China’s deep pockets in Egypt

Egypt must be mindful of the fact that more of China’s investment in massive infrastructure projects abroad are turning sour.
Sunday 17/02/2019
Showing the way. Egypt’s President Abdel Fattah al-Sisi (L) and Chinese Premier Li Keqiang at Diaoyutai State Guesthouse in Beijing, last September. (Reuters)
Showing the way. Egypt’s President Abdel Fattah al-Sisi (L) and Chinese Premier Li Keqiang at Diaoyutai State Guesthouse in Beijing, last September. (Reuters)

A few statistics sum up the considerable change that has occurred in relations between China and Egypt in the years since Abdel Fattah al-Sisi became president of Egypt.

Cumulative Chinese foreign direct investment in Egypt is estimated at $23 billion, though the figure is skewed by a $20 billion investment announced but not yet realised by China Fortune Land Development in the planned administrative capital east of Cairo.

China State Engineering Corporation has been contracted to build 20 towers in the new city, including what is billed as the tallest tower in Africa, in a separate contract. The Chinese conglomerate TEDA-Suez is expanding its industrial zone near the Red Sea port of Ain Sokhna.

The number of Chinese tourists visiting Egypt more than doubled in 2017 to 300,000 from the year before and keeps growing. These visits are encouraged by the ever-expanding number of charter flights between the two countries.

The Sisi administration has capitalised on Egypt’s strategic location — the Suez Canal lies at the heart of the Maritime Silk Road, which is a key component of Chinese President Xi Jinping’s all-encompassing Belt and Road Initiative.

The Chinese concept started as a project to connect Europe and Asia but has broadened into a blanket term for virtually all of China’s foreign policy. It includes financing infrastructure, such as ports, railways, free trade zones in the Maldives, Sri Lanka, Pakistan, Djibouti and various countries in Africa.

Sisi may have taken a leaf from Gamal Abdel Nasser’s book. In 1955, Egypt’s most famous modern leader, tired of US reluctance to sell him weapons and the World Bank’s refusal to finance the building of a new Aswan dam, approached the Soviet Union. This led to an arms race with disastrous consequences for the region but especially for Egypt.

Sisi has also turned to Russia, with which he signed arms deals worth $3.1 billion in 2014 and an agreement, in 2017, to finance and oversee the construction of a $21 billion nuclear power plant near El Alamein.

Unlike Russia, China has very deep pockets.

At a time when relations between Egypt and the United States remain uncertain, diversifying its foreign relations and finding allies other than its traditional partners in Europe and the United States makes sense for Cairo.

Relations between former US President Barack Obama and Sisi were frosty amid US accusations of human rights violations. Sisi has made a state visit to Washington but US President Donald Trump’s long-term strategy towards Egypt remains unclear.

The US Congress continues to fret about repressive laws that restrict NGOs, fuelling tensions that create openings for Russia and China. When Egypt bought new weapons from China, it was beholden to wealthy Gulf backers to finance them. Saudi Arabia alone accounted for $25 billion of aid and investment in Egypt from 2014-17.

Egypt can be of use to China in other ways. In May 2017, the Chinese government demanded the return from overseas of all Uighur students, members of the Muslim ethnic minority in the far western Chinese province of Xinjiang. Hundreds of Uighur students were sent to massive detention camps in China, which observers say hold as many as 1 million people. China has done all it can to clamp down on the Uighurs over the past decade and attempt to repatriate those studying abroad.

Chinese investments are seen in Cairo as a win-win situation. Egyptian exports start from a very low base of $40 million in 2018 and it is difficult to see, beyond oranges, grapes and tourists, what sources of export income Egypt could offer the Chinese economy.

Egypt must be mindful of the fact that more of China’s investment in massive infrastructure projects abroad are turning sour. In the Maldives, President Ibrahim Mohamed Solih has denounced the terms of the massive loans made by China to his country. That fuelled allegations of corruption as inflated Chinese contract costs appear to have financed the coffers of the friends of former Maldives President Abdulla Yameen.

China’s investment boom in the Maldives began four years ago after a visit by Xi. Beijing’s growing interest in the archipelago, whose population is tiny but whose exclusive economic zone covers 859,000, reflects its strategic location in a section of the Indian Ocean that touches the main shipping routes between China, its oil suppliers in the Middle East and Europe.

Malaysian Prime Minister Mahathir bin Mohamed, in January, said that his country would be “impoverished” if it proceeded with a $20 billion Chinese rail project agreed by his predecessor. His warning of a “new version of colonialism” was echoed in Myanmar, Pakistan and Sri Lanka.

Sisi has visited Beijing five times since he became Egypt’s president and Xi has travelled to Cairo once. So far, relations between the two countries are a bed of roses. Sisi could, however, do worse than to look at how relations have soured between China and some of its partners, not least Pakistan.

China may have deep pockets but there are always strings attached to financing megaprojects, with the Middle Kingdom as with the United States or Russia.