Historic proposal The Egyptian Stock Exchange is awaiting the inclusion of the administrative capital. Will the road be paved?

The Egyptian government hopes to start transferring between 40,000 and 50,000 employees to the administrative capital by the end of this year. The first phase includes a government district, a diplomatic and residential district, and a business district, and it is planned to accommodate 6.5 million people when the construction of all its phases is completed.

Egyptian President Abdel Fattah El-Sisi's decision to list the New Administrative Capital Company on the Egyptian Stock Exchange has had wide repercussions at the local and international levels in the world of finance and economy, considering that it will be the largest of its kind in the country's history.

Last Saturday, Sisi revealed the government’s plan to put the company that owns the new administrative capital in the capital market, located 45 kilometers from Cairo, as soon as possible, so that the company’s liquid funds in banks would be one hundred billion pounds ($6.4 billion).

He reiterated that the state - in reference to its general budget - did not bear a single penny, as the cost of the first phase of the project, which includes 3 phases, is $25 billion, according to the spokesman for the new capital, Brigadier General Khaled al-Husseini.

sudden decision

The announced decision was surprising, especially since this is the first time that it has been revealed, at a time when it was not mentioned by project officials or government officials earlier.

The company is owned by the Armed Forces and the Urban Communities Authority.

international offer

The day after Al-Sisi’s statements, the company’s chairman, Major General Ahmed Zaki Abdeen, expressed his hope that the company’s offering on the stock exchange “will be the largest in the history of Egypt,” noting that “they are in the planning stage now, and the procedures for selecting advisors and determining the size of the offer can begin early.” Next year".

In a press statement to Bloomberg, Abdeen did not rule out that the offering would bypass the Egyptian Stock Exchange, saying, "It is very likely (the company's offering) in another international market as well...we are studying this option."

The largest initial public offering in Egypt was in 2005 by Telecom Egypt when it raised 5.1 billion pounds.

In February 2016, al-Sisi issued a republican decree allocating lands south of the Cairo-Suez road (700 square kilometers) for the construction of the new administrative capital and the Sheikh Mohamed bin Zayed al-Omrani assembly for the Armed Forces Land Projects Authority.

The Armed Forces own 51% of the company, which was established on April 21, 2016 in partnership between the Urban Communities Authority (governmental) with 49%, the National Service Projects Organization of the Armed Forces with 29.4%, and the Armed Forces Land Projects Agency with 21.6%.

Hurdles

The decision to put on the stock exchange, according to economists who spoke to Al-Jazeera Net, requires a lot of major measures, on top of which is the disclosure and disclosure of the company's balance sheet and financial statements, which are still unknown until now, an obstacle that some expected to overcome.

In this regard, the Deputy of the Planning and Budget Committee in the House of Representatives, Yasser Omar, said that the company’s budget to be offered in the stock exchange cannot be viewed, because the company’s ownership structure includes entities affiliated with the armed forces, such as the Armed Forces Land Projects Authority and the National Service Projects Authority, in addition to the Authority New urban communities of the Ministry of Housing.

He explained in press statements that this matter "means that the rules that apply to the budget of the armed forces apply to the budget of the Administrative Capital Company, and just as the House of Representatives cannot review the details of the armed forces' budget, it cannot view the budget of the Administrative Capital Company."

This was indicated by the economist and head of the Development and Value-Added Forum, Dr. Ahmed Khuzaym, in his comment, saying, "There are legal and financial procedures that must take place before listing and offering the company's shares on the stock exchange," noting that "there are no data on the company's budget and structure so far." .

He added in statements to Al Jazeera Net that this decision may change during the next two years, and its goal may be to promote the process of the expected transition to the administrative capital at the end of this year, explaining that the government had previously announced during the past three years its intention to put up part of its companies, and the period had passed without complying with its commitments. .

In March 2018, the Egyptian government announced its intention to offer percentages of the shares of 23 state-owned companies in the capital market as part of a program to raise 80 billion pounds in a period ranging between 24 and 30 months, but only 4.5% of the shares of the Eastern Tobacco Company were offered in March 2018. 2019.

attract investment

The Secretary-General of the Union of Arab Investors, Ambassador Gamal Bayoumi, praised the decision of the offering, and considered that its goal is to "attract local and international financial investments in order to finance new projects in the Administrative Capital."

In his speech to AJ news, he stressed that the state budget - as Sisi indicated - did not bear any financial burdens because the Administrative Capital Company finances itself through the sale of land, and uses the proceeds of the sale in the construction process.

He expressed his belief that the obstacle related to the legal and financial procedures of the company will be easily overcome as long as there is a desire and political will to put it in the capital market.

The Egyptian government hopes to start transferring between 40,000 and 50,000 employees to the capital at the end of this year. The first phase includes a government district, a diplomatic and residential district, and a business district, and it is planned to accommodate 6.5 million people when the construction of all its phases is completed.

Revitalizing the Egyptian economy

For his part, Engineer Mohamed Abdel Raouf, member of the Board of Directors of the Egyptian Federation of Construction and Building Contractors, considered that "the construction of new cities has contributed greatly to maintaining the strength of the Egyptian economy, and revitalizing dozens of industries related to construction operations, and thus operating many factories and employment."

He expected that the offering of shares from the Administrative Capital Company in the stock exchange would be reflected in the revitalization of the economy and construction operations by exploiting the financial returns in other projects within the new administrative capital, pointing out that it is better to put state projects on the stock exchange and open the door for companies and individuals to invest.

The offering would have a significant impact on the Egyptian Stock Exchange, according to what was confirmed by the Egyptian Stock Exchange Chairman, Dr. Mohamed Farid, as the offering of state-owned companies contributes to the development of its financial markets, and will have a great return.

He added, during a telephone interview with one of the programs of the Sada Al-Balad satellite channel, that putting companies on the stock exchange is a qualitative leap in the volume of assets available to citizens, and contributes to attracting new categories of investors.