Egypt-Al-Ahram v3.indd

Our World

The keystone of the Middle East and a ma-jor player in regional and

world politics, Egypt is emerg-ing from one of the most tu-multuous periods of its recent history, with President Abdel Fattah El-Sisi looking to contin-ue down the road to recovery since celebrating his first year in office in May.

Much like his predecessors, Hosni Mubarak, who reigned for 30 years before being de-posed in the wake of the Egyp-tian Arab Spring in 2011, and Mohamed Morsi, the leader of the now banned Muslim Brotherhood, President from June 2012 to July 2013, Presi-dent El-Sisi’s core challenge can be summarized in two figures. Two thirds of 90 million Egyp-tians are under 35 years old, and a quarter of the population lives under the poverty line, accord-ing to the International Mon-etary Fund (IMF).

It’s the frustration and aspi-rations of a vast and predomi-nantly young population that fuelled the revolution of 2011, threw it into the arms of a cun-ningly populist “brotherhood”, and now spurs President El-Sisi’s government’s drive for economic reforms that are just as essential to domestic peace as they are to regional stability.

Speaking at the World Eco-nomic Forum in Davos, Swit-zerland, earlier this year the Egyptian President said, “there is no doubt that sustainable development is an issue of paramount importance” and that “Egypt is fully aware that it needs to open up to the world to realize its ambitions.”

With strong financial back-ing from the Gulf countries, which have pledged or given a combined total of $35 billion in the past year with the aim of strengthening an ally they consider crucial to counter the Islamist threat, the government of President El-Sisi has already accomplished a lot to recover from the economic wreckage of the past four years.

While it has been experi-encing recent difficulties, the Cairo Stock Exchange beat all of its competitors around the world in 2014, with an index that grew by nearly 30% in dol-lar terms, and offering the best returns for investors.

But the key word in Cairo is not so much economic growth but rather inclusive develop-ment. Indeed, President El-Sisi

is acutely aware that the eco-nomic well-being of millions of impoverished families is the safest way to ensure political stability and prevent radical-ism. One of his key reforms was to gradually suppress sub-sidies on food and energy that weighed heavily on the State’s budget – Egypt spent $3 billion a year on wheat imports, mak-ing it the largest importer in the world – and were a source of corruption.

An innovative initiative in this sense was the introduction earlier this year of a smart card system for subsidized flour and bread. Reuters news agen-cy reports “under the new sys-tem, families are issued plastic cards allowing them to buy five loaves of bread per fam-ily member per day. Buyers no longer have to queue. Baker-ies are paid for the subsidized loaves they sell, rather than be-ing given a fixed allotment of cheap flour, making it harder to siphon off subsidies.”

This measure “has freed up billions of dollars in the govern-ment’s budget so that we can

now invest more in education and health care programs for those who really need it,” says the Prime Minister, Ibrahim Mahlab. “Working on creating a social safety network is per-haps the most important thing we are doing right now.”

The government’s 2015/2016 draft budget envi-sions a 12% increase in spend-ing on social programs at 431 billion Egyptian pounds ($55 billion), or nearly half of total public expenditure, and a defi-cit of 9.9%, lower than the cur-rent 11%. The budget is based on encouraging indicators: growth rose to an annualized 5.3% in the first half of this fis-cal year, compared with 1.2% in the same period the year before. Unemployment, a particularly pressing issue, is still achingly high at 12.8%, with 55% of all those unemployed aged 15 to 24, according to national statis-tics (2013), but it is falling from its January 2014 peak of 13.4%.

The IMF has lauded the reforms implemented so far: “Egypt has chosen a path of ad-justment and reform which, if followed resolutely, will lead to economic stability and growth,” it stated in February. “For a num-ber of years, Egypt has suffered from large fiscal deficits, rising public debt, fragility in the bal-ance of payments and, hence, losses of foreign exchange re-serves. But the authorities have embarked on an economic re-form program to raise growth, create jobs, and contain fiscal and external deficits and the loss of foreign exchange reserves,” added Christopher Jarvis, IMF Mission Chief for Egypt.

On the expenditure side of the budget, the government started to reform the system of energy subsidies. It also started to get a grip on the public sector wage bill. On the revenue side it introduced measures such as higher tax rates for high earners. “Those measures have already made a big difference in curbing the unsustainably high fiscal defi-cit,” said Mr. Jarvis.

The fiscal program also in-cludes enacting a long-await-ed value-added tax which, if implemented successfully, “can greatly boost govern-ment revenues and, hence, improve the country’s fiscal position at large.” Last but not least, “the authorities are pursuing structural reforms and developing measures to protect the poor, increasing cash transfers and spending on health, education, and in-frastructure,” the IMF sum-marized in its report.

In parallel to reforming a notoriously bureaucratic and cumbersome economic sys-tem, the El-Sisi government is wooing foreign investors, well aware that it needs foreign money to compensate its defi-cit and its debt, which stands at 95% of the GDP. The new in-vestment law presented a few months ago goes a long way towards achieving this.

“When we began reform in June 2014, we had a very clear vision based on three pillars: structural adjustment and fiscal consolidation; an investment stimulus plan with the launch of mega-projects and incen-tives to the private sector; and

improving the investment cli-mate,” emphasizes the Minister of Investment, Ashraf Salman.

The objective of the new in-vestment law is to streamline regulations and facilitate in-vestment and job creation. Up until now, an entrepreneur had to obtain 85 different permits in order to set up a company, a process that could last up to five years. Now, they will be able to manage all the paper-work through a one-stop agen-cy. “This is a major change and it will take some time to imple-ment it,” adds Mr. Salman.

Although it will certainly take time, investors have al-ready voted with their purse and their feet. No less than 2,800 international political and business leaders flocked to the Egypt Economic Devel-opment Conference (EEDC) held in March in Sharm El Sheikh. The event had been carefully designed by the Egyptian authorities to send

a message to the world: we are open for business. “Egypt is going towards the future. Egypt is welcoming inves-tors who are seeking to use the chances given to them by Egypt and giving a better life for Egypt,” said President El-Sisi in his opening address.

