Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to another episode of the ad Bots podcast. I'm Tracy Alloway and I'm Joe Wisenthal. Joe, did you see the big headline coming out of Egypt recently?

Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to another episode of the ad Bots podcast. I'm Tracy Alloway and I'm Joe Wisenthal. Joe, did you see the big headline coming out of Egypt recently?

Yeah?

Yeah?

I was kind of blown away by it. So I think there's two things that I've seen recently out of Egypt. One is they've they're letting the Egyptian pound flow. They already have all and so the Egyptian pound has fallen to record lows. And then they have this huge deal with the UAE to develop a piece of property and it almost sounds like, and I don't think it's exactly the case, but it almost sounds like when you read about it, like the UAE basically just bought a big part of.

I was kind of blown away by it. So I think there's two things that I've seen recently out of Egypt. One is they've they're letting the Egyptian pound flow. They already have all and so the Egyptian pound has fallen to record lows. And then they have this huge deal with the UAE to develop a piece of property and it almost sounds like, and I don't think it's exactly the case, but it almost sounds like when you read about it, like the UAE basically just bought a big part of.

Eachypt Ooh that's punchy, But you're right, Like, Noah, wrong, I should have specified at the beginning because there have been a number of headlines and it's kind of interesting because they're all feeding into each other. So I think last month the UAE unveiled this announcement that it was investing thirty five billion dollars in a place in Egypt on the Mediterranean coast called rassel Hekma, and the idea was to develop new tourism and real estate. But of course that investment comes at a really sensitive time for Egypt. The economy hasn't been doing too well, Inflation has been high, and so what we've seen since that announcement is that the Egyptian Central Bank was able to high crates finally, and then to your point, they were able to free float the Egyptian pound, and then the IMF felt much better about the direction of the Egyptian economy, and so they ended up increasing their own financing for Egypt. I think it went from like three billion dollars to eight billion dollars. And so when you combine all of these things, which have basically happened in less than a month, you've seen kind of a turnaround in how people are feeling about the Egyptian economy. I'm looking at spreads on Egyptian bonds right now and they have come in quite a lot.

Eachypt Ooh that's punchy, But you're right, Like, Noah, wrong, I should have specified at the beginning because there have been a number of headlines and it's kind of interesting because they're all feeding into each other. So I think last month the UAE unveiled this announcement that it was investing thirty five billion dollars in a place in Egypt on the Mediterranean coast called rassel Hekma, and the idea was to develop new tourism and real estate. But of course that investment comes at a really sensitive time for Egypt. The economy hasn't been doing too well, Inflation has been high, and so what we've seen since that announcement is that the Egyptian Central Bank was able to high crates finally, and then to your point, they were able to free float the Egyptian pound, and then the IMF felt much better about the direction of the Egyptian economy, and so they ended up increasing their own financing for Egypt. I think it went from like three billion dollars to eight billion dollars. And so when you combine all of these things, which have basically happened in less than a month, you've seen kind of a turnaround in how people are feeling about the Egyptian economy. I'm looking at spreads on Egyptian bonds right now and they have come in quite a lot.

Right well, They've gotten a huge injection of cash, and I feel as though this story is at the intersection of a few different things. As you've mentioned, the Golf States seem really into real estate, megaprojects these days, whether it's Saudi or the UAE, et cetera. And so this is apparently another opportunity to build some gigantic modern city of the future. Egypt itself has of course come under strained, particularly since I don't know, maybe it's like the triple shock of COVID, the war in Ukraine and the surgeon wheat prices. We know Egypt is a really big wheat importer, and then also obviously strains from the war in Gaza, and like many ems, it's just generally been understrained and needed help from the IMF. And so this sort of feels like a story that sort of multiple things happening once, multiple things coming together at the same time.

Right well, They've gotten a huge injection of cash, and I feel as though this story is at the intersection of a few different things. As you've mentioned, the Golf States seem really into real estate, megaprojects these days, whether it's Saudi or the UAE, et cetera. And so this is apparently another opportunity to build some gigantic modern city of the future. Egypt itself has of course come under strained, particularly since I don't know, maybe it's like the triple shock of COVID, the war in Ukraine and the surgeon wheat prices. We know Egypt is a really big wheat importer, and then also obviously strains from the war in Gaza, and like many ems, it's just generally been understrained and needed help from the IMF. And so this sort of feels like a story that sort of multiple things happening once, multiple things coming together at the same time.

Well, it's also happening against a very intense political background and the complicated web of I guess influence in this particular region is something that we could probably spend hours and hours and hours on. You want to hear my framework for understanding this, I always think about it in terms of mean girls, like everyone's frenemies. But I guess Abu Dhabi MBZ is basically Regina George and Saudi Arabia NBS is sort of Karen Smith, and that makes Katar Gretchen Wiener because her hair is big and full of secrets. And then I guess, I guess Egypt is now Lens Lohan because people are trying to get her on board.

Well, it's also happening against a very intense political background and the complicated web of I guess influence in this particular region is something that we could probably spend hours and hours and hours on. You want to hear my framework for understanding this, I always think about it in terms of mean girls, like everyone's frenemies. But I guess Abu Dhabi MBZ is basically Regina George and Saudi Arabia NBS is sort of Karen Smith, and that makes Katar Gretchen Wiener because her hair is big and full of secrets. And then I guess, I guess Egypt is now Lens Lohan because people are trying to get her on board.

Amazing. I love it.

Amazing. I love it.

I think about this a lot weirdly. Okay, so maybe we should just bring on our guests. So we do, in fact have the perfect guest, someone we've been meaning to get on the podcast for a long time. I worked with him when I was based in Abu Dhabi and I used to go to Dubai quite a lot. We are going to be speaking with Bloomberg Economics chief Emerging Markets economist Zia Dowd. Zied is one of the smartest people I know when it comes to Middle Eastern economics, and he has a piece out on Bloomberg our New Big Take all about this particular topic. What does this thirty five billion dollar injection actually mean for Egypt and for the wider Middle East? So Zed, thank you so much for coming on all thoughts.

I think about this a lot weirdly. Okay, so maybe we should just bring on our guests. So we do, in fact have the perfect guest, someone we've been meaning to get on the podcast for a long time. I worked with him when I was based in Abu Dhabi and I used to go to Dubai quite a lot. We are going to be speaking with Bloomberg Economics chief Emerging Markets economist Zia Dowd. Zied is one of the smartest people I know when it comes to Middle Eastern economics, and he has a piece out on Bloomberg our New Big Take all about this particular topic. What does this thirty five billion dollar injection actually mean for Egypt and for the wider Middle East? So Zed, thank you so much for coming on all thoughts.

Thank you Tracy, and thank you Joe. It's a pleasure to be with you.

Thank you Tracy, and thank you Joe. It's a pleasure to be with you.

I'm going to start with the really basic question, which is what do we know about this thirty five billion dollar injection. So my understanding is that it was divided up into tranches. One of those has been paid at this point. But what do we know about the intended use of this money and whether or not it comes with conditions or strings.

I'm going to start with the really basic question, which is what do we know about this thirty five billion dollar injection. So my understanding is that it was divided up into tranches. One of those has been paid at this point. But what do we know about the intended use of this money and whether or not it comes with conditions or strings.

