Undoubtedly, as the Egyptian President Abdel Fattah Al-Sisi said last week at its inauguration, the new Suez Canal will “change the map of the Egyptian economy for the better, and bolster Egypt’s international standing”.
Like how it did when the first Suez Canal opened over 150 years ago, in 1869, after 10 long and painful years of construction.
It had been an amazing engineering marvel, at that time. A feat that helped cut down time and distance, as hundreds of ships were able to soon sail from the Mediterranean sea into the Arabian sea, without having to go all around Africa.
The canal in 1869 had cut down the sea-route distance from Europe to India by about 7000 kilometres, increasing the speed of transportation and communication and, thereby, the size of global trade.
His Majesty King Hamad bin Isa Al Khalifa who attended the new canal’s inauguration on August 6 paid tribute to the crucial role of the Egyptian army which carried out the mega project in a record time, hailing its long-standing history and its landmark achievements over years. And rightly so.
The mammoth task deserves praise.
But to get full benefits from this mega project, I feel, it is essential that Egypt improves its administrative system.
Since the 2011 uprising which toppled Hosni Mubarak, the successive governments, we all know, were unable to sustain stability.
President Al-Sisi has a great challenge ahead if he really wants to increase revenues from hundreds of ships transiting through this new canal expansion.
According to ‘The Economist’ magazine, “Egyptian officials say that the $8.2 billion project, which expands capacity to 97 ships per day, will more than double annual revenues to some $13.5 billion by 2023.
“That, however, would require yearly growth of some 10%, a rosy projection given that in the entire period from 2000 to 2013 world seaborne shipping grew by just 37%, according to UNCTAD.”
So, unless international trade agencies and shipping businesses are made to realize that they are sailing through no rough weather, it is unlikely that economy will improve.
And the new Egyptian government’s task now is to convince the global leaders that Egypt is back on its feet, and ready to run.
What is really praise-worthy is that the debt-strapped Egyptian government successfully ensured that this project is domestically financed. Egyptians last year snapped up nearly $9 billion in special investment certificates at 12% interest.
But, they had bought them in local currency, in a country where inflation is currently running at over 10%, which could give debatable yields, in the long term.
What could definitely bolster the economy is if Egypt’s plans to turn the whole Canal Zone into a giant logistical, ship-servicing and manufacturing hub come to fruition.
The strategic location of the canal gives Egypt enormous leverage. As the main shipping canal connecting Europe with India and Far East, it can give Egypt’s finances, the much needed boost.
Like for the Panama canal, in Central America – which, incidentally, was also dug under the leadership of the same engineer who oversaw the digging of the first Suez Canal – the shipping traffic can give the much needed revenues for strengthening the economy.
Egypt’s leadership must convince with effective governance that good growth is possible. Only when others are convinced of the leaders’ inspiration will they believe its possible!
Here’s what Ferdinand de Lesseps, the engineer, had said about the first canal project: ‘Since 1849 I have studied incessantly, under all its aspects, a question which was already in my mind since 1832. I confess that my scheme is still a mere dream, and I do not shut my eyes to the fact that so long as I alone believe it to be possible, it is virtually impossible’.