This year the government announced plans to launch a handful of megaprojects aimed at encouraging Egyptians to look beyond the six per cent of the land they currently occupy. The projects are meant to trigger growth by attracting investment and creating jobs in areas such as manufacturing, tourism and agriculture, while at the same time creating new urban communities. The areas initially lined up for development include the Suez Canal, the Mediterranean and Red Sea coasts, and Upper Egypt. Egypt's GDP is expected to grow by 3.5 per cent in 2015, however it averaged an annual rate of only 2 per cent in the four years since the 2011 Revolution. Before that, growth was around 5 per cent. The projects have moved the government front and centre, as far as the economy is concerned, and have caused many to question whether it has decided to ignore the private sector and do everything itself. Mohamed Farid, chairman of Dcode Economic and Financial Consulting, said such fears are unfounded. “The private sector is the key to the country's growth. By taking the lead the government is channeling investments to certain areas or putting down infrastructure that the private sector might not be willing to invest in at this stage,” he said. The past four years have been unchartered territory for the private sector, especially what Amr Adly, of the Carnegie Middle East Centre, refers to as the “large corporations that wield considerable influence over the economy.” During the rule of ousted former president Hosni Mubarak, these were viewed as receiving special treatment. Many big businessmen were associated with the country's ruling elite. “Some of the private sector grew because of its relationship with power,” said Sherif Delawar, a management professor at the Arab Academy for Science and Technology. During the one-year rule of the Muslim Brotherhood the situation was the same, he said, except with different faces. Businessmen Hassan Malek and Khairat Al-Shater, closely associated with the Brotherhood, then played a major role in the economy. However, since the end of Brotherhood rule there have not been any particularly prominent new figures on the scene. In fact, the private sector seems to have taken a back seat. It is not enjoying the privileges it once had. Not only is the private sector paying more taxes, it is no longer getting subsidised fuel and is required to donate money to funds such as Tahia Masr, set up to support the economy's rehabilitation. In 2014 taxes for the private sector reporting annual profits of more than LE1 million increased by 5 per cent, bringing their tax bill to 30 per cent. The tax hike was described as a “temporary” measure, to remain in effect for three years. A 10 per cent tax on capital gains and stock dividends was also introduced in 2014. But Delawar said that the private sector remains important to the government. “This exceptional treatment is only temporary,” he said. “It is being dictated by the hard economic circumstances.” Adly continued, “Big business still controls important sectors of the economy, including manufacturing, tourism, telecommunications, commerce and housing, and these are essential to any revival in investment or employment.” Yet, while big companies may be on the sidelines for the time being, the rest of the private sector continues to operate. Adly said that small- and medium-sized enterprises are being contracted by the military in some of its new public works, including the new Suez Canal waterway. He said that while this could be the military's way of procuring additional capacity, it could also be “a deliberate attempt to involve a broad base of enterprises and generate employment across the economy.” The idea of megaprojects should not be intimidating to the private sector, said Farid. The concept of huge projects is not new, the difference being that today the government is trying to create momentum around specific projects that it believes will benefit the country as a whole. During the rule of Mubarak there was a focus on large-scale, demand-driven investment, with the thought that this would trickle down and help smaller businesses, he said. However, the results were disappointing. At the time, Farid said, no particular sectors were targeted, but growth was led by the extractive industries, manufacturing, agriculture and telecommunications, although the latter's contribution to GDP was limited. Delawar, too, is supportive of the idea of megaprojects, acknowledging that these can be useful in pulling many industries behind them and creating jobs. However, he pointed out that megaprojects have been on the agenda of all governments in Egypt, even those of the Muslim Brotherhood. “They have now just been taken out of the drawer and modified,” he said. Delawar lamented the fact that during Mubarak's rule few real industries were created, and most efforts went into capital- and energy-intensive industries. He now wants to see a change in the way the government implements its investment strategy, since governments in Egypt are still courting the same investors with the same tactics, not deviating from the usual pattern even during the rule of the Muslim Brotherhood. “They have all been adopting liberal policies. The techniques and individuals may have changed, but they all speak the same language,” he said. “There should be more focus on industries that suit the Egyptian economy and its resources. So far this has not been happening.” Farid said that things might be beginning to change, however, giving the example of the new tariffs for renewable energy that were announced by the Ministry of Electricity this year. These could help create an industry in the field. There was also a greater realisation of the importance of internal trade, with 40 per cent of the basket of goods that people commonly consume being made up of food items. “If people are hit here, they will suffer,” he said. The mistake of the Mubarak governments was that they did not pay attention to high rates of inflation until the final years, when it was already too late. During Mubarak's rule, the government succeeded in achieving economic growth, but it failed in terms of economic development. As Farid said, not enough attention was paid to services such as health, education and transportation, things that are extremely important for people to feel that their standard of living is improving. The Mubarak-era governments were able to achieve high growth through reforms that targeted the investment environment, slashing taxes to 20 per cent, improving tax assessment and collection, and enhancing access to finance through reform of both banking and non-banking sectors. Banks were recapitalised and non-performing loans were repaid. “All of these reforms did matter in terms of growth and driving private investment,” Farid said. He added that post-2004 private investment surpassed public investment. Many institutions considered essential to an efficient free market were also put in place, though some have questioned their performance, including the economic courts, the Consumer Protection Agency and the Competition Authority. These agencies are important for the economy today as well. In the long run, it is the private sector that will drive the economy, Farid said, adding that the public sector was unlikely to continue to dominate. It could jump-start the economy, he said, but its continued major presence was not sustainable. In recent weeks the government has been meeting with Arab and Western investors to encourage them to invest in Egypt, inviting them to look into projects that will be up for grabs at a major economic summit planned for March. It remains to be seen what type of projects will be offered, and whether or not they will succeed in achieving the much-needed growth.
