This time last year, a sizeable segment of society was hailing the end of Egypt’s economic crises amid celebrations of the success of its first economic summit. Heads of state, CEOs of international companies and other prominent officials gathered in Sharm El-Sheikh from 13 to 15 March, to demonstrate their support for Egypt.
The Egypt Economic Development Conference (EEDC) was attended by representatives from a total of 52 countries, and was met with applause by media outlets for securing investment pledges with the worth of billions of dollars.
Saudi Arabia, Kuwait and the United Arab Emirates – Egypt’s strong backers following the ouster of Islamist former president Mohamed Morsi in July 2013 – had promised $12bn in economic assistance to Cairo in the form of Central Bank of Egypt (CBE) deposits and direct investments.
The aid package confirmed the Gulf countries’ support to Egypt. Further, 141 businessmen and official delegates from the UAE attended the EEDC and Saudi Arabia sent 57 delegates, constituting the largest official representation.
Despite the three-day economic summit costing the government EGP 300m, according to official figures reported by the General Authority for Investments and Free Zones (GAFI) at the time, it was largely viewed as a success by economic analysts and the government.
The aggregate value of signed agreements and investments made during the conference totalled $38.2bn.
Official figures announced by the government placed the value of investments in memoranda of understanding (MOU) at $15bn, while those in the form of installations and supplies were valued at $18bn. The provided loans and grants amounted to $5.2bn.
However, in subsequent months, and particularly in recent ones, mounting questions have been raised with regards to the success of the EEDC as follow-ups on investment pledges have not been announced periodically. Kuwaiti Emir Sabah Al-Ahmed Al-Jaber Al-Sabah announced during the EEDC a package of $4bn in investments from Kuwait entities to Egypt, but the government did not specify the exact fate of the pledge.
Further, Oman pledged $250m to Egypt in grants to be provided over a period of five years, along with $250m in investments, yet no updates have been provided on the Omani projects since.
Success of EEDC was political rather than economic: economist
As the Ministry of Investment is the only entity authorised to report on the progress of the EEDC projects, investment minister Ashraf Salman announced on Monday that Egypt signed $33bn in contracts, as the total outcome of the EEDC.
Salman added that the conference was “successful” in putting Egypt on the international investment map, adding that the number of companies investing in Egypt increased after the summit.
However, a different viewpoint was stated by economy professor and former dean at the Sadat Academy for Management Sciences Abdel Moneim Abdel Moteleb who told Daily News Egypt that the result of the EEDC was considered “positive” last year, “but now the situation is different”.
Abdel Moteleb explained that the value of signed contracts was lower than projections at the time.
“Although the target of the EEDC was economic, it achieved more results politically,” Abdel Moteleb said, highlighting that President Abdel Fattah Al-Sisi sent a political message that Egypt is “safe enough” for investments and for hosting an international summit.
Some project announcements were made simply for propaganda purposes, Abdel Moteleb contended, with the prime example being the Cairo Administrative Capital.
Other economists, such as economy professor at Cairo University Fakhry El-Fekki, view the EEDC as having achieved its goals. “More than 25% of the MOU were converted to contracts,” he stated, as evidence of the conference’s success in his viewpoint.
Some pledged projects crippled
Some MOU that were signed during the EEDC failed to make it to a final contract, most notably that of the Cairo Administrative Capital, which was announced as the country’s latest sky-reaching project with a total cost of $45bn and an area of 700 sqkm.
Construction was set to take place during a five to seven-year implementation period. The capital would be located along the corridor between Cairo and the Red Sea, providing links to significant shipping routes.
The project was set to be developed by Capital City Partners, a private real estate firm chaired by Emirati tycoon Mohamed Alabbar, who was behind Dubai’s Burj Khalifa. Local media however reported in June that the government and Alabbar disagreed over the Egyptian government’s share in the project.
The latest announcement by Minister of Housing Mostafa Madbouly was that the government will implement it with more than one developer.
Ministry of Housing spokesperson Hany Youness told Daily News Egypt that the ministry is “still working” on the Cairo Capital project.
According to Youness, last week the ministry signed an agreement with a Chinese firm to implement the technological and smart solutions of the new capital. Moreover, an Egyptian-Chinese alliance was formed in January, during Chinese president Xi Jinping’s visit Cairo, to carryout projects for capital.
The ministry moreover signed last May two contracts, for which MOU were signed in the EEDC, with Mountain View and Saudi-based Sisban to build two new projects in 6th of October City and New Cairo, Youness said.
The first project will be in New Cairo on an area of 500 acres with investments of $3bn, while the second is in 6th of October City on 470 acres and with investments of $2.7bn.
The two projects will take 10 years to be fully built and the government’s share in each project is between 30% and 40%.
The ministry also signed the $1.1bn Safari Park Development project, which was proposed by the ministry in the EEDC, in 6th of October City.
