Egypt is building a new $58 billion administrative capital from the ground up. But what began as a ploy to decongest Cairo’s traffic, has quickly racked up criticism over a growing budget and questions about who this new city benefits. 

Sitting over 20 miles east of Cairo, the new capital plans to include a miles-long central park, a main business district with a Chinese-built tower and a massive new headquarters for the Egyptian Ministry of Defense, known as the Octagon. But how many people can afford to live in this city designed for 6 million people?

WSJ looks at what this new desert city reveals about Egypt’s plans for the future and looks at the debt it’s racking up to get there. 

0:00 Egypt’s new capital
1:02 The goal behind the new capital 
3:47 The challenges for the government
4:55 The challenges for the people 
6:06 Geopolitics
6:57 What’s next?

#Egypt #Megaprojects #WSJ

Sitting over 20 miles east of the current capital in Cairo, Egypt is building a new administrative capital from the ground up.

The nearly $58 billion plan includes a miles-long Central Park, a main business district with a Chinese-built tower, and massive new headquarters for the Egyptian Ministry of Defense, known as the Octagon.

It's a city for 6 million people and I don't think there are 6 million people that can actually afford this city.

After borrowing tens of billions of dollars, Egypt is facing an economic crisis.

And given the country's historic role as a mediator between Israel and US-designated terrorist group Hamas, governments from around the world are looking to Egypt, with some having floated the idea of financial aid in return for accepting Palestinian refugees.

Here's what this new desert city reveals about Egypt's plans for the future and the debt it's racking up to get there.

The central goal behind this administrative capital is shifting the government's power away from here, the country's current capital, where ancient buildings are crumbling, traffic is congested, and residents are densely packed.

95% of the population, which is over 100 million, live in this very narrow valley.

Within that area, there's a significant wealth gap, and in turn, a history of revolt against the government.

In 2011, protests erupted in Cairo's Tahrir Square.

A revolution soon followed that led to the downfall of Egypt's then-president.

And its current 1, President Abdel Fattah el-Sisi, is a former general who came to power in a military coup 2 years later.

Sisi officially announced the project in 2015 under the objective that this will decongest Cairo and produce new working opportunities.

Going to the desert allows him to create this distance between him and the urban centers so that in case there is a revolt somewhere, He can repress it without it being effective in blocking him.

And despite Sisi's continued insistence that the Egyptian state won't pay a penny for the new capital, a project on Middle East Democracy Report says that Most of what has been spent so far has come from public funds.

After a partnership with the United Arab Emirates fell through over financial disagreements, Egypt's military stepped in to help finance the new administrative capital.

Now behind this project is a company owned 51% by Egypt's military, known as the Administrative Capital for Urban Development, or ACUD.

The military, especially since 2013, has penetrated the state and the political system.

Political analysts say that this involvement allows the military to benefit financially from the proceeds of land sales as well as cuts from the contracts.

And when the military took over the project, a new design was drawn up that separated the government from business and residential areas, making it far less pedestrian-friendly.

A noteworthy change, given that only about a quarter of Cairo residents have cars, the highest percentage in Egypt, but still comparably low to neighboring states.

And the project has quickly racked up additional criticism over a growing budget, just as President Sisi comes up for re-election in December.

And Egypt steps up as a key player in mediating relations between Israel and Hamas.

In 2015, Egyptian state media reported that the new capital will cost a total of $45 billion.

But reports today say the cost of phase 1 is more to the tune of $58 billion.

And experts say that the costs for the new capital are constantly changing.

There was a logic that we can just continue to borrow.

Of course, that came crashing down when the Russians invaded Ukraine.

Because it had sourced the majority of its wheat imports from Russia and Ukraine, Egypt was hit especially hard by the war.

The war in Ukraine has pushed up the price of building by about 10 to 15 percent, impacting the capital.

And this isn't Sisi's first big-budget endeavor.

In 2015, he ordered an $8.5 billion expansion of the Suez Canal.

The 120-mile canal accounts for some 12% of global trade, but a revenue boom hasn't materialized as the government imagined.