Public sector-led megaprojects now underway in Egypt Northwest Coast Development Project: This extends over a total area of 160,000 square km, including the 500 km stretch of Mediterranean coastline between Alamein to Saloum, on the border with Libya, with a depth into the desert of 280 km. The project plans to create 11 million jobs through tourism and agricultural development over the coming three decades. As part of the project, new urban communities will be built to absorb the population increase of 34 million over the next 40 years. The plan is to reclaim land in the area for agricultural purposes, depending on rainfall and underground water. The region is part of the greater national plan to reclaim one million feddans. Coastal cities will be developed for the benefit of the local communities and to attract tourism to the area, particularly environmental tourism. The city of New Alamein will be established 10 km from the coast on 88,000 feddans of land. It will be the centre of the development for the west coast and the Qattara Depression, which will also be developed for agricultural purposes. The area will be designed to depend on renewable energy, as well as nuclear energy from the Dabaa nuclear energy plant. A new road network is seen as crucial to the success of the project, and a number of roads are under construction to connect the area to the rest of the country, especially Upper Egypt.
The Golden Triangle: The Golden Triangle refers to a 6,000-square-km area that extends from Qena in Upper Egypt to Safaga and Qoseir in the Eastern Desert overlooking the Red Sea. Its goal is to establish an industrial, agricultural, touristic and commercial zone. The area, rich in natural resources, will include activities of extraction, manufacturing and trade in metals. Industries manufacturing fertilisers, phosphates, cement and gold have potential in the area, but its location on the Red Sea will also mean commercial activity through the ports as well as urban and tourist development. In Qena, the project will make use of agricultural land for cultivation. Since the area is rich in archeological sites, it will also be developed to attract tourists. The project also includes establishing new urban communities like New Qena and developing Safaga and Qoseir and other cities on the roads connecting the three points of the triangle. Initial estimates say that 300,000 direct job opportunities in the industrial sectors will be provided during the 20 years of the project's construction. Around 200,000 more indirect jobs should also be created. International consulting agencies have presented bids to develop the master plan for the area. Damietta Logistics Centre: Developing Damietta is part of a larger plan to develop Egypt as a global logistics centre. It involves an area of 3.35 million square metres, and includes the Port of Damietta as well as an untapped industrial area northeast of the port. Modern silos for the storage of 7.5 million tons of grain will be built. The Damietta port will be upgraded with new piers to receive large ships. A well-equipped river pier will also be added. The storage area will be connected via a road bridge for vehicles, and conveyor belts in the industrial area will facilitate the transfer of grain. The project includes five investment and industrial zones. These will be specified for different purposes, including mills, the production of flour, manufacturing of food commodities and soy, oil extraction, fodder production, sugar refinement and packaging, as well as a variety of other food industries. Suez Canal Area Development Project (SCADP): This project is separate from the Suez Canal project, which will excavate a second waterway to allow two-way traffic in the canal. The second waterway, expected to cost LE60 billion, is set for completion by the summer of 2015. The SCADP covers 450 square km and includes the eastern and western port facilities at Port Said; Al-Arish port, at the northern tip of the canal; Technology Valley Area; East Ismailia, in the central region of the canal; Ain Sukhna, Al-Tor and Al-Adabia ports; and, in the canal's southern region, the economic zone in the northwest Gulf of Suez. The project will transform the area into an international and logistics hub through the creation of industrial and logistic centres. Its goal is to benefit from the expected increased traffic, as a result of the new canal, by establishing value-added services and industries in the area. A master plan is currently being developed by a consortium led by Dar Al-Handsah. The master plan includes industrial, agricultural and tourism-related projects and activities. It hopes to create one million jobs over 15 years.
