WEBVTT - Why the UAE Is Pumping $35 Billion Into Egypt 0:00:03.160 --> 0:00:21.520 Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to 0:00:21.560 --> 0:00:24.760 another episode of the ad Bots podcast. I'm Tracy Alloway 0:00:24.800 --> 0:00:27.760 and I'm Joe Wisenthal. Joe, did you see the big 0:00:27.800 --> 0:00:29.920 headline coming out of Egypt recently? 0:00:30.920 --> 0:00:31.200 Yeah? 0:00:31.520 --> 0:00:33.960 I was kind of blown away by it. So I 0:00:33.960 --> 0:00:37.680 think there's two things that I've seen recently out of Egypt. 0:00:38.000 --> 0:00:41.879 One is they've they're letting the Egyptian pound flow. They 0:00:41.880 --> 0:00:44.120 already have all and so the Egyptian pound has fallen 0:00:44.159 --> 0:00:48.360 to record lows. And then they have this huge deal 0:00:48.920 --> 0:00:51.879 with the UAE to develop a piece of property and 0:00:51.960 --> 0:00:54.640 it almost sounds like, and I don't think it's exactly 0:00:54.680 --> 0:00:57.120 the case, but it almost sounds like when you read 0:00:57.120 --> 0:00:59.480 about it, like the UAE basically just bought a big 0:00:59.520 --> 0:00:59.720 part of. 0:00:59.720 --> 0:01:04.600 Eachypt Ooh that's punchy, But you're right, Like, Noah, wrong, 0:01:05.800 --> 0:01:08.039 I should have specified at the beginning because there have 0:01:08.240 --> 0:01:10.679 been a number of headlines and it's kind of interesting 0:01:10.720 --> 0:01:14.160 because they're all feeding into each other. So I think 0:01:14.280 --> 0:01:18.000 last month the UAE unveiled this announcement that it was 0:01:18.040 --> 0:01:21.480 investing thirty five billion dollars in a place in Egypt 0:01:21.520 --> 0:01:25.679 on the Mediterranean coast called rassel Hekma, and the idea 0:01:26.040 --> 0:01:29.959 was to develop new tourism and real estate. But of 0:01:30.000 --> 0:01:34.160 course that investment comes at a really sensitive time for Egypt. 0:01:34.240 --> 0:01:37.800 The economy hasn't been doing too well, Inflation has been high, 0:01:38.120 --> 0:01:41.679 and so what we've seen since that announcement is that 0:01:41.959 --> 0:01:45.840 the Egyptian Central Bank was able to high crates finally, 0:01:45.920 --> 0:01:48.640 and then to your point, they were able to free 0:01:48.640 --> 0:01:53.600 float the Egyptian pound, and then the IMF felt much 0:01:53.680 --> 0:01:57.080 better about the direction of the Egyptian economy, and so 0:01:57.280 --> 0:02:02.440 they ended up increasing their own financing for Egypt. I 0:02:02.480 --> 0:02:04.640 think it went from like three billion dollars to eight 0:02:04.680 --> 0:02:08.200 billion dollars. And so when you combine all of these things, 0:02:08.240 --> 0:02:12.160 which have basically happened in less than a month, you've 0:02:12.200 --> 0:02:15.400 seen kind of a turnaround in how people are feeling 0:02:15.480 --> 0:02:18.680 about the Egyptian economy. I'm looking at spreads on Egyptian 0:02:18.680 --> 0:02:20.919 bonds right now and they have come in quite a lot. 0:02:21.160 --> 0:02:24.640 Right well, They've gotten a huge injection of cash, and 0:02:24.680 --> 0:02:27.520 I feel as though this story is at the intersection 0:02:27.680 --> 0:02:30.799 of a few different things. As you've mentioned, the Golf 0:02:30.960 --> 0:02:36.720 States seem really into real estate, megaprojects these days, whether 0:02:36.760 --> 0:02:39.440 it's Saudi or the UAE, et cetera. And so this 0:02:39.560 --> 0:02:44.400 is apparently another opportunity to build some gigantic modern city 0:02:44.560 --> 0:02:49.280 of the future. Egypt itself has of course come under strained, 0:02:49.320 --> 0:02:52.600 particularly since I don't know, maybe it's like the triple 0:02:52.800 --> 0:02:56.720 shock of COVID, the war in Ukraine and the surgeon 0:02:56.760 --> 0:02:59.600 wheat prices. We know Egypt is a really big wheat importer, 0:03:00.080 --> 0:03:04.399 and then also obviously strains from the war in Gaza, 0:03:04.840 --> 0:03:08.760 and like many ems, it's just generally been understrained and 0:03:08.919 --> 0:03:11.040 needed help from the IMF. And so this sort of 0:03:11.040 --> 0:03:14.360 feels like a story that sort of multiple things happening once, 0:03:14.440 --> 0:03:16.480 multiple things coming together at the same time. 0:03:16.560 --> 0:03:21.079 Well, it's also happening against a very intense political background 0:03:21.480 --> 0:03:27.200 and the complicated web of I guess influence in this 0:03:27.280 --> 0:03:31.160 particular region is something that we could probably spend hours 0:03:31.160 --> 0:03:33.360 and hours and hours on. You want to hear my 0:03:33.440 --> 0:03:36.920 framework for understanding this, I always think about it in 0:03:37.040 --> 0:03:43.320 terms of mean girls, like everyone's frenemies. But I guess 0:03:43.480 --> 0:03:49.360 Abu Dhabi MBZ is basically Regina George and Saudi Arabia 0:03:49.600 --> 0:03:53.400 NBS is sort of Karen Smith, and that makes Katar 0:03:53.880 --> 0:03:57.520 Gretchen Wiener because her hair is big and full of secrets. 0:03:58.040 --> 0:04:00.000 And then I guess, I guess Egypt is now Lens 0:04:00.200 --> 0:04:02.480 Lohan because people are trying to get her on board. 0:04:02.560 --> 0:04:03.520 Amazing. I love it. 0:04:03.640 --> 0:04:07.760 I think about this a lot weirdly. Okay, so maybe 0:04:08.000 --> 0:04:10.040 we should just bring on our guests. So we do, 0:04:10.160 --> 0:04:12.720 in fact have the perfect guest, someone we've been meaning 0:04:12.760 --> 0:04:16.040 to get on the podcast for a long time. I 0:04:16.120 --> 0:04:18.840 worked with him when I was based in Abu Dhabi 0:04:18.920 --> 0:04:20.679 and I used to go to Dubai quite a lot. 0:04:20.880 --> 0:04:24.200 We are going to be speaking with Bloomberg Economics chief 0:04:24.240 --> 0:04:29.120 Emerging Markets economist Zia Dowd. Zied is one of the 0:04:29.279 --> 0:04:33.160 smartest people I know when it comes to Middle Eastern economics, 0:04:33.240 --> 0:04:37.520 and he has a piece out on Bloomberg our New 0:04:37.560 --> 0:04:41.760 Big Take all about this particular topic. What does this 0:04:41.880 --> 0:04:46.120 thirty five billion dollar injection actually mean for Egypt and 0:04:46.200 --> 0:04:48.720 for the wider Middle East? So Zed, thank you so 0:04:48.800 --> 0:04:50.760 much for coming on all thoughts. 0:04:50.520 --> 0:04:52.480 Thank you Tracy, and thank you Joe. It's a pleasure 0:04:52.520 --> 0:04:53.000 to be with you. 0:04:53.640 --> 0:04:56.200 I'm going to start with the really basic question, which 0:04:56.279 --> 0:04:59.480 is what do we know about this thirty five billion 0:04:59.520 --> 0:05:03.000 dollar injection. So my understanding is that it was divided 0:05:03.080 --> 0:05:05.960 up into tranches. One of those has been paid at 0:05:05.960 --> 0:05:08.760 this point. But what do we know about the intended 0:05:08.920 --> 0:05:12.520 use of this money and whether or not it comes 0:05:12.560 --> 0:05:14.520 with conditions or strings. 0:05:14.800 --> 0:05:18.240 Well, we know three things about this thirty five billion dollars. One, 0:05:18.320 --> 0:05:22.000 we know it's a huge amount of money. Thirty five 0:05:22.040 --> 0:05:25.640 billion dollars. Just for perspective, Egypt was trying to agree 0:05:25.680 --> 0:05:28.559 a deal with the IMF throughout last year. The size 0:05:28.560 --> 0:05:31.040 of that was three billion dollars. You know, thirty five 0:05:31.120 --> 0:05:34.240 is much bigger than three. When the IMF deal got 0:05:34.320 --> 0:05:36.719 much larger, it ended up being eight billion dollars. So 0:05:36.760 --> 0:05:39.520 thirty five again, it's huge. Thirty five billion dollars is 0:05:39.520 --> 0:05:43.039 more than Egypt has for an exchange reserve, and even 0:05:43.080 --> 0:05:45.600 for a rich country like the UAE, and it is 0:05:45.640 --> 0:05:49.040 a rich country. Thirty five billion dollars is seven percent 0:05:49.080 --> 0:05:52.120 of GDP, so it's a significant amount of money. So 0:05:52.160 --> 0:05:55.200 that's what we's that's the first thing we know about it. 0:05:55.600 --> 0:05:57.240 