Egypt

The New Cairo: The Egyptian Renaissance

In the news, whenever the country Egypt arises, we are greeted with very bad news of the state of the country. Whether it be a revolution, an economic struggle, or simply a dissatisfied country. Moreover, because of the negative media, Egypt has suffered in the tourism industry, which is a major component of its economy. However, President Abdel Fatah Al-Sisi hopes to change this through plans of constructing a mega-project on a yet to be named city.

Over the weekend, Egypt held an Egyptian Economic Development Conference “in the seaside resort of Sharm El-Sheikh aimed at boosting the country’s flagging economy”[1]. The plan is to build a new capital city to the east of Cairo, close to the Red Sea, and span 150 square miles and home close to 7 million people, for a projected cost of $45 billion, an ambitious project. Thanks to this summit, Egypt pocketed “$12 billion in investment pledges from an array of wealthy Gulf states”[2]. This new city would be built in partnership with a well-known private developer from the United Arab Emirates Muhammad Al-Abbar, known for the Burj Khalifa (the tallest building in the world), and “would take only five to seven years to complete, according to Egyptian Housing Minister Mostafa Madbouly”[3]. Additionally, “the summit delivered a message that Egypt is safe and is able to protect tourists and tourism investments. It further presented a future vision for projects, to be implemented by international companies”[4].

A delegation looks at a scale model of the new Egyptian capital displayed at the congress hall in the Red Sea resort of Sharm el-Sheikh on March 14, 2015. Egypt plans to build a new administrative and business capital east of Cairo that will house five million people and feature a theme park "four times bigger than Disneyland", a minister announced at a global investor conference. AFP PHOTO / KHALED DESOUKI        (Photo credit should read KHALED DESOUKI/AFP/Getty Images)

A delegation looks at a scale model of the new Egyptian capital displayed at the congress hall in the Red Sea resort of Sharm el-Sheikh on March 14, 2015. Egypt plans to build a new administrative and business capital east of Cairo that will house five million people and feature a theme park “four times bigger than Disneyland”, a minister announced at a global investor conference. AFP PHOTO / KHALED DESOUKI (Photo credit should read KHALED DESOUKI/AFP/Getty Images)

Capital Cairo 2

The project is meant to make Egypt an attractive investment by demonstrating stability, reinvigorate the collective national spirit, and allow for sustainable long-term growth. This ambitious project is to build “660 hospitals, 1,250 mosques and churches, and a theme park four times the size of Disneyland”[5]. Other extravagant ideas include a “green space twice the size of Central Park in New York… the centre will feature soaring skyscrapers and a structure best described as the metallic offspring of the Eiffel Tower and Washington Monument”[6]. Even far reaching is that a 200-metre-high skyscraper modelled after the famous Pyramids in Cairo is to be built that would be “composed of two pyramids – one tall and slim, and the other broad and short”[7] and would be the country’s tallest building. The cost of this part of the project has not been disclosed yet, only that it will be completed in conjunction with real estate developers and Egypt’s New Urban Communities Authority. The developer SOM says, “The Capital Cairo complements the national vision for an Egyptian renaissance”[8]. Partner of SOM, Philip Enquist, says, “While we are at the earliest stages of design, the new city will be built on core principles that include places of education, economic opportunity, and quality of life for Egypt’s youthful population”[9].

Capital Cairo 3

These are certainly aspiring goals that many countries can learn to adopt but a certain extent of skepticism is needed with such projects. These are lavish projects that need to be planned accordingly, specifically financially. “The impulse for a leader to create a new capital is as old as history itself”[10] and there is nothing as symbolic as the “centralizing authority of a new regime than a shining edifice, built in its supposed image”[11]. However, these new capitals and dreams have been executed in other countries, such as Brazil, Nigeria, and Malaysia, with the eagerness to break down the walls of division with a modern view of unity and the future but never succeed. To model, in 2005, “the Burmese junta quit the capital at Yangon, a former British colonial center, for Naypyidaw, a new city built literally out of the jungle. To this day, the capital is widely described as an artificial ‘ghost town’”[12]. The bitter truth is that more often than not, the ground of these skyscrapers outweigh the dreams of their architects.

Although this plan is in its early stages, there are still unanswered questions. An urban planning expert in Cairo, David Sims, says, “How are you going to do the infrastructure? How are you going to get the water? How will they move all these ministries?”[13] “Mr Sisi has made progress in this area, cutting fuel subsidies, reducing the budget deficit and making investment easier”[14] but inducing such a project has adverse impacts on the budget, which could be used for education, health, and other simpler tools to improve business. Amr Adly of the Carnegie Middle East Centre is not completely in agreement with Egypt’s plans. He says, “the government does not have a plan to spread the benefits of growth. Moreover, it is looking for inspiration in Dubai whereas India might be a more suitable model given Egypt’s size and poverty”[15]. Mr. Adly makes an interesting point, although Egypt does have over population, it is not to the extent of that of India and Egypt is just pulling itself back together after the revolution that took place recently. At first “there might be many construction jobs for a time. But the main benefits will accrue to Egypt’s dominant big firms, and to the Gulf companies that follow their government’s investments. Most small and medium-sized enterprises will be left on the sidelines”[16]. A shiny capital is nice and generates good publicity but “kick-starting these engines of growth would do more for his people”[17].

