As an exercise in getting a large-scale infrastructure project – and a massive industrial development – off the ground, it is probably unparalleled. An appeal to the Egyptian people to fund the widening and deepening of the Suez Canal was met with such enthusiasm that it took just eight working days to raise LE64bn ($9.1bn) – around LE4bn ($568m) more than was being sought. The president, Abdel Fattah El Sisi, reduced the time allotted for the work from five years to three years and then 12 months. Within 24 hours of El Sisi officially launching the project, approximately 7500 workers under the supervision of the Egyptian Army Corps of Engineers began digging.
The first phase involves digging a 34.4-km canal parallel to the existing waterway, from the Mediterranean to the Bitter Lakes, followed by doubling the size of the 37.6 km of four of the six bypasses south of the lakes. Figures for how much sand needs removing to achieve this feat vary but the most commonly quoted figure is some 250m cu metres.
Since the 193.3-km Suez Canal was opened in November 1869, it has been expanded several times to meet the changing needs of the global maritime industry as well as to take account of the ever-increasing size of the vessels that use it. Some 60% of the canal, 112.8 km, is single lane with ships able to pass each other only in the six bypasses.
The 10% of global trade that passes through the waterway translated in 2013 into more than 16,500 ships, mostly travelling in convoys down the 60-metrewide one-way stretches. Doubling the canal’s capacity will eliminate the need for convoys, also doubling the number of ships that can transit the waterway to around 95 a day. The same concept of two-way traffic occupied the thoughts of engineers working for Darius the Great in 510 BC. They were instructed to make the channel wide enough for two triremes to pass each other. Passage time for today’s large, very large and ultra-large ships will come down from an average of 18 hours to 11 hours, cutting operating costs for the ship-owners while increasing revenues for the state. Work on the Suez Canal is a mega-project in its own right, but it is only half the story. The enlarged transit route is part of a development plan for the whole Suez Canal Zone (SCZ).
The international project consultancy Dar Al Handasah has been awarded the first phase of that plan, which is to conduct an overarching study on the investment opportunities in all the geographic areas of the SCZ to serve as the basis for a master plan. That work started in September 2014 and will last six months, with its results scheduled to be announced to local and international investors at an economic conference in March 2015. In tune with the urgency associated with the entire project, it is believed that the government will be ready to offer the first tenders for fast-track projects at this conference.
According to Nahed Ashry, the minister of manpower, “A million job opportunities will be provided through the project and 76,000 sq km on both sides of the canal will be developed, as well as the reclamation and cultivation of nearly 4m acres.”
Mohab Mamish, chairman of the Suez Canal Authority (SCA), announced in August 2014 that the French engineering services firm Egis, nominated by the World Bank, had been selected to evaluate the performance of the project’s master plan. Dar Al Handasah’s study is completely separate from work on the canal itself. The brief is to make feasibility studies and to define the industrial and agricultural projects needed, as well as their sizes and locations. Once the plan has been approved by the government, it will be carved up into individual projects to be put out to public tender.
Along with tourism, the Suez Canal is the one of the country’s main foreign currency earners and there are expectations that with twice as much traffic current revenues will at least double when the expansion is complete. Dredging the canal to a depth of 24 metres will allow fully loaded giant vessels to transit and the government has estimated that total fees would rise from the current $5.5bn (the estimate for 2014) to about $10bn annually when the canal operates fully at its new capacity. Ashraf El Araby, the minister of planning and administrative development, was even more bullish. He told viewers during a television interview in August 2014 that he expected the waterway’s income to rise to around $13bn after the completion of the expansion project.
Mamish has already announced improved figures for the first eight months of 2014. He said the canal had achieved revenues to the value of $3.9bn during the period from January to August 2014, counting both dollars and Egyptian pounds. This compared with $3.3bn for the same period in 2013.
Tonnage and numbers of vessels in 2013 fell from the totals of the year before so the improved 2014 results are in part recovering lost income.
In line with other signs of recovery, like tourism, the August Suez Canal figures are indicative of the scale of the upward trend. The Cabinet’s Information and Decision Support Centre (IDSC) said revenues rose by 12.1% to $510m in August 2014 compared with the $455m in the same month of the previous year. An IDSC report on economic and social indicators said the number of ships crossing the Suez Canal in August rose by 8.8% compared with August 2013 to 1577 vessels.
Important to the economy though the canal is, even such a mega-earner pales beside the size of the development plans for the land on each side. Total state revenues should rise exponentially with the additional income associated with the SCZ’s services. The zone’s expansion plan includes establishing petrochemical, commercial and financial services as well as the million jobs that Ashry spoke of.
Ashraf Salman, minister of investment, told reporters that the project would see revenues of $2bn-5bn in the next two to three years, quite apart from a projected $220bn in investments over the next 15 years.
Hany Sarie-Eldin, managing partner of legal advisers Sarie-Eldin & Partners, part of the Dar Al Handasah group, told The Daily News that the entire SCZ is expected to be completed over 10 years. He added that some investment projects would begin operating immediately after the report for the master plan is completed. An outline for the report – in effect a structured contents page – is already known. There are six main sections. After detailing an overall strategy for economic development within the canal region, a second section will lay down a general engineering outline. Third comes the identification of uses suitable for the land surrounding the ports in the region, and this will be followed by a study on the investment opportunities available and how to market them.