The second thing we know about it is that the 0:05:57.279 --> 0:06:00.440 money is arriving over a short period of time. You know, 0:06:00.480 --> 0:06:02.880 when you do an IMFTL, you do it over multi 0:06:03.279 --> 0:06:07.120 multiple years. This one is coming within two months. So again, 0:06:07.200 --> 0:06:10.239 the UAE is shifting seven percent, the equivalent of seven 0:06:10.240 --> 0:06:13.479 percent of the GDP to Egypt in the space of 0:06:13.560 --> 0:06:16.560 two months, and that is fairly fairly rapid. And we're 0:06:16.560 --> 0:06:18.599 talking about real money here. You know, the thirty five 0:06:18.600 --> 0:06:22.360 billion twenty four billion dollars is fresh cash, and eleven 0:06:22.400 --> 0:06:26.960 billion dollars is basically a conversion of existing deposits for 0:06:27.000 --> 0:06:30.400 the UAE at the Egyptian Central Banks that's going to 0:06:30.400 --> 0:06:33.760 be converted into investments. And the third thing we know 0:06:33.839 --> 0:06:35.919 about this is that all these investments are going to 0:06:35.920 --> 0:06:38.800 be real estate investments. So the UAE is going to 0:06:38.800 --> 0:06:41.680 buy a big piece of land on Egypt's north coast 0:06:41.760 --> 0:06:44.760 called Russell Hekma, and on top of this, it will 0:06:44.760 --> 0:06:47.480 invest in other real estate projects. So it's big, it's 0:06:47.560 --> 0:06:49.320 arriving in a short period of time, and it's going 0:06:49.360 --> 0:06:50.720 to be real estate investments. 0:06:51.240 --> 0:06:54.080 I want to get to obviously what the UAE is 0:06:54.320 --> 0:06:56.560 ultimately getting out of this deal or why it's made that. 0:06:56.680 --> 0:06:59.279 But actually I want to ask one more step back question, 0:06:59.400 --> 0:07:02.159 which is, you know, in normal times and I don't 0:07:02.160 --> 0:07:04.920 know what counts as normal times anymore. Let's just start 0:07:04.920 --> 0:07:07.560 out of your like twenty eighteen, like, what is the 0:07:07.600 --> 0:07:08.799 Egyptian economy? 0:07:08.880 --> 0:07:10.960 I didn't say, Joe, that was the last time I 0:07:11.040 --> 0:07:13.360 was in the UAE, So thank you for choosing that 0:07:13.400 --> 0:07:14.520 as your pinnaclet of normal. 0:07:15.320 --> 0:07:18.120 That was the cutoff. When Tracy left, everything started to 0:07:18.160 --> 0:07:19.080 go off the rails. 0:07:19.280 --> 0:07:20.680 But in normal. 0:07:20.400 --> 0:07:24.640 Times, what is the Egyptian economy like? And what has 0:07:24.760 --> 0:07:28.280 happened to it since then that has caused it to 0:07:28.440 --> 0:07:29.880 go into such distress? 0:07:30.880 --> 0:07:34.120 Right, So let's start from the beginning. For a very 0:07:34.120 --> 0:07:36.680 ancient country like Egypt, the beginning to two thousands years ago, 0:07:36.800 --> 0:07:38.920 so we let's not go there. So let's start from 0:07:38.920 --> 0:07:39.440 twenty sixteen. 0:07:39.480 --> 0:07:45.400 Oh, very potent as yeah, many thousands of millennia a girl, Yeah. 0:07:45.320 --> 0:07:48.040 We're not going to do that. So twenty sixteen Egypt 0:07:48.080 --> 0:07:51.160 had the research, it had the recent Politically, it had 0:07:51.200 --> 0:07:53.880 a newly elected president after Fantasti's not in that year, 0:07:53.920 --> 0:07:56.440 but he was elected a couple of years earlier, and 0:07:56.480 --> 0:07:59.160 he had a lot of political capital, so there was 0:07:59.200 --> 0:08:02.559 a lot of political soport for presidency c at the time. 0:08:02.840 --> 0:08:06.120 But it also had an economic reset in late twenty sixteen, 0:08:06.640 --> 0:08:10.360 Egypt almost started on a clean state from an economic perspective. 0:08:11.120 --> 0:08:15.040 It basically devalued the currency by fifty percent. It agreed 0:08:15.040 --> 0:08:19.200 a deal with the IMF, it removed some subsidies on fuel, 0:08:19.640 --> 0:08:22.960 and it became the darling of global financial markets. It 0:08:23.080 --> 0:08:26.360 was the biggest carry trade in the world. So what 0:08:26.440 --> 0:08:28.720 was Egypt doing at the time it devalued the currency. 