So why is Egypt building a new capital city right next to Cairo?

A model of the proposed city (we're assuming the web address won't loom quite so large on the finished article). Image: Getty.

According to the highly reliable source that is Wikipedia, Egypt has had 29 capital cities over the past 5,000 years. The incumbent, Cairo, has been in place since 950 AD, so, in the scheme of things, it was due a change-up. 

Perhaps that's why, last week at an economic development conference, the Egyptian government announced it was planning a giant new building project to the east of Cairo. The new city, which could eventually cover 700 km sq, doesn't currently have a name, and is being referred to simply as "The Capital" (we're really hoping this is a Hunger Games reference).

If all goes to plan, the city will serve as the new administrative and financial capital of Egypt. Amazingly, the ministry claims that development could be finished within five to seven years, and construction on the road that will link the two cities has already begun. 

You could be forgiven for being a little confused as to why a country would shift its capital of over a thousand years 50km to the east, seemingly for the hell of it. Here are a few reasons the project looks so appealing to the Egyptian government . 

Cairo is full

The population of Cairo's larger metropolitan area is nearing 20m, and, as a result, it's one of the most congested cities on earth: the World Bank estimated in 2010 that traffic costs amount to about 4 per cent of Egypt's entire GDP

In this sense, the new development could be seen as an extension of the old city, to cut down on overpopulation and congestion. The housing ministry claims the capital could house up to 7m people; the initial plans include 1.1m residences, 1,250 mosques and churches, and 663 hospitals. That said, "New Cairo", a relatively new development to the east, was built for millions of residents, but is still only home to a few hundred thousand.

Still, Cairo's population is expected to double over the next 40 years, so a new satellite city does make some kind of sense. But why move the country's capital too? 

The president wants to make a statement

Abdel Fattah el-Sisi was elected president in June 2014, and subsequently told the Egyptian people to prepare for the "hard work phase" in their country's recent history, to help the country's economy recover from the effects of the 2011 revolution. That revolution played out in old Cairo, and centred on Tahrir square, the site of many of Cairo's current administrative buildings. 

Mubarak, Egyptian president between 1981 and 2011, actually tried to build a new capital too during his own tenure, but that project failed. If Sisi can succeed, and physically move the government away from the ghosts of the revolution to boot, it'll show he can overcome Egypt's previous setbacks and political tensions and move the country – and, hopefully, its economy – forward. 

Image: Getty.

The Egyptian governemnt may not have to pay for it

The government has hired a Dubai-based real estate investment fund, headed by Emirati Mohamed Alabbar, the man behind the Burj Khalifa, to raise funds for the project and build it. By the end of last week's conference, around $12bn had been pledged by Gulf-based investors, which is over a quarter of the total (that's if the project stays within budget, of course).

The Egyptian people must be hoping for big foreign investment, too: Sisi has already cut food and energy subsidies and raised fuel prices to help the country's ailing economy, which has led some to criticise the announcement of a grand new city project while Egypt's poorest go hungry. 

The Suez canal is getting wider

Another important factor is the city's location: it will lie between Cairo and the Suez Canal, with its profitable trade routes. Under a new expansion project, the Egyptian government is expanding the canal, to allow boats to sail in both directions at once (it goes both directions at the moment, but along most of its length its only wide enough to go one way at once), potentially doubling the trade revenue generated. 

Here's the planned location, a short hop from both New Cairo and El Shorouk city (the two blobs just to the north of the new capital). 

This will bring the city much closer to the canal,  using up what is at present just a stretch of desert: 

It's been done before

...though not particularly successfully. Malaysia moved parts of its central governemnt from Kuala Lumpur to the newly built Putrahaya in 1999, while in 2005 the Burmese government shifted from Yangon to the brand new city of Naypyidaw (though that city is reportedly still half empty). Egypt, meanwhile, has built over 20 "new towns" over the past half century, most of which are still very sparsely populated. Looks like President Sisi has a real job on his hands. 

