CAIRO (Reuters) - Egypt’s cash-strapped government says it has taken charge of plans to build a new capital after failing to close a deal with the UAE investor meant to lead a project some have compared in its ambition to the ancient pyramids.
Built to escape Cairo’s overcrowding and pollution, the new administrative capital was expected to cost a total $300 billion and feature an airport larger than London’s Heathrow and a building taller than Paris’s Eiffel Tower.
The mega-project was unveiled in March at the Sharm al-Sheikh economic summit, where President Abdel Fattah al-Sisi urged foreign investors to help Egypt recover from turmoil unleashed after the 2011 uprising against Hosni Mubarak.
Phase one alone was expected to cost $45 billion.
But Egyptian officials said Mohamed Alabbar, the United Arab Emirates (UAE) property tycoon who helped develop Dubai’s Burj Khalifa skyscraper, would not be the lead partner in the venture due to disagreements on the finances.
Alabbar did not respond to requests for comment.
Instead, the government will set up a wholly-owned company to lead the venture and allocate specific projects to private developers from the Gulf and elsewhere, which may include Alabbar’s Capital City Partners, Housing Minister Mustafa Madbouly told Reuters.
“Any memorandum of understanding is just an initial demonstration of interest but when you start to negotiate the details you definitely have the possibility of not reaching the expectation of any one of the partners and this is what has happened,” Madbouly said.
The timeline was a key sticking point, with the government keen to progress at an accelerated speed, Madbouly said.
Another point of contention involved how much money the UAE partner would invest.
“This was part of the discussion, of course, that based on the proposed share of each of the partners we requested an upfront investment to be offered from the developer,” he said without giving the numbers involved.
Located east of the ancient city of Cairo, the new capital is the grandest in a series of mega projects launched under Sisi, who has pushed for rapid results in a country where bureaucracy is known to slow business.
Gulf states have showered Egypt with billions of dollars in aid since Sisi removed the Muslim Brotherhood’s Mohamed Mursi from the presidency in mid-2013 following mass protests.
Cracks in the embryonic partnership to develop Egypt’s new capital had appeared early on. In June, Madbouly acknowledged there were “complications” in negotiations.
Then, in September, Egypt signed a new memorandum of understanding with China State Construction Engineering Corporation [601668.SS] to study the building and financing of the part of the city that includes government buildings.
That deal was the first clear sign the project was proceeding along a different course.
Under the new structure, the government is focusing on phase one, which will cover 10,000 of the planned total of 190,000 acres, and means the project can be launched sooner.
Madbouly said work had begun on infrastructure for the initial phase, which will cost $3-$4 billion alone.
“We are waiting for the date of the official launch of the program based on the agenda of the President. I expect this will be in a few weeks,” he said.
Developers will be expected to invest first then profit from the sale of completed properties. Egypt will also tender out parts of the development as private-public partnerships.
Sherif Otaifa, advisor on mega projects to the investment minister, said the government had selected a consultant to finalize the preliminary masterplan unveiled in Sharm al-Sheikh and would then seek investors.
“Private investment will play a major role,” he said.
Additional reporting by Matt Smith in Dubai, Writing by Lin Noueihed; editing by Ralph Boulton