0:08:28.840 --> 0:08:33.480 There's limited downside risk to carry traders. You know, if 0:08:33.480 --> 0:08:36.160 you're going into Egypt, you get high interest rate in 0:08:36.240 --> 0:08:39.600 a world that was offering zero to negative interest rates, 0:08:40.000 --> 0:08:43.120 and you have limited currency risk because the currency had 0:08:43.160 --> 0:08:46.760 moved a lot, and because the country had ensured that 0:08:47.160 --> 0:08:50.600 carry traders essentially can take their money out of the country. 0:08:51.400 --> 0:08:54.880 So a lot of money flowed into Egypt in terms 0:08:54.920 --> 0:08:59.079 of short term debt, and that lasted between twenty seventeen 0:08:59.120 --> 0:09:02.560 and twenty twenty. And yes, Egypt has been unlucky with 0:09:02.600 --> 0:09:06.079 a few global shocks, Joey, You've mentioned already. There was COVID, 0:09:06.440 --> 0:09:08.920 there was the Russia Ukraine war, and there was there 0:09:09.000 --> 0:09:12.240 is the war in Gaza, and also the US interest 0:09:12.320 --> 0:09:15.679 rate heives which were significant. But also I think there 0:09:15.679 --> 0:09:18.439 were policy mistakes in Egypt. There was the fact that 0:09:18.480 --> 0:09:22.240 there was massive reliance on this hot money influence, and 0:09:22.320 --> 0:09:26.240 these do reverse fairly quickly. There there has been a 0:09:26.280 --> 0:09:29.800 growing role for the army in the economy, which prevented 0:09:29.880 --> 0:09:32.800 more stable funding to go into Egypt and prevented the 0:09:32.800 --> 0:09:36.200 country from exporting more so, it was still running a 0:09:36.240 --> 0:09:39.120 trade deficit that had to finance, and the only source 0:09:39.160 --> 0:09:42.120 of financing that was available was this hot money influence. 0:09:42.960 --> 0:09:45.920 So there's reliance on hot money. There was the army 0:09:46.000 --> 0:09:50.200 role in the economy. Egypt actually effectively after the fifty 0:09:50.200 --> 0:09:54.320 percent evaluation of late twenty sixteen, almost repecked the currency 0:09:54.320 --> 0:09:56.440 to the dollars, so it didn't allow the exchange rate 0:09:56.840 --> 0:09:59.440 to move in a free way and absorb the shocks. 0:09:59.559 --> 0:10:03.080 So you can buy these policy mistakes with the unfortunate 0:10:03.120 --> 0:10:08.520 global shocks, and Egypt looked very vulnerable starting twenty twenty two. 0:10:09.040 --> 0:10:12.319 So I definitely want to get into the why, and 0:10:12.600 --> 0:10:15.640 I have a feeling the next question probably feeds into 0:10:15.679 --> 0:10:18.040 that anyway. But one thing I wanted to ask you 0:10:18.080 --> 0:10:22.800 about is this investment. This thirty five billion isn't coming 0:10:23.000 --> 0:10:27.120 from the Abu Dhabi Sovereign Wealth Fund that I would 0:10:27.160 --> 0:10:31.240 normally think of making these huge investments, so that would 0:10:31.240 --> 0:10:34.920 be Adia. And I cannot emphasize how big a deal 0:10:35.080 --> 0:10:37.679 Adia was. When I was in the UAE, there was 0:10:37.760 --> 0:10:41.320 this whole sort of mythology built up around it. But 0:10:42.120 --> 0:10:46.960 this investment is coming from a new SWF called ADQ. 0:10:47.200 --> 0:10:50.360 Can you talk a little bit about that and how 0:10:50.360 --> 0:10:53.240 it's supposed to be different to Adia, like what the 0:10:53.280 --> 0:10:54.360 different purposes are. 0:10:55.960 --> 0:10:58.880 So the UAE abu W in particular when you used 0:10:58.880 --> 0:11:03.800 to give tracy has multiple sovereign wealth funds. They have 0:11:03.960 --> 0:11:09.280 different chairpersons sharing them. Mostly they belonged to the ruling family. 0:11:09.960 --> 0:11:12.760 I think the division of labor is not clear to me. 0:11:13.320 --> 0:11:16.520 But what is clear is that this new sovereign wealth fund, ADQ, 0:11:16.720 --> 0:11:19.880 which is different from Adia, different from MOBADERA the other 0:11:19.920 --> 0:11:23.240 two sovereign wealth funds, has been very active in Egypt recently. 