The last two topics are an in-depth assessment of the economic, environmental and social impact of the project and a programme for presenting the plans to local and foreign audiences. “The Egyptian administration hopes to turn the two banks of the Suez Canal, one of the most important shipping lanes in the world, into an international commercial and industrial centre,” Sarie-Eldin added.
Incorporated into the overall project are six new tunnels for cars and trains. As well as the obvious improvement to logistics, the increased connectivity will enable development of the Sinai and enhance security by ending the peninsula’s isolation.
Al Ahram newspaper said, “The emergence of a strongly diversified economic hub in that area will be favourable for expansion in trade, tourism and the retail business,” adding that the project was expected to attract Egyptian, Arab and foreign investors “to finance industrial and export services north-west of the Gulf of Suez and east of Port Said”.
Sitting at the Mediterranean entrance to the canal, Port Said has been home to the Suez Canal Container Terminal (SCCT) for the past decade. The facility is used almost exclusively for trans-shipment and has been expanded since it was first opened in 2004 to the extent that it is now the biggest container terminal on the Mediterranean.
The latest expansion doubled its capacity from 2.7m twenty-foot equivalent units (TEUs) to 5.4m TEUs and quay length from 1200 metres to 2400 metres, while increasing the draught to 16 metres.
A new container port adjacent to the SCCT is due to open at the end of 2016, increasing the TEU capacity by a further 3m. The Ministry of Investment signed an agreement with the Kuwait-based United Arab Shipping Company, which will cooperate in developing the $680m container terminal with the Port Said Cargo and Container Handling Company.
In addition to expanding TEU capacity at Port Said, there will also be enlargement to terminals handling liquid cargo, dry bulk, agricultural shipments, roll-on-roll-off ships and bunkering.
Dredging contracts for the canal itself were signed with six international firms in October 2014. The companies were named as National Marine Dredging Company of the UAE; Royal Boskalis Westminster and Van Oord, both based in the Netherlands; Jan de Nul Group and Deme Group, both of Belgium; and US-based Great Lakes Dredge and Dock Company. SCA chairman Mamish said up to 36 dredgers would be needed to remove about 250m cu metres of material and the companies were scheduled to start work within a week of contract signing.
One of the most remarkable aspects of the whole canal project was the speed with which money to finance the expansion was raised. The largest public offering and fund-raising campaign in Egypt’s history took eight business days in September 2014. More than four-fifths of the LE64bn ($9.1bn) total raised came from individuals, with LE27bn ($3.8bn) being sourced outside the regular banking system.
Indeed, with only 10% of Egyptians having bank accounts, according to the World Bank, getting that order of financing from individuals with bank accounts would have been unlikely. Hesham Ramez, head of the central bank, said 88% came from individuals.
That so much money was raised internally in this way, making the works essentially a “people’s project” became a source of national pride. It is also being portrayed in the media as a barometer of confidence not only in the financial viability of the enlarged canal but also more broadly in the government itself.
The vehicle for the canal funds was the sale of five-year investment certificates bearing 12% annual interest, payable quarterly. Their accessibility to the wider population was perhaps best illustrated by the value of the certificates. They were issued in denominations of LE10 ($1.42), LE100 ($14.20) and LE1000 ($142). The interest rate is 1.5% higher than that offered on almost all similar-term investment certificates issued by a number of public sector banks, part of which made it so attractive. The certificates bear the name of the Suez Canal Authority, are guaranteed by the Ministry of Finance and were made available through four public banks, the National Bank, Banque Misr, Cairo Bank and the Suez Canal Bank. They are non-transferable and free from both tax and administration fees.
While the numbers for the two Suez projects, whether millions of cubic metres of sand, tens of thousands of workers or billions of dollars in costs, reach dizzying heights, there is already news of other big-number projects being developed alongside. The Ministry of Supply and Internal Trade said in October 2014 that Al Sweiden Holding, a UAE company, planned to build a commercial and shopping district close to the Suez Canal Zone. The LE40bn ($5.7bn) project, covering more than 4.2m sq metres, is expected to provide 500,000 jobs after the first phase is finished. Al Sweiden is also behind the establishment of a logistics centre for food products in Damietta, which is slated to handle around 65m tonnes of grains and other foods a year (see Transport chapter).
Earlier the ministry had announced the construction of two other logistics centres for food distribution – in East Port Said and Safaga.
The cost of building the three logistics centres, which are expected to provide about 20,000 jobs during construction and operation, will be LE13bn ($1.8bn). Completion is scheduled for 2016-17.
The scale of the activity is a far cry from the days of Senusret III, the Egyptian pharaoh who started building the first canal from the Nile River to the Red Sea in 1874 BC. Completion came more than 1300 years later at the hands of the Persian king Darius the Great. Even a partial share of the modern canal was short-lived. In 1875, six years after the canal opened, Egypt found itself short of money and sold its shares to Britain. This time the Egyptians plan on completing the job themselves – and benefitting from the results.
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