On August 6—years ahead of schedule—Abdel-Fattah El-Sisi presided over a historic moment for his young presidency: the completion of an $8.6 billion expansion of the Suez Canal. The enlargement of the important waterway, which was announced just last year, gives a glimpse not only to President El Sisi’s ambition but also Egypt’s path to charting a better future for itself and for the region.
The scene was perfect, showcasing a strong and united Egypt taking smart steps toward a prosperous future; not the picture of an unsettled Egypt that was relentlessly shown in mass media over the past few years. Distinguished guests from around the world were in attendance, including French President Francois Hollande, Jordan’s King Abdullah II, Russian Prime Minister Dmitri Medvedev, U.S. Congressman Darrell Issa, and U.S. Ambassador to Egypt Robert Beecroft.
The expansion is just the first step on a list of upgrades planned to help boost the Egyptian economy. Alongside the addition of the 45-mile channel will be a new industrial development corridor, the Suez Canal Area Development Project (SCZone), which will transform 76,000 square kilometers into an international commercial hub featuring four world-class ports, new sources of renewable and clean energy, as well as expanded agricultural, manufacturing, and wastewater treatment capacity.
Ultra Efficient Global Commerce
The Suez Canal’s 145-year-old history makes abundantly clear the waterway is one of the most important in the world. Nearly 10 percent of all global commerce and ships holding 416,000 tons of cargo pass through every year, shaving more than 5,000 miles off voyages around Africa for trips originating from Europe and Asia.
But the Canal’s expansion, by design, will make it an even more efficient and important anchor of global commerce. According to government-released estimates (table), the ship capacity per day will nearly double from 49 to 97. After the expansion, the ship waiting time will be reduced from 11 hours to just 3 hours. And transit time for southbound traffic will be reduced from 18 hours currently to 11 hours after the expansion. These are impressive numbers; but the project will do more than increase canal traffic volume. The creation of SCZone will transform the area to an innovative hub for international business.
Four Cutting Edge Ports
The Suez Canal is the second major contributor (after tourism) to Egypt’s $369 billion (2015 est. according to the IMF) economy. In 2014 alone, the Suez Canal generated $5.3 billion in revenue. And in the last 10 years, income generated by the Suez Canal infused $47 billion to Egypt’s economy. The four world-class ports in production—the East Port Said, the Ain Sokhna Port, the 10th Ramadan Dry Port, and the Ismailia Dry Port—will inject new life into this sector.
According to Egyptian government data, the East Port Said and industrial complex will be Egypt’s premier container hub and trade gateway. The expansion includes a $3 billion container terminal aiming to make this the fifth-largest port in the world.
The Ain Sokhna Port and Industrial Zone, located at the southern entrance to the Canal, will be transformed into an ultra-modern, multi-purpose facility, capable of handling large ships by increasing container capacity, making it Egypt’s main gateway to the Gulf Cooperation Council states, East Africa, and Asia. Alongside the port, 4,000 hectares will be made available for light and medium manufacturing activities, and 2,260 hectares for heavy industries. The construction of a business district will support commercial and retail activities as well as a research and development park.
Both the 10th Ramadan and Ismailia Dry Ports will help facilitate movement of goods between the ports and the domestic market. The 10th Ramadan Dry Port will eventually serve as the regional freight hub for all the ports of the SCZone while the Ismailia Dry Port will contain specialized facilities for the handling, transit, and storage of agricultural commodities.
Ahead of Schedule, Fast Forward to the Future
When the project was first announced last year, the Egyptian government projected a three-year timeline for the expansion of the Canal. Fast-forward a year later, the expansion is finished ahead of schedule. Despite the massive $8.4 billion cost, the upgrade was a high priority for the Egyptian government.
The financing for the upgrade was arranged by issuing uniquely generous interest bonds—at 12 percent—to every day Egyptians, and it was raised in a stunning six days. This was a clear demonstration that this was a project for the Egyptian people by the Egyptian people. And they stand to be beneficiaries of a nearly 260 percent increase in annual revenues. The Suez Canal Authority projects that the upgrades will increase the annual revenues from their current level of $5.3 billion to $13.2 billion in 2023.
The Egyptian people, through their investments, have demonstrated a belief not only in the viability of the mega project but also in their current President, his administration and their activist economic agenda. While Egypt’s leadership continues to wrestle with the myriad challenges it inherited from the political uprisings that marked the beginning of the Arab Spring, the country has forged a new path towards the future, one that will produce sustained prosperity for its people and increased economic opportunities from Asia to Europe.
Greg Lebedev is Senior Advisor to the CEO and Member of the Board of Directors at the U.S. Chamber of Commerce. Ana C. Rold is the Editor-in-Chief, Diplomatic Courier.
This article was originally published in the Diplomatic Courier’s September/October 2015 print edition.
Photo by Hassan Ammar for AP