0:11:23.880 --> 0:11:27.000 So it was the one which entered this land sale 0:11:27.040 --> 0:11:30.560 d the thirty five billion dollar development deal, but it's 0:11:30.600 --> 0:11:32.480 also has been active in Egypt lately. So in the 0:11:32.559 --> 0:11:36.760 last few years, since twenty twenty two, ADQ has bought 0:11:37.360 --> 0:11:45.360 state stakes and Egyptian firms as varied as insectors like fertilizers, banks, fintech, 0:11:45.800 --> 0:11:49.400 the tobacco company. And actually, if you look at the 0:11:49.440 --> 0:11:51.520 Egyptian stock index and you look at the top three 0:11:51.559 --> 0:11:54.960 companies in that index, the top one is a cib 0:11:55.120 --> 0:11:58.320 A bank and a company that is part of the 0:11:58.360 --> 0:12:03.080 Sovereign Wealth Fund ADQ largest shareholder. The third largest company 0:12:03.160 --> 0:12:06.640 in the Egyptian stock index is Eastern Tobacco Company, and 0:12:06.679 --> 0:12:10.600 again the biggest shareholder is ADQ, and the second largest 0:12:10.600 --> 0:12:14.079 company is a construction company called Talatmostava with a very 0:12:14.080 --> 0:12:18.439 interesting history, especially with relation to the UAE. Is basically 0:12:18.679 --> 0:12:21.000 is the one that is acting as the middleman for 0:12:21.280 --> 0:12:25.600 all these ADQ deals, including the recent thirty five billion 0:12:25.679 --> 0:12:29.319 dollar deal. But also Egypt recently sold a few historic hotels, 0:12:29.559 --> 0:12:33.560 which Palatmostafa Group was a co investor and a middleman 0:12:33.600 --> 0:12:37.160 for these deals. So ADQ seems very active in Egypt 0:12:37.679 --> 0:12:40.079 and its yeah, it's brokering all these deals there. 0:12:40.480 --> 0:12:44.000 So let's talk then about this deal, like how much 0:12:44.040 --> 0:12:48.000 potential is there? What can the UAE get for thirty 0:12:48.000 --> 0:12:48.720 five billion. 0:12:49.520 --> 0:12:51.800 It's a lot of money. And when the Prime Minister 0:12:52.200 --> 0:12:55.120 of Egypt had the press conference when he announced the deal, 0:12:55.120 --> 0:12:56.720 he said, you know what, this is going to be 0:12:56.880 --> 0:13:00.720 a global touristic destination. We will probably get eight million 0:13:00.800 --> 0:13:04.440 people coming to this area of land. It's not just 0:13:04.520 --> 0:13:07.120 going to be a city. It's gonna be gonna have yachts. 0:13:07.160 --> 0:13:10.600 You're gonna have all sorts of things and tourism all 0:13:10.600 --> 0:13:13.480 around the year. But I think it's something. 0:13:13.600 --> 0:13:15.599 I like how you say it's not just gonna be 0:13:15.640 --> 0:13:19.440 a mega city. It's also gonna have yachts. 0:13:20.040 --> 0:13:22.080 I saw this great video, and it's gonna have amusement 0:13:22.160 --> 0:13:25.760 parks and a clean energy corridor and a light industrial 0:13:25.880 --> 0:13:28.080 hub and anyway, sorry, keep going. 0:13:28.200 --> 0:13:32.640 Actually, interestingly, it's also adjacent, actually very close to Egypt's 0:13:32.760 --> 0:13:35.640 nuclear power plant called the Dabba, and he actually mentioned 0:13:35.679 --> 0:13:38.200 it and he said it might provide clean energy to 0:13:38.320 --> 0:13:42.800 the area, megacity, whatever it is. But I think I 0:13:42.800 --> 0:13:45.920 think if you look at it, it's just difficult just 0:13:46.000 --> 0:13:49.680 to see. That's just all about economics. I think the 0:13:49.679 --> 0:13:51.480 first item is if you look at you know, the 0:13:51.559 --> 0:13:54.200 average price of land in that area and what the 0:13:54.320 --> 0:13:57.720 UAE paid. It wasn't a fire sell. If anything, it 0:13:57.840 --> 0:14:00.240 might have been the UAE might have been generous, and 0:14:00.280 --> 0:14:04.120 the money that it paid to Egypt. So that's the 0:14:04.120 --> 0:14:07.160 first item, and I think it's second item. If you 0:14:07.200 --> 0:14:09.880 think about the narrative of why Egypt got into trouble, 0:14:09.880 --> 0:14:13.199 into the slatest crisis, the simplest thing, that one sentence 0:14:13.240 --> 0:14:17.120 