The conference was a re-sounding success from both a political and a business per-spective. Aside from the U.S. Secretary of State, John Kerry, and Managing Director of the IMF, Christine Lagarde, the conference gathered the Italian Prime Minister, Mat-teo Renzi, the Crown Prince of Saudi Arabia, Muqrin bin Abdulaziz – whose country offered $4 billion in funds to Egypt – and the United Kingdom’s Foreign Secretary, Phillip Hammond, who came leading a strong British del-egation of businesses, includ-ing British Petroleum (BP), which signed a $12 billion investment deal in the West Nile Delta, the single largest investment deal in Egypt’s his-tory. In total, the conference garnered more than $130 bil-lion in direct investment and signed commitments.

Concerning mega-projects, and apart from the opening today of the New Suez Canal, which was financed by a public bond transaction that “raised $8.5 billion in eight working days”, as the Minister of In-vestment proudly notes, the government unveiled at the conference plans for a sprawl-ing new capital city to be built 28 miles (45 km) east of Cairo. The government hopes this new $45 billion development will create 1.5 million jobs.

However, in his closing ad-dress, President El-Sisi called for more foreign investment and said that his country needs “no less than $200 to $300 billion to have real hope for the 90 million Egyptians to really live, really work, and really be happy.” If Egypt de-livers on the promises made at the conference for re-forms and stability, President El-Sisi’s objective seems defi-nitely attainable given that be-fore 2011, Egypt was emerging as one of the world’s top desti-nations for foreign capital.

EGYPTThursday, August 6 , 2015

#EgyptTheWorldfolio #TheWorldfolio

Our World Insert is produced by United World. Al-Ahram did not participate in its preparation and is not responsible for its content

“The authorities have embarked on an economic reform program to raise growth, create jobs, and contain fiscal and external deficits and the loss of foreign exchange reserves”

ChrisTophEr JArvis , iMF Mission Chief for Egypt

“There is no doubt that sustainable development is an issue of paramount importance…Egypt is fully aware that it needs to open up to the world to realize its ambitions”

AbdEl FATTAh El-sisi , president of the Arab republic of Egypt

With the overwhelming success of the Egypt Economic Development Conference, the opening of the New Suez Canal and a reform-minded president one year at the helm, Egypt is living a true watershed moment – a moment defined by the creation of new opportunities

This supplement to Al-AhrAM was produced by United World ltd., suite 179, 34 buckingham palace road, london sW1W 0rh – Tel: +44 (0)20 7305 5678 – [email protected] – www.unitedworld-usa.com

Nation engineers new channels of growth

official media partner in Egypt

A UNITED WORLD SUPPLEMENT PRODUCED BY: John Kirlin, Editorial Director Julia Maeda, Project Director James Kinnersly, Project Coordinator

president Abdel Fattah El-sisi gives a speech at the Egypt Economic development Conference in March

Egypt-Al-Ahram v3.indd 1 31/07/15 14:47

The Egypt Eco-nomic Develop-ment Confer-ence (EEDC), which took

place in Sharm El-Sheikh on March 13-15, allowed Egypt to scoop an impressive $130 billion worth of direct invest-ment agreements and signed commitments from some of the world’s leading companies. And even though President Abdel Fattah El-Sisi said in his closing remarks that his coun-try needs more to “really be happy”, this is an achievement that serves as a clear testament to the international invest-ment community’s confidence in a rejuvenated Egypt.

Titled “Egypt the Future”, the event was attended by 2800 foreign investors from 88 countries and 23 inter-national organizations, who listened to speeches by some of the world’s leading politi-cians and businessmen and schmoozed informally on the new business opportunities in the nation of 90 million as it re-covers from four years of tur-moil. Amongst the dignitaries was IMF Managing Director Christine Lagarde and U.S. Secretary of State John Kerry.

In its opening message to conference-goers, included in the official brochure, the gov-ernment said it is: “committed to pursuing policies aimed at achieving inclusive and sus-tainably high rates of growth, creating an attractive, predict-able, fair and internationally competitive business envi-ronment, and addressing the needs of Egyptian citizens. [...] The aim is to reengineer the economy through a coherent set of policies, programs and projects to ensure that future growth is high, sustainable and inclusive.”

Commenting on the prog-ress already made, Ms. La-garde said, “Over the past few months, there have been promising strides on the re-form front. [The government] did a lot to prepare the coun-try and beginning this process was a major achievement. Continuing it will be equally important, and completing it for good, the ultimate goal.” For his part, Mr. Kerry said, “how Egypt develops in the coming years ... is strategically impor-tant to this region and to all of us who are looking for stability, for a better standard of living and greater inclusivity.”

On the business side, the EEDC proved that internation-al investors are very keen to go back to the giant Middle East-ern nation. Some of the most notable investments made as a result of the conference in-clude a BP energy deal worth $12 billion to fund the West Nile Delta gas project, the larg-est single foreign investment in Egypt’s history; $10 billion from Siemens for the construction of two power stations; a conces-sion agreement with Italian en-ergy firm Eni worth $5 billion; and $6 billion from the Suidan Group, which will be used to establish logistical centers for seed storage in Damietta and along the Suez Canal.

In total the Ministry of Electricity signed 15 agree-ments totaling some $35.7 bil-lion, claiming the lion’s share of total agreements signed at the EEDC and reflecting the priority of the government to meet growing power de-mand. Besides Siemens, other companies that committed to building new power plants were Orascom, which will build a 3,000 MW coal-fired plant, Saudi Arabia’s ACWA Power, which committed $3 billion for power plant devel-opments, and $5 billion from Canada’s SkyPower Global for the development of 3GW of solar power.

Deals in construction and real estate included: a pledge by mall developer Majid Al Futtaim to invest $700 million in the development of eight malls in the next five years; $3 billion by Emirati Mohamed Alabbar to construct resi-dential housing on the North Coast, a project that will cre-ate 14,000 jobs; and $30 bil-lion for the New Cairo and 6 October City projects.

In the food and beverages sector, both PepsiCo and Coca Cola have pledged to invest $500 million each to expand their Egyptian operations in the coming years, while Beyti, the milk and juice company

PepsiCo owns with Al-Marai, will invest $525 million to build a new factory.

