Egyptian Army consolidates its economic prowess by building a new capital city: China pays the bill


The most irrefutable proof that Egyptian leaders have given up trying to solve the problems of Egypt is their decision to start constructing a brand new capital in the middle of the desert, a city as big and modern as Singapore, designed to accommodate Egypt’s most affluent families.

Cairo has become an indomitable city characterized by problems stemming from overpopulation, evident in the informal urban planning, pollution, insecurity, traffic congestion and noise. Because of these issues, the government has decided to transfer all the State institutions  and about 6 million inhabitants far from the chaos that reigns in the capital to a new life just 60 kilometers east of Cairo.

The relocation project was announced by the Egyptian president Abdul-Fattah el-Sisi in 2015 and has just started to take shape on the ground. It will have everything one might expect from a big capital: an international airport, ten universities, a green area twice the size of Central Park, a theme park four times the size of Disneyland, 663 hospitals, 1,250 mosques and churches and more than 1 million residences.

Egypt has a long record of constructing new suburbs to relieve the pressures on the capital. Many residential neighbourhood developments have been intended to attract and accommodate middle class but in most cases they have failed to do so. For example, the New Cairo satellite town was conceived to accommodate 6 million people, but only about 200,000 live there.

The construction of the new capital continues to grow. It ambitiously surpasses  all previous projects because it is not just about constructing new residential neighbourhoods; The government also intends to transfer all centers of power and decision making along with the associated jobs and workers out of Cairo . That is, all governmental facilities and the foreign diplomatic headquarters would be relocated to the new capital. Sisi said that it would cost 45 billion dollars and would be finished by 2020, thanks to the funding from the China Fortune Land Development company.

Architects and citizens of Cairo wonder why the government does not invest in renovating  existing buildings, streets, and neighbourhood infrastructures, instead of pouring its resources into such an ambitious and disproportionate project that could result in failure.. Cairo is at present a neglected city, with a certain air of decadence. Many believe that, if the new capital becomes a reality, Cairo quickly will be abandoned left to deteriorate.

The problems of overpopulation

Many Egyptians refer to Cairo with the same word they use for the country: “Misr”. We could say that for the inhabitants of Cairo, Cairo is Egypt and Egypt is Cairo. This identification is a metaphor for the proud people of the capital city, but every day it is closer to becoming a description of the country itself. Today, more than 22 million people live in the metropolitan area of Cairo, which represents 23 percent of the 92 million of Egyptians. The population of the capital is constantly growing. In 2017 alone, it increased by 500,000 inhabitants, making it the city with largest growth rate in the world. In 2050, Cairo is expected to exceed 40 million inhabitants.

The high population density is not a phenomenon exclusive to the capital. Egyptians live in one of the most densely populated areas in the world. The total area of Egypt is of 1.000.000 square kilometers, with a density of 96 inhabitants per square kilometer. But this calculation overlooks the fact that 97% of the territory is sparsely or not populated at all.

96% of the population is concentrated in the 30,000 square kilometers of the shores of the Nile and its delta; the rest is desert. The density of this area is 3,082 inhabitants per square kilometer, three times higher than that of the overpopulated Bangladesh, and 7.5 times the Netherlands, the country with the highest population density in Europe.

Economy in the hands of the army

70 percent of Egyptians live on agricultural land But curiously, in spite of this huge labour force poured into the field, the country hardly produces half of the food that it consumes. As a consequence, half of the population has an insufficient dietary intake. But at least the poorest can feed themselves because the State subsidizes the prices of many items. They do it at the expense of the huge deficit and the sacrifice of the international aid that should be spent on development policies.

In the mid-twentieth century, Cairo was an elegant city that attracted travellers and artists. Egypt was a regional power and its capital set itself up as one of the hubs of international politics. The nationalization of the Suez Canal by the president Gamal Abdel Nasser and the rise of the oil prices guaranteed the progress and the growth of the region. The magnificent buildings and infrastructures are remaining symbols of the prosperous new era that began fifty years ago. However, the same buildings now reflection the economic decline. Everything is dirty andthe wide avenues are poorly paved and full of holes. The big noble buildings now show cracks in their facades,damaged by the trace of the time; their elevators are out of service, their stairway steps are broken or just plain missing.