Well, we know three things about this thirty five billion dollars. One, we know it's a huge amount of money. Thirty five billion dollars. Just for perspective, Egypt was trying to agree a deal with the IMF throughout last year. The size of that was three billion dollars. You know, thirty five is much bigger than three. When the IMF deal got much larger, it ended up being eight billion dollars. So thirty five again, it's huge. Thirty five billion dollars is more than Egypt has for an exchange reserve, and even for a rich country like the UAE, and it is a rich country. Thirty five billion dollars is seven percent of GDP, so it's a significant amount of money. So that's what we's that's the first thing we know about it. The second thing we know about it is that the money is arriving over a short period of time. You know, when you do an IMFTL, you do it over multi multiple years. This one is coming within two months. So again, the UAE is shifting seven percent, the equivalent of seven percent of the GDP to Egypt in the space of two months, and that is fairly fairly rapid. And we're talking about real money here. You know, the thirty five billion twenty four billion dollars is fresh cash, and eleven billion dollars is basically a conversion of existing deposits for the UAE at the Egyptian Central Banks that's going to be converted into investments. And the third thing we know about this is that all these investments are going to be real estate investments. So the UAE is going to buy a big piece of land on Egypt's north coast called Russell Hekma, and on top of this, it will invest in other real estate projects. So it's big, it's arriving in a short period of time, and it's going to be real estate investments.

Well, we know three things about this thirty five billion dollars. One, we know it's a huge amount of money. Thirty five billion dollars. Just for perspective, Egypt was trying to agree a deal with the IMF throughout last year. The size of that was three billion dollars. You know, thirty five is much bigger than three. When the IMF deal got much larger, it ended up being eight billion dollars. So thirty five again, it's huge. Thirty five billion dollars is more than Egypt has for an exchange reserve, and even for a rich country like the UAE, and it is a rich country. Thirty five billion dollars is seven percent of GDP, so it's a significant amount of money. So that's what we's that's the first thing we know about it. The second thing we know about it is that the money is arriving over a short period of time. You know, when you do an IMFTL, you do it over multi multiple years. This one is coming within two months. So again, the UAE is shifting seven percent, the equivalent of seven percent of the GDP to Egypt in the space of two months, and that is fairly fairly rapid. And we're talking about real money here. You know, the thirty five billion twenty four billion dollars is fresh cash, and eleven billion dollars is basically a conversion of existing deposits for the UAE at the Egyptian Central Banks that's going to be converted into investments. And the third thing we know about this is that all these investments are going to be real estate investments. So the UAE is going to buy a big piece of land on Egypt's north coast called Russell Hekma, and on top of this, it will invest in other real estate projects. So it's big, it's arriving in a short period of time, and it's going to be real estate investments.

I want to get to obviously what the UAE is ultimately getting out of this deal or why it's made that. But actually I want to ask one more step back question, which is, you know, in normal times and I don't know what counts as normal times anymore. Let's just start out of your like twenty eighteen, like, what is the Egyptian economy?

I want to get to obviously what the UAE is ultimately getting out of this deal or why it's made that. But actually I want to ask one more step back question, which is, you know, in normal times and I don't know what counts as normal times anymore. Let's just start out of your like twenty eighteen, like, what is the Egyptian economy?

I didn't say, Joe, that was the last time I was in the UAE, So thank you for choosing that as your pinnaclet of normal.

I didn't say, Joe, that was the last time I was in the UAE, So thank you for choosing that as your pinnaclet of normal.

That was the cutoff. When Tracy left, everything started to go off the rails.

That was the cutoff. When Tracy left, everything started to go off the rails.

But in normal.

But in normal.

Times, what is the Egyptian economy like? And what has happened to it since then that has caused it to go into such distress?

Times, what is the Egyptian economy like? And what has happened to it since then that has caused it to go into such distress?

Right, So let's start from the beginning. For a very ancient country like Egypt, the beginning to two thousands years ago, so we let's not go there. So let's start from twenty sixteen.

Right, So let's start from the beginning. For a very ancient country like Egypt, the beginning to two thousands years ago, so we let's not go there. So let's start from twenty sixteen.

Oh, very potent as yeah, many thousands of millennia a girl, Yeah.

Oh, very potent as yeah, many thousands of millennia a girl, Yeah.

We're not going to do that. So twenty sixteen Egypt had the research, it had the recent Politically, it had a newly elected president after Fantasti's not in that year, but he was elected a couple of years earlier, and he had a lot of political capital, so there was a lot of political soport for presidency c at the time. But it also had an economic reset in late twenty sixteen, Egypt almost started on a clean state from an economic perspective. It basically devalued the currency by fifty percent. It agreed a deal with the IMF, it removed some subsidies on fuel, and it became the darling of global financial markets. It was the biggest carry trade in the world. So what was Egypt doing at the time it devalued the currency. There's limited downside risk to carry traders. You know, if you're going into Egypt, you get high interest rate in a world that was offering zero to negative interest rates, and you have limited currency risk because the currency had moved a lot, and because the country had ensured that carry traders essentially can take their money out of the country. So a lot of money flowed into Egypt in terms of short term debt, and that lasted between twenty seventeen and twenty twenty. And yes, Egypt has been unlucky with a few global shocks, Joey, You've mentioned already. There was COVID, there was the Russia Ukraine war, and there was there is the war in Gaza, and also the US interest rate heives which were significant. But also I think there were policy mistakes in Egypt. There was the fact that there was massive reliance on this hot money influence, and these do reverse fairly quickly. There there has been a growing role for the army in the economy, which prevented more stable funding to go into Egypt and prevented the country from exporting more so, it was still running a trade deficit that had to finance, and the only source of financing that was available was this hot money influence. So there's reliance on hot money. There was the army role in the economy. Egypt actually effectively after the fifty percent evaluation of late twenty sixteen, almost repecked the currency to the dollars, so it didn't allow the exchange rate to move in a free way and absorb the shocks. So you can buy these policy mistakes with the unfortunate global shocks, and Egypt looked very vulnerable starting twenty twenty two.

We're not going to do that. So twenty sixteen Egypt had the research, it had the recent Politically, it had a newly elected president after Fantasti's not in that year, but he was elected a couple of years earlier, and he had a lot of political capital, so there was a lot of political soport for presidency c at the time. But it also had an economic reset in late twenty sixteen, Egypt almost started on a clean state from an economic perspective. It basically devalued the currency by fifty percent. It agreed a deal with the IMF, it removed some subsidies on fuel, and it became the darling of global financial markets. It was the biggest carry trade in the world. So what was Egypt doing at the time it devalued the currency. There's limited downside risk to carry traders. You know, if you're going into Egypt, you get high interest rate in a world that was offering zero to negative interest rates, and you have limited currency risk because the currency had moved a lot, and because the country had ensured that carry traders essentially can take their money out of the country. So a lot of money flowed into Egypt in terms of short term debt, and that lasted between twenty seventeen and twenty twenty. And yes, Egypt has been unlucky with a few global shocks, Joey, You've mentioned already. There was COVID, there was the Russia Ukraine war, and there was there is the war in Gaza, and also the US interest rate heives which were significant. But also I think there were policy mistakes in Egypt. There was the fact that there was massive reliance on this hot money influence, and these do reverse fairly quickly. There there has been a growing role for the army in the economy, which prevented more stable funding to go into Egypt and prevented the country from exporting more so, it was still running a trade deficit that had to finance, and the only source of financing that was available was this hot money influence. So there's reliance on hot money. There was the army role in the economy. Egypt actually effectively after the fifty percent evaluation of late twenty sixteen, almost repecked the currency to the dollars, so it didn't allow the exchange rate to move in a free way and absorb the shocks. So you can buy these policy mistakes with the unfortunate global shocks, and Egypt looked very vulnerable starting twenty twenty two.