Youness added that the ministry is still finalising the contracts of other MOU signed during the EEDC, such as the South Marina tourist project on the North Cost.
In October, citing official sources, local media reported, that the government will cancel an MOU signed with Palm Hills and UAE-based Aabar Investments to implement the October Oasis project in 6th of October. After that, sources told local media the New Urban Communities Authority (NUCA) will be the main developer of the project.
Meanwhile, a number of businesspersons reported difficulty in converting their MOU into contracts. Head of the Saudi-Egyptian Businessmen Association (SEBA) Mohammed Al-Rajhi told Daily News Egypt last September that the agriculture-sector related MOU that were signed at the EEDC have not yet been activated.
According to Al-Rajhi, the Saudi investors provided all financial and technical studies for the projects, but the MOU were not considered by the Ministry of Agriculture.
Moreover, the general manager of Saudi-based renewable energy firm Fawaz Al Hokar Group (FAS Energy), Sabri Asfour, told Daily News Egypt in a September interview that they are waiting to contract their MOU, signed during the EEDC, to build a 200MW solar plant.
When asked about the effect of this on the nature of Egyptian-Gulf relations, economy professor at Benha University Mohamed Gamal said the MOU that failed to result in contracts do not necessarily imply a deterioration in the economic relations. Rather, he said it means that the investment climate in Egypt still needs improvement.
“Egyptian-Gulf relations are still strong and the fuel shipments that Saudi Arabia and Kuwait send to Egypt frequently are a huge proof,” Gamal said.
MOU that progressed
Following the conference, President Al-Sisi pushed for the rapid implementation of projects. After requesting from Siemens to reduce the period of their project implementation to 1.5 years instead of three, the company met the demand.
Siemens AG reached agreements with the Egyptian government to build three power plants, each with a 4.8GW capacity.
The German company later stated that it will implement the project with Orascom Construction and Elsewedy Electric. It agreed with consortiums led by Germany-based KFW-IPEX Bank and HSBC on the sources of financing for the project, with the initial operations expected to start by the end of this year.
Also, General Electric (GE) Chairman and CEO Jeffrey Immelt announced in the EEDC that GE is investing in a new $200m multimodal manufacturing, engineering, services and training centre in Egypt. He added that it will help in adding 2.6MW to the national grid.
Al-Sisi requested GE to implement the project within eight months. Last July, GE announced that it started supplying the thermal turbines for their projects.
During the EEDC, Egypt and BP signed an agreement worth $12bn to invest in the West Nile Delta (WND) gas project.
The agreement entails that production from the WND project is anticipated to be equal to approximately 25% of Egypt’s actual gas production, with production expected to reach 1.2bn cubic feet per day (bcf/d).
In December, BP finalised the acquisition of shares of two offshore concessions in Egypt, whereby the company now owns 22.75% in the North Alexandria concession, as well as 2.75% in the West Mediterranean Deep Water Concession, according to a statement by the company.
In the same conference, Russian also announced that it will be participating in building Egypt’s first nuclear plant. Russian Economy Minister Alexei Ulyukayev said at that time that the cooperation with Egypt will not be limited to the power plant, but also in delivering technology and staff training.
The final agreement was also signed in November with Russia’s state-owned nuclear firm Rosatom. The project is expected to be completed in 2022.
Gamal commented that the contracted MOU are mostly in the energy sector, as Egypt is in dire need of additional power quantities “to meet the needs of the growing population”.
“Also, Egypt needs to diversity its natural gas sources to reduce its import bill,” he said.
Promise for annual EEDC not met
“Egypt is waking up now, we are having a new start” – this was how President Abdel Fattah Al-Sisi ended the summit. With the national anthem playing in the background, he stated that Egypt needs $200bn to $300bn worth of investments to be fully developed.
To benefit from the success of the EEDC in terms of signing several MOU, Al-Sisi called for an annual economic summit. However, no further announcements were made regarding the annual summit, with the exception of a statement by Salman, who said in December that he is in discussions with Al-Sisi for the preparation of the annual event.
The Ministry of Investment’s press office was unable to provide information on the annual EEDC preparations when contacted by Daily News Egypt.
The call for a conference to economically assist Egypt was originally made by the late King of Saudi Arabia, Abdullah bin Abdel Aziz, who called for the summit in June 2014 after the inauguration of Al-Sisi.
Ahead of the EEDC, the Investment Law was amended to unify the process of obtaining licences through a ‘one-stop shop’ investment window.
Expert Abdel Moteleb criticised that the executive bylaw, which details the application of the Investment Law, was not announced yet, which he said makes the law ineffective to this day.
“Attracting foreign direct investments doesn’t happen through conferences and summits, it happens when the government makes serious legislative reform,” the economist insisted.
Abdel Moteleb furthermore expressed indifference with regards to the occurrence of an annual economic summit, “because even the government had higher hopes about the success of the first summit last year.”