- [Narrator] Sitting over 20 miles east
of the current capital in Cairo,
Egypt is building a new administrative capital
from the ground up.
The nearly $58 billion plan includes
a miles-long central park,
a main business district with a Chinese-built tower,
and massive new headquarters
for the Egyptian Ministry of Defense, known as the Octagon.
But some say,
- It's a city for six million people,
and I don't think there are six million people
that can actually afford this city.
- [Narrator] After borrowing tens of billions of dollars,
Egypt is facing an economic crisis.
And given the country's historic role as a mediator
between Israel and US-designated terrorist group, Hamas,
governments from around the world are looking to Egypt.
With some having floated the idea of financial aid
in return for accepting Palestinian refugees.
Here's what this new desert city reveals about Egypt's plans
for the future and the debt it's racking up to get there.
The central goal behind this administrative capital
is shifting the government's power away from here,
the country's current capital,
where ancient buildings are crumbling, traffic is congested,
and residents are densely packed.
- [Maged] 95% of the population,
which is over a hundred million,
live in this very narrow valley.
- [Narrator] Within that area,
there's a significant wealth gap.
And in turn, a history of revolt against the government.
In 2011, protests erupted in Cairo's Tahrir Square.
A revolution soon followed
that led to the downfall of Egypt's then-president,
and its current one.
President Abdel Fattah el-Sisi is a former general
who came to power in a military coup two years later.
(crowd chanting)
Sisi officially announced the project in 2015,
under the objective that this will decongest Cairo
and produce new working opportunities.
(speaking foreign language)
But political analysts say,
- Going to the desert allows him to create this distance
between him and the urban centers
so that in case there is a revolt somewhere,
he can repress it without it being effective
in blocking him.
- [Narrator] And despite Sisi's continued insistence
that the Egyptian state won't pay a penny
for the new capital,
a project on Middle East Democracy Report
says that most of what has been spent so far
has come from public funds.
After a partnership with the United Arab Emirates
fell through over financial disagreements,
Egypt's military stepped in
to help finance the new administrative capital.
Now, behind this project,
is a company owned 51% by Egypt's military,
known as the Administrative Capital for Urban Development,
or ACUD.
- The military, especially since 2013,
has penetrated the state and the political system.
- [Narrator] Political analysts say that
this involvement allows the military to benefit financially
from the proceeds of land sales,
as well as cuts from the contracts.
And when the military took over the project,
a new design was drawn up that separated the government
from business and residential areas,
making it far less pedestrian-friendly.
A noteworthy change,
given that only about a quarter of Cairo residents
have cars, the highest percentage in Egypt.
But still comparably low to neighboring states.
And the project has quickly racked up
additional criticism over a growing budget,
just as President Sisi comes up for reelection in December.
And Egypt steps up as a key player
in mediating relations between Israel and Hamas.
(truck honking)
In 2015, Egyptian state media reported
that the new capital will cost a total of $45 billion.
But reports today say the cost of phase one
is more to the tune of $58 billion.
And experts say that the costs for the new capital
are constantly changing.
- There was a logic that we can just continue to borrow.
Of course, that came crashing down
when the Russians invaded Ukraine.
- [Narrator] Because it had sourced the majority
of its wheat imports from Russia and Ukraine,
Egypt was hit especially hard by the war.
The war in Ukraine has pushed up the price of building
by about 10 to 15%, impacting the capital.
And this isn't Sisi's first big budget endeavor.
In 2015,
he ordered an $8.5 billion expansion of the Suez Canal.
The 120-mile canal accounts for some 12% of global trade,
but a revenue boom hasn't materialized
as the government imagined.
The canal's all-time high revenue of $9.4 billion
is still $3.6 billion away
from the government's projection for this year.
All of this points to a central problem.
Economists say Egypt can't afford this new capital.
And the majority of its residents can't either.
(speaking foreign language)
For Sisi's capital plan to pay off,
it needs millions of people to actually move there.
But over the past year, amid double-digit inflation,
the Egyptian currency has depreciated by about 50%.
Egypt's Ministry of Foreign Affairs
did not respond to requests for comment.
Parliament is now said to be moving into the new complex
by the end of October.
And other government buildings are also set to relocate.
But employees don't expect to be able to afford apartments
in the area,
since the cost of an apartment starts at around $80,000.
In 2020, the average household income
in an urban community was just over $2,600.
- It's clearly a city for the rich, simply by finances.
- [Narrator] So for the project to be fully realized,
it needs buy-in from more groups,
including foreign embassies.
The US embassy in Egypt
did not respond to requests for comment,
but several foreign diplomats
have previously said their embassies would need to see
that Egyptian government ministries locate there first.
Each year since 1979,
the US has given Egypt about $1.3 billion
in US military aid.
But in September this year,
the US said it plans to pull some $85 million
of its conditional aid to the country
over Egypt's failure to make progress on human rights.
Political analysts say some of this emphasis
on human rights could take a backseat.
Because right now Egypt is playing a unique role.
The country is mediating conflicts
between Israel and US-designated terrorist group, Hamas,
while also helping squeeze Hamas out of the Gaza Strip
with a blockade on goods and travel.
All the while, Egypt is facing pressure to open its border
and host refugees crossing to escape
an Israeli bombing campaign and expected ground invasion.
- With regard to Rafa,
I had a very good conversation with President el-Sisi.
We have put in place, Egypt has put in place,
a lot of material support for people in Gaza.
- [Narrator] But this pressure comes amid
its economic challenges.
The country has sought financial lifelines
from the UAE, Saudi Arabia, Kuwait, and Qatar,
as well as from the D.C.-based International Monetary Fund.
Now, officials say Gulf States,
which had initially resisted providing cash to Egypt,
have floated the idea of giving Egypt financial aid
in return for accepting Palestinian refugees.
In the meantime, the company behind the new capital,
the ACUD, is eyeing an IPO in the first half of 2024.
The ACUD did not respond to requests for comment.
But even with the potential for new financial support,
experts are still concerned about the health
of Egypt's economy with the completion
of the capital still shrouded in doubt.
(gentle music)