Grand give and take
Today I halt—if only briefly—the Problems on Hold series, in order to tackle a topic definitely not placed on hold. It is the enthusiastic and joyous rush by Egyptians to finance the project of the Second Suez Canal which Watani described in a story printed last month as “The Suez Canal: dug by our forefathers under forced labour…and by their grand children in dignity”. Now we witness with pride the progress on the twin Suez Canal megaproject. Even though the new canal will not exceed in length a third of the original waterway—72km as compared to 200km—it will pump fresh blood into its twin, opening up unlimited opportunities in foreign trade and development projects on its shores. This relatively short canal will work as the foundation of a promising economic miracle that should go down in history as a great achievement by the Egyptian people.
It is not possible to assess this megaproject on economic merit alone: through studies of feasibility, cost, return on investment, and funding by local or international sources. The project goes beyond economic worth; it carries significant added value to global trade, offered by Egypt. It was thus imperative for Egyptians to shoulder the funding and execution of the project that augments the balance of their achievements through the ages.
Hence the Egyptian administration invited Egyptians to contribute in the financing of the new Suez Canal. Given the decline in Egypt’s economy owing to the tumultuous after-effects of the Arab Spring uprising in January 2011, the State coffers could not have provided the financing. Only the Egyptian people could have funded it, as a point of national honour. The eagerness with which they responded to that invitation confirmed that time and again Egyptians have been willing to band behind any national project. It proved they have always been up to the challenge, their proud patriotism never balked at offering all that is dear for the good of their nation.
After studying various means of public financing, Egypt’s economic and political authorities decided against a public offering of shares, since these would involve variable dividends and tricky ownership issues. It was a unanimously agreed upon fact that the Suez Canal was Egyptian and should remain purely so. The viable option thus was to offer the public a savings tool limited in time and of fixed return, the Suez Canal Investment Certificates were thus born. The conditions were as follows:
• The Suez Canal Investment Certificates (SCICs) are five-year savings vessels issued by the Suez Canal Authority through the National Bank of Egypt, Banque Misr, Banque du Caire, and the Suez Canal Bank. The banks sell the certificates in all their branches inside and outside Egypt to Egyptians alone. Agents of these banks, including post offices, also provide the SCICs.
• In order to allow all Egyptians no matter how limited their means to share in this massive national project, the certificates are issued in EGP10, EGP100, and EGP1000 denominations.
• The certificates yield 12 per cent yearly interest, the highest on all comparable savings tools on the Egyptian market. The interest is paid cumulatively or periodically, according to the category of certificate. The cumulative interest on investment certificates of EGP10, EGP100 and their multiples is paid to the owner at the end of the five year period, and amounts to 80 per cent of the capital. This means that by the end of five years the value of the original certificate is redeemed, in addition to 80 per cent of its value. As for the interest on the EGP1000 certificates, it can be collected quarterly and the original value redeemed at the end of the five year period.
• According to the administrative regulations of the Central Bank of Egypt, and in coordination with the four banks that issue the SCICs, the purchaser of a EGP1000 certificate and its multiples may have instructed the bank to use the quarter-year interest to buy new certificates. That is provided new certificates were still being issued. But the target sum of EGP60 billion (USD8.5 billion) was fulfilled last Monday, and new SCICs will no longer be issued.
The above information may already be common knowledge to many. However, I chose to print it for the benefit of those who did not grasp all the aspects related to the SCICs when they were first released, but who later noted the rush of Egyptians to buy them. I see the SCIC plan as safe and guaranteed. But best is what Egyptians are achieving for Egypt through these certificates.
21 September 2014