Could Land be Egypt’s Dutch Disease?


A model of a planned new capital for Egypt, Sharm El-Sheikh, March 28, 2015. Amr Abdallah Dalsh/Reuters

For nearly thirty years, Egypt’s hopes for economic growth, development, and social progress hung on the promise of planned new cities built out in the desert, miles away from heavily populated towns and cities clustered around the Nile Valley. For David Sims, the author of Egypt’s Desert Dreams, which chronicles the history of this state-led project, Egypt continues to pursue—and fail to deliver on—this vision of desert cities as a panacea.

At an AUC lecture, Sims posited that Egypt cannot achieve its “dreams of modernity.” To begin with, its new cities will never keep up with population growth. In 2017, the population of the new towns accounted for only 3.8 percent of Egypt’s total population increase. Even if the rate of redistribution into the new cities goes up to 10 percent in the next ten years, that will hardly have an effect on overpopulation along the Nile River.

Nonetheless, the government continues to invest in a host of new cities and industrial zones across the country. Some seventeen new towns have been launched or decreed since 2016, six of which—covering a total expanse of 500 square kilometers—are extensions to existing areas. Of the stand-alone new towns, Sims noted that New Alamein is the only one witnessing development, and this only on its ten kilometers of coveted Mediterranean coastline. “This shows that development in the new towns has become completely commodified. It is a financial issue—this is why I think it continues.”

Selling and redeveloping land for private money is a profitable safe haven for family wealth. With prices for a few plots of land in one of Cairo’s suburbs rising from 4,500 Egyptian pounds in 2009 ($818 at the time) to 55,000 ($3,143 today) per square meter, Sims gave as an example, investing in housing is lucrative for both buyers and sellers, including the Housing Ministry and even the Armed Forces.

As for the New Administrative Capital—a megaproject announced in 2015 and planned east of Cairo—Sims was skeptical it would succeed. According to Sims, the city’s “eastward expanse takes the Dubai model to the extreme.” It is seen as a vehicle for investment and a way to reform government—and isolate it. Even at 14 square kilometers and larger than built-up Cairo, at least half the land allotted for the “new capital,” if not more, has been sold.

However, the investment model on which building the city rests is not too sound, said Sims. Hopes for the new capital to become a city-state, business-friendly, international destination and tax haven like Dubai will never happen. That is because Egypt does not have limitless funds to draw from—Gulf handouts are not significant, and the Chinese are unwilling to fund their investment with anything but advanced loans, which Egypt would have to pay back, he added. Turning to the other half of Egypt’s desert ambitions—planned industrial zones— Sims also found the government’s efforts misplaced. “Most of these are unsuitable, poorly serviced and largely empty.” By focusing on allocating even more land in the desert for industrial use, he said, Egypt was failing its nascent manufacturing sector and, in many ways, putting the cart before the horse.

While the government has taken admirable steps to improve the environment for small and medium enterprises or SMEs, Sims said these also fall victim to the “obsession with infinite space.” For example, he noted that virtually all areas which have been sanctioned for small industries (where SMEs work) are in remote industrial and logistics zones or new towns—again, an issue of access. “Egypt should be using its advantage—cheap, relatively educated labor. But these places are just too far away from population centers. Two to four hours per day commuting for a job that’s horribly underpaid [does not work].” The focus on creating these industrial spaces, he added, crowds out other, more effective industrial policies that would boost employment and the sector as a whole.

Seeing the desert as a dangerous mirage for urban development, Sims concludes with a question: can the land curse be as debilitating and rent-creating as a natural resources curse?

2 thoughts on “Could Land be Egypt’s Dutch Disease?

Add yours

  1. Ahmed Tarek, MBA, PMP 1st degree connection1st
    Head Of Architecture at Dubai Development Authority

    I believe that facts about Egypt’s New urban centers need to be researched in more depth, while the article remains so pessimistic about all the attempts of growing out of Egypt’s old overcrowded cities, it should have also studied successes that the new cities such as 6th October or New Cairo had offered, and how can these be improved to develop them as the the new nucleus for new successful urban centers, I personally think it is a too early to judge the New Capital, and believe that the coming years will reveal more about this project, though I find it as a development that avoided some of the fatal failures of cities such as 10th Ramdan and Sadat, and could be Egypt’s rescue ring if the strategies set for it are continuously developed.

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  2. Adil Abdalla Author
    Governance | Urbanity | Projects | Freelancer

    True, the article had simplified and summarized the widely discussed matter, yet I recognize the scientific integrity of the publisher; Cairo Report..
    the Urban Quest of Egypt is inevitably centered at Cairo, which hosts more than 15% of the population. However, Urban Analysis is a nation wide quest rather than a regional one; particularly in all underdeveloped countries..
    Due to both nature and context; Urban Developments are single-shot-endeavor; to make or break a successful livelihood and future happiness. Therefore, they are not measured by timely outcomes, but by the rationales of their decision making process..
    Theories of Regional Metropolis had been proven failure; yet Urban Authorities in Egypt are creating a new astonishing one, with seriously-questioned vision, solutions, opportunities and funds; which mostly remain unanswered..
    We all know that Dubai model is unrepeatable and non-referable; which was born and grow in exceptional models of ideation, management and finance. Many of the Dubai-amused-nations had realized the need to create their own practical and genuine models; or just recruit reliable expertise to fill the sensitively epistemic gaps..
    Urbanity is a quest of shared historical and scientific legacies

    Like

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