Abu Dhabi's ADQ to invest $35bn in Egypt

Ras El Hekma is a coastal region about 350km north-west of Cairo. Photo: UN-Habitat/ Egyptian Ministry of Housing

Abu Dhabi's investment holding firm ADQ is leading a consortium that will invest $35 billion in major projects in Egypt.

ADQ said it will acquire the development rights for Ras El Hekma, a coastal region about 350km north-west of Cairo, for $24 billion.

The mega project is intended to turn the region into one of the largest new city developments by a private consortium.

The Egyptian government will retain a 35 per cent stake in the development and the work is expected to start next year, ADQ said in a statement.

The development is expected to attract as much as $150 billion in investments, Egyptian Prime Minister Mostafa Madbouly told a press conference on Friday.

The Arab world’s most populous nation is expected to attract eight million more tourists after the completion of the project, Mr Madbouly said.

“This deal will be the beginning of correcting the course of the Egyptian economy.”

The agreement was signed by Egypt's Minister of Housing, Assem El Gazzar, and the UAE’s Minister of Investment, Mohamed Alsuwaidi, in the presence of Mr Madbouly, at Egypt's New Administrative Capital.

“With this signing, a new chapter begins in the long-standing bilateral relations between our two nations,” Mr Alsuwaidi said.

“As a large-scale infrastructure project, the planned Ras El Hekma development will foster widespread impact across multiple sectors, be a catalyst for job creation, and attract significant additional foreign direct investments in the years to come.”

ADQ said it will also convert its $11 billion of deposits held with the Egyptian central bank to invest in “prime projects” across Egypt to support the nation’s economic growth and development.

Egypt's foreign bonds surge

Following the news, Egypt's foreign bonds experienced a significant surge in value. They were positioned as the top-performing sovereign debt within emerging markets on Friday. The government's dollar-denominated notes maturing in 2051 saw an increase of 4.5 cents on the dollar.

This financial development provides a significant boost to Cairo's endeavours in addressing its most severe foreign exchange crisis in decades. It could also facilitate the implementation of a highly anticipated currency devaluation, which would be Egypt's fourth since early 2022.

Despite the International Monetary Fund’s persistent calls for this move over the past few months, Egyptian authorities have been holding off, probably anticipating a substantial influx of foreign currency.

This influx would enable them to carry out the adjustment without the fear of overshooting the mark, according to industry experts.

Spanning over 170 million square metres, the Ras El Hekma development is expected to attract more foreign direct investment, boost trade, create new jobs and support Egypt’s private sector.

It will include hotels, yacht marinas, entertainment facilities, as well as residential, commercial and recreational spaces with global connectivity.

The investment from the UAE is a key step towards establishing the location as a leading Mediterranean holiday destination, financial centre and free zone.

“ADQ is a long-standing investment partner in Egypt, and we have demonstrated our ability to select opportunities that are aligned with our investment framework and benefit the Egyptian economy,” said Mr Alsuwaidi, who is also managing director and chief executive of ADQ.

“This investment underscores our commitment to developing Ras El Hekma into one of Egypt’s most attractive coastal destinations through the enablement of mega-infrastructure and development projects, working with partners such as Modon Properties and Talaat Moustafa Group.”

Set up in 2018, ADQ has been growing its portfolio of companies, which span sectors including energy, utilities, food and agriculture, health care, pharmaceuticals, mobility and logistics.

ADQ is also boosting investments globally. It has become an investor alongside the Bank of Montreal in the Canadian alternative asset management company Sagard.

“The magnitude of the [Egypt] investment is far greater than what we had been expecting, and the timing far sooner,” said Farouk Soussa, an economist at Goldman Sachs, according to Bloomberg.

“[It] provides an opportunity for Egypt to restore two-way liquidity in the FX [foreign exchange] market in the coming days and weeks.”

UAE’s rising investment in Egypt

In the past few years, the UAE has intensified its investment in Egypt to help bolster the country's economy and capitalise on the investment potential.

In April 2021, ADQ acquired Egypt’s Amoun Pharmaceutical Company from Canada's Bausch Health for $470 million, in a move that strengthens its long-term healthcare and pharmaceutical portfolio.

In December of the same year ADQ opened an office in Cairo, and over the past few years has bought stakes in publicly-listed Egyptian companies across key sectors, from FinTech to logistics.

The deals include investments in shares of Commercial International Bank, digital payments platform Fawry, logistics player Alexandria Container and Cargo Handling Company, Misr Fertilisers Production Company, and Abu Qir Fertilisers and Chemical Industries.

In September last year, the Central Bank of the UAE and the Central Bank of Egypt signed a bilateral currency swap agreement to boost economic ties between the countries. The size of the agreement is between Dh5 billion ($1.36 billion) and 42 billion Egyptian pounds.