The canal's all-time high revenue of $9.4 billion is still $3.6 billion away from the government's projection for this year.

Economists say Egypt can't afford this new capital, and the majority of its residents can't either.

For Sisi's capital plan to pay off, it needs millions of people to actually move there.

But over the past year, amid double-digit inflation, the Egyptian currency has depreciated by about 50%.

Egypt's Ministry of Foreign Affairs did not respond to requests for comment.

Parliament is now said to be moving into the new complex by the end of October, and other government buildings are also set to relocate.

But employees don't expect to be able to afford apartments in the area, since the cost of an apartment starts at around $80,000.

In 2020, the average household income in an urban community was just over $2,600.

It's clearly a city for the rich simply by finances.

So for the project to be fully realized, it needs buy-in from more groups, including foreign embassies.

Embassy in Egypt did not respond to requests for comment, but several foreign diplomats have previously said their embassies would need to see that Egyptian government ministries locate there first.

Has given Egypt about $1.3 billion in U.S.

Said it plans to pull some $85 million of its conditional aid to the country over Egypt's failure to make progress on human rights.

Political analysts say some of this emphasis on human rights could take a back seat because right now Egypt is playing a unique role.

The country is mediating conflicts between Israel and U.S.

Designated terrorist group Hamas, while also helping squeeze Hamas out of the Gaza Strip with a blockade on goods and travel.

All the while, Egypt is facing pressure to open its border and host refugees crossing to escape an Israeli bombing campaign and expected ground invasion.

With regard to Rafa, I had a very good conversation with President el-Sisi.

We have put in place, Egypt has put in place, a lot of material support for people in Gaza.

But this pressure comes amid its economic challenges.

The country has sought financial lifelines from the UAE, Saudi Arabia, Kuwait, and Qatar, as well as from the DC-based International Monetary Fund.

Now, officials say Gulf states, which had initially resisted providing cash to Egypt, have floated the idea of giving Egypt financial aid in return for accepting Palestinian refugees.

In the meantime, the company behind the new capital, the ACUD, is eyeing an IPO in the first half of 2024.

The ACUD did not respond to requests for comment.

But even with the potential for new financial support, experts are still concerned about the health of Egypt's economy, with the completion of the capital still shrouded in doubt.


Speaker 0: Sitting over 20 miles east of the current capital in Cairo, Egypt is building a new administrative capital from the ground up. The nearly $58 billion plan includes a miles-long Central Park, a main business district with a Chinese-built tower, and massive new headquarters for the Egyptian Ministry of Defense, known as the Octagon. But some say…

Speaker 1: It's a city for 6 million people and I don't think there are 6 million people that can actually afford this city.

Speaker 0: After borrowing tens of billions of dollars, Egypt is facing an economic crisis. And given the country's historic role as a mediator between Israel and US-designated terrorist group Hamas, governments from around the world are looking to Egypt, with some having floated the idea of financial aid in return for accepting Palestinian refugees. Here's what this new desert city reveals about Egypt's plans for the future and the debt it's racking up to get there. The central goal behind this administrative capital is shifting the government's power away from here, the country's current capital, where ancient buildings are crumbling, traffic is congested, and residents are densely packed.

Speaker 1: 95% of the population, which is over 100 million, live in this very narrow valley.

Speaker 0: Within that area, there's a significant wealth gap, and in turn, a history of revolt against the government. In 2011, protests erupted in Cairo's Tahrir Square. A revolution soon followed that led to the downfall of Egypt's then-president. And its current 1, President Abdel Fattah el-Sisi, is a former general who came to power in a military coup 2 years later. Sisi officially announced the project in 2015 under the objective that this will decongest Cairo and produce new working opportunities.

But political analysts say.

Speaker 1: Going to the desert allows him to create this distance between him and the urban centers so that in case there is a revolt somewhere, He can repress it without it being effective in blocking him.

Speaker 0: And despite Sisi's continued insistence that the Egyptian state won't pay a penny for the new capital, a project on Middle East Democracy Report says that Most of what has been spent so far has come from public funds. After a partnership with the United Arab Emirates fell through over financial disagreements, Egypt's military stepped in to help finance the new administrative capital. Now behind this project is a company owned 51% by Egypt's military, known as the Administrative Capital for Urban Development, or ACUD.