This is the message that Egypt must deliver, that it is a safe country with aspiring goals. The future city must strengthen and diversify Egypt’s economic potential by creating attractive new places to live, work, and welcome the world. For too long, the treasure of Egypt has been hidden as the city of Egypt became a spectacle for the world as the people of Egypt struggled to obtain an appropriate leader. Now, the plans to find this treasure are in place as the entire country risks almost everything to find this treasure, which is admirable. But in seeking this treasure, Egypt must have counter-measure plans, as this is the real world, and the real world is not a fantasy. Egypt must make sure that during this period of heavy investment a steady economic supply is found, so as to be able to continue a decent lifestyle for the people and not uproot another crisis.

[1] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[2] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[3] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[4] http://www.dailynewsegypt.com/2015/03/18/egypts-tourism-revival-sought-at-economic-summit/

[5] http://www.theguardian.com/cities/2015/mar/16/new-cairo-egypt-plans-capital-city-desert

[6] http://www.economist.com/news/middle-east-and-africa/21646806-another-egyptian-leader-falls-false-promise-grand-projects-thinking-big

[7] http://www.dezeen.com/2015/03/02/pyramid-inspired-skyscraper-zayed-crystal-spark-cairo-egypt/

[8] http://www.dezeen.com/2015/03/20/som-new-capital-city-cario-egypt-seven-million-people/

[9] http://www.dezeen.com/2015/03/20/som-new-capital-city-cario-egypt-seven-million-people/

[10] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[11] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[12] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[13] http://news.nationalpost.com/2015/03/17/egypt-new-capital-why/

[14] http://www.economist.com/news/middle-east-and-africa/21646806-another-egyptian-leader-falls-false-promise-grand-projects-thinking-big

[15] http://www.economist.com/news/middle-east-and-africa/21646806-another-egyptian-leader-falls-false-promise-grand-projects-thinking-big

[16] http://www.economist.com/news/middle-east-and-africa/21646806-another-egyptian-leader-falls-false-promise-grand-projects-thinking-big

[17] http://www.economist.com/news/middle-east-and-africa/21646806-another-egyptian-leader-falls-false-promise-grand-projects-thinking-big

The Price of the Emotional World Cup

Written by: Mark Eisa

The World Cup, no other prize has been coveted more in sports entertainment by each nation in the sport of soccer. The World Cup occurs every four years and has a wave of influence and impact on the hosting country’s economy. The hosting country of the World Cup enjoys the benefits of an increased spotlight from the world as it hosts an international tournament to see the champion of champions. However, to determine which country will host this prestigious event, several factors are taken into consideration in addition to the bid the interested countries make. These factors include the number of suitable stadiums as well as the potential for success and profit. Although there is a great joy in the hosting nation, there are severe economic issues that could arise in a lack of preparation and analysis.

For many countries the sport of soccer, or football as commonly said, is a religion, and one of those countries is Brazil. The nation of Brazil was thrilled to host this coveted event but it is a nation that exemplified the lack of proper financial analysis as well as planning their future appropriately. The country placed their emotional aspirations above their objective goals to a certain extent. Firstly, “the government of Brazil spent over $11 billion in preparation of the World Cup”[1]. Though an overjoyed nation was expected as they are hosting the thing they love most in the entire world, Brazil’s Favela’s experienced much unrest as the residents and police clashed. The reason for this is the significant debt that Brazil is facing and instead of using resources to alleviate some of this debt, the Government is incurring more debt to finance the World Cup. To illustrate, footballer-turned-congressman Romario says, “you see hospitals with no beds; you see hospitals with people on the floor, you see schools that don’t have lunch for kids; you see schools with no air-conditioning. You see buildings and schools with no accessibility for people who are handicapped.”[2] Furthermore, for remote areas, an increased expense was added in transportation of materials. For example, “Manaus, a very remote area, needed materials to be brought in by boat, shipped from the Atlantic from Portugal and up the Amazon River. This is a waste of money as the stadium built will only be used for 4 World Cup games.”[3] Moreover, there is no team in Manaus that could fill it, say in a seasonal match, essentially becoming a wasteland afterwards. Finally, there is no financial advantage in hosting the World Cup as Romario says, “FIFA, who invested nothing in Brazil to stage its signature event, will leave when it’s finished with considerable profits.”[4] It is actually FIFA, organizer of the World Cup, that makes money, and not the hosting country, as FIFA and its subsidiaries demand they be exempt from any tax levied at any level of Government. For example, “Brazil allowed FIFA to forego $250 million worth of taxes.”[5] Brazil, like many other countries, is an example that nations should recall when hosting the World Cup, making sure they are financially sufficient to host this lavish event.