sort of narrative is that Egypt borrowed extensively and in 0:14:17.200 --> 0:14:21.320 short term from financial markets abroad and built a new 0:14:21.360 --> 0:14:24.320 capital city that had limited economic critter. Right, So this 0:14:24.400 --> 0:14:26.920 is the one center summary of what happened to Egypt 0:14:27.040 --> 0:14:30.880 between twenty seventeen and today. Now. It is very odd 0:14:31.240 --> 0:14:33.840 and I say that in the Odd Lost podcasts that 0:14:33.920 --> 0:14:36.280 the solution to building a megacity is to build another 0:14:36.320 --> 0:14:39.720 megacity which is even further away from the capital. So 0:14:39.840 --> 0:14:42.160 I think it's not about the economics, and we can 0:14:42.240 --> 0:14:46.040 think about what is there in terms of non economic 0:14:46.560 --> 0:14:49.800 benefits that Egypt can provide, and I think the biggest 0:14:49.800 --> 0:14:54.440 one is basically stability. The region is already unstable. If 0:14:54.440 --> 0:14:57.400 you look at Egypt's west, there is Libya and it's 0:14:57.440 --> 0:15:00.440 completely unstable. Egypt south there is Sudan and again there's 0:15:00.480 --> 0:15:03.480 an internal civil war and Egypt is there is Gaza 0:15:03.520 --> 0:15:05.720 and there's an ongoing war that is that is brutal 0:15:05.760 --> 0:15:07.440 and that's probably going to shape them in the least 0:15:07.760 --> 0:15:10.640 in the coming years. So I think the stability of 0:15:10.680 --> 0:15:16.000 Egypt is important. I think the UAE is very conscious 0:15:16.040 --> 0:15:20.640 about not allowing, for example, Islamist groups to be in power, 0:15:20.960 --> 0:15:24.120 and maybe they think that kind of investment would prevent 0:15:24.400 --> 0:15:27.360 such thing from happening. But it's clearly something beyond the 0:15:27.400 --> 0:15:30.120 economics of this, because the economics, yes, you can, you 0:15:30.160 --> 0:15:33.480 can make a case there, but it's not full. It 0:15:33.520 --> 0:15:37.040 doesn't tell you the full picture. And whatever the economics is, 0:15:37.120 --> 0:15:39.040 we just talked about the size of it. Seven percent 0:15:39.080 --> 0:15:42.080 of GDP, the ue sending seven percent of GDP in 0:15:42.160 --> 0:15:46.080 two months to Egypt to do to invest in Egypt 0:15:46.160 --> 0:15:47.760 real the state. That is significant. 0:16:04.160 --> 0:16:08.960 I appreciate your summary of Egypt's economic situation earlier since 0:16:09.040 --> 0:16:12.680 twenty sixteen slash twenty seventeen, there is an event that 0:16:12.760 --> 0:16:15.720 I think lives sort of rent free in a lot 0:16:15.760 --> 0:16:20.880 of UAE rulers' heads, which is the twenty eleven Day 0:16:21.120 --> 0:16:25.760 of Revolt in Egypt or the Arab uprising elsewhere. And 0:16:25.800 --> 0:16:29.480 I think there is also that element sort of hovering 0:16:29.600 --> 0:16:32.640 in the background. But one thing I wanted to ask you, 0:16:33.600 --> 0:16:39.240 how much of this is coming from geostrategic considerations. So 0:16:39.320 --> 0:16:42.120 the idea that okay, maybe you're going to develop a 0:16:42.400 --> 0:16:46.920 tourist city on the Mediterranean coast in Egypt, but maybe 0:16:46.960 --> 0:16:51.240 you're also sort of building up a trade network in 0:16:51.280 --> 0:16:54.960 a kind of like China Belt and Road type way. 0:16:55.160 --> 0:16:58.440 Maybe you're building up a strategic bulkhead in that area 0:16:58.480 --> 0:17:00.239 as well. 0:17:00.280 --> 0:17:02.760 Perhaps, I think I think there's three elements here. There's 0:17:02.800 --> 0:17:04.920 the commercial side of it, and we've talked about it, 0:17:05.680 --> 0:17:08.600 and there is the trade side of it. But then 0:17:08.600 --> 0:17:10.879 if you think about that, I mean the last G 0:17:11.000 --> 0:17:12.639 twenty in August. I don't know if it's the last one, 0:17:12.680 --> 0:17:15.840 but the G twenty last August, there was a memoranda 0:17:15.880 --> 0:17:19.880 of understanding that was signed to have a trade corridor 0:17:20.119 --> 0:17:24.160 between India, the