Wednesday,18 July, 2018
Current issue | Issue 1237, (12 - 18 March 2015 )
Wednesday,18 July, 2018
Issue 1237, (12 - 18 March 2015 )

Ahram Weekly

Ready for business

The planners behind the Suez Canal Development Area Project believe it can become an essential part of the global supply chain, writes Niveen Wahish

Al-Ahram Weekly

The final draft of the master plan for the Suez Canal Development Area Project (SCDAP) is finally ready and will be presented at the Egypt Economic Development Conference (EEDC), scheduled to start tomorrow in Sharm El-Sheikh.

The project has been hailed as a lifeline for the future of Egypt’s economy. Yehia Zaki, managing director of Dar Al-Handasah Egypt, says the project will demonstrate how other large-scale development projects should be done.

Dar Al-Handasah leads the consortium that won the bid, six months ago, to draw up the SCDAP master plan. The company was founded in 1956 and is a leading international consultancy with offices in Beirut, Cairo, London, Pune and Amman, along with 45 regional operations offices.

The size of the SCDAP, Zaki says, makes it a very strong business investment platform for the future of Egypt, if it is implemented according to the master plan. The SCADP covers a number of locations within a 650-km-square area and includes the cities of Port Said, Ismailia and Suez and six ports.

In order for the project to be a success, Zaki says, it needs commitment from the government, starting with provision of a supportive legislative environment. This will be possible through the application of a slightly modified version of Law 83/2002 for special economic zones, he adds.

The law establishes a sole authority with full administrative powers within the designated zones. “It is a simple law, one of the best we think are currently available,” Zaki says.

A few amendments will be needed to make it more investment-oriented and enable the future SCDAP authority to take a more investment friendly approach. “These will put the project on the proper platform for lift-off,” he adds.

Until the new authority is created, the Suez Canal Authority will carry out its role. In the current absence of a parliament, amendments to the law could be approved by presidential decree.

Zaki explains that the law will only apply within the economic zones and not the entirety of the Suez Canal area. “It is the clusters that will fall under the control of the authority and will be governed by the law,” he says, adding that more clusters can be added later if necessary.

Another advantage of the law are the tax and investment incentives it offers. It provides for 10 per cent corporate tax, as compared to the 25 per cent tax rate paid by companies countrywide on profits less than LE10 million and 30 per cent on those above that figure.

Zaki is optimistic about investment prospects for the area. Investors are eager to learn more about the project and available opportunities, he says, adding, “This is a unique location, and there is very strong potential if the whole project is started with the right investment approach.”

Interest has come mostly from investors involved in the sectors that the area best serves. According to the master plan, there are five main sectors considered to be optimal for the area. The sectors are maritime, logistics and manufacturing, energy and information and communications technology.

Once these five sectors are engaged, Zaki expects investments in other sectors, such as housing, agriculture and tourism, to follow.

Some of the possible investment opportunities will be profiled during the EEDC, he says. “We have quantified the infrastructure requirements for these areas and identified the location and construction costs.”

Maritime and port activities make up the core of the project, which includes six ports: East and West Port Said, Ain Sokhna, Al-Adabiyah, Al-Arish and Al-Tor. The master plan focuses on developing East Port Said as a transshipment port and Ain Sokhna as an international and domestic port and industrial centre.

Zaki says work to expand the two ports will begin soon. Port Said, with its unique location, gives it advantages for transshipment and is being considered for containers and logistics.

The current volume of containers in East Port Said is slightly above three million per year. This is low, Zaki says, but adds that development of the port will allow larger vessels to enter the area. The target is to handle 10 million containers annually within the next ten years.

East Port Said is currently ranked 43rd by the World Shipping Council in terms of its worldwide container business. But this is not where it should be, Zaki says. “We believe that with the introduction of the master plan and the improvement of the port, East Port Said has the potential to be within the top ten in the container business worldwide.”

He adds that the new Suez Canal that is currently being dug will be a considerable addition to the region. The new canal will allow vessels to pass more quickly in both directions and will also allow for wider and deeper vessels.

The project is projected to create one million jobs in the next 15 years, according to Zaki. Some believe that this figure is too low, considering that Egypt’s annual need for new jobs is 500,000.

Beyond 2030, it is hoped that an additional 2.5 million jobs will be created. Zaki points out that job creation is cumulative and does not happen overnight. The jobs will serve the area’s population, and at the same time will attract others to the area, “to live, work and play,” as Zaki puts it, highlighting the fact that the project is intended to provide good-quality jobs.

Two milestones for the project have been identified for 2030 and 2050. If all goes as planned, Zaki says that by 2030 there will be 400 factories in the 22-km-square industrial area adjacent to East Port Said. However, it is important that the master plan be flexible and responsive to market demand.

Zaki says it is difficult to determine the total investment needed. “If we are to achieve the infrastructure needs of this area, we are talking about some $15 billion,” he says. “If we are to improve and embark on new phases for the ports, we are talking about $25 billion.” He adds, “The one million job opportunities need an investment of $15 billion.”

While the private sector will be the major investor in the area, Zaki says that the government should invest heavily at the beginning, particularly in infrastructure, in order to get the ball rolling.

He is optimistic about the project, but is also aware of potential threats such as terrorism. “We all think about these obstacles, but in reality the opportunities are much greater and the government and the will of the administration that much stronger. The opportunities will offset any obstacles that now exist, whether terrorism or anything else,” he says.

The idea of the project is not new and had been talked about for decades, even as far back as the 1980s. What is making it happen now, according to Zaki, is the support of the administration, the president himself and the cabinet.

“Everyone sees potential in this, and everyone is adding to the opportunities rather than being part of the constraints,” says Zaki. He also believes that with the new political environment in Egypt the project is being perceived by the rest of the world in a different way.

“People can see there is transparency and proper process, and this gives better credibility,” he says.

“The environment is ready, the legislation is about to be ready, and it is just a matter of making it happen.” There are always going to be obstacles, he adds, but the opportunities are greater than the potential threats.

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