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Administrative Capital.. Economic Importance and Expected Returns

Executive Summary

In light of suffering many Egyptian cities and governorates from population concentration or overcrowding, where about 97% of the population resides on an area not exceeding 7%, and the consequent negative impact on the infrastructure, facilities and services in them, The Egyptian state has adopted a new vision aimed at re-engineering the geo-economic appearance of Egypt, and finding distinct areas in the Egyptian desert that would disrupt the existing urban mass, and attract population density from the narrow valley to new cities that have basic attractions, achieve the well-being of its residents, meet their living requirements, and guarantee them Distinctive quality of life, as well as achieving sustainability standards, and securing multiple economic opportunities.

And then the idea of establishing new administrative capital came to expand the circle of development and urbanization, that project that addresses the eternal problems of the old capital, most of which are poor planning, weak infrastructure, and its lack of readiness to achieve Egypt’s vision 2030, which aims to transform Egypt into a country with a digital economy based on Knowledge, an economy expanding in the fourth industrial revolution and capable of providing distinguished services to citizens and investors.

The idea was inspired by the successful global experiences in re-establishing their capitals. Many countries have taken the step of establishing alternative capitals, for reasons ranging from political, economic and demographic. Over the past fifty years only 13 countries have taken such a step, such as Brazil, Kazakhstan and Malaysia. This policy has proven successful in redrawing the economic, social and cultural dimension of countries, and transforming them into new cities that can lead the world.

In this context, this paper highlights the economic importance of the Administrative Capital and the expected revenues from its establishment, through the following axes:

First: an overview of the administrative capital

Second: The economic importance of the Administrative Capital and the revenues arising from it

Third: The most important criticisms to the Administrative Capital and the response to them

The most important results of the paper are as follows:

– The Administrative Capital project succeeded in creating an economic value for the land on which it is built and raising its value, adding an economic value to the Egyptian state by about EGP 2 trillion.

-it was chosen to be the Arab Digital Capital for the year 2021 by the Arab Council of Ministers for Communications and Information, For its highly advanced digital and technological infrastructure.

– The New Administrative Capital is one of the largest and most important national projects that have direct and indirect advantages for the Egyptian economy by providing many job opportunities and achieving popularity in the real estate market and construction companies.

– The real estate sector contributes about 15.2% of the GDP, and employs 3.4 million workers (13% of the total number of workers in Egypt). The sector enjoys forward and backward links with more than 100 other industries.

The Administrative Capital Company was able to achieve liquidity of more than 40 billion pounds, in addition to more than 40 billion pounds due to others. The new administrative capital project is funded by selling desert lands that have been without value or exploitation for centuries.

First: an overview of the Administrative Capital

The project area, when completed, will be about 700 square kilometers, or 170,000 acres, and the implementation will take place in 3 phases. The area of the first phase of the project is about 168 square kilometers (40,000 acres), which is almost half the area of Cairo, which is about 90,000 acres. It was designed to be the center of national economic power, and the main headquarters for ministries and public and private sector companies, in the midst of a group of urban neighborhoods, and work has been done on the infrastructure to be a sustainable, smart city with the latest technologies.

The capital was built in the east of Cairo, and it is surrounded by the most important main roads: the Cairo/Suez road, the Cairo/Ain Sukhna road, the middle ring road, and the regional ring road, and those roads made the location of the new administrative capital close to the most important strategic places in Egypt. It is divided into 3 neighborhoods: the residential district, the government district, and the business district.

The Administrative Capital is the first technological smart city to be established within Egypt’s Vision 2030. It relies on sustainability methods and provides services electronically using the latest technological means, and contains the latest urban systems in the world. The government seeks to encourage housing in the new capital, by facilitating methods of financing housing units, and the existence of a strong infrastructure and transportation networks linking it to the various locations in the country. The issue of population distribution is more related to the process of economic development in the various Egyptian governorates, What makes the provinces attractive rather than repellent.

Second: Economic significance and returns to the administrative capital

The importance of establishing a new administrative capital is growing in addition to being an alternative headquarters for government ministries and a cultural and civilizational center, as it will also become a new economic city for Egypt. Here, many people have a question: “How does the Administrative Capital contribute to the lives of citizens directly and indirectly, and what is its role in supporting Egypt’s Vision 2030?” We can answer it through the following points:

1-Promoting Egypt’s economic growth

The Administrative Capital is a step on the right path to building a modern state and moving to it administratively or residentially, in addition to the expected economic returns, especially since there are large companies, universities, private institutes, service projects, and investments amounting to 800 billion pounds, which provided thousands of job opportunities and contributed to moving economic growth, and it is one of the mechanisms sustainable development for Egypt 2030.

The expansion of the street network and the establishment of industrial zones and auxiliary services achieve investment prosperity and help urban expansion, which benefits the Egyptian economy as a whole.

2- Adoption of a new legislative system

Egypt approved a new legislative reform system related to the Egyptian economy file, as it is among the achievements in addition to the huge infrastructure projects, the administrative capital, and 14 new cities of the fourth generation, and the enactment of the investment law and its executive regulations, and what the law included in terms of investment incentives for foreign companies and investors, in addition to facilitating the establishment of companies.

These steps pave the way for building a strong state, and the transfer of services to the Administrative Capital with mechanization will attract investors and facilitate the establishment of companies and projects.

