Egypt’s upgraded Suez Canal is bold bid on the future
There was good news for once coming from the Middle East, a region from which there has been seemingly little positive to report, as Egyptian President Abdel Fattah al-Sisi has inaugurated the New Suez Canal project.
Launched in August 2014, the New Suez Canal project adds a 35-kilometre shipping lane to the existing canal channel linking the Red and Mediterranean seas. The project is intended to increase the daily average of transiting vessels to 97 ships by the year 2023, about double the current rate. The new bypass will also allow direct unstopped transit in two directions.
Under a torrid sun and temperatures exceeding 39 degrees Celsius, hundreds of foreign dignitaries gathered in Ismailia on the eastern bank of the Suez Canal for the August 6th ceremony.
The inauguration was replete with military hardware — at least 40 helicopters flew over the site, followed by Egyptian Air Force transports and fighter jets trailing black, white and red smoke, the colours of the Egyptian flag, as a frigate cruised northward. During Sisi’s speech three merchant ships, heavily laden with containers, transited north as another ship cruised south.
Sisi proclaimed that the New Suez Canal was Egypt’s “gift to the world”, an accurate assessment, given the canal’s importance since 1869 in allowing cargo ships to avoid the 5,000-mile transit around South Africa’s Cape of Good Hope when sailing between the Atlantic and Pacific oceans.
The Suez Canal is Egypt’s second largest earner of foreign currency, exceeded only by tourism. According to the Egyptian Central Agency of Public Mobilization and Statistics (CAPMAS), over the past decade Suez Canal transit fees contributed $47 billion to the Egyptian economy. CAPMAS statistics record that, in 2014, 16,700 ships used the Suez Canal and for the period 2004-14, 182,300 vessels transited the channel. According to projections by the Suez Canal Authority, the upgrades will increase Suez Canal revenues from their current annual level of $5.3 billion to $13.2 billion in 2023.
An impressive aspect of the project is not only the speed of its construction but the fact that it was entirely financed through indigenous sources, rather than loans from international entities such as the International Monetary Fund and the World Bank.
When construction began in August 2014 to expand and widen the Ballah Bypass for $8.4 billion, financing was arranged by issuing interest-bearing investment certificates exclusively available to Egyptian financial entities and individuals. In a notable display of public support for the project, the target amount was collected over only six working days.
As the necessary funding was raised from indigenous sources, profits from increasing transit fees will accordingly remain in Egypt rather than being diverted to foreign fiscal institutions. At the current transit fee level, the upgrades will pay for themselves in less than two years.
While economists note that maritime global shipping has been sluggish since the world financial collapse in 2008, the developments have led analysts to expect to see higher traffic totals for the Suez Canal in 2015, especially because of diversions from shippers fearing delays at the Panama Canal, which is in the latter stages of adding a third set of locks to handle much larger container and other types of vessels.
The Egyptian government sees the New Suez Canal as only the harbinger of bigger plans costing an estimated $150 billion to develop the canal zone into an industrial and commercial hub. At a time of fiscal austerity and retrenchment, Egypt’s bold commitment to expanding a major maritime transit corridor can only be applauded by governments believing that trade is one of the best antidotes to extremism and war, both fuelled by poverty.