Interviewing the Head of the Nuweiba and Taba Investors Association
Originally published on Invest-Gate
Sinai, a land that is best known for presenting an unmatched combination of nature, history, and unique circumstances. The peninsula has long been a touristic hub for international tourism; the possible answer for the Egyptian economy’s foreign currency woes.
Certainly, tourism in Egypt recently has taken several hits, dramatically reducing the levels of hotel occupancy throughout Egypt; yet, areas such as Nuweiba and Taba have been particularly hard hit — both in terms of the number of tourists and the flow of investment — for quite some time now.
Contradictory facts have been circulating through the media, amid government efforts to put the area on the global investment map. Meanwhile, the actual percentage of operating hotels has fallen to 26% of once functioning hotels, with banks rendering the region an unsafe investment.
To better understand the reality and potential of a vital area such as South Sinai, Invest-Gate sat down with Samy Soliman, Head of the Nuweiba and Taba Investors Association.
In his opening remarks, Soliman explained that the main role of the association is to put the coastal area on the global tourism map and encourage the state to pay more attention to the region. “Our role as investors is to develop this area and shed light on the uniqueness of a magnificent area like Nuweiba and Taba,” Soliman said.
He contends that such a goal can be achieved in several ways, beginning with marketing available properties in the area to Egyptian expatriates. “This solution not only enhances the flow of foreign currency in the local economy but will also help developers who now have suspended projects in Taba, as local banks have pulled out of financing projects in this area, out of a belief that investments there are not promising,” explained Soliman.
For an expatriate looking to purchase in touristic regions, South Sinai presents both a sound investment opportunity given the steep projected increases in real estate prices and the opportunity to own property in one of Egypt’s prime beach locations.
Another suggested solution is to contract major developers from the Gulf region who could manage the area well and turn it into a profitable touristic area, or even into a new Dubai.
When asked about how he views the mechanism for this arrangement, Soliman explained that the government could ink a 40-year usufruct agreement with a well-established developer, for example, whereby the developer would pay a yearly lease to the government, and in exchange re-plan, develop, manage, and promote the touristic destination well. In addition, real estate investors will assist in the movement through their existing and new projects.
“The area can then enjoy mega commercial attractions, such as the largest amusement park in the world, the largest night clubs in the world, expensive mansions on the mountains for the world’s richest celebrities, and many more,” he added.
Throughout the interview, Soliman boasted about the uniqueness of Nuweiba and Taba, highlighting that “it has 70 kilometers of beaches, surrounded by mountains, includes several touristic attractions, and is unlike other coastal areas in Egypt, as no factories are near it, ensuring very high oxygen levels. Not to mention that Taba is the only spot in Egypt where you are in close proximity to four other countries.”
In terms of attracting international tourism, the proximity of South Sinai to other neighboring countries plays a major role, confirmed Soliman. “For example, a country like Israel where gambling casinos are banned, tourists can cross the border to Egypt and enjoy the freedom to gamble. The same applies to Saudi Arabia, where night clubs are not legal within the country; however, Saudis can simply cross the border and enjoy a variety of night clubs,” he explained.
Reality in the Figures
Moving on to where tourism in the area stands today, in every coastal location in Egypt, real estate investment stands at different levels, from approved hotels, to those under construction, constructed, and finally operational hotels, with their different occupancy levels.
In a previous interview with Al Masry Al Youm, Soliman revealed shocking figures about operational hotels, especially in Taba. When asked about them, Soliman confirmed the combined number of hotels in Nuweiba and Taba to be “a total of 70 hotels under construction. Previously, about thirty had managed to open their doors; however, due to shutdowns or operational problems, only eight hotels remain operational today, not including eco-lodges and camps.”
One of the reasons behind such numbers is the banking sector’s decision to suspend loans to investments going into the area, according to Soliman.
“I have a hotel in Taba, built since 1999, and it remains non-operational to this day. One of the main issues leading to this was caused by the National Bank of Egypt. After partnering with the bank, it paused any investments in the hotel due to the negative outlook of the potential of the area,” he explained.
However, in June 2016, Daily News Egypt reported that the National Bank of Egypt (NBE) has allocated EGP 30 million in loans to tourism investments in the region, part of an EGP 500 million loan portfolio earmarked for the touristic destination. The move followed correspondence between the Egyptian Tourism Federation and the Central Bank of Egypt (CBE) to provide facilitations for hotels and tourism companies in light of the soaring decline in tourism traffic.
