01 Apr Castles in the Sand: Modern Day Pyramid-Building in Egypt
The Egyptian government announced last month that it plans on literally leaving Cairo for a $45 billion new capital city that will be built within 7 years. In what is likely to be the most ambitious large-scale infrastructure project the world has ever seen, this yet-to-be-named city will span 700 square kilometers (about the size of Singapore), have 21 residential districts, hundreds of hospitals and clinics, 1250 religious facilities, and more than 1.1 million new homes for more than 5 million residents.
Other facilities to be built include a park roughly two times the size of NYC’s Central Park, a 4 square kilometer theme park (4x the footprint of Disneyland), an international airport occupying 16 square kilometers (i.e. bigger than London’s Heathrow Airport), more than 40,000 hotel rooms, 700 kindergartens, 4.2 million square feet of retail space, and office buildings to house Egyptian ministries and foreign embassies. Building the new city is expected to create almost 1.8 million permanent jobs.
Lest you think that I’m making up these numbers, click HERE for a link to the project’s website and see for yourself. My favorite line on the website: “With over 10,000 km of boulevards, avenues and streets, the city will be pedestrian-friendly.” That’s a lot of potential walking! According to The Guardian, the project is the “largest purpose-built capital in human history – nearly as large as Islamabad, Brasilia, and Canberra put together” (Click HERE).
Moving a capital to another city is not particularly unique (click HERE) and has been done dozens of times in Egypt before 969 AD, but building a new city from scratch is not very common. But there are examples. Brazil moved its capital from Rio de Janeiro to a newly built Brasilia in 1961; Nigeria moved from Lagos to the planned city of Abuja in 1991. More recently, Myanmar moved its capital from Rangoon to Naypyidaw, a new city built in the jungle.
I’ve long been a skeptic of attention grabbing projects of enormous size, scale, or scope – and believe they are wonderful manifestations of hubris, global liquidity, and speculative tendencies. The world’s tallest skyscrapers (click HERE for a piece I wrote for Forbes in 2011) and mega-projects are similar in this regard. In fact, upon hearing about Egypt’s new capital project, I immediately thought of Ghana’s Hope City, a $10 billion development that was planned in a $48 billion economy (~20% of GDP!) (click HERE). Over the last few years, Ghana went from the world’s fastest growing economy to having one of the world’s weakest (click HERE). At a cost of more than 15% of GDP, the new capital city does not suggest a rosy outlook for Egypt’s economy.
Sadly, Egypt has a history of trying to deal with population pressures by creating new cities (click HERE) and in fact already has a “new Cairo” that was meant to attract several million residents (it currently holds a few hundred thousand) – a fact that led Egypt’s investment minister to call the current project the “New New Cairo” (click HERE), reminding me of Internet bubble thinking as captured in The New New Thing by Michael Lewis.
New New Cairo strikes me as an example of vision that has gone too far, where speculative juices and global liquidity have met overconfidence and hubris. The combination is toxic and risks misallocating capital away from productive uses that improve the lives of Egyptians towards modern-day pyramid building.