One of the most notable deals was the Aviation Indus-try of China’s commitment to invest $700 million in a brand new electric train from Alex-andria to Abu Qir. Meanwhile the Gulf States, which had al-ready donated billions of dol-lars in aid, pledged to invest a further $12.5 billion in several new projects as well as depos-its in Egypt’s Central Bank.

The improved business en-vironment and political sta-bility also prompted Moody’s to upgrade Egypt’s credit rating, raising the country’s issuer and unsecured bond ratings one level from Caa1 to B3, six levels below invest-ment grade. “This expected level is based on an assump-tion that domestic political stability will continue, as will improvements in the busi-ness environment, which in Moody’s view will be condu-cive to higher investment lev-els,” it said in a statement.

Following the success of the EEDC this year, the Egyptian government plans to make the conference an annual event, with President El-Sisi stating that the country would need an extra $200 to $300 billion in order to see real change.


Deals worth $130bn secured at landmark conferenceThe $130 billion of investment agreements signed at the Egypt Economic Development Conference, which is set to become an annual event, serves as a clear testament to the international investment community’s confidence in the new Egypt

2 Thursday, August 6, 2015 distributed by Al-AhrAMEGYPT

2800 foreign investors from 88 countries attended the EEdC

The media and the new consensusby Mohamed Abdel-Hady Allam, Editor-in-Chief of Egypt’s Al-Ahram newspaper

Egyptian society is passing through a critical phase of its current history. In the

aftermath of the popu-lar uprising against the former president and the outlawed Muslim Broth-erhood, the Egyptian po-litical and economic elites have focused their efforts on building a new consen-sus around the principles of both the January 25 and June 30 revolutions.

At the heart of current developments, the Egyp-tian media plays a major role in cementing the ad-vancement towards a real civic state that should be based on full citizenship and equality of all citi-zens as a premise of a new paradigm before the whole world. The Egyptian media has enjoyed a margin of freedom that allows dif-ferent voices to express their opinions. At the same time, professional journal-ism came to the conclu-sion not to give a space to frantic or violent voices that caused a national rift in the recent past.

Part of pushing the coun-try along a path of prosper-ity is building a consensus around the new national economic plans that aim at enhancing the living condi-tions and quality of life for all Egyptians. Media could be a central component of such an endeavor.

The Egypt Economic Development Conference (EEDC) offered Egypt a real chance to explain the

challenges that businesses face. It was a great venue to get the international me-dia to understand the deep changes that the major-ity revolting against the for-mer rulers have made. The EEDC has also prepared the global stage for a new Egypt that will rise from the ashes of the Middle East to build a new regional consensus towards freedom and de-velopment for everyone. Indeed, it is time to com-municate with the right au-diences with a sound mes-sage and the perfect tone.

“The EEDC has also prepared the global stage for a new Egypt that will rise from the ashes of the Middle East to build a new regional consensus towards freedom and development for everyone”

AbdEl-hAdy AllAM, Editor-in-Chief, Al-Ahram newspaper


3Thursday, August 6, 2015distributed by Al-AhrAM EGYPT


When one thinks of E g y p t ’ s g re ate st e n g i -

neering feats, perhaps the Great Pyramids first spring to mind. However, equally impressive is the Suez Canal, a man-made waterway con-necting the Mediterranean Sea and Red Sea. Opened in November 1869 after 10 years of construction, the canal revolutionized world trade – dramatically cutting transit times from Europe to Asia by eliminating the need to sail around Africa’s Cape of Good Hope. It has served as the lifeblood of Egypt’s economy for almost 150 years, now generating billions of dollars in annual revenues, and a profound source of national pride.

Officially inaugurated on August 6, the New Suez Ca-nal, the first major expan-sion of the waterway in its 146-year history, has been hailed as the “megaproject of the century” and a sym-bol of the new Egypt. Con-struction time was initially estimated at three years. But last year President Ab-del Fattah El-Sisi promised in a televised speech that it would be completed in just one year. He has managed to keep this promise thanks to a hugely successful and well thought-out financing strategy, as well as the hard work and diligence of the 41,000 workers involved in its construction.

“We will lift our country on our shoulders,” President El-Sisi told the nation in his televised address, promis-ing that “Egyptians will ex-perience a new economic era that will depend on the strength of people and the project will be owned by Egyptians.” The president invited the public to have a direct stake in the New Suez Canal. As a result the Egyptian people completely funded the project, invest-ing $8.5 billion dollars in just eight days through the pur-chase of tax-free investment certificates offered by state

banks for as little as 10 Egyp-tian pounds (around $1.30).

The new 45-mile lane will allow ships to travel simultaneously in both di-rections for the first time. This will double the daily vessel capacity from 49 to 97 and reduce total navi-gation time from 22 hours to 11 hours. Mohab Mam-eesh, Chairman and Man-aging Director of the Suez Canal Authority, has said the new canal will more than double annual rev-enues from $5.4 billion to $13.5 billion by 2023.

But the canal expansion is just the beginning of a much more ambitious scheme. The master plan for the Suez Canal Zone (SCZone) project is a comprehensive long-term development strategy that aims to turn the waterway’s environs into a world-class transport, logistics, commercial and industrial hub. The govern-ment believes that over the next fifteen years, the SC-Zone will have the potential to create one million jobs and generate $100 billion in annual revenue.

“The Zone should create an industrial awakening,” says Yehia Zaki, Director of Operations at Dar Al Han-dasah, the Lebanese-based engineering and consult-ing firm that developed the master plan.

In order to turn the area along the Suez Canal into a logistics and industrial hub, the master plan focuses on three main development sites: Port Said at the north-ern mouth of the canal opening onto the Mediter-ranean; the city of Ismailia and its surroundings; and Ain Sokhna, situated on the southern end of the canal along the Gulf of Suez.

According to the Gen-eral Authority of SCZone, both East Port Said and Ain Sokhna Port will be trans-formed into thriving gate-way ports with dedicated multi-modal logistics facil-ities. Furthermore, around 4,000 thousand hectares around each port have

been earmarked for light and medium manufactur-ing activities.

At Ain Sokhna Port, a further 2,260 hectares will be allotted for heavy indus-tries including oil refining, petrochemicals and energy component manufacturing. The highlight development in this industrial zone will

be local company Carbon Holding’s $7bn petrochemi-cal complex, which is ex-pected to create approxi-mately 100,000 direct and indirect jobs and generate annual revenue of $6bn.

