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October 22, 2014
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Egypt launches Suez Canal II project, reasserts image as building nation

The Global Patriot, a US cargo ship which was under short-term charter to the US Navy’s Military Sealift Command, sails in the Suez canal in Ismailia, Egypt, on March 25, 2008. The Global Patriot fired warning shots at a small Egyptian boat while passing through the Suez Canal. Egyptian authorities said at least one man was killed. (AP Photo)
By Guillermo Háskel
Herald Staff

New President al-Sisi announces the US$4-billion, 72-kilometre waterway whose construction will be carried out by the country’s armed forces

The announcement by Egypt that it will build a new waterway parallel to the Suez Canal is aimed not just to keep pace with growing international trends but also to boost revenue in a country that has been forced to become the world’s largest wheat importer to feed its 84 million people.

And, at the same time it is designed to tell the world that while other Arab states are plunged in chaos and violence, the nation from which the term “pharaonic” was coined to describe mammoth public works, is resolved “to build,” international relations pundits told the Herald.

Revenue from the new project is expected to reach US$13.5 billion by 2023 versus the current US$5 billion from its 145-year-old predecessor.

The announcement on Tuesday was made with great fanfare by President Abdel Fattah al-Sisi, a former army head who came to power in June after overthrowing Mohammed Morsi, who lasted just one year in power.

Al-Sisi said that the construction of the US$4-billion (or so), 72-kilometre waterway linking the Mediterranean and Red Seas will create about one million jobs in a country where a quarter of the population lives below the poverty line.

The project comes at a time when a US$5.25-billion expansion of the Panama Canal is expected to be completed by early 2016 after some delays, and after Nicaragua in July approved a proposed route for a Chinese-led group US$40-billion 278-kilometre shipping channel to link the Pacific and the Atlantic Oceans to rival the Panama Canal. Construction of Suez II should start this year and inauguration is expected by 2020.

“We are racing against time because we are very late,” the Egyptian President said, adding that the works will take a year, an assertion disputed by experts.

Even Suez Development Authority head Mohab Mamish said the project was expected to be completed over five years. It includes tunnels for motor vehicles and trains.

“As global trade grows and the Egyptian economy needs to develop its sources of hard currency, we had to think about the project of digging a new Suez Canal,” Mamish said.

Neil Davidson, a senior adviser for ports at London-based Drewry Maritime Research, was quoted as saying by Reuters: “The strategic location of Egypt and the canal is a key advantage... being a key point where cargo can be distributed or worked on. This hubbing concept is extremely valuable.”

The current canal is the fastest shipping lane between Asia and Europe.

The new channel, which will allow vessels to pass each on the canal, will cut ships’ waiting time to a maximum of three hours from the current 11 hours as it will have a capacity for 96 ships a days versus the current 49, said Néstor Aleksink, the head of the Argentina Exporta consultancy.

International trade is facing new challenges and one of them is linked to attempts to curb logistics and transport costs,which have an impact on the final costs of goods, as well as on the setting of the taxable basis on which import duties are levied afterwards, he said, adding that investment plans and trade competition will be reflected in sea trade at the expense of air transport.

Horacio Calderón, a Buenos Aires-based international affairs pundit specializing in highly sensitive matters, told the Herald that Suez Canal revenue rose by seven percent year-on-year last May 2014 thanks to the easing of political tensions which had slowed GDP growth to just one percent on an annualized basis during the first quarter, he said. The country’s economy has been shaken by struggles and key sectors such as tourism, weakened after the 2008 world economic crisis and Egyptian political turmoil ultimately leading to the collapse of the economy which began after the palace coup ousting President Hosni Mubarak in 2011, Calderón added.

GEOPOLITICAL GAMES

The Armed Forces — the real economic power behind scenes — will lead the canal construction but in al-Sisi’s inner circle there is speculation that the new waterway will be funded also by foreign investors, mainly Saudi Arabia, Calderón said. The Saudi kingdom was outraged by Mubarak’s overthrow and the strengthening of the Muslim Brotherhood, an old Egyptian Islamist movement that the House of Saud sees as an existential threat to its long-standing monarchy, the expert added.

“Of course all the canal projects involve economic interests but at the same time they are all part of geopolitical games between powers such as the United States and China, among others. Suez II will also mean mainly a powerful geo-political leverage for regional actors such as Saudi Arabia and other Gulf countries,” Calderón said.

“The Nicaragua Canal is a full Chinese-funded project, which means that China is prepared to use it to counter the leverage of the US that could block the crossing of its ships in the case of a growing conflict in the Asia-Pacific region,” he said.

Amr Adly, a Cairo-based scholar at the Carnegie Middle East Centre, was quoted as saying by the New York Times: “Focusing on the canal, a symbol of independence and sovereignty for Egyptians, serves the nationalistic discourse of the new regime. He’s here to do something radical, or unprecedented, compared to Mubarak — and to show that the military have the intention to change things,”

Carlos Pérez Llana, a former Argentine ambassador to France, told the Herald that Suez II will be perhaps Egypt’s largest public work after the inauguration in 1970 of the Aswan High Dam on the River Nile under the 16-year tenure of strongman Gamal Abdel Nasser, who died that year.

“The new project comes as a natural decision. Trade is increasing and there are not many major works in the world.” The current Canal accounts for 22 percent of Egypt’s foreign currency revenue, which has been dwindling, mostly due to declining tourism. About seven percent of the world’s oil and 12-13 percent of the liquefied gas pass through it. “At the same time, it is highly symbolic. There is a new President and the project will be managed by the armed forces, not the Public Works Ministry. Saudi Arabia and Kuwait will be participating in its financing,” he said.

“Furthermore, al-Sisi has announced it near the anniversary of the construction of the Suez Canal by French and British capital 145 years ago and also near the anniversary of its nationalization by Nasser in 1956.

Nasser’s decision led to a failed invasion by Britain, the nation which controlled the channel, as well as France and Israel. But the Anglo-French intervention was defeated and the waterway was declared open to all countries.

Pérez Llana added that, at the same time, al-Sisi is also sending the message that “whereas several states in the area — Syria, Iraq, Lebanon, Libya, Yemen — are falling apart, Egypt is the only Arabic nation launching works.”

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