So I definitely want to get into the why, and I have a feeling the next question probably feeds into that anyway. But one thing I wanted to ask you about is this investment. This thirty five billion isn't coming from the Abu Dhabi Sovereign Wealth Fund that I would normally think of making these huge investments, so that would be Adia. And I cannot emphasize how big a deal Adia was. When I was in the UAE, there was this whole sort of mythology built up around it. But this investment is coming from a new SWF called ADQ. Can you talk a little bit about that and how it's supposed to be different to Adia, like what the different purposes are.

So I definitely want to get into the why, and I have a feeling the next question probably feeds into that anyway. But one thing I wanted to ask you about is this investment. This thirty five billion isn't coming from the Abu Dhabi Sovereign Wealth Fund that I would normally think of making these huge investments, so that would be Adia. And I cannot emphasize how big a deal Adia was. When I was in the UAE, there was this whole sort of mythology built up around it. But this investment is coming from a new SWF called ADQ. Can you talk a little bit about that and how it's supposed to be different to Adia, like what the different purposes are.

So the UAE abu W in particular when you used to give tracy has multiple sovereign wealth funds. They have different chairpersons sharing them. Mostly they belonged to the ruling family. I think the division of labor is not clear to me. But what is clear is that this new sovereign wealth fund, ADQ, which is different from Adia, different from MOBADERA the other two sovereign wealth funds, has been very active in Egypt recently. So it was the one which entered this land sale d the thirty five billion dollar development deal, but it's also has been active in Egypt lately. So in the last few years, since twenty twenty two, ADQ has bought state stakes and Egyptian firms as varied as insectors like fertilizers, banks, fintech, the tobacco company. And actually, if you look at the Egyptian stock index and you look at the top three companies in that index, the top one is a cib A bank and a company that is part of the Sovereign Wealth Fund ADQ largest shareholder. The third largest company in the Egyptian stock index is Eastern Tobacco Company, and again the biggest shareholder is ADQ, and the second largest company is a construction company called Talatmostava with a very interesting history, especially with relation to the UAE. Is basically is the one that is acting as the middleman for all these ADQ deals, including the recent thirty five billion dollar deal. But also Egypt recently sold a few historic hotels, which Palatmostafa Group was a co investor and a middleman for these deals. So ADQ seems very active in Egypt and its yeah, it's brokering all these deals there.

So the UAE abu W in particular when you used to give tracy has multiple sovereign wealth funds. They have different chairpersons sharing them. Mostly they belonged to the ruling family. I think the division of labor is not clear to me. But what is clear is that this new sovereign wealth fund, ADQ, which is different from Adia, different from MOBADERA the other two sovereign wealth funds, has been very active in Egypt recently. So it was the one which entered this land sale d the thirty five billion dollar development deal, but it's also has been active in Egypt lately. So in the last few years, since twenty twenty two, ADQ has bought state stakes and Egyptian firms as varied as insectors like fertilizers, banks, fintech, the tobacco company. And actually, if you look at the Egyptian stock index and you look at the top three companies in that index, the top one is a cib A bank and a company that is part of the Sovereign Wealth Fund ADQ largest shareholder. The third largest company in the Egyptian stock index is Eastern Tobacco Company, and again the biggest shareholder is ADQ, and the second largest company is a construction company called Talatmostava with a very interesting history, especially with relation to the UAE. Is basically is the one that is acting as the middleman for all these ADQ deals, including the recent thirty five billion dollar deal. But also Egypt recently sold a few historic hotels, which Palatmostafa Group was a co investor and a middleman for these deals. So ADQ seems very active in Egypt and its yeah, it's brokering all these deals there.

So let's talk then about this deal, like how much potential is there? What can the UAE get for thirty five billion.

So let's talk then about this deal, like how much potential is there? What can the UAE get for thirty five billion.

It's a lot of money. And when the Prime Minister of Egypt had the press conference when he announced the deal, he said, you know what, this is going to be a global touristic destination. We will probably get eight million people coming to this area of land. It's not just going to be a city. It's gonna be gonna have yachts. You're gonna have all sorts of things and tourism all around the year. But I think it's something.

It's a lot of money. And when the Prime Minister of Egypt had the press conference when he announced the deal, he said, you know what, this is going to be a global touristic destination. We will probably get eight million people coming to this area of land. It's not just going to be a city. It's gonna be gonna have yachts. You're gonna have all sorts of things and tourism all around the year. But I think it's something.

I like how you say it's not just gonna be a mega city. It's also gonna have yachts.

I like how you say it's not just gonna be a mega city. It's also gonna have yachts.

I saw this great video, and it's gonna have amusement parks and a clean energy corridor and a light industrial hub and anyway, sorry, keep going.

I saw this great video, and it's gonna have amusement parks and a clean energy corridor and a light industrial hub and anyway, sorry, keep going.

Actually, interestingly, it's also adjacent, actually very close to Egypt's nuclear power plant called the Dabba, and he actually mentioned it and he said it might provide clean energy to the area, megacity, whatever it is. But I think I think if you look at it, it's just difficult just to see. That's just all about economics. I think the first item is if you look at you know, the average price of land in that area and what the UAE paid. It wasn't a fire sell. If anything, it might have been the UAE might have been generous, and the money that it paid to Egypt. So that's the first item, and I think it's second item. If you think about the narrative of why Egypt got into trouble, into the slatest crisis, the simplest thing, that one sentence sort of narrative is that Egypt borrowed extensively and in short term from financial markets abroad and built a new capital city that had limited economic critter. Right, So this is the one center summary of what happened to Egypt between twenty seventeen and today. Now. It is very odd and I say that in the Odd Lost podcasts that the solution to building a megacity is to build another megacity which is even further away from the capital. So I think it's not about the economics, and we can think about what is there in terms of non economic benefits that Egypt can provide, and I think the biggest one is basically stability. The region is already unstable. If you look at Egypt's west, there is Libya and it's completely unstable. Egypt south there is Sudan and again there's an internal civil war and Egypt is there is Gaza and there's an ongoing war that is that is brutal and that's probably going to shape them in the least in the coming years. So I think the stability of Egypt is important. I think the UAE is very conscious about not allowing, for example, Islamist groups to be in power, and maybe they think that kind of investment would prevent such thing from happening. But it's clearly something beyond the economics of this, because the economics, yes, you can, you can make a case there, but it's not full. It doesn't tell you the full picture. And whatever the economics is, we just talked about the size of it. Seven percent of GDP, the ue sending seven percent of GDP in two months to Egypt to do to invest in Egypt real the state. That is significant.