The poor qualification of an important part of the Egyptian population does not help achieve a better future. Near half of the population is illiterate. The official unemployment rate is 15 percent, but we should take into account that the government has only registered half of the working age population in the labour force. In Egypt we can trust the official data as much as the opinion expressed by any Egyptian in an informal conversation. Therefore, we can estimatethat up to a third of the population does not have a job.

This panorama is partly the responsibility of the military governments who have looted money from the State. It’s poor planning has also had an influence, because the soldiers have been devoted to imposing policies of control on the economy, and have not bothered to foster productivity. As a matter of fact, the soldiers should be the first to help boost the country, but they only seem concerned with filling their pockets.

The economic power of the army dates back to the time of president Nasser, who led a military coup in 1952 and promoted a plan of nationalization of the economy. He placed military men at the front of the industries and created the network of corruption that has kept since plagued Egypt. The successor of Nasser, colonel Anwar el-Sadat, moved away from the socialists policies of hispredecessor and from the Soviet Union. Sadat tried to liberalize the economy with a series of privatizations that didn’t please many in the army. As a matter of fact, the number of soldiers in the positions of power diminished.

Sadat was murdered in 1981 by the Islamic Jihad group during a military parade. The responsibility of the attack falls on the Islamists, but we should keep in mind that Sadat also had enemies in the army.

The death of Sadat gave way to a new period of expansion of military businesses. In that period the conglomerates, groups of companies dedicated to several economic activities, were set up under the control of the Department of Defense and Military Production which has maintained control of the economy until now.

Sadat had made peace with Israel and the president who succeeded him, Hosni Mubarak, and created new industries and companies to place the thousands of soldiers that were no longer needed in the army. He could not take the risk of leaving them unemployed, because the job market in the eighties was already saturated. These companies benefited from aid and fiscal exemptions. In addition to that, they have never paid taxes. They are exempt from the taxes related to property, business activity, imports and sales. Besides, many soldiers work in these companies in exchange for a meager salary. This increases exponentially the grievance towards the private initiatives that dare to compete in the vitiated and tricky Egyptian market.

This empire directed by the Generals has grown up in the shadow of state aids and nobody knows the magnitude or the volume of this business. There are analysts who assure that the companies controlled by the army represent the 40 percent of the economy. But nobody really knows. If we made a list of the more forbidden and prosecuted issues in Egypt, we would put research or the disclosure of information related to this subject at the top.

In these circumstances, what can help Egypt emerge from poverty? For a start a massive emigration would help them very much. This would reduce the internal pressure and would generate professional opportunities in the country. As for the expatriates, they would reinforce the national economy with the money that they send to their families. Thousands of Egyptians left the country for good during the last decades, especially to the Persian Gulf. In Saudi Arabia there are some 3 million Egyptians, in Jordan 1.5 million, before the war in Libya there was 1 million and in the United Arab Emirates, 750,000. In total, about 10 million Egyptians live abroad.

We have an example of another country with a similar population size to Egypt that some years ago also sank into misery due to the overpopulation and decades of extremely corrupt and repressive governments. This country partly began to get back on its feet thanks to the mass emigration of its youngsters. Since the eighties more than ten million Mexicans have emigrated to the United States. But even though the figures of Mexico are similar to those of Egypt, they are not yet sufficient for the African country.

The fleeting presidency of the Islamist Mohamed Morsi between 2012 and 2013 could not alter this situation. The dismissal of Morsi by force and commander Sisi’s accession to power in 2014 has promoted again the role of the army in the economy. During its mandate, the armed forces have diversified its operations. This time its participation in the fields of energy and public works has grown significantly. The most important project of which is the expansion of the Suez Canal.

