Egypt has struck a massive deal with the United Arab Emirates (UAE) to develop a £118 billion mega-city along its Mediterranean coast, in what is being described as the largest foreign investment in the country’s history.
The Ras El-Hekma project will cover 170 square kilometres, and is set to transform a prime coastal area west of Alexandria into a high-end tourism, residential, and business hub.
The agreement, which was signed last year, saw Egypt partner with Abu Dhabi’s sovereign wealth fund, ADQ, to create what has been described as a “next-generation city.”
The project will feature luxury hotels, residential districts, a marina, an international airport, business hubs, and a free economic zone aimed at attracting global investment.
Egyptian officials hope Ras El-Hekma will become a top tourist destination, attracting eight million visitors per year once completed.
As part of the agreement, Egypt will retain a 35% stake in the development while receiving an initial £27 billion ($35 billion) in investment from the UAE.
The country is also set to benefit from long-term revenue shares as the project progresses.
Egypt’s Prime Minister Mostafa Madbouly called the deal a “model for future investment partnerships”, estimating that the total investment in the project could eventually reach £118 billion ($150 billion).
The deal came at a crucial time for Egypt, which has been grappling with a severe economic crisis, rising debt, and a shortage of foreign currency.
A significant portion of the initial £27 billion investment was expected to help stabilise Egypt’s financial position, with £11 billion ($14 billion) arriving in the first two months after the agreement was signed.
The country has also used part of the funds to secure a new deal with the International Monetary Fund (IMF), which required economic reforms and a 40% devaluation of the Egyptian pound.
Last year Goldman Sachs analyst Farouk Soussa said: “If the financing comes through as planned, we believe this - along with an upsized IMF programme - should provide ample liquidity to cover Egypt’s financing gap over the next four years.”
Despite being described as a landmark investment, the Ras El-Hekma project has sparked debate.
Critics argue that Egypt’s reliance on real estate megaprojects to boost the economy is risky, particularly as it shifts focus away from long-term industrial development.
Others have raised concerns about the displacement of local communities, as olive groves and homes have reportedly been expropriated to make way for construction.
Some have also accused the government of “selling off Egypt’s sovereignty” by granting a prime coastal region to foreign investors.
What’s more, an analysis by The Tahrir Institute for Middle East Policy showed that “very few thought the area could be exploited to bail Egypt out of one of its worst economic crises”, describing Ras El-Hekma as one of Egypt’s last unspoiled coastal regions.
Nonetheless, construction of the project was expected to begin in early 2025, with ADQ leading the development.
While the project promises to create jobs and attract investment, questions remain about its long-term economic impact.
Egyptian officials have previously reassured the public that the government will benefit financially from the project, but some experts warn that the profits are far from guaranteed.
The government is also facing pressure to manage its debt burden, with foreign loans standing at a record £130 billion ($165 billion) in 2024.
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