Egypt economic crisis: What is Ras al-Hekma and why is Cairo 'selling it' to UAE?

Update: On February 23, Egypt and the UAE officially signed a $35 billion deal for Ras al-Hekma, with UAE owning 65 percent stake in the project.

Ras al-Hekma is an up-and-coming resort destination located on a cape approximately 212 kilometres west of Alexandria and about 350 kilometres northwest of Cairo. It boasts stunning turquoise waters, and white sandy beaches, and has been attracting significant investment in luxury developments, now likely from the United Arab Emirates.

The Egyptian government, in collaboration with UN-Habitat, says it is developing a new sustainable and inclusive waterfront city called Ras Al Hekma Waterfront New City to transform the North Coast region as part of future urban developments in Egypt. The first phase of the project is expected to be completed by 2028.

Ras al-Hekma has been making headlines recently following reports the cash-strapped Egyptian government is in talks to to sell it to the UAE for US$22 billion, amid a currency and debt crisis pushing down the Egyptian pound (EGP) in the black market against international currencies with dire implications for the import-dependent nation.

Will selling Ras al-Hekma help Egypt's economic crisis?

Egypt's main recipe for attracting foreign currency has relied on making big bets on natural gas exploration, expanding the Suez canal, doubling down on tourism in a restive region, and pouring billions of dollars into megaprojects (including building a huge new administrative capital) hoping to both employ thousands of Egyptians while attracting foreign investments, mainly from the oil-rich Gulf.

That recipe worked for a while until it didn't. But it's not stopping Egypt from doubling down on the same approach while seeking a bailout from the International Monetary Fund (IMF) although that may require the kind of reforms Egypt's military-dominated economic model is incapable of conceiving.

The involvement of a United Arab Emirates consortium has been confirmed by Hossam Heiba, CEO of Egypt's General Authority for Investment and Free Zones, to local television outlets. While Egypt may retain a 20% ownership stake, including entities like the Talaat Moustafa Group, according to Bloomberg.

Egypt’s government said Thursday a committee is studying “investment offers for important projects that are set to generate large resources of foreign currency".

Abu Dhabi's involvement aligns with its history of supporting Egyptian President Abdel-Fattah El-Sisi, with previous investments and economic assistance. Egypt hopes the deal, if successful, would help it in managing currency devaluations and securing liquidity, reinforcing its position in talks with the IMF.