Actually, interestingly, it's also adjacent, actually very close to Egypt's nuclear power plant called the Dabba, and he actually mentioned it and he said it might provide clean energy to the area, megacity, whatever it is. But I think I think if you look at it, it's just difficult just to see. That's just all about economics. I think the first item is if you look at you know, the average price of land in that area and what the UAE paid. It wasn't a fire sell. If anything, it might have been the UAE might have been generous, and the money that it paid to Egypt. So that's the first item, and I think it's second item. If you think about the narrative of why Egypt got into trouble, into the slatest crisis, the simplest thing, that one sentence sort of narrative is that Egypt borrowed extensively and in short term from financial markets abroad and built a new capital city that had limited economic critter. Right, So this is the one center summary of what happened to Egypt between twenty seventeen and today. Now. It is very odd and I say that in the Odd Lost podcasts that the solution to building a megacity is to build another megacity which is even further away from the capital. So I think it's not about the economics, and we can think about what is there in terms of non economic benefits that Egypt can provide, and I think the biggest one is basically stability. The region is already unstable. If you look at Egypt's west, there is Libya and it's completely unstable. Egypt south there is Sudan and again there's an internal civil war and Egypt is there is Gaza and there's an ongoing war that is that is brutal and that's probably going to shape them in the least in the coming years. So I think the stability of Egypt is important. I think the UAE is very conscious about not allowing, for example, Islamist groups to be in power, and maybe they think that kind of investment would prevent such thing from happening. But it's clearly something beyond the economics of this, because the economics, yes, you can, you can make a case there, but it's not full. It doesn't tell you the full picture. And whatever the economics is, we just talked about the size of it. Seven percent of GDP, the ue sending seven percent of GDP in two months to Egypt to do to invest in Egypt real the state. That is significant.

I appreciate your summary of Egypt's economic situation earlier since twenty sixteen slash twenty seventeen, there is an event that I think lives sort of rent free in a lot of UAE rulers' heads, which is the twenty eleven Day of Revolt in Egypt or the Arab uprising elsewhere. And I think there is also that element sort of hovering in the background. But one thing I wanted to ask you, how much of this is coming from geostrategic considerations. So the idea that okay, maybe you're going to develop a tourist city on the Mediterranean coast in Egypt, but maybe you're also sort of building up a trade network in a kind of like China Belt and Road type way. Maybe you're building up a strategic bulkhead in that area as well.

I appreciate your summary of Egypt's economic situation earlier since twenty sixteen slash twenty seventeen, there is an event that I think lives sort of rent free in a lot of UAE rulers' heads, which is the twenty eleven Day of Revolt in Egypt or the Arab uprising elsewhere. And I think there is also that element sort of hovering in the background. But one thing I wanted to ask you, how much of this is coming from geostrategic considerations. So the idea that okay, maybe you're going to develop a tourist city on the Mediterranean coast in Egypt, but maybe you're also sort of building up a trade network in a kind of like China Belt and Road type way. Maybe you're building up a strategic bulkhead in that area as well.

Perhaps, I think I think there's three elements here. There's the commercial side of it, and we've talked about it, and there is the trade side of it. But then if you think about that, I mean the last G twenty in August. I don't know if it's the last one, but the G twenty last August, there was a memoranda of understanding that was signed to have a trade corridor between India, the Middle East and Europe. Right, so that's goes from India to the UAE, through Saudi Arabia, Israel and all the way to Europe. And that was only signed as a memorandum understanding in August. So to think about doing another trade route, maybe maybe there's some logic there, but you start to make progress on that initial project first before you had there. I think there is a geopolitical side of this as well, if you think about the ongoing war in Gaza, you know that Gaza has two borders, one with Israel and one with Egypt, and Egypt will clearly play a role in the future of Gaza. And maybe this is a way to flex muscle UAE muscle in Egypt and to ensure that in case of future agreements over the future of Gaza, Egypt will side with basically the country that got it out of its crisis.

Perhaps, I think I think there's three elements here. There's the commercial side of it, and we've talked about it, and there is the trade side of it. But then if you think about that, I mean the last G twenty in August. I don't know if it's the last one, but the G twenty last August, there was a memoranda of understanding that was signed to have a trade corridor between India, the Middle East and Europe. Right, so that's goes from India to the UAE, through Saudi Arabia, Israel and all the way to Europe. And that was only signed as a memorandum understanding in August. So to think about doing another trade route, maybe maybe there's some logic there, but you start to make progress on that initial project first before you had there. I think there is a geopolitical side of this as well, if you think about the ongoing war in Gaza, you know that Gaza has two borders, one with Israel and one with Egypt, and Egypt will clearly play a role in the future of Gaza. And maybe this is a way to flex muscle UAE muscle in Egypt and to ensure that in case of future agreements over the future of Gaza, Egypt will side with basically the country that got it out of its crisis.

There's one other thing I wanted to ask you, and I don't think it's verging on conspiracy theory, but it's definitely speculative, and it kind of goes back to Abu Dhabi making a push into petrochemicals, renewable energy, things like that. We've seen it make these moves because it kind of wants to diversify away from pure oil extraction and move into more value add processing that sort of thing. But I think this particular area of Egypt sits kind of right above the world's biggest sinkhole, and I have totally forgotten its name, but there's been some discussion at various points in time of developing that area into either mining it for critical minerals or putting like using it to generate electricity, or maybe like building a pipeline from the Mediterranean or something like that. Do you think those sort of energy considerations play into this at all.

There's one other thing I wanted to ask you, and I don't think it's verging on conspiracy theory, but it's definitely speculative, and it kind of goes back to Abu Dhabi making a push into petrochemicals, renewable energy, things like that. We've seen it make these moves because it kind of wants to diversify away from pure oil extraction and move into more value add processing that sort of thing. But I think this particular area of Egypt sits kind of right above the world's biggest sinkhole, and I have totally forgotten its name, but there's been some discussion at various points in time of developing that area into either mining it for critical minerals or putting like using it to generate electricity, or maybe like building a pipeline from the Mediterranean or something like that. Do you think those sort of energy considerations play into this at all.

They weren't mentioned, so I think the first when when when the deal was announced, a few things were mentioned that these beaches are very pristine, they are virgin and undiscovered, and it's going to be a touristic attraction. I think then doing mining would probably undermine that sort of touristic attraction side of it, I think to the broader question of energy and and maybe this is just a bit of a digression, but I think within the region you might see that you know from Afar that the the oil monument in the region, places like Saudi Arabia, Ata and the UE, and they're very active in their investments. You might group all of them as doing the same thing, but I think there is sort of a there are. There are differences in their visions for different things on political issues and economic issues, on market issues, and one of the very obvious one is energy transition and what that does to oil. You know, this is all coming down to the fact that these countries export the GCC. By that I mean export a lot of oil and that gives them a lot of wealth and a lot of firepower. But there's different visions on how to deal with that and how to manage this in the context that the world is going to transition away from fossil fuel towards cleaner energy. And I think the two pillars of these different visions are basically have Saudi Arabia on one side and the UAE on the other. The UAE is basically pushing for it, actually it is expanding it's all production capacity. It is pushing for it's OPEC quota to increase, and it wants to produce more today so that it doesn't end up with the stranded assets when all prices drop in the future. Saudi Arabia is the other sort of end of the spectrum where it has large funding needs which requires it have a high oil price and as a result there it's strategy towards the oil markets is to restrict supply now, not to increase. Supply restricted in order to get that high price and allows it to funds domestic investments. And these disputes at times, you know, sometimes they surface and a oppect meetings, and they did a couple of years ago, but sometimes they just you know, they're they're they're they're in the background when when the OPEC discussions happen. So maybe it's not I digress quite a bit, but maybe it's not related to the to the clean energy. But I think the deal speaks to the fact that there's also competition between these oil monument and ages. Is one area where they compete over Now.

