The government is undertaking a series of ambitious projects to tap land which remains undeveloped

By Mark Huband in Cairo

Financial Times, 11 May 1999

Tapping the potential offered by the 96.5 per cent of Egypt’s land area which as-yet remains uncultivated and undeveloped, has become the task to which the government has so far committed more than $ 200m in investment, with the aim of encouraging the private sector to invest a great deal more.

With private sector domestic and foreign investment now increasing, the government has launched vast projects designed to increase the inhabited area to 25 per cent of Egypt’s total, and increase by 40 per cent the area under cultivation, from 3m hectares to 5m hectares.

Aside from the growth of satellite cities intended to ease the population pressure in Cairo, two large projects under way will engineer this transformation.

The most ambitious is the South Valley project, at Toshka on the western bank of Lake Nasser. The first phase of the project is intended to bring 500,000 hectares under cultivation. The leading investor in the agricultural project, Prince Al-Waleed bin Talal bin Abdelaziz Al-Saud, whose Kingdom Agricultural Development Company (Kadco), plans to establish a $ 1bn agricultural business on 50,000 hectares of land. In October 1998, Kadco signed a contract for the purchase of the land, and has drawn-up plans for projects worth $ 600m as well as having begun the experimental planting of crops in the past month.

The government subsequently awarded a $ 436.6m contract to the UK-Norwegian Kvaerner Construction Company, Hitachi of Japan and Arabian International Construction of Egypt,{A for the construction of the world’s largest pumping station at Toshka on the western shore of the lake.

The Arab Fund for Economic and Social Development, the Kuwait Fund for Arab Economic Development and the Saudi Fund for Development have together provided $100m towards the cost of the pumping station. Powered by electricity from the Aswan Dam to the north, the pumping station’s 21 pumps will lift 300m4 of water per second up 52m into the 30km long, 30 metre wide and seven metre deep Sheikh Zayed Canal and its four spur canals, which will irrigate the 500,000 hectare area. The completed canal and spurs will be 168km long.

The government has so far spent $176m on the construction of the canal, for which a substantial amount has also been received from Shiekh Zayed of the United Arab Emirates, after whom it is named. It has now been asked to extend the canal a further 50km.

Government provision of infrastructure for the South Valley is intended to be complemented by a private sector role in developing industry and agricultural projects, of which KAC is one example. Research by Robert Fleming, the UK investment bank, assesses the total investment required for the South Valley as being $ 88bn by 2017.

To facilitate the involvement of private sector investors, substantial financial incentives have been offered. Investors will benefit from 20-year tax holidays, exemption from customs duties on imported capital equipment, the transfer of ownership of land to Egyptian companies at 34.5 per hectare, and land lease for companies with foreign majority ownership at $7 per hectare.

Similar advantages are also on offer at the agricultural project of East Oweinat, south-west of Toshka, close to the border with Sudan. In this area, large quantities of subterranean water are estimated to be capable of irrigating up to 5.8m hectares of land for agriculture. The government intends to invest $1bn to cultivate an initial 84,000 hectares, which it will then expect private sector developers to exploit further.

Sagric International of Australia has signed an agreement with the Egyptian PICO group, to provide farm development services in Toshka and East Oweinat. PICO has already secured a 40,000-acre site for agricultural development in East Oweinat.

Redirection of the water resources available to Egypt is crucial to the development of areas in the extreme north of the country. At the heart of plans to develop the area east of Port Said is the 200km El Salam Canal, pumping water from the Nile west of the Suez Canal, which it will pass under in pipes before re-emerging in the Sinai and irrigating land for agriculture as far east as El Arish.

The evolution of the East Port Said project, centering on a new container port for the area, has brought a grouping of inter-linked infrastructural projects, intended to harmonise needs, potential and ambitions to develop the north Sinai. Eni of Italy and BP Amoco are to build a gas pipeline from Egypt’s off-Delta gas fields to Gaza and Israel, which will bring supply to the new agriculture-based communities expected to settle there from the Nile valley and the delta.

Intense scepticism of the viability of the Toshka project has led to furious debate in the opposition newspapers, with robust counter-claims from the state-owned press. Equally important for the government has been the impact of its programme of new projects on the issue of Nile water use and expectations that it will require more water than it is currently allocated if the projects are to be sustainable.

By a1959 agreement, Egypt is allocated 55.5bn m4 of Nile water annually, which is gauged at the Aswan high dam, but needs 15bn m4 more to supply its new projects away from the Nile. Mahmoud Abu Zeid, Egypt’s Minister for Irrigation and Water Resources is expected to introduce the delicate subject of increasing Egypt’s water share when ministers from 10 Nile states meet in Addis Ababa for a week-long meeting starting tomorrow.


© Financial Times