 
 
 
 

What’s the constitutional status of the Isle of Man, then?

...what? Image: Google Maps/CityMetric.

Amidst the tumult of Brexit negotiations, away from questions about the integrity of the Union itself being asked by wearied bureaucrats in Edinburgh, Belfast, Brussels and London, the constitutional uncertainty of our times has washed up on the shores of the Isle of Man. Now it threatens the slumber of policymakers in Douglas, too.

The ten-by-forty mile island in the Irish Sea is best known internationally for its annual TT motorcycle races and tax haven status. If you haven’t been you should go: the variety of scenery is breath taking, as are the economics. Lamborghinis emerge from the back of slate cottages, a seaside dwelling can set you back more than an Edinburgh duplex, and the gilet prevalence index is off the charts in certain localities.

The reason for the disconnect is the constitutional relationship between the Isle of Man and the UK. For centuries the island supplemented threadbare revenue streams from subsistence farming and fishing with a robust smuggling sector. The IoM government homepage clearly, maybe even proudly, states that it has never been part of the UK: in the 1700s plans to buy it out and make it part of England were shelved after local unrest, while the current arrangement of Home Rule dates to the early 1800s.

Today the IoM government is based in Douglas, the island’s largest town. Its funding comes through a revenue sharing agreement, the “common purse”, with tax gathered locally on behalf of London and returned to the island according to an unpublicised formula. The agreement has been a source of contention for about as long as it’s existed, but ire has grown proportionally with the island’s pre-eminence as a tax haven. Its detractors point out that the UK consistently gives back to the IoM government more than it gathers, effectively subsidising the island’s status as a tax haven; while its supporters are wealthy.

A map of the Isle of Man. Image: Eric Gaba/Wikimedia Commons.

In a world gripped by economic injustice, the IoM drives social change with a programme of support to welcome the huddled masses of oligarchs yearning for freedom from autocratic tax regimes. Income tax tops out at 20 per cent but, fear not, it’s capped at £150,000. Corporation tax is nil, until your firm earns £500,000 a year; then it has to pay 10 per cent on everything over that. For mega-wealthy émigrés forced to flee odious obligations like capital gains, inheritance or wealth tax, there are opportunities to invest in local property, to get back on your feet: proceeds are taxed at 20 per cent.

The Isle of Man enjoys the same constitutional status as the Channel Islands: the UK handles its accountancy and defence, but aside from the constant vigilance required to keep Dublin at bay the only international hassle comes from Brexit. In the same way as the IoM has never been part of the UK, it’s never been part of the EU – it enjoys all the benefits (or unconscionable infringements) of membership by virtue of a legal protocol which doesn’t bestow membership. Crucially, the IoM doesn’t have any representation with the EU – it can’t, being the kind of Schrödinger jurisdiction which is neither part of the UK nor its own recognised area.


That distinction brings other problems. Regardless of how Brexit pans out, the EU has shown signs of going to war on tax avoidance – a rare political argument which unites populists and progressives. The EU now maintains lists of high risk money-laundering and tax compliance jurisdictions, and the IoM’s prominence in the international sector was part of the reason some MEPs have pushed for including the UK as a whole.

The IoM experiences the paradox of autonomy without representation. Its relationship with the UK has often been hamstrung, too, such as in 2009 when the Treasury slashed common purse funding in an attempt to nudge Douglas away from its tax avoidance platform.

Domestically, the distance between the plutocracy and everyday islanders is stark. Most people on the island are not wealthy: they rely on public services and work jobs like anywhere else. After the IoM’s funding was cut by London at the height of the financial crisis, lower and middle income earners were worst hit. Now the island has to maintain a favourable tax code for plutocrats while supporting public services used by the people who need them. It’s a difficult balance to strike, and likely to become more so if the EU pursues its anti-tax avoidance agenda post-Brexit.

Simon Jones is a writer based in Glasgow.