Monthly Archives: March 2019

Egypt’s New Capital City: What Does it Entail?

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Photo by Christine Schmiederer from Pexels

by Ghada Al-Thani, the Middle East and North Africa Editor for IR Today and an International Relations student at King’s College London. She writes about the financial and social implications of Egypt’s possible new capital city, yet to be named. 

Cairo has served as the heart and capital of Egypt for over a thousand years. However, 40km to the east, construction on a new city which will serve as the new seat of the Egyptian government has begun. Announced in March of 2015, the Egyptian government promises a bigger, better and newer capital. This yet to be named City is provisionally known as the new administrative capital. As the brainchild of President El Sisi, it is projected to be completed by 2022, with the first permanent inhabitants expected by mid 2019. At its completion, it is expected to hold 6 million people in an area of 700 km².[1] To put this into perspective, it is the size of Singapore or double that of Cairo. Additionally, most institutions are expected to relocate, including the presidency, cabinet, parliament, ministries and foreign embassies are encouraged to follow. In regards to its urban structure, the plans include large green spaces, a brand new parliament building, a business district to hold Africa’s largest skyscraper, a new central bank, an airport larger than London’s Heathrow, a theme park larger than Disneyland, and finally a presidential palace eight times larger than the White House.[2]

Clearly, the project does not lack ambition, reflected in its current $45 Billion price tag, the calculations of which remain unknown. The project supervisor – the administrative capital for urban development – has stated it will settle the budget on a case-by-case basis as each part undergoes construction. Historically however, projects of this nature and magnitude are known to grow out of budget. Although assigned to administrative capital for urban development, 51% of the project is owned by the military with funding from China and Saudi Arabia indicating the construction of Egypt’s new capital is not merely commercial or urban in nature.

Geo-economic and Geo-political Motives

Currently, 90% of the Egyptian population live on only 4% of the country, with 96% remaining uninhabitable. Cairo itself as of 2017 houses 97 million people, with population predicted to grow to 151 million people by 2050. Cairo is currently ranked as one of the world’s fastest growing cities with an annual growth of about half a million people, predicted to reach a population of 40 million people by 2050.[3] It is easy to see how cities will become increasingly crowded and congested, compounding the pre-existing issues of traffic and air pollution. The depreciating infrastructure and quality of life, coupled with the worrying demographic predictions seemingly warrant El Sisi’s ambitious project. With this predicted surge in population, housing is expected to be insufficient causing real estate prices to rocket, contributing to social tensions.

Economic motives for El Sisi’s project revolve around employment. The new capital will include malls, educational facilities, housing units and medical centers; all boosting the construction center contributing to GDP. Upwards of a million jobs are expected to be created. The city’s new location sits between the recently invested in Suez Canal and Cairo, allowing a stretch of human resources to flow between the two. The investments include expansion plans and the creation of a new industrial zone, illustrating the country’s desire to expand opportunities in insurance, banking and shipping.[4]

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google maps – Egypt

With regional contenders such as Saudi Arabia and Turkey seeking to increase their influence in the Red Sea, Egypt may be trying to push back and reclaim their position in the Arab world. Saudi Arabia’s proposed ‘Neom City’ may act as a rival to Egypt’s new capital, competing for foreign investors.[5] However, this may equally present an opportunity for cooperation between the two regional powers. If efforts were coordinated, a mutually beneficial endeavor may present itself.

Criticisms

Critics have proclaimed the new city as a ‘White Elephant’, warning that the ambitious $45 billion endeavor may be a waste. The approval and subsequent construction of the city was fast-tracked with little public debate. Some have voiced their concerns stating funds may have been better allocated to refurbish and expand Cairo itself. Egyptians themselves have questioned the efficacy of this project when lower and middle-class citizens are continuously hit with more taxes and inflation, while the state was awarded with a $12 billion loan from the International Monetary Fund.[6]

Currently, Egypt have at least twenty-two unfinished cities in the desert, some dating back almost thirty years. These satellite towns hold around one-million people with most houses remaining uninhabited.[7] The most prominent example being ‘New Cairo’. Initially meant to house around one-million people, a decade later it only holds 200,000. It failed to attract residents due to the lack of infrastructure, employment opportunities and the high-cost of resettlements which lower and middle-class Egyptians simply cannot afford. Worryingly, housing prices in the new capital remain beyond the reach of these very same Egyptians due to the developing real estate bubble. To fix this requires the Egyptian government to manage the underlying issue of the real estate bubble, something that has yet to take place. Without this, the new city is unlikely to be populated. High-class Egyptians that can afford to make the move risk turning it into a symbol for the social and economic divide in Egypt, fueling social tensions.

It is apparent that Egypt is in need of a new capital. Debates on whether this entails refurbishing Cairo or creating this new city is no longer relevant. El Sisi elimination of food, water and energy subsidies to improve the country’s finances fixed Egypt’s balance sheet, but generated resentment. If this project fails to live up to expectations, Egypt’s government may feel the backlash.

