By Eman Ibrahim
Translated by Reem Hesham
The onset of Egypt’s urban renaissance several years ago, along with the extensive construction of new cities across the nation, highlighted the necessity of creating a cohesive infrastructure that offers comprehensive amenities and services within these cities. Achieving this objective required a collaborative effort involving diverse agencies and institutions, spanning beyond the real estate sector and encompassing both the public and private domains.
In response to this need, the government took steps to facilitate the participation of industrial developers in advancing the urban renaissance starting in 2007. This initiative, known as the Industrial Developer system, was devised as a strategic approach to address the growing demand for industrial land. The Industrial Development Authority played a pivotal role in this endeavor by actively working to augment the availability of industrial land for developers. This concerted effort aimed to bolster industrial investment and contribute to the overall success of the urban renaissance.
Recently, Assem El-Gazzar, Egypt’s Minister of Housing, Utilities, and Urban Communities, revealed the approval by the Board of Directors of the New Urban Communities Authority to allocate 13 mn sqm of land in four new cities under the Industrial Developer system.
El-Gazzar further clarified that approximately 22 mn sqm had been previously allocated in 2007. Accordingly, the total land allocated under the Industrial Developer system in new cities will amount to around 35 mn sqm. The minister also highlighted that some facilitations and amendments concerning industrial lands had been granted, allowing the industrial developer to plan and divide industrial land plots, up to 75% of the total project area.
These statements prompted Invest-Gate to delve deeper into this experience, closely monitoring its progression.
Exploring Egypt’s Industrial Developer System: Origins and Implementation
An industrial developer is a company that develops a specific industrial area following the rules of the entity offering the land. Despite the concept of industrial developers appearing in the late 1990s in Egypt, the state did not officially adopt it as an initiative to overcome the problem of providing industrial lands until the beginning of 2007, through the Industrial Development Authority (IDA).
The IDA started implementing this system in 2007 by offering 8.43 mn sqm in six regions. Furthermore, to enhance the provision of industrial lands with complete facilities, the authority adopted the program for the new generation of industrial clusters; the industry’s need for attached lands exceeds 7 mn sqm annually, while the state supplies no more than 3 mn sqm.
Speaking of the main responsibilities of the industrial developers, they collaborate with the area’s management authority to develop roads, water, drainage, electricity, gas, and telephone lines, in addition to providing logistic and security services, maintenance work, and marketing the industrial complex locally and internationally.
In consideration of the objectives set forth by industrial developers, a noteworthy aim is to establish an avenue for industrial growth driven by the private sector. This initiative runs concurrently with the state’s endeavors, with the overarching goal of relieving the financial burden associated with the establishment, enhancement, and promotion of industrial zones from the public budget. Additionally, it seeks to augment the value-added to Egyptian resources, particularly raw materials.
According to the IDA, this system aims to attract foreign direct investments and increase exports. This will occur through the general developer experienced in marketing to attract international companies. It also targets to establish specialized industrial clusters on a global level, while contributing to the provision of industrial lands.
Furthermore, this endeavor aims to enhance competitiveness by integrating various activities, enticing a higher influx of both domestic and foreign investments within the industrial sector, facilitating the transfer of contemporary technologies, and preparing local talent to proficiently engage with cutting-edge technologies
Development of 80% of Industrial Lands
The number of industrial zones brought into existence by industrial developers stands at 19 areas, representing approximately 11.5% of the total industrial zones established throughout the country. Furthermore, an overwhelming majority of these industrial zones, constituting about 89.5%, were made available through the IDA, amounting to roughly 17 zones. These zones collectively span an estimated area of 22.7 mn sqm and entail investment costs totaling EGP 32.9 bn, as revealed by research conducted by the Egyptian Center for Economic Studies.
Additionally, two additional areas were established, with one being allocated through the General Authority for Urban Communities and the other via the Suez Canal Economic Authority (formerly known as Suez Governorate).
The study revealed that the system developed 80% of the total industrial lands across Egypt until 2016. Each million sqm developed attracts investments on average of USD 1-2 bn, in addition to infrastructure development investments.
The study emphasized that approximately 70% of the companies operating within regions where industrial developers are active belong to crucial sectors of the Egyptian economy, encompassing engineering, food, chemical, and textile industries. In aggregate, these sectors make up 76% of all companies engaged in manufacturing industries within Egypt and contribute to 44% of the total value added by the country’s manufacturing industries.
Fostering Urban Vitality: The Role of Privatization in City Development
Abdel–Magid Gado, an architect and real estate expert, emphasized that the ongoing allocation of lands to industrial developers in new cities will contribute to the support and expansion of the industrial sector in the country. This, in turn, will have a positive impact on the overall performance of the national economy and provide additional job opportunities.
Gado revealed that currently, city planners have to prioritize several. These include conducting studies on the city’s healthcare, environmental, and industrial requirements, ensuring connectivity to the road networks of surrounding cities, and providing public facilities that meet international standards to ensure long-term sustainability.
He further emphasized that cities’ demands encompass more than just residential aspects; they necessitate the growth and enhancement of their industrial and productive capabilities to attain comprehensive cohesion. Historically, cities were primarily established with residential objectives in mind, a practice that resulted in numerous challenges and placed undue pressure on the infrastructure of neighboring cities.
Regarding the impact of privatization in the new cities developed by industrial developers, Gado explained that this could enhance their integration and provide them with opportunities for healthy growth. It enables the creation of communities with sustainable facilities and industries. Some cities may have unique industries that support the state’s growth or contribute to meeting the city’s needs and providing employment opportunities for its residents.
Hassan Ibrahim, another real estate expert, pointed out that city authorities often face challenges in allocating their budgets for facilities and infrastructure. Therefore, allocating land to developers to carry out these projects helps alleviate the burden on these entities, accelerates the pace of city construction, and ensures the completion of urbanization with the necessary facilities.
Ibrahim asserted that the allocation of land and the amenities offered for the establishment of new cities serve as strong incentives for developers to engage in projects within these cities, setting them apart from other opportunities. He stressed that providing such amenities may demand a considerable portion of the developer’s available funds, yet it stands as a pivotal factor in advancing the cause of new cities. Prospective residents are less likely to opt for a city that lacks essential amenities and suffers from poor transportation connectivity.
Ibrahim advocated for collaborative arrangements between the public and private sectors when allocating land, whether for industrial or real estate development. This can be accomplished by offering developers increased support and facilities. These provisions entail shared land usage with the government, enabling developers to implement projects and remit payments to government entities upon reaching a significant project completion milestone and delivering it to customers. This approach permits developers to reinvest their cash flows into the project.
In conclusion, both real estate experts agreed that cities are not merely constructed for residential purposes but are developed as self-contained communities that rely on their facilities and resources to meet their needs. They emphasized the vitality of employing modern industries to handle waste in environmentally sustainable ways.