Wednesday, 13 August 2014
Egypt: El-Sisi Announces New Mega-Project on the Suez Canal
President Abdel Fattah El-Sisi announced, 5 August, a new plan to build additional channels on the Suez Canal which would deepen and widen the current passageway and construct new channels to speed up traffic, with an aim to greatly expand traffic along the trade route.
Admiral Mohab Mamish, the Chairman of the Suez Canal Authority (SCA), has said that the new channel would take five years to be completed, although the President has subsequently said that he would like to see the project completed in just one year.
An official with the SCA estimated that revenues from the expansion would reach US$13.5 billion by 2023, more than doubling its current revenues. We have not been able to determine how accurate these forecasts are, however, and remain sceptical about the merits of the new plan which will just cut waiting times to use the Canal and speed up transit. We are also unsure if this project, once complete, will attract additional ships to transit through it.
In the local media, the announcement has been hailed as the country’s new mega-project, and serves as a further indication of the scale of the new President’s ambitions, as well as tapping into the vein of nationalism. El-Sisi made clear that the army would take the lead and that any private partners (he mentioned that up to 20 firms could eventually be involved) would work under its supervision.
Work has already begun, with no public discussion of the merits of this investment and we have been told informally that the thousands of vehicles working on the project will use significant supplies of fuel, which remains in tight supply in the market at times. The President noted that shares would be offered to finance this project at different prices, although the financial regulator noted that the differential pricing of shares is illegal. It still remains uncertain how this project will be financed and, if shares are sold to finance it, what the shareholder would then be entitled to in the future.
At an expected cost of US$4 billion, we believe the economy would be improved more efficiently by investing in the modernisation of Egypt’s railway system, adding to the main cities’ mass public transport systems, and power stations (given the continuing power cuts, which are now running at up to five times a day in some areas), as well as spending on road building, water and electricity distribution in poor areas.
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