The increasing role in the economy of the companies linked to the army concedes the military a power that grows in exponentially. This, in turn justifies the dimension of the armed forces. Egypt has 438,000 active soldiers, which makes it the tenth largest army in the world, not including the 400,000 Central Security Forces paramilitaries and the 480,000 servicemen from the reserve troops.

Besides, the public works constructed by companies linked to the army stay forever under military control. The Constitution of 2014 puts them under military jurisdiction for being considered vital to national security. Since 2016, this consideration has been broadened to the lands adjacent to the constructed roads by the army. And there is more. The soldiers’ privileges and the opacity about their businesses are growing all the time. For example, since 2011 the active and retired soldiers are immune to ordinary justice and can only be prosecuted by military tribunals. Besides, the 2014 Constitution stipulates that only the National Defense Council, formed almost exclusively by members of the armed forces, can be informed and decide about the Defense budget.

All this represents a constant threat for the economy of the Egyptians as the tentacles of the military controlled industry broaden the smallest margin to liberalize the economy. The room for the private initiative, for job creation is reduced and the transparency of a regime already opaque and extremely bureaucratized shrinks.

The Silk Road Economic Belt Initiative

The huge Chinese investment in the project of the new capital for Egypt has very much to do with the Belt and Road Initiative launched in 2013 by the government of Beijing. It is a political-economic project for commercial integration intended to guarantee and to reinforce direct communication between Asia and Europe with the objective of weakening the United States hegemony in the region.

Since the announcement of the Belt Initiative, president Sisi has visited China twice in search of an alternative alliance to the one with the U.S., and the Chinese presence in Egypt has significantly increased.

One of the consequences of this approach is the construction of a second side channel in Suez and the depth of the old one. At the inauguration, on 6 August 2015, it was announced that the reduction in wait time for crossing ships would double the traffic and the economic benefit coming from this infrastructure within 10 years. The authorities foresaw that the income would go from 5.3 billion dollars in 2014, to 13.4 billion in 2023. But three years after the inauguration the expectations have not yet been fulfilled. As a matter of fact, in June 2017 the income reached 427.2 million dollars, only 2% more that the same month of the former year, but less than that of May. In view of the situation, the Suez Canal Authority has decided not publish any more economic data about the income provided by this infrastructure.

The apparent failure of the project is a consequence of the fact that the old canal never reached its maximum capacity. The prescriptive economic feasibility studies for this 8.5 billion dollar Pharaonic investment were not made. This money was attracted through bonds with a generous annual interest of 12%. Besides there are related environmental threats. But all these issues are a problem just to Egypt while China has already secured itself the expansion and modernization of one of the main routes for their export products to Europe. 7% of the world trade transits through the Suez.

The Egyptian government wants to offset the loss of this investment and to straighten the economic situation that derives from it with a new multimillion-dollar  project. It has announced an ambitious plan for the development of an economic zone on the shores of the Canal that will have, among others, a strong Russian presence (4.6 billion dollars). It is an industrial and logistical center that includes four tunnels and two suspension bridges that will connect the African and Asian parts of Egypt, as well as a pisciculture project with 4,440 aquariums to produce 700,000 tons of fish a year.

The Egyptian authorities believe that their country deserves to be one of the key hubs of the new route of the maritime silk for its geographical situation and its history . The prize for the geographical situation has been the foreign investment for the extension of the Suez Canal. Regarding the recognition of Egypt as an historically relevant actor in the international scene, the Chinese wanted to make the army happy by investing in the construction of the new capital through the China Fortune Land Development Co.

But the success of this ambitious project will depend on the interests of China in the coming years and on the proper management of the budget dedicated to it by the Egyptian authorities. Regarding the opinion and the social response of the inhabitants of Cairo to the rich Egyptians fleeing 60 kilometers away, its resources and its investments, this is an unknown factor. The elite of the country did not take into account the worries and concerns of the popular classes. Neither carried out any study about it because the army doesn’t have any real interest in knowing it.