“By moving into the in-dustrial zone south of the Suez Canal, you are look-ing at many logistics op-erations being based there. The fact that there is lo-gistics means there will be warehousing – meaning that eventually, there will be manufacturing. For a company like ours that produces a variety of pet-rochemical products, these manufacturers are going to require the products that

we produce,” says Carbon Holdings Chairman and CEO Basil El-Baz, who be-lieves that the SCZone “is not just a very good proj-ect, but a necessary proj-ect in this specific time in Egypt’s history”.

In the third development node, Ismailia, the focus will be on hi-tech activities such

as R&D, ICT and renewable energy development. Agri-processing, logistics centers, a dry port and other light manufacturing facilities will also be developed just north of Ismailia in Qantara.

There is no doubt that the SCZone project is Egypt’s most ambitious develop-ment project to date – a project that is going to re-quire substantial investment from the private sector. But with so many free trade zones, shipping hubs and special economic zones in the region and around the world available to investors, what makes the Suez Ca-nal Expansion Project and Suez Canal Zone stand out amongst the competition?

“Firstly, among our stud-ies that examined other ar-eas around the world with similar projects, a certain study in particular gives as-surance about the viabil-ity and attractiveness of the Suez Canal Expansion and Zone Project.” replies Mr. Zaki. “Secondly, investors have been knocking on our doors and asking about it from an early onset. Every-one is quite interested and eager. There are a number of industrial developers that are holding their deci-

sion to build a new factory as they are waiting for the Zone to be integrated. Inter-ested parties have done their homework, which makes us feel more confident.”

Perfectly positioned to prosper from the billions of dollars being pumped into the construction of the SC-Zone and its related infra-structure work is Suez Ce-ment, the country’s leading cement manufacturer.

“Cement is the backbone of any production and for a country like Egypt that is on the verge of taking off, you will find that the con-struction business is the first that shows a result,” says Suez Cement Chair-man Omar Mohanna.

As the SCZone becomes one of the world’s premier transport and logistics hubs, local companies offering freight services also stand to benefit greatly from the proj-ect’s development. One such company is Reliance Logis-tics – a subsidiary of Reli-ance Investments – which will be in a prime position to offer logistics, maritime freight and trucking servic-es to the influx of potential new clients operating along the Suez Canal corridor.

“Logistics is an impor-tant sector that needs to be developed in Egypt and as a group we have a mis-sion to try and develop new concepts of logistics in a number of sectors and in-dustries,” explains Magdi Moheb Kassabgui, Chair-man of the Board of Reli-ance Investments. “As far as the Suez Canal is concerned, we believe that we need to look at it with a different concept. Warehousing is going to be extremely im-portant there. We need to create a logistics hub in the Suez Canal region where we can serve several industries.

“We have a number of projects that are surround-ing the new Suez Canal ex-pansion project. We expect the impact of the project to be very large for both the country and our company.”

Like Suez Cement, Reli-ance Investments is also set to take advantage of the de-mand for locally produced cement as construction of the SCZone project goes into full swing – through its subsidiaries Reliance Ready Mix and Reliance Cement Trading.

“There is optimism and appetite to focus on the opportunities in Egypt,” adds Mr. Kassabgui, “whether they are related to infrastructure, logistics, or the Suez Canal. The lat-ter is opening doors for many projects.”

While the New Suez Canal will double the capacity of the 146-year-old wa-terway, the canal expansion is just the beginning of a much more ambitious scheme that aims to turn the environs into a world-class transport, logistics and industrial hub

New Suez Canal project to generate $100bn a year and 1 million jobs

“The Zone should create an industrial awakening. In different locations, we have a total area of 460 square kilometers that we’re developing”

yEhiA ZAKi, director of operations, dar Al handasah

“We have a number of projects that are surrounding the new Suez Canal expansion project. We expect the impact of the project to be very large for both the country and our company”

MAgdi MohEb KAssAbgUi, Chairman of the board, reliance investments

“We took advantage of the dormant period in activity here in Egypt to equip ourselves for better days. Those days are coming”

oMAr MohAnnA, Chairman of suez Cement




P erhaps not for thousands of years has Egypt e x p e r i e n c e d such a boom in

construction like that which is taking place today due to plans for unprecedented public and private invest-ment encouraged by the government of President Abdel Fattah El-Sisi.

As in ancient times, new structures are popping up all over the country. Not to erect towering pyramids, columned temples and luxurious palaces for rulers and priests, but rather me-ga-construction projects – civil, residential, indus-trial and leisure – aimed at helping to usher tens of millions of Egyptians into the 21st century.

According to industry an-alysts, spending on Egypt’s construction sector should top $7.3 billion by the end of this year, with much of that – $6.7 billion – earmarked for non-residential projects like the expansion of the Suez Canal and developing 75,000 square kilometers (30,000 square miles) of land along the strategic wa-terway’s route for industry and infrastructure.

And this global figure was calculated even before the Egypt Economic Develop-ment Conference was held in March, where additional me-ga-projects were announced, such as plans for a new Egyp-tian capital city projected to cost up to $70 billion.

At the conference, also attended by U.S. Secretary of State John Kerry, Min-ister of Housing Mostafa

Madbouly said the new capital project was nec-essary as Cairo’s current population of 18 million was expected to double be-tween now and 2055.

While these government-sponsored projects are un-derway, at the same time, private sector investment is pouring into factories, of-fice blocks and major shop-ping centers that are spring-ing up across the country, all of which will create jobs for Egypt’s burgeoning youth demographic now and for many decades to come.

In one project alone, re-tail developer Majid Al Futtiam of Dubai has an-nounced plans for a $2.3 billion investment over the next five years for four me-ga-malls and almost three dozen hypermarkets which will account for a total of 40,000 new jobs.

Housing is also a top pri-ority for the Egyptian gov-ernment as demand for home ownership increases among the growing middle class. In 2015, an estimated $600 million will be spent on residential construction spurred by new government initiatives to ease housing fi-nance and the development of new residential areas.

Construction firm Arabtec of the United Arab Emirates, for instance, last year said it would erect one million affordable homes costing $40 billion with the backing of the Egyptian and Abu Dhabi governments.

