China’s US$20 billion project to develop a new capital for Egypt falls through amid discord over how to share revenue

  • The project was to develop 15,000 acres (6,070 hectares) over 25 years in the new capital, east of Cairo
  • Phase One of the project was due for completion in mid-2019
PUBLISHED : Monday, 17 December, 2018, 11:49am
UPDATED : Monday, 17 December, 2018, 11:49am

Talks between Egypt and Chinese builder CFLD for a US$20 billion development in the new administrative capital have fallen through over disagreements on how to share revenue from the project, Egyptian officials said.

Two years of tough negotiations came to an end after Egyptian authorities sent a response to the final proposal by the Shanghai-listed China Fortune Land Development (CFLD) on developing 15,000 acres (6,070 hectares) over 25 years in the new capital east of Cairo.

“We didn’t hear back,” Ahmed Zaki Abdeen, who heads the company created to oversee the construction of the new capital, told Bloomberg News. “The talks have stopped.”

Failure to reach an agreement is likely to raise questions over Egypt’s ability to attract crucial foreign direct investments to propel economic growth. It may not, however, deter state-owned Chinese companies from pursuing other opportunities in the Arab country, thanks to strong ties between the two governments.

CFLD international declined to comment. Officials in CFLD Egypt did not respond to requests for comment.

Khaled Abbas, Egypt’s deputy minister for housing and urban communities, said authorities could collaborate with CFLD on another development, though not in the new capital. “This could be an alternative to the new capital project,” he said by phone, without elaborating.

Egypt has struggled to attract major foreign investments outside the oil and gas industry, even after floating its currency in November 2016 and taking painful measures to clinch a US$12 billion loan from the International Monetary Fund (IMF). FDI fell US$200 million to US$7.7 billion in the fiscal year that ended in June 2018.

With the exception of the business district, which is being developed by another Chinese company, work on the new capital has so far been undertaken by the housing ministry, the military and Egyptian contractors who have bought smaller parcels of land outright.

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Khaled Elhusseiny, a spokesman for the company overseeing the new capital project, said Egypt wanted 40 per cent of the project’s revenue, while CFLD offered 33 per cent.

“We found that to be unacceptable especially they were going to have a premium plot,” he said.

CFLD began talks with the Egyptian government in June 2016 and signed a memorandum of understanding in October that year agreeing to plan, develop, manage and market a section of the new city.

The new administrative capital is one of several mega-projects launched by President Abdel Fattah El-Sisi since taking office in 2014 in an effort to reboot the economy and leave his mark on the most-populous Arab nation.

The three-phase administrative capital project envisages transforming a 700 square kilometre swathe of desert into a modern hub for government buildings, foreign embassies and major companies.

That project aims to ease pressure on traffic-choked Cairo, the sprawling 1,000-year-old city that is home to 23 million people. The first phase is due to be completed by mid-2019.