Bibliography:

[1] https://www.bbc.co.uk/news/business-31874886

[2] https://www.independent.co.uk/news/long_reads/egypt-capital-city-cairo-architecture-the-new-administrative-capital-a8521981.html

[3] http://www.capmas.gov.eg/HomePage.aspx 

[4] http://www.sis.gov.eg/Story/132575?lang=ar

[5] https://www.bloomberg.com/news/articles/2019-01-16/saudi-arabia-to-begin-building-homes-in-futuristic-city-neom

[6]  https://www.theguardian.com/cities/2018/may/08/cairo-why-egypt-build-new-capital-city-desert

[7]http://www.eulc.edu.eg/eulc_v5/Libraries/Thesis/BrowseThesisPages.aspx?fn=ThesisPicBody&BibID=12297152&TotalNoOfRecord=109&PageNo=1&PageDirection=First

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Has the US-Sino Trade War Made the American Economy Great Again? – Promises Made and Promises Broken

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Aleksandr George is a first year International Relations student at King’s College London and is also the North America editor at International Relations Today. This article discusses the contentions around the US-Sino trade war under POTUS Donald Trump. 

Why the hard feelings toward China?

Before Trump even stepped foot into the Oval Office, it was clear how he felt about the United States’ biggest trading partner. On the campaign trail, he repeatedly expressed dissatisfaction with US-Sino trade relations, claiming on several occasions that China was ‘stealing’ American jobs [1]. Once in office, Trump mostly surrounded himself with cabinet members and advisors who would affirm his view of the world. Among them, former Democrat and top economic advisor Peter Navarro stands out for his heterodox beliefs about economic policy. Despite joining Trump during his campaign in 2016, Navarro often found himself silenced by free-trade advocates on Trump’s economic advisory team; however, early 2018 marked a power-shift for Navarro when chief economic advisor Gary Cohn and staff secretary Rob Porter—an avid supporter of free-trade—left the administration [2]. This allowed Navarro to affirm Trump’s long-standing mistrust of China and encourage his desires to be tougher on China.

With Navarro now being the busiest bee buzzing in Trump’s ear, it’s necessary to outline his views on trade with China. Not only does Navarro side with Trump’s claims that China engages unfairly with the United States in trade, but he also tends to take views commonly held by other economists to the extreme [3]. Navarro encouraged Trump to threaten leaving NAFTA, impose tariffs on Mexico and Canada to force renegotiation on trade deals, and slap tariffs on Chinese imports wherever possible [4]. Navarro harbours deep-seated—and largely unfounded—beliefs about Chinese trade policies and so-called aggression and deception, ardently advocating for permanent tariffs and trade barriers [5]. Absent outspoken free-trade proponents in the White House, Navarro has free reign to greatly influence the trade policies of the United States without let or hindrance. He is the most influential of Trump’s economic advisors, yet economists on both the left and right find many of his beliefs about trade to be archaic, fallacious, and flat-out incorrect [6].

Getting tough on China

Tump’s heavy reliance on Navarro’s ‘expertise’ led the United States into a trade war with China last year. This came after a US investigation into Chinese intellectual property practices in 2017 [7]. In September of last year, Washington enacted tariffs on Chinese imports totalling in the billions of dollars, followed by a proportionate Beijing response [8]. In December, months of retaliatory action back and forth gave way to a suspension of the creation of new trade tariffs set to expire after 90 days [9]. US tariffs have mainly been focused on industrial products, including electrical equipment, industrial furnaces, rail parts, navigational equipment, machinery for making plastic products, etc [10]. Chinese tariffs, on the other hand, have been employed specifically to negatively impact Trump’s political base, including agricultural products and natural gas [11].

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Getting tough on Americans—and the global economy

On balance, the Trump administration’s hostile engagement with China that led to the current trade war has had a negative impact on both Americans and the global economy as a whole.

After merely one month following its inception, the trade war demonstrated its capacity for economic devastation. The United States’ GDP dropped 1.78 points in October of last year—the worst hit to American GDP since 1985 [12]. Furthermore, higher tariffs mean less overall trade between the United States and China, which led to shipping companies being forced to fire employees to compensate for lost revenue [13]. In 2017, the United States exported 33 million tonnes of soybeans to China—or more than a third of all soybeans imported by China—meaning that Trump’s trade war negatively affected American farmers as well [14]. Trump claimed that his protectionist policies—specifically those regarding Chinese steel—would help industry. But that’s not what happened. The tariffs on steel hurt the domestic steel industry more than they helped it. In fact, stock for steel-producers actually fell 22 percent as a result of Trump’s tariffs [15]. For consumers, the impact has been less than expected; however, if a deal is not reached soon—meaning that tariffs on Chinese imports may more than double—American consumers will feel the impacts of Trump’s frivolous trade war with China [16].