Meanwhile, one of the Middle East’s leading con-struction and engineering firms, Orascom Construction

Limited, is expected to play a major role in many of the new projects being promoted by the government which should mean fresh opportunities for local operators, argues CEO Osama Bishai.

“Personally, I’m very opti-mistic from a business and construction perspective as there is a strong focus on stimulating the econo-my through infrastructure projects and developing a better platform for foreign investment.

“The current administra-tion has a tendency to en-courage local contractors which will create more ex-perience within Egypt rath-er than forcing the sector to become dependent on for-eign contractors regarding technical skills,” he says.

Mr. Bishai states that the challenge lies in sustainabil-

ity with the country need-ing a long-term plan utiliz-ing a model for at least four to five years. As a contrac-tor, Orascom can only plan ahead for a period of 18 to 24 months, the usual life-time of a project.

“We hope that within the next few months there will be a master plan for the next five to seven years out-lining where to invest and how much money should be earmarked for various proj-ects,” he explains.

Orascom is well posi-tioned for the future, thanks to its vast experience in the market as well as its global connections.

Founded in 1950 as a small construction firm in Upper Egypt, it grew swift-ly and made its first foray overseas in 1985 when it set up the Contrack company

in McLean, Virginia to pur-sue U.S. AID and U.S. gov-ernment-financed projects in Egypt.

A series of successes fol-lowed, including an initial public offering on the Egyp-tian Stock Exchange to be-come the largest company on the bourse, an ambitious overseas expansion cam-

paign and the winning of a range of contracts on some of the most prestigious proj-ects in the Middle East.

Now, thanks to the ambi-tious initiatives proposed by the El-Sisi government, the group is eagerly looking for-ward to the opportunities at home and the chief execu-tive is confident Orascom will benefit.

“We are not an outsider who has been invited to look into Egypt,” Mr. Bishai says. “We know Egypt, we are committed to Egypt and we are bullish about Egypt and for us the expectation is to attract more foreign di-rect investors.

“As a contractor, when these investors come in, we realize that these firms will need to build something at some point so even if I am not a direct beneficiary of this construction, it in-creases the overall market share which allows me to gain more work whether through this opportunity or another.”

Along with sustaining Egypt’s growth, the CEO says the second most seri-ous challenge will be main-taining the fiscal discipline to manage FDI, spending, foreign currency and re-ducing subsidies, among other issues.

“But from a business standpoint, I think our big-gest challenge is the avail-ability of talent and human capital within the next five years as there has been a talent drain flowing out of Egypt to the rest of the Mid-dle East, Canada and the United States.”

Spending on construction and infrastructure to reach $7.3bn in 2015The Suez Canal Zone development, the New Capital City and a string of other large-scale construction projects will form the foundation of the new Egypt and ensure that the country’s building boom will last for years to come

“We are not an outsider who has been invited to look into Egypt... We know Egypt, we are committed to Egypt and we are bullish about Egypt and for us the expectation is to attract more foreign direct investors.”

osAMA bishAi, CEo of orascom Construction

The moment was not lack-ing in drama at last March’s g roundbreak-

ing Egypt Economic Devel-opment Conference, when the host country’s Housing Minister, Mostafa Madbouly, unveiled a to-scale mock-up of what is someday going to be the country’s brand new capital. Planned to be built up from scratch in the desert east of Cairo, about halfway between the current sprawl-ing capital and the Suez Ca-nal Development Corridor, the new city is meant to ab-sorb the population overflow and bulky administrative ap-paratus of government and finance that the swollen, pol-lution-wracked Cairo can no longer accommodate.

“We are committed to the first phase,” Mr. Madbouly said in an recent interview. “We al-ready have a very clear plan.”

One may be forgiven for wondering if the government of President Abdel Fatah El-Sisi is out to make a big po-litical splash by pledging to achieve the impossible. On the other hand, it could be rather a serious attempt to come to terms with the re-lentlessly inevitable, since de-mographers and planners all agree that Greater Cairo is on course to double its current population to top the 40 mil-lion mark by mid-century.

What its promoters de-scribe as “a momentous en-deavor to build the national spirit, foster consensus and provide for the country’s sus-tainable long-term growth” is a full-function, futuristically post-modern city covering 700 square kilometers, rough-ly the size of Singapore, that is to be grown from and remain attached organically to the mixed-use megacity develop-

ment of New Cairo, which has been in operation for more than a decade.

Residents will be free to make use of amenities that in-clude a theme park “four times the size of Disneyland” an in-ternational airport larger than Heathrow, over 1250 mosques and places of worship, 663 hospitals, 10,000 km of boule-vards, avenues and streets and 1.1 million housing units.

Commentators, mean-while, have remarked that the capital’s proposed skyline looks a lot like Dubai. In fact, the master planning and ex-ecution is to be carried out by Capital City Partners, a private investment fund led by Mohamed Alabbar, the Dubai financier at the head of the consortium that financed and built the emblematic Burj Khalifa tower in Dubai. No-body can say how much the Egyptian project will end up costing, but sums between $45 and $300 billion have been mentioned. Who’s going to pay for it? Authorities insist that private investment capital from the Gulf region and else-where will cover everything.

Regardless of who picks up the tab, public opinion has not settled on whether this is a case of unjustifiable ex-travagance for a country with Egypt’s current problems or an essential and overdue reform. Supporters point out there’s nothing inherently wrong with changing capitals; Paki-stan, Nigeria, Brazil and oth-ers have done it without going bust or disrupting the delivery of government services. And whatever may or may not hap-pen out there in the desert, the original, inimitable Cairo will still be where it always has been for the past 1,000 years, a 20 minute ride by car or elec-tric train from the new capital of a very old country.