Middle East and Europe. Right, so that's 0:17:24.200 --> 0:17:27.359 goes from India to the UAE, through Saudi Arabia, Israel 0:17:27.600 --> 0:17:30.119 and all the way to Europe. And that was only 0:17:30.440 --> 0:17:34.400 signed as a memorandum understanding in August. So to think 0:17:34.440 --> 0:17:38.480 about doing another trade route, maybe maybe there's some logic there, 0:17:38.840 --> 0:17:42.960 but you start to make progress on that initial project 0:17:43.040 --> 0:17:45.840 first before you had there. I think there is a 0:17:46.160 --> 0:17:49.080 geopolitical side of this as well, if you think about 0:17:49.119 --> 0:17:52.600 the ongoing war in Gaza, you know that Gaza has 0:17:52.640 --> 0:17:55.240 two borders, one with Israel and one with Egypt, and 0:17:55.320 --> 0:17:58.200 Egypt will clearly play a role in the future of Gaza. 0:17:58.440 --> 0:18:02.240 And maybe this is a way to flex muscle UAE 0:18:02.400 --> 0:18:05.560 muscle in Egypt and to ensure that in case of 0:18:05.640 --> 0:18:08.919 future agreements over the future of Gaza, Egypt will side 0:18:09.320 --> 0:18:13.280 with basically the country that got it out of its crisis. 0:18:14.160 --> 0:18:16.160 There's one other thing I wanted to ask you, and 0:18:16.680 --> 0:18:19.440 I don't think it's verging on conspiracy theory, but it's 0:18:19.440 --> 0:18:23.520 definitely speculative, and it kind of goes back to Abu 0:18:23.600 --> 0:18:30.000 Dhabi making a push into petrochemicals, renewable energy, things like that. 0:18:30.040 --> 0:18:33.240 We've seen it make these moves because it kind of 0:18:33.280 --> 0:18:38.000 wants to diversify away from pure oil extraction and move 0:18:38.080 --> 0:18:41.959 into more value add processing that sort of thing. But 0:18:42.359 --> 0:18:46.560 I think this particular area of Egypt sits kind of 0:18:46.640 --> 0:18:51.400 right above the world's biggest sinkhole, and I have totally 0:18:52.080 --> 0:18:56.119 forgotten its name, but there's been some discussion at various 0:18:56.160 --> 0:19:00.920 points in time of developing that area into either mining 0:19:00.960 --> 0:19:05.919 it for critical minerals or putting like using it to 0:19:06.000 --> 0:19:09.119 generate electricity, or maybe like building a pipeline from the 0:19:09.160 --> 0:19:11.960 Mediterranean or something like that. Do you think those sort 0:19:12.000 --> 0:19:14.400 of energy considerations play into this at all. 0:19:15.359 --> 0:19:18.200 They weren't mentioned, so I think the first when when 0:19:18.359 --> 0:19:20.639 when the deal was announced, a few things were mentioned 0:19:20.640 --> 0:19:25.400 that these beaches are very pristine, they are virgin and undiscovered, 0:19:25.920 --> 0:19:28.640 and it's going to be a touristic attraction. I think 0:19:28.680 --> 0:19:32.440 then doing mining would probably undermine that sort of touristic 0:19:32.480 --> 0:19:36.160 attraction side of it, I think to the broader question 0:19:36.320 --> 0:19:38.959 of energy and and maybe this is just a bit 0:19:39.000 --> 0:19:41.359 of a digression, but I think within the region you 0:19:41.440 --> 0:19:44.080 might see that you know from Afar that the the 0:19:44.119 --> 0:19:48.000 oil monument in the region, places like Saudi Arabia, Ata 0:19:48.200 --> 0:19:50.560 and the UE, and they're very active in their investments. 0:19:51.240 --> 0:19:54.600 You might group all of them as doing the same thing, 0:19:54.960 --> 0:19:57.320 but I think there is sort of a there are. 0:19:57.359 --> 0:20:00.159 There are differences in their visions for different things on 0:20:00.200 --> 0:20:02.880 political issues and economic issues, on market issues, and one 0:20:02.880 --> 0:20:07.200 of the very obvious one is energy transition and what 0:20:07.240 --> 0:20:09.679 that does to oil. You know, this is all coming 0:20:09.760 --> 0:20:13.199 down to the fact that these countries export the GCC. 0:20:13.359 --> 0:20:15.439 By that I mean export a lot of oil and 0:20:15.480 --> 0:20:17.280 that gives them a lot of wealth and