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On with the new Suez Canal

Fady Labib

27 May 2015 9:16 pm

 

It does not seem so long ago that Egyptians were all so fired up over the prospect of building a new Suez Canal that they managed to come up with EGP64 billion in a mere eight days to finance it. But even more amazing was the fact announced by Hisham Ramez, Governor of the Central Bank of Egypt (CBE), that some EGP27 billion of the total sum raised had come from outside the banking sector, meaning that Egyptians had dug into their personal savings to finance the project. That was less than a year ago, when the CBE issued investment certificates to raise funds for the mega project, and they sold out in a few days.

The New Suez Canal project establishes a new 72-kilometre canal, parallel to the current one, to speed up transit time and allow ships to sail into both directions at the same time. Huge development is planned along the banks of the canal in order to turn it into an international, state-of-the-art trade and logistics hub that would be the fulcrum of shipping activity in the Middle East.

Today, the new waterway is near completion. While on a visit to Moscow earlier this month President Abdel-Fattah al-Sisi invited his Russian counterpart, Vladimir Putin, to attend the inauguration of the New Suez Canal project, scheduled for August this year.

 

Bridging continental Egypt and the Sinai

“The Suez Canal is one of Egypt’s main sources of foreign currency, and 10 per cent of international trade passes through it,” Motaz Raslan, head of the Canada Egypt Business Council (CEBC), told an audience at a recent event organised by the CEBC under the title “The New Suez Canal Project…the New Egyptian Economic Artery”.

According to Mr Raslan, the project once in operation is expected to increase the revenue Egypt reaps from the Suez Canal by leaps and bounds, and to provide more than a million job opportunities. He stressed that the new project would benefit not only the Egyptian economy but also global trade.

“Egyptians strongly support this national project,” he said. “What better proof to this than that the billions needed to fund it were raised from the public in a mere eight days. Because all Egyptians believe in the advantage of this project, it gives them a motive to accomplish it on time.”

Chairman of the Suez Canal Authority (SCA) Mohab Mameesh couldn’t agree more. “This is a national mega project,” he said. “We are making use of all our wealth of economic, technical and engineering experience to accomplish it.” He explained that the digging and dredging work to widen the canal to almost double its current width started on 5 November 2014 and that the opening of the first phase is planned for August 2015.

“The project is planned so as to ensure a substantial increase in canal revenues and benefits from the expected growth in international trade. Equally important is that the project involves the digging of six tunnels under the canal; these will link the Sinai Peninsula to the rest of Egypt and ensure that development extends to this remote part of Egypt and that it is no longer separated from the motherland.”

 

 

 

 

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Beating the deadline

“The idea of building the New Suez Canal emerged when revenue from the [old] canal recorded an unprecedented USD5 billion in 2014, despite all the turmoil in Egypt since the Arab Spring uprising in January 2011,” Admiral Mameesh said. During those years Egypt fell into the hands of the Islamist Muslim Brotherhood until, in July 2013, the military responded to mass public demonstrations demanding the overthrow of the Islamists. Today Egypt is under secular rule.

“All business indicators showed that international trade between the East and West was booming,” Admiral Mameesh said. “It was therefore imperative for Egypt to expand accordingly in order to fulfill the needs of the growing economy and jump the gun on any other country that might decide to build an alternative trade route. The SCA conducted the required feasibility studies covering the various economic, technical and engineering aspects of the project.

“With the dry digging operations of the New Suez Canal now completed,” Admiral Mameesh said. “we are now proceeding with the largest dredging operation ever known; we have beaten the set deadline of three years and are completing the waterway in one year. The purpose of the dredging is to reach the required depth to ensure that the old and new canals are at the same ground level which will allow for the flow of water between the two.”

Admiral Mameesh said all on-site operations, such as the supply of spare parts, logistics, insurance of local and foreign workers, planning, follow up, digging and dredging are conducted with the highest precision. According to the estimates of international consultancy firms, the national project should be completed in five years; those in charge of the project, however, have pledged to complete it in three.

 

 

 

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The solid facts

Despite the countless superlatives used to describe the project, there’s nothing like the solid figures to give a real feel of the staggering scale of the work. So far, the dry digging has been accomplished and 227 million cubic metres of sand were lifted, said Admiral Mameesh. Some 140 million cubic metres of wet sand were also removed, he said, noting that the progress is nothing short of “miraculous”.

Admiral Mameesh explained that the New Suez Canal will be equipped with the most modern seamarks and buoys to achieve the highest level of navigational safety for passing ships. A total 110 buoys will be installed by June, in addition to guidance and control stations, he said. The main station will be established in Ismailiya, midway along the canal, and the navigation control system for the canal will be developed.

The project is expected to increase the Suez Canal revenue by USD5 billion annually. Furthermore, as Egypt becomes an international logistics hub more job opportunities will be created, improving the economy and opening new areas for development.

According to Yehia Zaki, Director of Operations at the Dar al-Handasah group which was awarded the consultancy for the New Suez Canal project, the general layout of the project includes six main axes to create international industrial and logistics hubs in one integrated plan. The studies conducted, including environmental studies, led to a general plan that aims at creating new urban communities to the west and east of the Suez Canal to provide global marine services, logistics, transport, roads and railroads, and industries including those related to marine navigation. The area will also include major commercial activities related to ports, transport and containers. Last but not least it will also include housing and energy generation projects.

 

Double the current population

The New Suez Canal Project plan was also based on demographic studies of the area which currently has a population of 2.8 million that is expected to double by 2030/2040. By that time, more than a million job opportunities will have been created in Port Said, Ismailiya and Suez governorates.

According to these plans, Mr Zaki said, the requirements of the development areas are being studied, especially public utilities and infrastructure, and the expected needs of power, electricity and water are being estimated. The available land plots are also being examined to choose the most promising, and so far the best ten plots have been identified on an area of 650,000 sq. km. The general layout of factories has been set until 2030, allowing for flexibility in factory distribution according to market needs.

Several ports in the region are also being developed, especially those of Damietta and Port Said on the Mediterranean and Ain al-Sukhna on the Red Sea. All the ports will be interconnected through a network of roads and railways.

 

Law for special economic zones

According to Hani Sarie al-Din, head of Sarie Eldin & Partners, legal consultants to the project, “The New Suez Canal Project is expected to employ about 35 per cent of Egypt’s work force and to contribute 30 to 35 per cent of Egypt’s GNP within the next 10 years. It is therefore imperative to work in accordance with a law that puts an end to investment impediments.”

Dr Sarie al-Din said that Egypt’s notorious government red tape had slowed down investment procedures. The Special Economic Zones law was issued in the 2002 to facilitate investment procedures, but was unfortunately halted because of complications related to land ownership and infrastructure.

Because it is important to adopt a flexible decision-making approach, Dr Sarie al-Din suggests that the Suez Canal project be managed by an independent board consisting of only four ministries which would be under the direct supervision of the president or the cabinet. Such a board would be better suited for quick decision making which would benefit the investments in this area, he said.

Even though the new Investment Law was issued in March to facilitate investment procedures by adopting a one-stop shop approach for issuing government permits, Dr Sarie al-Din said that the law of Special Economic Zones was better suited to deal with the peculiarities relating to projects established under special economic status.

The main provisions of the law secure autonomy for special economic zones and place them directly under the supervision of the president of the republic or the cabinet, thus serving swift decision-making. These zones are also granted generous incentives and guarantees in terms of taxes, custom duties, permits, labour laws, and work regulations. As Dr Sarie al-Din sees it, the law comes closest to allowing special economic zones to operate as a ‘State within a State’.

 

Watani International

27 May 2015

 


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