President Abdul Fattah al-Sisi announced the establishment of a new capital for Egypt in March 2015 and the project rushed into implementation so fast disregarding both any criticism pointed at it and legitimate questions about its benefit in the circumstances of these difficult economic times Egypt is going through.

Now, more than four years after the launching of the city that is now known as “The New Administrative Capital,” the Centre for Near and Middle Eastern Studies (CNMS) published a research paper revealing new information about the project, its sources of funding, and how government institutions are competing to put their hands on it in the absence of democracy and public participation in decision making.

The importance of the paper entitled “The Political Economy for producing new urban spaces in Cairo,” is a rare source of information on the new capital that lacks any kind of transparency. The researchers that produced the paper relied on three years of field work in Egypt, and conducted field interviews with 36 people and officials working in the New Administrative Capital.

Foreign investment runs away from the project

At the beginning of the project the government announced that it is seeking to attract $500 billion as foreign investment in the project, but that wasn’t achieved. Many of the foreign companies that had announced their intention to participate in the project started fleeing, one after the other.

For example, the Egyptian government’s negotiation with the Emirati companies which were supposed to be a main part of the project, led by Emaar, owned by businessman Mohammed al-Abbar, stalled. He signed an agreement with the Egyptian government at the economic conference in Sharm el-Shiekh in 2015 before the negotiations between them faltered.

The same thing happened with Chinese investors who backed away from investing large funds into the project, and sufficed with only participating in establishing the Business District of the city but with a $3 billion loan that Egypt would get from the Chinese banks, along with another loan to establish an express train connecting Cairo to the new capital.

According to the research paper, the main reason for the withdrawal of foreign investors from the new capital projects was the Egyptian army’s direct intervention in supervising it. There is a big misunderstanding between the Ministry of Housing and the New Urban Communities Authority, which have legal jurisdiction over the project, and the Army Engineering Authority (that is supervising the project), and the Army itself, which controls the territory of the new city. In addition, the New Capital Company which runs the project is owned by the Urban Communities Authority and the National Service of the Army.

This confusion and interference contributed to the failure to attract foreign investments in the new capital project. Instead, it relied on local firms to implement its initial stages or on taking loans to implement areas such as the business district referred to above.

Who finances the new capital?

President al-Sisi’s government has always asserted that the new capital is financed outside the public budget without clarifying the details of this funding. For example, the Church of the Birth of Christ and the Mosque of al-Fatah al-Alim were inaugurated in the Administrative Capital early this year, and General Kamel al-Wazir, head of the Army Engineering Authority at that time, and Minister of Transport currently, said that the companies that executed the mosque and the church got only 25 per cent of their dues and that the remaining dues would be taken from donations.

The research paper reveals that what the government is saying about the financing of the new capital is incorrect, as during the research period that lasted about three years, the Urban Communities Authority pumped at least $15 billion (EGP 244 billion) into the project. It is a public authority which means that its funds and lands that are its main source of income is public money taken from the resources of the Egyptian people.

In addition, the Egyptian companies working in the new capital projects are expected to get their money by allocating governmental buildings in Cairo that will be transferred to the New Administrative Capital, according to the statements of Deputy Mohammad Badrawi, member of the Economic Committee in the People’s Assembly.

Moreover, the loans that will be used to execute some of the new capital projects, such as the business district and the express train, are loans signed by the Ministry of Housing and whose benefits and payments will be deducted from the general budget of the state and from taxes.

Security concerns decide on the presidential palace’s location

The New Administrative Capital includes a huge presidential palace spanning six square kilometres. However, the research paper reveals that the palace was supposed to be established on 9.5 square kilometres in the centre of the capital beside the governmental district, but it was decided that it would be moved to the northern end of the capital, its size reduced and security fortifications around it strengthened, an indication of the fear of security dangers in the capital.

Just as foreign investors withdrew from projects in the capital, the Chinese company, which was supposed to design and implement the presidential palace, also withdrew, and was replaced with local Egyptian companies.

This is all happening despite the fact that Mohammad Ali accused President al-Sisi of corruption and building presidential palaces that have no use. So far, however, there is no information about the cost of the new presidential palace or other large projects, such as the headquarters of the ministries and the headquarters of the army command.