They weren't mentioned, so I think the first when when when the deal was announced, a few things were mentioned that these beaches are very pristine, they are virgin and undiscovered, and it's going to be a touristic attraction. I think then doing mining would probably undermine that sort of touristic attraction side of it, I think to the broader question of energy and and maybe this is just a bit of a digression, but I think within the region you might see that you know from Afar that the the oil monument in the region, places like Saudi Arabia, Ata and the UE, and they're very active in their investments. You might group all of them as doing the same thing, but I think there is sort of a there are. There are differences in their visions for different things on political issues and economic issues, on market issues, and one of the very obvious one is energy transition and what that does to oil. You know, this is all coming down to the fact that these countries export the GCC. By that I mean export a lot of oil and that gives them a lot of wealth and a lot of firepower. But there's different visions on how to deal with that and how to manage this in the context that the world is going to transition away from fossil fuel towards cleaner energy. And I think the two pillars of these different visions are basically have Saudi Arabia on one side and the UAE on the other. The UAE is basically pushing for it, actually it is expanding it's all production capacity. It is pushing for it's OPEC quota to increase, and it wants to produce more today so that it doesn't end up with the stranded assets when all prices drop in the future. Saudi Arabia is the other sort of end of the spectrum where it has large funding needs which requires it have a high oil price and as a result there it's strategy towards the oil markets is to restrict supply now, not to increase. Supply restricted in order to get that high price and allows it to funds domestic investments. And these disputes at times, you know, sometimes they surface and a oppect meetings, and they did a couple of years ago, but sometimes they just you know, they're they're they're they're in the background when when the OPEC discussions happen. So maybe it's not I digress quite a bit, but maybe it's not related to the to the clean energy. But I think the deal speaks to the fact that there's also competition between these oil monument and ages. Is one area where they compete over Now.

I mentioned in the beginning or early on that there just seems to be an endless stream of stories about the development of big new real estate project megacities, and there are all these visions, particularly Saudi obviously, and like there will be these videos that I see on Twitter, like here's how they're one hundred kilometer city is going, and here's how they're city that's going to be have a mayor that's an AI bought or something like that. Like it's always like this sort of wild stuff. But like, what is the track record here setting aside whether the UAE is going to fully get the sort of economic returns that maybe would justify a thirty five billion dollar deal, is there reason to think that there's a good chance of turning this part of Egypt into sort of a booming industrial and tourist area.

I mentioned in the beginning or early on that there just seems to be an endless stream of stories about the development of big new real estate project megacities, and there are all these visions, particularly Saudi obviously, and like there will be these videos that I see on Twitter, like here's how they're one hundred kilometer city is going, and here's how they're city that's going to be have a mayor that's an AI bought or something like that. Like it's always like this sort of wild stuff. But like, what is the track record here setting aside whether the UAE is going to fully get the sort of economic returns that maybe would justify a thirty five billion dollar deal, is there reason to think that there's a good chance of turning this part of Egypt into sort of a booming industrial and tourist area.

The short answer to this is that the regional track recit of developing and making profitable new cities megacities is not great if you look at itself. I've just mentioned the reason why it got into this most recent crisis. It built a new it has built a new administrative capital, which has limited economic critics. Actually, in the late nineteen nineties, eighty two thousands, Egypt tract to build another city which was in southwest of the country, away from then All Valley, and the president was at the time was fully invested in that. They were hoping that millions of people would live there. Today, very few people reside there. Saudi Arabia obviously is building a mega city in Neon Way to see if that's going to succeed or not. But Saudi itself had a number of cities and developments. There were mega developments that didn't work out, there were King Abdal economic cities, and there's a bunch of other stuff. So the track lockt in the region of building these cities away from where you have the cluster of the population hasn't been great, and that doesn't bode well for this new investment.

The short answer to this is that the regional track recit of developing and making profitable new cities megacities is not great if you look at itself. I've just mentioned the reason why it got into this most recent crisis. It built a new it has built a new administrative capital, which has limited economic critics. Actually, in the late nineteen nineties, eighty two thousands, Egypt tract to build another city which was in southwest of the country, away from then All Valley, and the president was at the time was fully invested in that. They were hoping that millions of people would live there. Today, very few people reside there. Saudi Arabia obviously is building a mega city in Neon Way to see if that's going to succeed or not. But Saudi itself had a number of cities and developments. There were mega developments that didn't work out, there were King Abdal economic cities, and there's a bunch of other stuff. So the track lockt in the region of building these cities away from where you have the cluster of the population hasn't been great, and that doesn't bode well for this new investment.

So Joe mentioned in our intro that there could be a sense that Egypt is kind of selling part of itself to the UAE. What's been the domestic reception within Egypt around this steal? So obviously it seems to have led to something of a recovery in financial markets, but people on the ground, how do they feel about it?

So Joe mentioned in our intro that there could be a sense that Egypt is kind of selling part of itself to the UAE. What's been the domestic reception within Egypt around this steal? So obviously it seems to have led to something of a recovery in financial markets, but people on the ground, how do they feel about it?

Not great? I think if you think about it, inflation in Egypt is above thirty percent, and that is before the recent floatation of the pound, which moved by forty percent weekend, by forty percent. So even before that weakening, inflation was very high. And that's the second, you know, if you think about the currency itself, and the last since presidencies it came to power in mid twenty thirteen, the currency has lost about eighty six percent of its value against the dollar. So that obviously eats up into people's real incomes, that increases living costs. And I think while there was a lot of sort of understanding that twenty sixteen was an accumulating the devaluation, the fifty percent devaluation that happened in twenty sixteen was a result of previous policy mistakes that had to be corrected. At one point in time. I think there is a realization now that what is happening now is partly, maybe mostly, a result of policy mistakes. There is an arctive that is a series of unfortunate shocks that happened globally that affected the whole global economy, and Egypt is one of it. But I think the true narrative is that there was a series of policy mistakes which were exposed by these global shocks.

Not great? I think if you think about it, inflation in Egypt is above thirty percent, and that is before the recent floatation of the pound, which moved by forty percent weekend, by forty percent. So even before that weakening, inflation was very high. And that's the second, you know, if you think about the currency itself, and the last since presidencies it came to power in mid twenty thirteen, the currency has lost about eighty six percent of its value against the dollar. So that obviously eats up into people's real incomes, that increases living costs. And I think while there was a lot of sort of understanding that twenty sixteen was an accumulating the devaluation, the fifty percent devaluation that happened in twenty sixteen was a result of previous policy mistakes that had to be corrected. At one point in time. I think there is a realization now that what is happening now is partly, maybe mostly, a result of policy mistakes. There is an arctive that is a series of unfortunate shocks that happened globally that affected the whole global economy, and Egypt is one of it. But I think the true narrative is that there was a series of policy mistakes which were exposed by these global shocks.

You know, if you're getting an IMF deal, then obviously the country is expected to make all of these reforms and privatizations and ending fuel subsidies and all the things that we sort of associate you know, reducing the size of government, all these things that we associate with IMF conditionality. A thirty five billion dollar injection for a piece of land is very nice, Like, is there any sense that beyond the sort of capital injection that Egypt is going to make any changes to sort of its fundamental economic structure to improve the I don't know, sustainability, or competitiveness or just the health perhaps of its economy outside of the new cash injection.