Speaker 1: The military, especially since 2013, has penetrated the state and the political system.

Speaker 0: Political analysts say that this involvement allows the military to benefit financially from the proceeds of land sales as well as cuts from the contracts. And when the military took over the project, a new design was drawn up that separated the government from business and residential areas, making it far less pedestrian-friendly. A noteworthy change, given that only about a quarter of Cairo residents have cars, the highest percentage in Egypt, but still comparably low to neighboring states. And the project has quickly racked up additional criticism over a growing budget, just as President Sisi comes up for re-election in December. And Egypt steps up as a key player in mediating relations between Israel and Hamas.

In 2015, Egyptian state media reported that the new capital will cost a total of $45 billion. But reports today say the cost of phase 1 is more to the tune of $58 billion. And experts say that the costs for the new capital are constantly changing.

Speaker 1: There was a logic that we can just continue to borrow. Of course, that came crashing down when the Russians invaded Ukraine.

Speaker 0: Because it had sourced the majority of its wheat imports from Russia and Ukraine, Egypt was hit especially hard by the war. The war in Ukraine has pushed up the price of building by about 10 to 15 percent, impacting the capital. And this isn't Sisi's first big-budget endeavor. In 2015, he ordered an $8.5 billion expansion of the Suez Canal. The 120-mile canal accounts for some 12% of global trade, but a revenue boom hasn't materialized as the government imagined.

The canal's all-time high revenue of $9.4 billion is still $3.6 billion away from the government's projection for this year. All of this points to a central problem. Economists say Egypt can't afford this new capital, and the majority of its residents can't either. For Sisi's capital plan to pay off, it needs millions of people to actually move there. But over the past year, amid double-digit inflation, the Egyptian currency has depreciated by about 50%.

Egypt's Ministry of Foreign Affairs did not respond to requests for comment. Parliament is now said to be moving into the new complex by the end of October, and other government buildings are also set to relocate. But employees don't expect to be able to afford apartments in the area, since the cost of an apartment starts at around $80,000. In 2020, the average household income in an urban community was just over $2,600.

Speaker 1: It's clearly a city for the rich simply by finances.

Speaker 0: So for the project to be fully realized, it needs buy-in from more groups, including foreign embassies. The U.S. Embassy in Egypt did not respond to requests for comment, but several foreign diplomats have previously said their embassies would need to see that Egyptian government ministries locate there first. Each year since 1979, the U.S. Has given Egypt about $1.3 billion in U.S.

Military aid. But in September this year, the U.S. Said it plans to pull some $85 million of its conditional aid to the country over Egypt's failure to make progress on human rights. Political analysts say some of this emphasis on human rights could take a back seat because right now Egypt is playing a unique role. The country is mediating conflicts between Israel and U.S.

Designated terrorist group Hamas, while also helping squeeze Hamas out of the Gaza Strip with a blockade on goods and travel. All the while, Egypt is facing pressure to open its border and host refugees crossing to escape an Israeli bombing campaign and expected ground invasion.

Speaker 2: With regard to Rafa, I had a very good conversation with President el-Sisi. We have put in place, Egypt has put in place, a lot of material support for people in Gaza.

Speaker 0: But this pressure comes amid its economic challenges. The country has sought financial lifelines from the UAE, Saudi Arabia, Kuwait, and Qatar, as well as from the DC-based International Monetary Fund. Now, officials say Gulf states, which had initially resisted providing cash to Egypt, have floated the idea of giving Egypt financial aid in return for accepting Palestinian refugees. In the meantime, the company behind the new capital, the ACUD, is eyeing an IPO in the first half of 2024. The ACUD did not respond to requests for comment.

But even with the potential for new financial support, experts are still concerned about the health of Egypt's economy, with the completion of the capital still shrouded in doubt.

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Why Egypt Can’t Afford Its $58B New Capital City | WSJ Breaking Ground