What are the hidden details of the Egypt-UAE Ras Al-Hikma deal?

Despite the official Egyptian cheer for the Ras Al-Hikma deal with the UAE, questions remain, even though Egypt is counting on it to get out of its stifling economic crisis. The deal was concluded a few days ago, and is receiving a lot of attention. It is seen as a lifeline that can stop the insane rise in the dollar exchange rate on the black market, which had been over 70 Egyptian pounds. The rate has now dropped below 50 pounds, compared with 30.9 pounds on the official market.

According to official statements, the Egyptian government has already received $10 billion as part of the deal, which is basically a Gulf rescue package for the regime of President Abdel Fattah Al-Sisi. The regime is burdened with huge debt, and a maturity schedule for instalments and debt interest of about $42.3bn during 2024, according to the Central Bank of Egypt.

What’s making the controversial deal even more suspicious are the discrepancies regarding its actual value, estimated at $35bn.

Under this deal, Abu Dhabi Developmental Holding Company (ADQ) acquired the rights to develop a major project on the Ras Al-Hikma peninsula on Egypt’s Mediterranean coast to the west of Alexandria. The project will develop residential, commercial, entertainment and tourism facilities and an investment area, covering 170.8 million square metres.

The real value of the deal is only $24bn, which is the value of the land allocated for the project, in addition to 35 per cent of the profits. The remaining $11bn is the value of UAE deposits held at the Central Bank of Egypt. Egypt will not have to refund this in dollars; the UAE will be paid in Egyptian pounds.

The second issue concerns the price per square metre in one of the most beautiful spots on the Mediterranean coast. It equates to about 4,300 Egyptian pounds per square metre ($140), which is low and unreasonable in a charming tourist spot and a high-class investment destination.

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Moreover, the contract announced by Egyptian Prime Minister Mostafa Madbouly did not clarify the nature, method or date of the Egyptian government obtaining 35 per cent of the profits of the project, which is expected to start at the beginning of 2025. Nor is it clear whether those profits would be one-off or annual payments, and how the company’s accounts and profit levels will be verified.

Economic expert and former Chairman of the Board of Directors of Al-Ahram newspaper, Ahmed Al-Sayed Al-Najjar, wrote under the headline “Ras Al-Hikma: the beginning of the series of selling the nation’s land”, that this type of deal is a trick by an inept government that builds its economic strategy upon the sale of state assets. According to Orouba 22 website, he compared the deal to the 19th century Suez Canal concession contract.

Experts question the feasibility and priority of tourism and real estate investment, compared with their agricultural and industrial counterparts. Egypt is already saturated with huge real estate projects and tourist resorts with about two million multi-apartment buildings, according to the Central Agency for Public Mobilisation and Statistics.

There is a new administrative capital, east of Cairo, that is still not ready, and there is the new city of Alamein, in the north, not to mention the decline in tourism revenues due to the tension in Gaza and the Red Sea, and the fact that Egypt welcomed fewer than 14.9 million visitors in 2023.

What is more controversial is Al-Sisi signing a resolution published in the Official Gazette, No. 55 of 2024, which stipulated in the first article: “Allocating a plot of land from private state property with an area of [170,800,000] square metres in the Matrouh Governorate area according to the attached plate and table of coordinates for the benefit of the New Urban Communities Authority, to be used to establish the new city of Ras Al-Hikma, transferring it from lands owned by the armed forces.” This means that the land sold was owned by the Egyptian army, although it’s not clear how it was allocated to the military in the first place.

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There are so many questions about this deal. Will the Egyptian military institution get paid for the land and from the profits? Or will everything go to the state treasury? On a wider note, what is the size and value of the land owned by the army? These are questions that have been thought about but not asked in Egypt regarding the army’s economic empire, the number of its companies and the size of his financial portfolio.

Al-Sisi had previously estimated the size of the armed forces’ participation in the Egyptian economy at 1.5 to 2 per cent. However, unofficial estimates confirm the expansion of its share, exceeding 60 per cent, since the military coup in July 2013. Since then, the armed forces have become involved in the production of iron and cement, infant formula, medicines and school meals, as well as selling meat, food and electrical appliances, and establishing hotels, clubs and petrol stations.

According to estimates issued by the World Bank, there are 60 companies affiliated with the army operating in 19 industries, out of a total of 24 listed on the industry classification table.

The people of Egypt are fearful that the deal will be a price paid in exchange for arrangements being made regarding the Gaza Strip, the Palestinian displacement issue, and the procrastination in permanently opening the Rafah Border Crossing. They’re also worried that the sale will be a way to transfer ownership to a third party, to Israel for example, especially considering the lack of transparency regarding guarantees that ownership of the Ras Al-Hikma project and other Egyptian assets sold to other parties will not be transferred or sold to third parties.

Doubts extend, according to opponents, to the possibility that the project is a cover for an Emirati naval base on the Mediterranean coast, given that the project plans include the construction of two seaports and an international airport. This has prompted Egypt’s prime minister to deny the presence of any clause in the contract that affects Egyptian sovereignty.

However, one Egyptian writer living abroad, Gamal Sultan, wondered on Facebook why the government won’t publish the contract for the people to see it, instead of having to stay in defence mode denying all accusations about its content. He asked what possible crimes could be found in the contract that the government wouldn’t want the people to see.

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The position of the opposition, which is sceptical about the objectives and feasibility of the project, is reinforced by the fact that it was not presented to the Egyptian Parliament Representatives and Senate chambers. In addition, its implementation timetable has not been announced, nor have the penalties if the UAE violates its terms, not to mention the fact that no approval has been sought from the area’s 25,000 people, who have not been offered financial compensation.

The Egyptian government is being secretive about the terms of the contract. The legal framework of the land ownership is still not clear, or whether it is permanent ownership or ownership with a usufruct system. Also, the fair price per metre in that area is not known and nor is the amount of compensation for the residents who refuse to move.

There is no doubt that the presence of the UAE as a second party to the contract has become a source of many concerns for Egyptians, especially with the accelerating pace of Abu Dhabi’s acquisition of sensitive Egyptian assets in several vital sectors, not least in shipping, maritime transport and logistics services.

The Abu Dhabi Ports Alliance (the regional competitor to the Suez Canal Company) earlier signed agreements to implement projects that include managing and operating docks and ship terminals in the ports of Sharm El Sheikh, Hurghada, Sokhna and Safaga. With the addition of Ras Al-Hikma to the list of ports under UAE control, Abu Dhabi will link the Red Sea and Mediterranean ports, which tightens its control over Egyptian ports on the one hand, and takes the Suez Canal out of competition with UAE ports on the other.

During the past few years, the UAE has acquired five banks in Egypt, Abu Qir Fertilisers and Chemical Industries, and Egypt Fertiliser Production “MOPCO” (the two most important companies in the fertiliser sector), as well as Alexandria Container and Cargo Handling. In addition, it acquired a stake in Fawry Electronic Payments Company, several major hotels and hospitals, and two of the largest chains of laboratories, namely Al-Burj and Al-Mokhtabar.

An Egyptian economic expert spoke to me on condition of anonymity, and suggested that the Ras Al-Hikma project is likely to have been planned to compete with the Kingdom of Saudi Arabia’s NEOM project on the Red Sea. Or it could be an attempt to block the rapprochement between Egypt and Turkiye. He based this on the fact that the project has been awarded directly to an Emirati entity, without issuing a global tender.

The announced time frame for Egypt to receive $24bn is two months, about a year before the project begins. This creates an appetite for some to claim that the deal is political and not economic, that the devil lies in the details, and that the UAE has other goals behind purchasing Ras Al-Hikma.

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The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.