New $45bn capital city to rise out of the desertGovernment unveils an ambitious plan to build a smart-city the size of Singapore that aims to solve Cairo’s overcrowding issues. Officials boast it will include an airport bigger than London’s Heathrow, 1.1 million housing units, and 10,000 km of boule-vards, avenues and streets



“Modern, moderate and a beacon for freedom in the Arab world,” is the future that Nobel Peace laureate Mohamed El

Baredi envisages for Egypt one day. Meanwhile, Egypt remains a “developing country” in terms of its efforts to meet the urgent needs of its 90 million inhabit-ants. Roughly half are young and either at or approach-ing an age in which the usual thing is to get married and set up a household. The result is a yearly shortfall of 500,000 to 800,000 residential housing units in the major urban areas, affecting all price categories and giving rise to a situation that makes Egypt’s real estate and construction sector an ex-tremely promising target for in-ternal and foreign investment.

Residential property is the primary focus of Egyptians’ re-lentless hunger for real estate, with prices increasing across the board for apartments and villas at a rate of 20% per year. How could prices not be shoot-ing up in a country where 96% of the people live on roughly 4% of the land? But on a per capita basis, Cairo remains one of the most underserved capi-tals in the world, says Alsherif Wahdan, a Harvard trained civil engineer who manages the Egyptian portfolios at Capstone Advisory Services.

That fact duly noted, other types of property have posted extremely positive results for the first quarter of 2015. In the commercial category, turnover in new office space has been particularly brisk in the satellite towns on the outer periphery of the capital where digital con-nectivity, parking, housing and services are easy to come by. Developers have promised to deliver another 37,000 square meters of offices at the New Cairo City complex, to cite just one example. In the center of the capital, government depen-dencies occupy virtually all the existing office space, making it not uncommon to see older apartments reconverted for use as office complexes. Mean-while, the scramble for retail space has been eased some-what by a number of newly-built in-town and out-of-town shopping malls.

14% sector growth in 2015In uncertain times, owning property is seen as the fail-safe fallback option. It will still be there when things return to normal and very likely to have increased in value. “Real estate gets sick, but it never dies,” the saying goes. Timing matters greatly, though. That’s why it should be emphasized that all evidence suggests that the cur-rent government has succeed-ed in winning the confidence of Egyptians and foreigners alike, as is evident from the upgrade it received at the beginning of the year from all the international ratings agencies. That is the confidence that explains why it took all of eight working days to finance the $8.5 billon Suez Canal Expansion Project, with many small-time investors and everyday Egyptians purchasing low denomination bonds is-sued by the government.

Housing and construction is expected to attract some $7.3 billion in direct investment over 2015 and continues to generate a 20-30% Internal Rate of Return (IRR). Demographic indicators suggest that up to eight million more units still need to be built just to catch up with the demand curve. In short, the climate could hardly be more favorable than it is now in a sector poised to maintain growth of 14% a year, while at the same time pro-viding employment (through related sectors like cement, utili-ties, infrastructure, furniture and household goods) to an estimat-ed 8% of the workforce.

Beating bureaucracy Given those numbers, an op-timistic view of the market seems neither perfunctory nor undue. However, that is not to suggest that the path ahead is smooth and uniform. One ma-

jor obstacle to doing business is a bloated bureaucracy that feeds on a plethora of outdated laws and niggling regulations. It is a situation that Hassan Dorra, Chairman of the Dorra Group, says that the government is now acknowledging needs change.

“At the top levels of the cur-rent government, officials are doing all they can within the available resources and time frame. The improvement has to be at lower levels where civil servants should move projects forward rather than wrapping them with red tape,” says Mr. Dorra, whose company also has a strong presence in the United Arab Emirates.

“The government now re-alizes it has to make many legislative and administrative upgrades and modifications. Some have already been com-pleted, like the latest invest-ment law, and other reforms are in the pipeline,” adds the chairman of the 70-year-old firm that has signed on to build elements for the Suez Canal Expansion project and prepar-ing for the second phase of the Capital Business Park in the Cairo suburb of Sheikh Zayed City, where the outer walls are sheathed in shimmering panels of Belgian glass.

Mr. Dorra does not regret the fact that the playing field, as it was known to his father, the group’s founder, has changed its contours. He sees it not as change for its own sake but change for the better. “We have hope,” he says. “The gov-ernment is open to ideas. In the past, we could not suggest anything. Now they will listen. This is one of the most impor-tant things that must be kept in mind. They are very receptive to ideas and suggestions.”

Social Housing ProjectArchitectural showpieces like the Capital Business Park are not the solution to Egypt’s hous-ing crunch. It is unfortunate that in a country where half the population meets the UNESCO criteria for “poor,” most new construction is designed and priced for upper middle to up-per income buyers. The middle class is poorly served, and low income families all but shut out of the market. This is where the Egyptian government has stepped in with a series of initia-tives mostly aimed at encourag-ing developers to take a more active role at the lower end so as to attract families that would otherwise remain outside it.

“We have launched the Social Housing Project and established a national fund with the goal of creating one million housing units over the next five years,” says Egypt’s housing minister, Mostafa Madbouly. “Right now we have 240,000 units under

construction and expect to final-ize 170,000 of them by the end of this year. I used to work for the UN Habitat program so I know this is one of the world’s largest projects of its kind.”

As one would expect, an ini-tiative on this scale has an imme-diate impact on the larger econ-omy, since the authorities have made a point of contracting out the work to local, mainly small businesses. At least 250,000 di-rect jobs have been created un-der the project, according to Mr. Madbouly who notes “When you are in a recession, the best thing you can do is invest heav-ily in infrastructure and big proj-ects like this one.”

At the same time, the gov-ernment is reaching out to low-income families by drawing on a special fund in which 10 billion Egyptian pounds ($1.3 billion) provided by the country’s Cen-tral Bank has been earmarked for mortgage financing and guarantees. That may sound fairly routine, but the fact is mortgages are not at all com-mon as a means of home financ-ing in Egypt, where transactions involving property are almost always off the books and in cash.

Mr. Madbouly believes this is going to change, and the up-tick in mortgage lending will be apparent when the numbers are in for this year. “Prior to the action of the Central Bank, no one benefitted from mort-gages except the very affluent who could prove their income and pay very high interest rates of 14%. Under this initiative, though, low income families will be eligible for 40-50% of the mortgages written.”

Housing & Development One bank that supports the government’s interest in ex-panding the market and thinks that good social policy can also be good business is the state-owned Housing and Develop-ment Bank. Managing Director for Engineering and Investment at the bank, Mohamed El Alfy, was very much encouraged by the attitudes he observed at the Egypt Economic Development Conference (EEDC) held in March at the Red Sea resort of Sharm el Sheikh.