You know, if you're getting an IMF deal, then obviously the country is expected to make all of these reforms and privatizations and ending fuel subsidies and all the things that we sort of associate you know, reducing the size of government, all these things that we associate with IMF conditionality. A thirty five billion dollar injection for a piece of land is very nice, Like, is there any sense that beyond the sort of capital injection that Egypt is going to make any changes to sort of its fundamental economic structure to improve the I don't know, sustainability, or competitiveness or just the health perhaps of its economy outside of the new cash injection.

Right, So, I think this is where the IMF deal comes in, and it's conditionality. So I think if the country is to learn from its latest crisis, there are a few things that they need to do. They need to float the currency, and the IMF seems intent on that happening. Egypt has a credibility sort of gap there because in twenty sixteen they said they were floating the currency. They didn't. They just repegged in twenty twenty two because they said there was floating in twenty sixteen and twenty twenty two they said it's going to be a durably flexible exchange, right, they had to add the world the word durably, and again they didn't. And now they said they're going to let market forces determine basically the currency. And since the currency moved on the sixth of March, it's been mostly it's basically there's very little volatility. That telling us probably market forces are not that smooth. So the first thing is they need to do is as a floating of the exchange rate in I think the IMF is pushing for this. The second thing is the reliance on hot money, and yes, as global interest rates are about to fall, egyptis devaried the currency significantly is hiking interest rates. It might become again an attractive place for carric traders and hot money. But again the lesson is, don't just rely on this because this is unstable and they can escape in the space of weeks, as had happened recently. But I think there's I think beyond that this sounds all like Washington consensus stuff. I think the biggest lesson that we've learned from this and I think just it just it's not just for Egypt, for the whole region. It's the whole region is trying to find sort of technical economic solutions two big questions, and you realize that the technical economics can get you only so far, and there are political decisions to be made. The biggest issue that Egypt can't get money, which is not hot money, can't get direct investments into the country, not from some one of the fun from several wealth funds, but from other players. Is that the army plays a dominant role in the economy and it's very difficult to compete with the army, and you know, the IMF, it's very difficult to the IMF to change that. The reason why Egypt runs a persistent trade deficit, yes, because it keeps free fixing the currency and includes competitiveness. Competitiveness, but also I think the internal dynamics within the Egyptian market lacks competitiveness because you have this big player at the army which doesn't need to be efficient to export abroad because it captures the domestic market. So I think the big either there are technical lessons, economic lessons that Egypt should implement and hopefully will implement this term around, and they have learned from past mistakes. But I also I think that is which the IMF actually can intervene and make conditions on. But there's a political dimension to this which is very difficult for the IMF to go in and decide how, you know, who plays what role within the economy.

Right, So, I think this is where the IMF deal comes in, and it's conditionality. So I think if the country is to learn from its latest crisis, there are a few things that they need to do. They need to float the currency, and the IMF seems intent on that happening. Egypt has a credibility sort of gap there because in twenty sixteen they said they were floating the currency. They didn't. They just repegged in twenty twenty two because they said there was floating in twenty sixteen and twenty twenty two they said it's going to be a durably flexible exchange, right, they had to add the world the word durably, and again they didn't. And now they said they're going to let market forces determine basically the currency. And since the currency moved on the sixth of March, it's been mostly it's basically there's very little volatility. That telling us probably market forces are not that smooth. So the first thing is they need to do is as a floating of the exchange rate in I think the IMF is pushing for this. The second thing is the reliance on hot money, and yes, as global interest rates are about to fall, egyptis devaried the currency significantly is hiking interest rates. It might become again an attractive place for carric traders and hot money. But again the lesson is, don't just rely on this because this is unstable and they can escape in the space of weeks, as had happened recently. But I think there's I think beyond that this sounds all like Washington consensus stuff. I think the biggest lesson that we've learned from this and I think just it just it's not just for Egypt, for the whole region. It's the whole region is trying to find sort of technical economic solutions two big questions, and you realize that the technical economics can get you only so far, and there are political decisions to be made. The biggest issue that Egypt can't get money, which is not hot money, can't get direct investments into the country, not from some one of the fun from several wealth funds, but from other players. Is that the army plays a dominant role in the economy and it's very difficult to compete with the army, and you know, the IMF, it's very difficult to the IMF to change that. The reason why Egypt runs a persistent trade deficit, yes, because it keeps free fixing the currency and includes competitiveness. Competitiveness, but also I think the internal dynamics within the Egyptian market lacks competitiveness because you have this big player at the army which doesn't need to be efficient to export abroad because it captures the domestic market. So I think the big either there are technical lessons, economic lessons that Egypt should implement and hopefully will implement this term around, and they have learned from past mistakes. But I also I think that is which the IMF actually can intervene and make conditions on. But there's a political dimension to this which is very difficult for the IMF to go in and decide how, you know, who plays what role within the economy.

Zooming out a little bit and going back to the oil theme, you know, we used to see a lot of the excess money from places like the UAE and Saudi Arabia from their oil production end up in Western financial assets, so you know, they would buy a bunch of treasuries, or they would buy they would make investments in tech companies and things like that. Does it feel to you like we're seeing a little bit of a shift where maybe more of those petro dollars are ending up in these kinds of regional projects or other strategic long term investments around the region.

Zooming out a little bit and going back to the oil theme, you know, we used to see a lot of the excess money from places like the UAE and Saudi Arabia from their oil production end up in Western financial assets, so you know, they would buy a bunch of treasuries, or they would buy they would make investments in tech companies and things like that. Does it feel to you like we're seeing a little bit of a shift where maybe more of those petro dollars are ending up in these kinds of regional projects or other strategic long term investments around the region.

Yes, absolutely so, we've actually we've looked at this and written a few pieces on this actually on the terminal. So what do you see in terms of the petro dollars sort of investments from the soil wealth funds and the countries more broadly? You're seeing two changes. One change is that countries in the GCC, like the Arabia cut out, like the UAE are investing more domestically, building new cities, building new infrastructure, hosting the World Cup, hosting the Asian Games and so on. And if you invest more domestically, that means your imports are higher, and that means you have a smaller sort of trade surplus to invest externally to begin with, so you have more domestic investments. And then once you have that smaller pool from your trade surplus, how is it invested? And there's a clear shift if you look at how they allocate between risky assets like stocks like real estate in neighboring countries or even abroad, versus what they traditionally did, which is basically part the money in central bank reserves that ends up in US treasuries or even just cash or safe deposits. This has actually been a shift. It's a visible shift that the GCC is allocating more of their wealth towards riskier assets like stocks like real estate lack direct investment, and away from you know, US treasuries and simple deposits and cash. And that shift is very visible and you could just see it in the data.

Yes, absolutely so, we've actually we've looked at this and written a few pieces on this actually on the terminal. So what do you see in terms of the petro dollars sort of investments from the soil wealth funds and the countries more broadly? You're seeing two changes. One change is that countries in the GCC, like the Arabia cut out, like the UAE are investing more domestically, building new cities, building new infrastructure, hosting the World Cup, hosting the Asian Games and so on. And if you invest more domestically, that means your imports are higher, and that means you have a smaller sort of trade surplus to invest externally to begin with, so you have more domestic investments. And then once you have that smaller pool from your trade surplus, how is it invested? And there's a clear shift if you look at how they allocate between risky assets like stocks like real estate in neighboring countries or even abroad, versus what they traditionally did, which is basically part the money in central bank reserves that ends up in US treasuries or even just cash or safe deposits. This has actually been a shift. It's a visible shift that the GCC is allocating more of their wealth towards riskier assets like stocks like real estate lack direct investment, and away from you know, US treasuries and simple deposits and cash. And that shift is very visible and you could just see it in the data.