a lot 0:20:17.320 --> 0:20:20.920 of firepower. But there's different visions on how to deal 0:20:20.960 --> 0:20:24.600 with that and how to manage this in the context 0:20:24.600 --> 0:20:26.879 that the world is going to transition away from fossil 0:20:26.880 --> 0:20:29.800 fuel towards cleaner energy. And I think the two pillars 0:20:29.800 --> 0:20:32.679 of these different visions are basically have Saudi Arabia on 0:20:32.680 --> 0:20:35.359 one side and the UAE on the other. The UAE 0:20:35.960 --> 0:20:39.480 is basically pushing for it, actually it is expanding it's 0:20:39.520 --> 0:20:43.320 all production capacity. It is pushing for it's OPEC quota 0:20:43.720 --> 0:20:47.959 to increase, and it wants to produce more today so 0:20:48.000 --> 0:20:50.440 that it doesn't end up with the stranded assets when 0:20:50.560 --> 0:20:54.119 all prices drop in the future. Saudi Arabia is the 0:20:54.240 --> 0:20:57.879 other sort of end of the spectrum where it has 0:20:58.160 --> 0:21:01.000 large funding needs which requires it have a high oil 0:21:01.119 --> 0:21:04.840 price and as a result there it's strategy towards the 0:21:04.840 --> 0:21:07.280 oil markets is to restrict supply now, not to increase. 0:21:07.320 --> 0:21:10.320 Supply restricted in order to get that high price and 0:21:10.840 --> 0:21:15.400 allows it to funds domestic investments. And these disputes at times, 0:21:15.520 --> 0:21:18.200 you know, sometimes they surface and a oppect meetings, and 0:21:18.280 --> 0:21:21.040 they did a couple of years ago, but sometimes they 0:21:21.160 --> 0:21:23.119 just you know, they're they're they're they're in the background 0:21:23.160 --> 0:21:25.760 when when the OPEC discussions happen. So maybe it's not 0:21:26.359 --> 0:21:28.399 I digress quite a bit, but maybe it's not related 0:21:28.440 --> 0:21:30.480 to the to the clean energy. But I think the 0:21:30.560 --> 0:21:33.800 deal speaks to the fact that there's also competition between 0:21:33.800 --> 0:21:36.159 these oil monument and ages. Is one area where they 0:21:36.160 --> 0:21:38.080 compete over Now. 0:21:38.160 --> 0:21:41.840 I mentioned in the beginning or early on that there 0:21:41.920 --> 0:21:44.440 just seems to be an endless stream of stories about 0:21:44.480 --> 0:21:49.280 the development of big new real estate project megacities, and 0:21:49.600 --> 0:21:53.080 there are all these visions, particularly Saudi obviously, and like 0:21:53.119 --> 0:21:55.000 there will be these videos that I see on Twitter, 0:21:55.240 --> 0:21:57.960 like here's how they're one hundred kilometer city is going, 0:21:58.040 --> 0:22:00.159 and here's how they're city that's going to be have 0:22:00.200 --> 0:22:03.200 a mayor that's an AI bought or something like that. 0:22:03.240 --> 0:22:05.800 Like it's always like this sort of wild stuff. But like, 0:22:06.440 --> 0:22:10.240 what is the track record here setting aside whether the 0:22:10.359 --> 0:22:12.959 UAE is going to fully get the sort of economic 0:22:13.080 --> 0:22:16.840 returns that maybe would justify a thirty five billion dollar deal, 0:22:17.480 --> 0:22:20.560 is there reason to think that there's a good chance 0:22:20.600 --> 0:22:24.080 of turning this part of Egypt into sort of a 0:22:24.600 --> 0:22:27.680 booming industrial and tourist area. 0:22:29.119 --> 0:22:32.200 The short answer to this is that the regional track 0:22:32.240 --> 0:22:37.359 recit of developing and making profitable new cities megacities is 0:22:37.400 --> 0:22:41.080 not great if you look at itself. I've just mentioned 0:22:41.119 --> 0:22:44.040 the reason why it got into this most recent crisis. 0:22:44.080 --> 0:22:47.359 It built a new it has built a new administrative capital, 0:22:47.920 --> 0:22:52.320 which has limited economic critics. Actually, in the late nineteen nineties, 0:22:52.400 --> 0:22:56.320 eighty two thousands, Egypt tract to build another city which 0:22:56.440 --> 0:23:00.840 was in southwest of the country, away from then All Valley, 0:23:01.240 --> 0:23:04.200