“The EEDC restored confi-dence and pushed a reset button that lined up the entire interna-tional community alongside Egypt to support reforms in the investment, business, economic and political spheres,” says Mr. El Alfy, whose bank posted ex-

ceptional results that last year earned it a place on the coun-try’s top ten banking list.

“The private sector, whether locally, regionally or interna-tionally anchored, will take the lead in driving the economy for-ward,” underscores Mr El Alfy. “The government, being the reg-ulator, will maintain an environ-ment that makes doing business easier, rather than overcrowding the market or competing in it.”

The Housing and Develop-ment Bank itself plays an im-portant role in driving socio-economic development. Many people who apply through the bank for social housing ben-efits become first-time bank customers – no small matter in a country with only 10 million bank accounts for a population of 90 million.

“We welcome our social housing clients, and we are probably the first bank they will have had any dealings with. We encourage them to open accounts, even if just for a small sum, inform them about the products we offer and show them how the sys-tem works,” he adds.

Under legislation that took ef-fect at the beginning of the year, property developers can take advantage of a new mechanism that allows the government to swap land it owns for a stake in the equity or in the revenues generated by whatever is con-structed on it.

Granted, disputes will inevi-tably rise over the assessed value of the land in question, but both sides have too much at stake to let that become a deal breaker. Land in Egypt is almost as hard to obtain as is the permission to build on it. Cairo visitors have commented on the unseemly vacant lots and weed-tangled parcels of neglected land at in-tervals along the banks of the Nile. That is just land being held as part of the family patrimony, often untouched from one gen-eration to the next.

The Government-owned Housing and Development Bank is a special case in that projects in need of financing come to them from developers and the bank itself directly inter-venes in the market to see them carried out through a number of affiliated, subsidiary or sister companies that are active play-ers in the sector.

“The only way to go is up,” Mr. El Alfy assures us. “The support we received showed unanimous international support for Egypt which was translated into the mega-projects that were recent-ly announced.”

Indeed fueling the surge in new housing developments are the mega-projects unveiled at the EEDC in March, where public officials, foreign inves-tors and local private sector decision-makers conferred over how to get the best return on their money, exchange know-how and sign memorandums of understanding. The govern-ment made the scope of its am-bitions clear when it unveiled its Suez Canal enlargement and development plan. It is to be structured around a special economic zone 100 kilometers wide that will include custom

built logistics and handling fa-cilities buffered by a 400 square kilometer industrial zone.

MegacitiesHowever, arguably the true show stopper at the EEDC conference was when Housing Minister Mostafa Madbouly unveiled a mock-up new city that will be spawned out of the existing Egyptian capital known as “New Cairo”. The city will increase hugely in size as it develops in a rational, eco-logically sound and sustainable manner until it becomes a fully mixed community of 70 million inhabitants, eventually replac-ing Cairo as Egypt’s capital.

But why should Cairo have to be replaced, you may pon-der. It’s crowded, chaotic and beloved by the many who live there, and that means one in every four Egyptians. So what’s not to love about noisy, lively, and colorful Cairo? For its 18 million inhabitants (who make it Africa’s largest unitary urban space) life is still articulated around the local mosque, yet living space is pricey, pollu-tion out of control, workplace access complicated, and traffic beyond congested.

These drawbacks were seri-ous enough for the authorities to start building “satellite cities” out in the desert as long ago as the early 1980s. But comple-tion of the prototype high rises brought no big rush to relocate. Only a few people were ini-tially willing to trade up to run-ning water, sewage treatment, schools, hospitals and a reliable supply of electricity, plus access to global consumer brands that never would have made it to the family-run shops and suqs in the heart of the old city.

Little by little, that has been changing over the years. By now some one million Cairo residents are said to have moved out of town to resettle in 6th of October City, located about 45 km west of Cairo. By now there are over 20 hybrid developments not yet over-taken by Cairo’s metastasiz-ing sprawl. Shopping malls? Of course they have shopping malls. 6th of October City also has several universities, a cou-ple of tech start-ups and (you guessed right) Starbucks.

The question is whether these multiple-use residential-com-mercial-leisure complexes are no more than a haven for the se-riously well-to-do. Actually, the government has been at pains to include a substantial percent-age of low-income units in new developments such as Al Obour

and Al Shorouk, scheduled for completion in 2017.

Regulating real estate Mamdouh Badr El Dine is chair-man of the Badreldine for Real Estate company, which came to occupy a secure share of the market in the post-1995 bonan-za years when it won fame for ensuring that the mostly high-end buildings reflected and en-hanced the cultural specifics of the community they were built for. This includes pioneering developments in Sheikh Zayed in the suburbs of Cairo, as well as the 6th of October City.

His idea now – indeed, his priority – is to help organize an independent Federation of Realtors that would act as an intermediary mechanism for resolving disputes should they arise between developer and buyer. Since almost all trans-actions in Egypt are in cash, unregistered and unreported, today’s homebuyer has little re-course if delivery dates are not met or the faucets fall off the bathtub, other than taking his complaint to Egypt’s jammed-to-the rafters and borderline dysfunctional court system.

Similarly, proponents of the Federation would like to see it create an administrative body to assume some basic regula-tory functions such as assessing and approving plans and speci-fications for new construction, issuing habitability certificates, appraising pre-owned proper-ties and verifying land title. Mr. Badr El Dine, who is supported by other important industry executives in this venture, says “Establishing the federation will improve the performance and benefits for all the players.”

Financing for Egypt’s extreme makeover as well as the know-how required to make it hap-pen has been directed at Egypt from many countries in the region, particularly members of the Gulf Cooperation Council. The same consortium of UAE investors that helped put up the emblematic Burj Khalifa tower, are involved in the planning for substantial parts of Egypt’s new capital city. SECON, a Saudi-Egyptian joint stock company has been active in Egypt since 1975. The CEO, Darwish Has-sanein, is pleased to think he will still be at the helm when the firm enters its newly-acquired niche in the hotel and hospitality sec-tor. “Two out of three current projects are in hotels and tour-ism area, including a hotel with 256 rooms and suites in Maadi, an affluent Cairo suburb with privileged views of the Nile, and also at New Damietta, on the Mediterranean, where we are building a 90-room hotel.”