I'm going to go back on Egypt, just sort of focus on something you said about the Egyptian economy. So this idea that the army is a big player in the domestic economy, A like, what does that mean specifically? Is it just that mean that that is the big employer and that's sort of how stability is maintained, And then be like okay, clean slate, Let's say that weren't the case. What ideas do people have for where Egypt could theoretically grow it's economy. We seem to be in this age of everyone thinking about like, you know, rising up the you know, the manufacturing value chain and capturing a greater share of that, or or exploiting some sort of domestic resources and trades that you talked about. But what does that mean? This army dominance of the economy and like what other alternative models could there be?

I'm going to go back on Egypt, just sort of focus on something you said about the Egyptian economy. So this idea that the army is a big player in the domestic economy, A like, what does that mean specifically? Is it just that mean that that is the big employer and that's sort of how stability is maintained, And then be like okay, clean slate, Let's say that weren't the case. What ideas do people have for where Egypt could theoretically grow it's economy. We seem to be in this age of everyone thinking about like, you know, rising up the you know, the manufacturing value chain and capturing a greater share of that, or or exploiting some sort of domestic resources and trades that you talked about. But what does that mean? This army dominance of the economy and like what other alternative models could there be?

Right, So, in terms of the army dominance, basically what that means is that the army has companies and different sactics in hospitality, in construction and food supply chains and all sorts of things. And traditionally some of these companies have existed for decades, but the role has definitely increased in recent years. Certainly in the second half of the two Andy tens, the number of Army link companies that have been formed has increased. And what that does is, as I said, if you're a foreign investor, you wouldn't go. And the army has an advantage in terms of getting land, it gets cheap labor, it's very it has the regulation, it's very difficult to compete with that, and that handers each of growth and development because if you I think the model for growth and development remains that, you know, you're a country, try and basically export more and that generates more wealth and that generates more domestic demand. And you do this and if that's the case, and you have an entity that is very big that is essentially apps as a local monopoly, it has limited interest in trying to expand abroad, and therefore it ends up being inefficient and therefore ends up being you know, unable to increase exports. And this is where probably it's worth thinking about this and why Egypt keeps getting into a currency crisis almost once a decade. So there was a currency crissis in Egypt two thousand and three, I mentioned the twenty sixteen one and the recent one twenty twenty three. I think the main reason is that you always had basically politically connected entities that acted as local monopolies that captured the domestic market and didn't increase exports. In the two thousands before the twenty eleven protests that Tracy mentioned used to be businessmen that linked to the then president Mobarak's son, Gaman Mobarak. These guys had, you know, monopolized the steel industry, the cement, tourism and so on, and again there was very limited interests in expanding abroad. After twenty thirteen, the army became more prominent. And that makes you think that if you're replaced now the army, if the army starts selling sales, selling shares and stakes in his companies, just GCC, several wealth funds actually doesn't change the competitive dynamic of the Egyptian economy. All you're doing is replacing one local monopoly that is the army, with another. There are the GCC Social Wealth funds. So again this goes back to the political economy side of it and how each we could get out of it.

Right, So, in terms of the army dominance, basically what that means is that the army has companies and different sactics in hospitality, in construction and food supply chains and all sorts of things. And traditionally some of these companies have existed for decades, but the role has definitely increased in recent years. Certainly in the second half of the two Andy tens, the number of Army link companies that have been formed has increased. And what that does is, as I said, if you're a foreign investor, you wouldn't go. And the army has an advantage in terms of getting land, it gets cheap labor, it's very it has the regulation, it's very difficult to compete with that, and that handers each of growth and development because if you I think the model for growth and development remains that, you know, you're a country, try and basically export more and that generates more wealth and that generates more domestic demand. And you do this and if that's the case, and you have an entity that is very big that is essentially apps as a local monopoly, it has limited interest in trying to expand abroad, and therefore it ends up being inefficient and therefore ends up being you know, unable to increase exports. And this is where probably it's worth thinking about this and why Egypt keeps getting into a currency crisis almost once a decade. So there was a currency crissis in Egypt two thousand and three, I mentioned the twenty sixteen one and the recent one twenty twenty three. I think the main reason is that you always had basically politically connected entities that acted as local monopolies that captured the domestic market and didn't increase exports. In the two thousands before the twenty eleven protests that Tracy mentioned used to be businessmen that linked to the then president Mobarak's son, Gaman Mobarak. These guys had, you know, monopolized the steel industry, the cement, tourism and so on, and again there was very limited interests in expanding abroad. After twenty thirteen, the army became more prominent. And that makes you think that if you're replaced now the army, if the army starts selling sales, selling shares and stakes in his companies, just GCC, several wealth funds actually doesn't change the competitive dynamic of the Egyptian economy. All you're doing is replacing one local monopoly that is the army, with another. There are the GCC Social Wealth funds. So again this goes back to the political economy side of it and how each we could get out of it.

So putting it all together, as you explained, there have been these sorts of false starts when it comes to the Egyptian economy and reform before. Is there something here that makes you think it might be different this time? Like how optimistic should people be about this particular you know, thirty five billion dollars and the ensuing increase in IMF financing and things like that. How much of a difference is it going to make? Is Egypt going to follow through on this one?

So putting it all together, as you explained, there have been these sorts of false starts when it comes to the Egyptian economy and reform before. Is there something here that makes you think it might be different this time? Like how optimistic should people be about this particular you know, thirty five billion dollars and the ensuing increase in IMF financing and things like that. How much of a difference is it going to make? Is Egypt going to follow through on this one?

I think that's a short term and there's a long term. In the short term, Egypt's getting thirty five billion dollars from the UAE, is getting eight billion dollars from the IMF, from other entities getting twelve billion dollars. The total is we're talking about fifty five billion dollars arriving in Egypt over the next few years, and that is enough to is the dollar shortages in the country in the short In the short term, I think in the long term, the stuff I've mentioned about changing the role of the army, about floating the exchange rate, about the reliance on hot money, these things need to change. And unless we see a change in there, I don't know, maybe Egypt will enter in another currency crisis. Further down the road. I think if it takes zoom out a little bit, and if you think about the region as a whole, I think that is the summary of the critical economy in the region is that you have every country relies on what economists call rents, right, which is basically rent is an income that you get without working. And you know, if you think about the Gulf and Iraq, they rely on oil. If you think about Egypt, it relies on the Sewers Channel. If you think about a place like Jordan, it relies on aid from abroad. And everyone's trying to transition out of that. But it's very difficult to transition out of that because that kind of rent basically creates not just an economic structure, but also a political and social structure. And trying to address that with technical economics without addressing the political side of it is bound to end in.

