continent, confirming Egypt’s support for the African Union’s initiative for integration among African countries through developing infrastructure and building a road network that would connect near and far. Major among these is the Cairo – Cape Town highway. Egypt has already agreed with Chad to construct a road that would link Egypt to central Africa, and is in talks with the international organisations, among them the European Investment Bank, to secure funding for the project.
Along the same line of connecting Africa, Egypt is exploring the idea of a navigational route along the Nile to connect Uganda’s Lake Victoria to the Mediterranean.

Power hungry
There can be no two opinions that development could never be attained without securing sources of energy. In this domain, Egypt has struck gold with its gas find of Zohr natural gas field which started production last December. The Mediterranean offshore field was discovered in 2015 by the Italian oil and gas giant Eni SpA which now operates it. At 850 billion cubic metres of gas reserves, Zohr is the largest field in Egypt and the Mediterranean. According to Oil Minister Tarek al-Molla, natural gas from Zohr should bring Egypt self-sufficiency, cut imports of liquefied natural gas, and ease the burden on the State budget. It should also attract foreign investment.
On 2 March 2017, German Chancellor Angela Merkel and President Sisi joined Siemens CEO Joe Kaeser and high-ranking officials in the symbolic inauguration of the first phase of Siemens’ mega-project in Egypt which will boost the country’s power generation capacity by 45 per cent when finished. Together with its local partners, Orascom Construction and Elsewedy Electric, Siemens broke all records in modern power plant construction by connecting the first 4.8 gigawatts (GW) of new capacity to the grid in only 18 months after the signing of the contract for the company’s biggest single order ever. When completed, each of the three power plants, located at Beni Sweif, New Administrative Capital and Burullus, is set to become the biggest gas-fired combined-cycle power station in the world. Altogether, the three power plants will have a combined capacity of 14.4 GW.

Alternative energy
Egypt is in the process of building its first power plant at Dabaa on the North Coast, some 160km west of Alexandria. The plant is being built by the Russians—the reactor will be supplied by Rosatom—at a cost of USD30 billion, 85 per cent of which financed by Russia as a State loan. It is expected to go in production in 2024, generating some 4,800KW of electricity.
In the field of renewable energy, Egypt is building at Benban in the southern region of Aswan what will be the largest solar installation in the world. The total capacity planned is 1.8GW of electricity.

Suez Canal project
To make better use of the Suez Canal, the shortest waterway between Asia and Europe, the New Suez Canal project established a new 72-kilometre canal, parallel to the current one, to speed up transit time and allow ships to sail in both directions at the same time. Huge development is planned along the banks of the canal in order to turn it into an international, state-of-the-art trade and logistics hub that would be the fulcrum of shipping activity in the Middle East.
According to Yehia Zaki, Director of Operations at the Dar al-Handasah group which was awarded the consultancy for the New Suez Canal project, the general layout of the project includes six main axes to create international industrial and logistics hubs in one integrated plan. New urban communities west and east of the Suez Canal would provide global marine services, logistics, transport, roads and railroads, and industries including those related to marine navigation, major commercial activities related to ports, transport and containers, as well as housing and energy generation projects.

Going digital
A nationwide initiative has launched information technology compounds that aim at using information technology to achieve a digitised information-based economy. The first phase has seen the establishment of 10 compounds in various Egyptian universities, where students and participants are provided with all the means that would help them innovate in the information technology field.
An innovation centre was set up jointly by Egypt, Greece, and Cyprus in the technology zone in Burg al-Arab southwest Alexandria. The aim is to execute joint technological projects, exchange experience, and support entrepreneurship and small and medium size businesses.
On the trade front, a national strategy for e-commerce has been launched jointly with the Ministry of Trade and Industry and the United Nations’ UNCTAD. This is the first such initiative to be launched in Egypt.
An information technology city has been designed to be built over 301 feddans (1 feddan = 4,200sq.m) in the New Administrative Capital. It will include research, innovation, and entrepreneurship centres; the prospect is to design programmes and applications for the Internet as well as for management of smart cities and transport systems.

Egypt’s economy: where are we today?

Axes of economic development
Several special economic zones are planned nationwide, where investment projects operate under laws and rules not hampered by bureaucracy, and spurring innovative solutions. Among these is the Golden Triangle, an area situated between Qena on the River Nile and Safaga and Qoseir on the Red Sea. It stretches over around 2 million feddans, and promotes agricultural, industrial and tourist projects. At USD18 billion in investment, it is expected to benefit some 2 million people.
A number of economic development axes form the basis of the full development planned for 2030. The first is the Suez Canal axis which requires some USD50 billion to invest in new urban communities, and industrial and logistic zones along the canal banks. The second focuses on developing Sinai on the agricultural and industrial levels, and building 77,237 housing units by the end of 2018, at the cost of EGP 150 billion.
The third axis centres on cultivating one-and-a-half million feddans to add to Egypt’s agricultural wealth, at the cost of EGP70 billion; whereas the fourth is the national road network which, at EGP100 billion aims to build a 30,000km long nationwide network of roads. The fifth axis involves EGP150 billion projects of new towns, major among which is the New Capital on 10,500 feddans. Other development axes include a EGP185 billion national housing project over five years; and EGP500 billion power projects.
Projects related to food production have also been launched, including a huge fish farm in Kafr al-Sheikh in the north Delta, that promises to flood the markets with fish at affordable prices.

Investing in the human being
Perhaps most important are projects that focus on human development and centre on 11 areas including health care, social care; eliminating poverty; securing affordable bread for all; rehabilitating the poorest villages; and raising cultural and digital awareness among young people. To say nothing of cultural and educational feats such as the momentous digital Knowledge Bank which brings world-renown online sources of data, knowledge, information, and modern research at the fingertips of scholars old and young.
The above list of projects is not a complete one; so many could not be cited here because of limited space. But with such numerous, impressive projects already underway, Egyptians may look to the future with confidence.

Watani International
14 February 2018

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