New Canal could mean economic gain for Egypt’s leader

When construction of the Suez Canal began more than 150 years ago, it took a decade to complete the vital passageway that connects the Mediterranean Sea and Red Sea. The expanded waterway that opens Thursday was completed in only one year, just a third of the time originally planned.

Swift completion of the $8 billion project is being touted by the government as a sign of its competence under President Abdel Fattah al-Sisi, the former military commander who ousted and jailed Egypt’s first democratically elected president two years ago.

“This is Egypt’s gift to the world. We promised and we delivered,” said Admiral Mohab Mameesh, the retired commander-in-chief of the Egyptian navy and chairman of the state-owned Suez Canal Authority, which owns and operates the waterway.

The expansion, much of it funded by the sale of investment certificates to private citizens, involved widening and deepening the original waterway and adding a parallel canal nearly 22 miles long. al-Sisi had demanded that the three-year timetable for the project be sped up.

“I think it’s extremely impressive that they have done this very big project in a very short time. That’s astonishing,” said Peter Hinchliffe, secretary-general of the International Chamber of Shipping, who visited the new canal last week.

The widening will increase traffic from 50 ships a day to 97 and reduce the time to travel through the canal from around 18 hours to 11 hours, according to Mahmoud Rezk, director of planning and research at the Suez Canal Authority. Annual profits from the canal will more than double from $5.3 billion to $13.2 billion by 2023, Rezk predicted.

In addition to expanding the canal, the government has ambitious plans to develop a massive industrial and transportation hub nearby that would create jobs and boost an economy ravaged by years of political unrest.

Mass protests forced long-time President Hosni Mubarak out of office in 2011, and the 2012 election of Mohamed Morsi, an Islamic activist, was cut short after a year when the military staged a coup and took over.

“The New Suez Canal is more than a waterway, it is a symbol of the new Egypt,” Admiral Mameesh said in an email.

Faced with international condemnation of its human rights record, suppression of all political opposition and voting irregularities that installed al-Sisi as president last year, the government has a lot at stake politically as well as economically in the the successful completion of the project, analysts said.

“The ability to actually deliver, to actually finish the project in one year as al-Sisi promised is huge, to send the message locally and internationally that there is a regime that is capable of delivering,” said Amr Adly, a nonresident scholar at the Carnegie Middle East Center.

“The biggest political objective … was to give average Egyptians hope of a national project around which Egyptians should unite, following years of political strife and instability,” said Yasser El-Shimy, a research fellow at the John F. Kennedy School of Government at Harvard and former diplomat in the Egyptian Ministry of Foreign Affairs.

While the government boasts the new canal will bring huge economic gains, shipping experts question whether it is overestimating the financial impact. Neil Davidson, a senior analyst at Drewry, a maritime research group in London, said global international trade is determined by a range of factors that include demand, exchange rates and labor costs. Lower shipping costs “are part of the equation, but just one small part,” he said.

“It is extremely difficult to predict what shipping will be like 8 to 10 years down the road,” said Hinchliffe, of the International Chamber of Shipping. “But what we’re interested in is, are they providing a service which is better for shipping and are they providing something that’s attractive to shipping. I think the answer to both is ‘yes.’ “

Others say making promises of economic miracles to ordinary Egyptians desperate after years of economic decline comes at a risk.

“Government officials made many lofty promises of massive economic dividends once the project is completed,” said El-Shimy. “The downside is of course raised and often unrealistic expectations among millions of Egyptian citizens awaiting material improvements in their living conditions rather soon.”

Source: The Clarion Ledger