3- Increasing infrastructure projects

The value of spending on infrastructure projects in the New Administrative Capital has reached at least EGP 80 billion so far, given that it is considered the most important means of attracting more foreign investments, which provide more job opportunities. Here comes the impact of these projects on the citizen indirectly, and their greatest returns will be during the coming years.

4- Developing services and reducing corruption

The new capital will be a first-class technological capital for Egypt, and work in it will be with modern technology only between government agencies and citizens, to end the era of usual paper in government departments, which calls for training employees on technological development and work without papers.

The digital transformation will have a role in developing services provided to citizens and reducing corruption in a way that contributes to the advancement of government work and achieves greater transparency and governance, which ultimately results in improving services provided to citizens.

5- Increasing private sector investment

Private sector investments account for the financing of the Administrative Capital, with a volume of 300 billion pounds. According to what the Council of Ministers announced, all New Administrative Capital projects will be funded completely independently of lending from banks, by relying on the Administrative Capital Company’s revenues from the proceeds of selling lands to real estate developers, in addition to investments in the project.

Companies operating in the private sector in the field of construction, marble, granite and building materials companies in general have achieved great benefit by supplying the needs of the construction of the capital, which contributed to a great movement in the Egyptian economy.

6- Attracting foreign direct investment

The establishment of the new capital in the desert and the transfer of the administrative structure to it will contribute to the establishment of many service and development projects and attract more foreign and local investment, which will accelerate economic growth and allow the establishment of projects for capital and productive goods.

7- Providing job opportunities

The projects established in the New Administrative Capital provide many job opportunities, estimated at 1.5 million new job opportunities, which would contribute to improving the standard of living of citizens.

8- Promoting new and green energy industries

The state has paid great attention to increasing reliance on renewable and green energies in the Administrative Capital project, as it is planned that about 50% of the rooftops in the Administrative Capital will be covered with solar energy, and 52 stations will be installed in the government district, as part of a plan to circulate solar energy in the Administrative Capital by The year 2035. The Administrative Capital for Urban Development Company has announced opening the door to investment in the purchase of energy produced from solar energy cells on the roofs of buildings in the residential neighborhoods of the New Administrative Capital.

9- Reducing pressure on Cairo

The idea of establishing the new administrative capital came to relieve pressure on the old capital, Greater Cairo, which is the most crowded capital in the world.
Therefore, the state has drawn up a plan to transfer ministries and government departments, and its first phase has already been implemented with the aim of shortening the time, effort and energy required to spend services and services, which relieves a lot of trouble for the Egyptian citizen and reflects positively on the individual and society and reduces accidents that result from overcrowding in Cairo. This, in turn, leads to facilitation for the citizen, and then increases his productivity, and thus increases the gross domestic product and the rate of economic growth.

10- Providing a healthy work environment

Reducing overcrowding in Cairo through the movement of many of its residents to the New Capital will contribute to providing a healthy environment and mitigating the severity of the spread of diseases and epidemics, by achieving social divergence, which will reduce the consumption of medicines and eliminate the need to import large quantities of them, and also relieve pressure on hospitals and reduce the budget allocated for spending on aspects of health care.

Third: The most important criticisms to the Administrative Capital and the response to them

The New Administrative Capital project continues to raise successive waves of controversy and criticism in Egypt, and it has recently increased with the intensification of the economic crisis as a result of the Russian-Ukrainian war and before that the repercussions of the “Covid-19” pandemic, under the pretext of rationalizing government spending priorities, while the government has confirmed several times that the project will not be financed from The state’s budget and the establishment of the city through the resources of the Autonomous Administrative Capital Company through investments with companies and offering lands and through finding an economic value for the land on which the project is built, and turning it into a source of financing. The project achieves large returns as a result of the sale proceeds from which the state receives 20%, in addition to the installments that the state receives from temporary usufruct projects such as mobile petrol stations.

Investments in the first phase of the project are estimated at 800 billion pounds, according to the official statements of the Administrative Capital Company. The capital project is one of the projects that Cairo was in dire need of, since the era of former President Anwar Sadat, who planned to establish an administrative capital to accommodate the population increase in a city that bears his name on the desert road, but the project was not successful, and the matter was repeated during the era of the former president. Hosni Mubarak, who drew up a plan to move the government ministries square from the center of the country, but it was not implemented. Planning for the establishment of a new capital and all new cities opens new horizons for horizontal urban expansion, and paves the way towards the idea of leaving the valley, in addition to being an effort to sustain urban growth commensurate with population and economic growth.

It is clear from the foregoing that the pivotal elements in the success of the new capital are represented in the following: the optimal choice of location and good planning, the distribution based on scientific studies of the sites of administrative, economic, commercial and entertainment institutions, the application of the principle of central planning and decentralization of management and implementation, in addition to the development of all legal controls To control urbanization to ensure that the New Capital plan does not deviate from the path set for it, and work to provide job opportunities and raise the level of income and wages to see the extent of their impact on attracting residents to it, and the availability of services and meeting the needs of the population.

In conclusion, the completion scale of the Administrative Capital project is unprecedented, and the praises continue for the largest smart city in the Middle East. The project continues to carry many wishes and aspirations, but its success remains dependent on the will and capabilities and the extent to which previous experiences are used in facing challenges and promoting promising attractions.


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