Tuesday,24 October, 2017
Current issue | Issue 1209, (14 - 20 August 2014)
Tuesday,24 October, 2017
Issue 1209, (14 - 20 August 2014)

Ahram Weekly

The devil in the details

What are the expectations of the new Suez Canal projects, asks Noha Moustafa

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eco3
Al-Ahram Weekly

An ambitious plan to dig a new canal parallel to the Suez Canal and to widen parts of the existing waterway has stirred mixed reactions in Egypt.

Last week, President Abdel-Fattah Al-Sisi caught people by surprise when he announced the development project. It would see creation of a new canal, 72 km in length and requiring 35 km of dry digging, and a 37-km expansion and deepening of the current waterway.

The first major expansion in the canal’s 145-year history is expected to double the waterway’s capacity to 97 ships a day by 2023, up from 49 now. The president called for the work to be completed within one year.

“The digging of a parallel canal is certainly good news. It is expected to decrease the crossing time for vessels from 18 hours to 11 hours,” Adel Al-Lamai, chairman of the Port Said Shipping Chamber, said.

Al-Lamai said that vessels currently wait between 36 and 40 hours to cross the Suez Canal, in addition to the 18-hour crossing. “Shorter crossing times mean fewer costs and more profit for the shipping companies, shipowners and traders. This is certainly a major benefit,” he added.

The second waterway would allow more vessels to use the Suez Canal and speed up journey times.

Crossing the Suez Canal is not cheap, and for the largest vessels a two-way voyage costs a reported US$1.25 million. But it is still less costly and requires less fuel and time than the alternative route around the Cape of Good Hope in southern Africa.

Al-Lamai said that the new waterway would also breathe new life into the eastern bank of the canal and see the creation of new ports parallel to Ismailia and Suez. New services, industries, terminals and logistics projects would also be established in the area.

Building new roads, tunnels and railroads would also mean faster development and economic growth on the banks of the canal and in Sinai, he said. By 2023, the new canal is expected to bring in more than US$13 billion a year in fees, compared to the US$5 billion currently earned by the Suez Canal.

However, some shipping sector experts have cast doubt on this figure, saying that it is unlikely to be attained by increased passage tolls alone due to competition with the Panama Canal.

 If the Suez Canal Authority increases the already high fees, they said, vessels will start using the Panama Canal instead.

The Suez Canal is expected to face strong competition after current work to expand the Panama Canal is concluded next year.

However, there are other plans for the Suez Canal, including the Suez Canal corridor project and the building of a logistics hub adjacent to the canal to attract more ships and investments to the area, taking full advantage of Egypt’s geographical position.

In January, Egypt invited 14 consortia to bid for development of a master plan for the corridor development. The name of the winning consortium will soon be announced. A French consulting firm, working without the involvement of the Suez Canal Authority, has selected the winning bid.

 The National Security Authority is now reviewing the name of the successful consortium before issuing clearance for the award. The winner will present the project’s master plan within six months and public consultation will follow.

The project includes wide-ranging development plans, such as four new seaports in the canal area, a new industrial zone west of the Gulf of Suez and a technology valley in Ismailia.

By the first quarter of 2015, Arab and foreign companies will be invited to bid for specific local projects, according to Al-Lamai.

“It will be a great chance for the private sector to participate in a major national project,” he said. “We are all waiting for this opportunity as we all know that the private sector is the engine for economic growth in Egypt and the shipping sector, in particular, is responsible for growth.”

However, some observers are concerned about the vagueness surrounding the announced Suez Canal projects.

“The total costs, financing, timeframe and entities responsible for the implementation of the projects are all elements that are unclear,” said Khaled Amin, a professor of public policy at Cairo University’s Faculty of Economics and Political Science.

“I believe that the project is a necessity for the future of Egypt. Extensive studies have been done and it hardly holds any risks, but not drafting clear and comprehensible plans could lead to complications in implementation later,” he said.

Amin is also concerned about the entities in charge of the projects, whether the new canal or the corridor development. “The distribution of work should be clearly spelled out,” he said.

“There is no need for a special law. All major national projects, such as the Aswan High Dam or the Suez Canal itself, or even recent projects like the Toshka Valley, did not need special legislation. But decisions need to be made on the organisation of the work.”

Amin also cast doubt on the ability of the construction sector in Egypt to handle all the national projects planned by the government.

“The capacity of our construction companies is limited, and they may not be able to meet the needs of these projects,” he said.

The Suez Canal projects include digging the new waterway, building roads, and constructing six new tunnels, in addition to electricity work. The timeframe of the projects adds to the challenges.

“The timeframe is very limited, and it is highly unlikely that the projects could be finished in one year. These are medium-term projects,” Amin said.

How the projects will be financed is also unclear. President Al-Sisi has said that Egyptian funds will be used, but government infrastructure investment does not exceed LE40 billion annually. The total cost of the Suez Canal project is expected to exceed LE60 billion, and involve some 33 companies.

“Egypt’s economic situation isn’t good, and it is not yet clear which projects will be financed by the budget and which projects will be open to private-sector funding, whether local or foreign,” Amin added.

The president has stressed that only national companies and investors will be asked to finance the project. He has called on the public to take part through an initial public offering that will be open to Egyptians only.

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