Though I’d imagine that Trump is far more concerned with the domestic, the global economy hasn’t benefitted from the US-Sino trade war either. Roberto Azevedo, head of the World Trade Organisation, explained to the BBC that the world is facing a free-trade crisis worse than it has witnessed since 1947, citing the escalating trade war between the US and China as a major contributing factor [17].

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Where do we go from here?

Given the gravity of the situation and further considering that the end of the 90-day freeze on creating new tariffs ended on March 1st, one must wonder where all of this is heading. At the Governor’s Ball last month, Trump claimed that progress had been made in negotiations between Washington and Beijing [18]. Trump agreed to halt increases on further tariffs of Chinese products; however, this raises concerns in Congress from both the left and the right about what kind of deal he is willing to agree to [19]. Political pundits have concerns for whether or not China will honour the agreement that is eventually reached and worry that Trump’s concerns with his image will lead to him accepting a shoddy deal for the sake of being able to say he negotiated a deal at all [20]. But even if tariffs don’t increase greatly in the near future, it is unlikely that presently existing tariffs on China are going anywhere, anytime soon [21]. Because of this, even if a trade deal were reached tomorrow, the slowing of the global economy caused by these high tariffs and non-cooperation between the US and China wouldn’t be reversed [22].  And none of that even touches on the fact that Trump very well could derail the progress that’s already been made in searching for a peaceful resolution to the US-Sino trade war [23]. With the volatility of the Trump administration, what comes next will surely surprise us all.

[1] https://www.washingtonpost.com/news/post-politics/wp/2015/06/16/full-text-donald-trump-announces-a-presidential-bid/?utm_term=.f4f54a674b04

[2] http://time.com/5375727/peter-navarro/

[3] https://www.forbes.com/sites/timworstall/2016/10/13/donald-trumps-trade-adviser-peter-navarro-is-alarmingly-ignorant-about-trade/

[4] https://www.theguardian.com/us-news/2018/mar/11/peter-navarro-the-economist-shaping-trumps-economic-thinking

[5] http://time.com/5375727/peter-navarro/

[6] https://www.theatlantic.com/magazine/archive/2018/12/peter-navarro-trump-trade/573913/

[7] https://www.bbc.co.uk/news/business-40982032

[8] https://www.bbc.co.uk/news/business-45899310

[9] https://www.bbc.co.uk/news/world-latin-america-46413196

[10] https://www.businessinsider.com/trump-china-tariff-full-list-of-goods-products-2018-6?r=US&IR=T

[11] https://www.bbc.co.uk/news/business-45555749

[12] https://www.businessinsider.com/gdp-trump-tariff-trade-war-us-china-2018-10?r=US&IR=T

[13] https://www.forbes.com/sites/johnbrinkley/2018/10/26/trade-war-helps-steel-and-aluminum-industries-while-everyone-else-suffers/#57232a386eca

[14] https://www.cnbc.com/2018/09/19/escalation-in-trade-war-comes-at-worse-time-says-iowa-ag-official.html

[15] https://www.cfr.org/blog/trumps-tariffs-are-killing-american-steel

[16] https://www.npr.org/2019/02/16/695420209/if-the-u-s-and-china-dont-reach-a-trade-deal-consumers-will-soon-feel-the-impact?t=1551394221997

[17] https://www.bbc.co.uk/news/business-46395379

[18] https://www.nytimes.com/2019/02/25/us/politics/china-trump-trade-deal-democrats.html

[19] https://www.nytimes.com/2019/02/25/us/politics/china-trump-trade-deal-democrats.html

[20] https://www.washingtonpost.com/opinions/2019/02/27/trump-is-headed-bad-trade-deal-that-china-wont-honor/?noredirect=on&utm_term=.a3fd19b222c2

[21] https://www.bbc.co.uk/news/world-us-canada-47352657?intlink_from_url=https://www.bbc.co.uk/news/topics/ce25yderw6pt/trade-war&link_location=live-reporting-story

[22] https://www.cnbc.com/2019/02/25/trade-war-us-china-deal-wont-stop-global-economic-slowdown.html

[23] https://www.independent.co.uk/news/business/news/trump-us-china-trade-war-talks-beijing-tariffs-truce-a8773731.html

Picture of Donald Trump and Xi Jinping

https://www.aljazeera.com/blogs/americas/2017/04/donald-trump-xi-jinping-170406202305435.html

Picture of Peter Navarro

https://www.washingtonpost.com/business/economy/meet-mr-death-by-china-trumps-inside-man-on-trade/2017/02/17/164d7458-ea25-11e6-80c2-30e57e57e05d_story.html?utm_term=.282c00acd531

Picture of Donald Trump Tweet

https://twitter.com/realDonaldTrump?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1099800961089003522&ref_url=https%3A%2F%2Fwww.cnbc.com%2F2019%2F02%2F25%2Ftrade-war-us-china-deal-wont-stop-global-economic-slowdown.html

 

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