I think that's a short term and there's a long term. In the short term, Egypt's getting thirty five billion dollars from the UAE, is getting eight billion dollars from the IMF, from other entities getting twelve billion dollars. The total is we're talking about fifty five billion dollars arriving in Egypt over the next few years, and that is enough to is the dollar shortages in the country in the short In the short term, I think in the long term, the stuff I've mentioned about changing the role of the army, about floating the exchange rate, about the reliance on hot money, these things need to change. And unless we see a change in there, I don't know, maybe Egypt will enter in another currency crisis. Further down the road. I think if it takes zoom out a little bit, and if you think about the region as a whole, I think that is the summary of the critical economy in the region is that you have every country relies on what economists call rents, right, which is basically rent is an income that you get without working. And you know, if you think about the Gulf and Iraq, they rely on oil. If you think about Egypt, it relies on the Sewers Channel. If you think about a place like Jordan, it relies on aid from abroad. And everyone's trying to transition out of that. But it's very difficult to transition out of that because that kind of rent basically creates not just an economic structure, but also a political and social structure. And trying to address that with technical economics without addressing the political side of it is bound to end in.

Failure, all right, Zia dud Are, Chief Emerging Markets economist over at Bloomberg Economics. The big take is out right now. You can find it on Bloomberg dot com and on the terminal of course. Thank you so much for coming on all thoughts.

Failure, all right, Zia dud Are, Chief Emerging Markets economist over at Bloomberg Economics. The big take is out right now. You can find it on Bloomberg dot com and on the terminal of course. Thank you so much for coming on all thoughts.

Thank you.

Thank you.

Yeah, that was great. That was so good, so good, Thank you so much.

Yeah, that was great. That was so good, so good, Thank you so much.

Joe.

Joe.

That was so clear.

That was so clear.

That was such a clear explanation, and I think, like I have to emphasize here how complicated the sort of political backdrop often is when it comes to these sort of developments in the Middle East. And Ziad did such a good job of explaining all.

That was such a clear explanation, and I think, like I have to emphasize here how complicated the sort of political backdrop often is when it comes to these sort of developments in the Middle East. And Ziad did such a good job of explaining all.

Of them totally. That was so good and so interesting, you know, starting for there were a few things that really stood out, but that I had not realized that at all, about the army's dominance of the domestic economy and the various local monopolies and retail locations and real estate project etcetera that are army backed. And when you think about, like, well, what is a challenging domestic reform thing. I mean, every country in the world has issues with like the challenge of military reform and military spending and stuff like that. And so when you think, well, how do you like, you know what what like I can't that must be an unimaginable challenge if like that really needs to be reformed in some way.

Of them totally. That was so good and so interesting, you know, starting for there were a few things that really stood out, but that I had not realized that at all, about the army's dominance of the domestic economy and the various local monopolies and retail locations and real estate project etcetera that are army backed. And when you think about, like, well, what is a challenging domestic reform thing. I mean, every country in the world has issues with like the challenge of military reform and military spending and stuff like that. And so when you think, well, how do you like, you know what what like I can't that must be an unimaginable challenge if like that really needs to be reformed in some way.

Well.

Well.

I also liked his characterization of a lot of the countries in the region as sort of rent seeking economies, where the primary mode of making money is either extracting stuff from the ground or charging people to travel down your canal. That sounds weird, but then the idea that the entire region is sort of trying to transition its way out of that move to that value add economy, that was super clear. The one thing I will also say is it's weird that so much of it has to be megacities, right, because surely, I mean, there is a relativity at play here where if one one country is successful at building a mega city, whether it's Saudi Arabia or the UAE, there's only so many tourists that can go around, right, There's only so many yachts that can be positioned in these really fancy cities. So I do wonder about that. But that said, I mean people said this about Dubai ages ago that eventually Dubai growth would sort of peter out, and instead, over the past couple of years following Russia's invasion of Ukraine, that economy has been absolutely booming. So who knows.

I also liked his characterization of a lot of the countries in the region as sort of rent seeking economies, where the primary mode of making money is either extracting stuff from the ground or charging people to travel down your canal. That sounds weird, but then the idea that the entire region is sort of trying to transition its way out of that move to that value add economy, that was super clear. The one thing I will also say is it's weird that so much of it has to be megacities, right, because surely, I mean, there is a relativity at play here where if one one country is successful at building a mega city, whether it's Saudi Arabia or the UAE, there's only so many tourists that can go around, right, There's only so many yachts that can be positioned in these really fancy cities. So I do wonder about that. But that said, I mean people said this about Dubai ages ago that eventually Dubai growth would sort of peter out, and instead, over the past couple of years following Russia's invasion of Ukraine, that economy has been absolutely booming. So who knows.

Yeah, no, that's really interesting on that point about rents. And just to sort of further your observation, that stuck out at me too. And you see the challenge, like everyone wants to diversify and everyone wants to like we're gonna be an ai hub and we're going to be a clean energy hub or whatever it is, right, Like that's the goal because yeah, you make all this money from rents you're blessed to have in the ground or natural gas resources, but you want to like make something that people want or you want to be able to climb up the value chain in some way. And I don't know our mega cities and real estate, Like, I mean, real estate is a valuable thing, but it does seem tricky.

Yeah, no, that's really interesting on that point about rents. And just to sort of further your observation, that stuck out at me too. And you see the challenge, like everyone wants to diversify and everyone wants to like we're gonna be an ai hub and we're going to be a clean energy hub or whatever it is, right, Like that's the goal because yeah, you make all this money from rents you're blessed to have in the ground or natural gas resources, but you want to like make something that people want or you want to be able to climb up the value chain in some way. And I don't know our mega cities and real estate, Like, I mean, real estate is a valuable thing, but it does seem tricky.

Yeah, all right, Well, I'm glad we finally.

Yeah, all right, Well, I'm glad we finally.

Had on Yeah, we got to have them back. That was great.

Had on Yeah, we got to have them back. That was great.

All right, shall we leave it there, Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.

All right, shall we leave it there, Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.

I'm Jill Wisenthal. You can follow me at the Stalwart, follow z ed At at zed Sorry, follow zi ed at At zed m Daud and of course check out his big Take now on Bloomberg dot Com and the Terminal. Follow our producers Carmen Rodriguez at Carmen Ermann, dash Ol Bennett at Dashbot and kel Brooks at kel Brooks. And thank you to our producer Moses on them. Form our odd Lats content. Go to Bloomberg dot com slash odd Lots, where we have transcripts, a blog and a newsletter, and you can show us fellow listeners in the discord Discord dot gg slash odd Lots twenty four seven And.

I'm Jill Wisenthal. You can follow me at the Stalwart, follow z ed At at zed Sorry, follow zi ed at At zed m Daud and of course check out his big Take now on Bloomberg dot Com and the Terminal. Follow our producers Carmen Rodriguez at Carmen Ermann, dash Ol Bennett at Dashbot and kel Brooks at kel Brooks. And thank you to our producer Moses on them. Form our odd Lats content. Go to Bloomberg dot com slash odd Lots, where we have transcripts, a blog and a newsletter, and you can show us fellow listeners in the discord Discord dot gg slash odd Lots twenty four seven And.

If you enjoy odd Lots, if you want us to do more on the military industrial complexes in emerging markets, just wait till I tell Joe about Pakistan. Then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is connect your Bloomberg subscription with Apple Podcasts. Thanks for listening.

If you enjoy odd Lots, if you want us to do more on the military industrial complexes in emerging markets, just wait till I tell Joe about Pakistan. Then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is connect your Bloomberg subscription with Apple Podcasts. Thanks for listening.