“We have to accept that a crisis exists, and to resolve it we need the best economic minds out there. This problem needs to be resolved on a macro level; either the Egyptian Army takes control of managing and developing the place, or simply rents it to whomever it can,” Soliman affirmed.
“In a country like Egypt, all professions are related to tourism in the end, from agriculture that is used to feed the tourist, to building material, to the bell-boy carrying a bag and receiving a tip in a foreign currency. This industry can save the troubled economy […] however, policies increasing taxes on the sector are chipping away at a boat that can save Egypt single-handedly, instead of supporting it,” he added.
Invest-Gate asked Soliman about his estimates for the current real estate investment figures in Nuweiba and Taba; he answered that investments stand at no less than EGP 20 billion – at the current prices —besides the cost of infrastructure, and of course the damages incurred due to floods which he estimates to be between EGP 500 to 700 million, not including the losses incurred by hotels that did not manage to reopen.
Infrastructure and the Flow of Investment
News circulated that the General Authority for Investment and Free Zones (GAFI) has set plans or to put Nuweiba and Taba on the global investment map. When asked about the reality of these plans, Soliman began by addressing basic infrastructure problems, which he discussed with the Minister of Transportation during his last visit to Nuweiba.
Beginning with “the government’s decision to lower the riverbed, where floods from heavy rain pass through making their way from the very top of the mountain to the seashore. This means that any tourists or residents passing though will have to wait until the last drop of water passes through before they can cross the riverbed. This negatively affects the investment potential, and the solution here is very simple; a small bridge a few meters long over the lowered riverbed to ensure the safety of tourists and residents,” Soliman added that this solution has in fact been suggested a few times to date.
“Another example is Wadi Wateer road (Wateer Valley road), which has been shut down since the floods. Ideally, this valley should be closed properly to allow lakes to build up, deer, birds, and other wildlife to come back to the valley, creating a great spot for eco-tourism in South Sinai, in addition to saving plenty of fresh drinking water from making its way into the Red Sea,” he continued.
Soliman then went on to compare where the area in
Egypt stands in comparison to the similar nature of neighboring Eilat. “The difference is saddening. We have a better nature, however, they have a better human element. They have taken good care of their natural resources, solved all issues with floods and mountains, developed the infrastructure well, they even have a wealth of wild deer, which should have been the case in Egypt, but they were all hunted,” he explained.
In talks about planned infrastructure expansions, Soliman was asked about the possible boosting effect of Ras Sudr airport once it opens, as well as the famous Saudi-Sinai bridge, especially in terms of investment flow. Soliman simply negated its potential effect of the airport on Nuweiba and Taba, as the area already has an airport, moreover expressing skepticism regarding the possibility of actually constructing the Saudi-Egyptian bridge. “From a technical point of view, it seems too trying to build at such lengths, not to mention that from the economic side things are not very clear,” he stated.
Other Challenges and Possible Solutions
Investors in the region are facing issues with taxes, electricity and utility bills; Invest-Gate asked Soliman about his suggestions to help ease the situation for developers.
“We have suggested before some sort of collaboration with the state, where debt owed to ministries for electricity, water, insurance, and other elements can be paid back by investors through a barter agreement, where governmental entities would be offered rooms in hotels at a 50% discount to give to its employees or even companies they deal with. This suggestion would help hotels remain operational, lift the burden of debt on investors, allow them in the future to pay dues, boost tourism in the area, and attract further investments,” explained Soliman.
Another suggestion Soliman made was utilizing the slowdown in tourism to eradicate existing informal settlements in the coastal destination.
Many vacationers seeking eco-tourism are attracted to spots like Nuweiba and Taba – a concept that Soliman suggests the state can boost by allocating a specific area free of hotel developments. “It is simple to create a touristic destination without electricity. The state should designate a separate area for eco-tourism; it is unwise to have a five-star hotel right next to an eco-lodge lit up by candles.”
In conclusion, though the problems afflicting the area are myriad, Soliman still appears certain that a shift in attitudes and approaches would lead to an unprecedented leap in numbers, both in terms of tourists and foreign revenues. Moreover, such a shift in attitude can similarly be applied across the board when it comes to Egypt’s tourism industry nationwide. In previous statements to Invest-Gate, Soliman had noted that it is not so much a matter of the industry dealing with a number of crises – many other touristic destinations have been hard hit but have prevailed against these crises – but rather the manner in which such crises are dealt with.