Asked if he could disclose the secret that has kept a busi-ness with two equal partners representing different cultures and national interests thriving for four decades, Mr. Hassanein said, “the company is focused on the details that matter to its customers by choosing sites very carefully and taking into account the technical and envi-ronmental aspects of the place. You could probably say that it all comes down to location, lo-cation and location.”



“The private sector, whether locally, regionally or internationally anchored, will take the lead in driving the economy forward. The government, being the regulator, will maintain an environment that makes doing business easier”

MohAMEd El AlFy, Managing director of Engineering and investment, housing and development bank

High-rise demand for Egypt’s property developersWith 8 million housing units needed to meet demand, the real estate sector is forecasted to grow 14% annually, while the government’s Social Housing Project aims to extend the property ladder to include lower-income families

“At the top levels of the current government, officials are doing all they can within the available resources and time frame. The improvement has to be at lower levels where civil servants should move projects forward rather than wrapping them with red tape”

hAssAn dorrAChairman, dorra group


7Thursday, August 6, 2015distributed by Al-AhrAM EGYPT


Palm Hills Developments builds on success in real estate sector

R apidly cement-ing its position as Egypt’s lead-ing real estate developer; Palm

Hills Developments now re-tains one of the largest land banks in the country. The company’s vision of cre-ating integrated and self-sufficient communities has yielded remarkable results. Palm Hills not only pos-sesses an impressive collec-tion of eighteen nationwide residential, commercial and tourist projects but has also achieved spectacular sales and profits growth. In the first quarter of 2015, year- on-year net profits rose by almost 260% reaching EGP 218million ($28.6m). In ad-dition, year-on-year sales figures for the same period also doubled achieving EGP 1.35 billion.

Building upon this suc-cess, Palm Hills recently signed two Memorandums of Understanding (MOUs) at the Egypt Economic De-velopment Conference (EEDC) in March, for two major projects in partner-ship with the Egyptian Min-istry of Housing (MNHD). The first project is for a 500 feddan gated community de-velopment in New Cairo.

This is an area in which Palm Hills has a lot of past experience and expertise, as Tarek Abdel-Rahman, the co-chief executive officer of Palm Hills Developments explains: “It will be similar to our usual compounds servicing the upper-middle class and above. This is our bread and butter, and we do know how to do it.”

The second project is an altogether more ambitious and historic undertaking. A 10,000 feddan develop-

ment in West Cairo, it brings together Palm Hills Devel-opments and UAE’s Aabar Investments. It will consti-tute the largest ever private joint venture in Egyptian-Emirati history.

“The 10,000 feddan proj-ect is completely different because it is the develop-ment of a town. It will have to include low-medium and high density housing with a strong theme underlying the whole town.” Mr. Abdel-Rahman explains. “We are thinking that our 10,000 feddan project will be based on wellness and education, but we are not quite set on a theme yet. However, it will have a very strong theme that will drive the economy and the town so that people can live and work there, and we have currently initiated the conceptual master-plan-ning phase,” he adds.

Situated in the 6th of Oc-tober area of Cairo, the proj-ect will complement rather than compete with the gov-ernment’s The Capital Cairo project. “They are both on dif-ferent sides of the city, so they won’t necessarily compete,” says Mr Abdel-Rahman. “Our understanding is that the gov-ernment wants the whole 6th of October area to be the resi-dential, entertainment, and tourism hub.”

Both projects were signed at the global three day Egyp-tian Economic Develop-ment Conference in March. Aimed at re-affirming inter-national investor confidence in Egypt, it was according to Mr. Abdel-Rahman, an important success. “The conference was extremely important because it sig-naled that Egypt is open for business. The quality of the speakers was unbelievable. In which conference do you see the CEOs of GE and Siemens along with senior people from Pepsi and Co-ca-Cola, Christine Lagarde, Tony Blair, Albert Speer and delegations from the Gulf countries together? This sig-nals again that foreign inves-tors are interested in Egypt and that Egypt is courting foreign investors.”

The need for housing projects in Egypt is appar-ent. The present cumulative housing gap in the country stands at 8 million units and is growing by 3,000-4,000 units per year. Whether or not the gap can be closed is uncertain, but it certainly demonstrates the contin-ued real demand for real es-tate development in Egypt, supported by the country’s compelling demographics. “I’m not so sure that we will catch up,” says Mr. Abdel-

Rahman. “Where do you get the infrastructure to build 8 million units? How long will it take you to build 8 million units, and what is the gap go-ing to be then? Last year, we delivered 980 units. The oth-er competitive developers probably delivered roughly 4,000 units. Let’s assume that all the other developers developed 10,000 units. It’s still insignificant compared to the demand driven by real need for personal usage.”

International invest-ment is a key priority for the company. Listed in both the Cairo-Alexandria Stock Exchange and the London Stock Exchange, Palm Hills has already proven its ability to attract foreign capital. In November last year for ex-ample, UAE based Aabar In-vestments PJS bought a 5.1% stake in the company.

Palm Hills hopes to attract more international investors this year, as it undertakes a

capital increase with a new share issue worth EGP 1.65 billion. Mr. Abdel-Rahman explains: “It’s being offered to existing shareholders at two Egyptian pounds per share, but in Egypt, the right to subscribe trades is sepa-rate from the share itself. If you are a shareholder that doesn’t want to subscribe, you can actually sell that right to someone else who can buy it and subscribe in your place.”

In support of the share issue, the company has recently completed a suc-cessful road show tour tar-geting international insti-tutional investors. “We did the road show in London, New York, Washington, Dubai, Abu Dhabi, Johan-nesburg and Cape Town,” says Mr. Abdel-Rahman. “It was a very positive road show and we met some of the top-tier investors in the world who were willing to listen to our story and were very excited about Egypt.”

The real estate developer signed two Memorandums of Understanding with the Egyptian Ministry of Housing at the Egypt Economic Development Conference in March

“Our 10,000 feddan project will be based on wellness and education. It will have a very strong theme that will drive the economy and the town.”

TArEK AbdEl-rAhMAn, Co-CEo of palm hills developments


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