Arabtec project not on the house

Millions of Egyptians dream of affordable houses, and so does Arabtec. The United Arab Emitates-based Arabtec Holding Co., the biggest construction company in the Dubai stock market, perceives affordable housing as a prime investment opportunity. Former Field Marshal and presidential candidate Abdel Fattah al-Sisi’s latest campaign promise is making this dream come true, for the company.

It is paramount to read Sisi’s campaign pledge to build one million affordable housing units for low-income Egyptians as a mega business deal, and not merely a form of assistance from our Gulf friends.

In its 2012 annual report, Arabtec enlists its need to diversify its investments and expand in new markets, particularly when it comes to meeting the demands of neighboring countries. Arabtec lists shortages of affordable housing in countries that are witnessing rapid population growth and urbanization as a determining factor in its investment strategy. The report mentions the need for 3.6 million housing units in the MENA region, including a demand for 1.5 million housing units in the Egyptian market alone. Naturally, investing in affordable housing in Egypt is a priority for the mega construction company.

Arabtec highlighted its plan to invest in affordable housing last year. The company clearly stated how investment in the affordable housing sector holds the greatest potential in the upcoming period.

This substantial investment opportunity is made possible in the context of the Emirati government’s backing of the post 30 June ruling coalition in Egypt, after the ouster of Muslim Brotherhood President Mohamed Morsi from office.

In 2013, and right after Morsi’s ousting from power, Arabtec began talking about ongoing negotiations with the Egyptian government regarding a low-income housing project. This was at a time when the Emirati government was showcasing its support for the post-Morsi ruling coalition. This leads us to believe that the one million housing unit project is an effort by the Emiratis to create stable conditions for the current regime.

Egyptians watched the official announcement of the project on their television screens this month. Arabtec’s managing director and CEO, Hassan Abdullah Ismaik, told reporters that Sisi insisted on offering the land for the project to Arabtec (around 160 million square meters) free of charge.

The company has also been careful to emphasize the “social” side of the project by claiming that the prices of the housing units are going to be 30-40 percent lower than the actual cost, without clarifying how this “actual cost” was calculated.

This did not deter investors in the company’s stocks. According to Bloomberg, shares in Arabtec rose in the Dubai market after the company announced the deal. And we can only imagine the enthusiasm of the company’s shareholders after announcing such a historic agreement that ensures a durable investment in low-income housing in the promising Egyptian market — a type of project that Arabtec’s annual reports have addressed for over five years.

But the project has stirred controversy. Political commentators have raised concerns over the consequences of partnering with the Armed Forces to undertake such a massive project. On his personal Facebook page, political science professor Mustafa Kamel al-Sayed, questioned whether it is possible to ensure accountability for such a project if the military is involved. He asked, “What does it mean that the Armed Forces have given away the land to the company for free? Is this land under the private ownership of the Armed Forces, or the property of the state and the people?”

Financial analysts, however, will have to wait for more details in order to be able to evaluate the impact of such a project on the performance of the company, see if Emirati aid will be utilized, and whether Arabtec will be able to execute the work within the announced period from 2017 to 2020.

Housing experts have also questioned the possibility of carrying out two national housing projects at the same time. This is in reference to another one million low-income housing unit project, currently being undertaken by the Egyptian Ministry of Housing.

What we can conclude is that the Armed Forces’ partnership in such a massive project is an attempt to calm the Egyptian street on the one hand, and is a fulfillment of Arabtec’s investment ambitions on the other. We will have to wait and see the extent to which the project will benefit each partner.

And the question for Egyptians remains whether or not partnering with Arabtec is the best way to undertake such a national project.

This article has been translated from Arabic. You can read the original here.

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