Despite not receiving much international media coverage, many Brazilians protested the lavish costs of hosting FIFA's flagship event in Brazil.

Despite not receiving much international media coverage, many Brazilians protested the lavish costs of hosting FIFA’s flagship event in Brazil.

For the 2010 World Cup, Egypt made a bid to host the World Cup but received no votes and ultimately South Africa obtaining the most votes. To host the World Cup several factors need to be aligned and work together coherently to yield a successful event for FIFA. There were several reasons why Egypt could not host this tournament, mainly stemming from the political and economic risks at large during the time. Politically, Egypt had been struggling due to the reform that was taking place because of the need for change needed by the citizens. Between 2004 and 2011 “an economically liberal cabinet pursued an economic reform programme with far-reaching plans for change. Public opinion has turned against liberalisation, and post-Mubarak governments have demonstrated some populist tendencies.”[6] This has resulted in Egypt, as a republic, “undergoing a convoluted political transition, ostensibly designed to introduce a more democratic system.”[7] An unstable government has repercussions that deal with economy of the country as well as the foreseeable future of that country. Lack of continuity is a major factor any investor looks at to view a profitable return, which is the case for FIFA. Economically, Egypt was not on par with other countries, due to the crisis at the time, which did affect the flow of the economy. “Financial contagion was contained by limited direct exposure to structured products and low levels of financial integration with world financial markets.”[8] Moreover, the country’s finances remained heavily reliant in foreign aid and the tourism industry, making it vulnerable to external shocks. Egypt had a large debt to pay off, “weak growth prospects, and a persistently high fiscal deficit will continue to impair Egypt’s creditworthiness”[9]. In terms of future potential, Egypt still faces financial worries as “the Economist Intelligence Unit forecasts that the external debt stock will rise in 2015‑16, to an average of US$63.5 billion, but remain manageable at 17.5% of GDP. Ongoing security uncertainties pose additional downside risks to the sovereign rating”[10]. Lack of a fortified economy would prove to be a stringent liability for Egypt because of the several expenses needed building the stadiums, building transportation routes to the stadiums, and gathering construction materials.

The Logo of Egypt's failed bid to host the 2010 FIFA World Cup

The Logo of Egypt’s failed bid to host the 2010 FIFA World Cup

To summarize, the World Cup brings joy to the nation because in many ways, it is a celebration of the many cultures in our magnificent world. In the joy of celebration, many countries make the mistake of accepting this credit risk that comes with hosting this expensive event, without fully realizing the detrimental effects that could take place without a practical analysis. Brazil is an example of a country that may have taken on more than they could handle, as they sacrificed potential funding needed by its institutions in favour of, and liability, the FIFA World Cup. Egypt, in many regards, could not host this event because of the risks that it posed FIFA, as an investor. The political and economic risks were too great and may have harmed Egypt’s economy further if pursued. In looking to the future, Egypt’s political structure is starting to stabilize, and with a more stabilized political infrastructure, a more stable economy is on the rise.

[1] http://www.youtube.com/watch?v=DlJEt2KU33I

[2] http://bleacherreport.com/articles/1845944-how-much-has-hosting-the-world-cup-cost-brazil

[3] http://www.youtube.com/watch?v=DlJEt2KU33I

[4] http://bleacherreport.com/articles/1845944-how-much-has-hosting-the-world-cup-cost-brazil

[5] http://www.youtube.com/watch?v=DlJEt2KU33I

[6]http://country.eiu.com/article.aspx?articleid=512413635&Country=Egypt&topic=Summary&subtopic=Fact+sheet

[7]http://country.eiu.com/article.aspx?articleid=512413635&Country=Egypt&topic=Summary&subtopic=Fact+sheet

[8] https://www.imf.org/external/np/ms/2010/021610.htm

[9]http://country.eiu.com/article.aspx?articleid=652427849&Country=Egypt&topic=Risk&subtopic=Credit+risk&subsubtopic=Overview

[10]http://country.eiu.com/article.aspx?articleid=652427849&Country=Egypt&topic=Risk&subtopic=Credit+risk&subsubtopic=Overview

Episode 4 – The Bashmurite Revolution

Most history books will tell you that Copts welcomed the Arab Conquest of Egypt in 693 AD with open arms, because it was seen as a welcome change from an oppressive Byzantine regime. But there was one story of rebellion that most books missed: the Bashmurite Revolution.

Join Sherif as he lays out the facts of this little-known series of revolutions, and what we can learn from it today!