Mubarak eyes opportunity to make the desert bloom




By Mark Huband in Cairo

Financial Times, 10 January 1997

President Hosni Mubarak yesterday inaugurated an $810m infrastructure project in the Nile valley of upper Egypt intended to create a new river delta over the next 20 years by irrigating 500,000 acres of desert and luring new industrial and tourist enterprises with attractive investment incentives.

Launching the start of work on the $223m Sheikh Zayed canal, which will take Nile water into the Western Desert to irrigate land south of the town of Kharga, Mr Mubarak signalled the start of state-financed infrastructure projects which the government hopes will attract up to $4bn in private investment.

The canal, which will start at a vast new pumping station 50 km north of the ancient site of Abu Simbel, is named after Sheikh Zayed of Abu Dhabi, whose government has provided an undisclosed proportion of the funds for its construction. Egyptian government expenditure on the canal and the 571m pumping station will be spread over the next four years. Long-term government expenditure will finance development of agricultural, industrial, transport, health and education infrastructure, as well as road construction, in four phases each lasting five years.

Nine foreign companies have so far visited the site of the pumping station, and two British companies have been approached by the Egyptian government to discuss the construction contract, which is thought to be worth $400m. Pre-qualification for the contract must be finalised by February 18.

The population of upper Egypt, home to 10m of Egypt’s 60m people, is expected to double in the next 10 years and the expansion of cultivatable land and the establishment of new desert urban centres to be fed by the canal is regarded as essential to relieving population pressure along the Nile valley, where 90 per cent of Egyptians live.

Mr Kamal el-Ganzouri, the prime minister, confirmed last week that the draft of a new investment law would be ready within a month. It will detail the benefits available to investors in what is being termed the National Project for Developing Upper Egypt (NPDUE).

Companies already established along the Nile valley will be given special incentives to move from the densely populated riverine area into the desert. Both Egyptian and foreign companies will be encouraged to invest. State-owned banks investing in new projects will be required to sell their shares within an as-yet unspecified time in a bid to broaden interest.

The banks are likely to be the next big state-owned institutions to be privatised as part of Egypt’s extensive moves towards attracting private investment in its increasingly dynamic capital market.

But views of the investment opportunities in the NPDUE among Cairo business people is varied, with a “wait and see” attitude prevailing, at least until the details of the government’s new investment code are known. The entire project has been strongly criticised by the opposition as a misuse of scarce water resources.

© Financial Times