New Suez Canal

The New Suez Canal (Arabic: قناة السويس الجديدة‎) is the name of a waterway project in Egypt, expanding the existing Suez Canal between the Mediterranean Sea and the Red Sea. It was launched simultaneously with plans to build six new tunnels under the canal and to transform a 76,000 km² area on both banks of the canal into an international logistics, commercial and industrial hub that would "create one million jobs". These projects were first announced during the presidency of Mohamed Morsi by the Chairman of the Suez Canal Authority Mohab Mamish it was later launched by Egyptian President Abdel Fattah el-Sisi on 5 August 2014.

Overview

The Suez Canal is the shortest shipping route between Europe and Asia, as it acts as an alternative to Cape of Good Hope route. The new works increase trade alongside the canal.^[2] The enlarged canal will allow ships to sail in both directions at the same time over much of the canal's length. This is expected to decrease waiting hours from 11 to 3 hours for most ships.^[3] and to double the capacity of the Suez Canal from 49 to 97 ships a day.

The New Suez Canal works are expected to be 72 km (45 mi) long – this will involve 35 km (22 mi) of dry digging, and 37 km (23 mi) of "expansion and deep digging",^[2][4] whereas the whole canal is 164 kilometres (102 mi) long. Six new tunnels for cars and trains are also planned to end the isolation of the Sinai peninsula, connecting it better to the Egyptian heartland.^[5] As of 2015, there was only a single tunnel under the Canal, the Ahmed Hamdi Tunnel that connects Suez with the Sinai.

The construction of the new canal itself was initially scheduled to take five years. It was then first reduced to three years and finally ordered by President Abdel Fattah el-Sisi to be completed in one year only.

Benefits and risks

The chairman of the Suez Canal Authority, Vice-Admiral Mohab Mamish, announced that the revenues from the Suez Canal would jump from 5 billion dollars to 12.5 billion dollars annually. There are major risks to the economic viability of large-scale infrastructure projects such as the New Suez Canal. These include delays during construction, cost overruns, and lower than expected revenues. Due to poor planning, technical difficulties have already arisen, such as the flooding of the new canal through seepage from the existing canal. This has apparently happened because the distance between the two canals is only 750 meters, half the distance recommended by engineers. Furthermore, the official estimate that traffic will double in the first year of the canal's operation is vastly exaggerated, according to the Egyptian trade expert Dr. Omar el-Shenety.^[6] Furthermore, any traffic projection could be affected by a slump in global trade or by higher fees that are expected to be levied.^[7]

Cost and funding

The expansion of the canal and the tunnels are expected to cost around 60 billion Egyptian pounds (US$8.4 billion).^[8] 30 billion Egyptian pounds will be for digging the new canal and the other 30 billion will be for the 6 new tunnels. President el-Sisi refused to allow foreign investors to invest in the project, but rather he urged Egyptians to participate in funding the project. Initially the project was to be financed through a stock market IPO, allowing partial private ownership of the project. However, the government quickly changed its financing strategy, relying on interest-bearing investment certificates that do not confer any ownership rights to investors.^[7] Resident Egyptian citizens were asked to buy certificates worth 10, 100 or 1000 Egyptian pounds. The smallest investment certificates would allow students to invest in the project. According to a law signed by President el-Sisi on September 1, the four banks of Banque Misr, National Bank of Egypt, Banque du Caire and the Suez Canal Bank sold the 5-year non-transferable certificates issued by the Suez Canal Authority with a 12 percent interest, about 1.5 percent higher than similar certificates issued by Egyptian banks. Interest on the 1000-pound certificates, which account for the bulk of sales revenues, will be paid quarterly. Interest on smaller denominations will be paid out after five years. Investors are allowed to borrow from the banks up to 90 percent of the funds needed to buy the certificates, which was done to the tune of 4 billion pounds, or about 6 percent of the total. 82 percent of the certificates were sold to individuals. Interest from the certificates is not taxable.^{[5][9] [10] [11]} To the surprise of Central Bank Governor Hisham Ramez, investment certificates were sold within only eight working days and the Central Bank stopped issuing new certificates afterwards.^[12] The project will reduce the availability of government revenues for other expenditures, as the Ministry of Finance guarantees the certificates and sets aside funds in a special account at the Central Bank to pay quarterly interest of 1.9 billion pounds.^{[13] [14] [15]}

After President el-Sisi announced the project, Egypt's stocks briefly rose to the highest level in the past six years, but dropped again sharply in the course of September.^[16]

Companies involved

On 19 August 2014, 42 companies were selected to work on the canal "under the supervision of the Egyptian armed forces".^[17] In October 2014 Egypt signed contracts with six international dredging firms: the National Marine Dredging Company of the United Arab Emirates; Royal Boskalis Westminster and Van Oord, both based in the Netherlands; Jan de Nul Group and Deme Group, both of Belgium; and U.S.-based Great Lakes Dredge and Dock Company. The companies would work in five zones while engineers from the Egyptian Army work in a sixth zone.^[18]

In October 2014 state-owned Arab Contractors and the private Orascom Construction Industries (OCI) were selected to build four tunnels, two for cars and two for railways. In November 2014 the Armed Forces announced that alongside the above contracts, the German firm Herrenknecht was selected to provide drilling equipment to build the tunnels.^[19]

On 19 August 2014, a Master Plan for the study of investment opportunities in the Suez Canal area was awarded after competitive bidding to the engineering firm Dar Al-Handasah in cooperation with the Armed Forces Engineering Authority.^[20] It is expected to last six months, resulting in an investor's conference in March 2015. Additionally, the French engineering services company Egis Group was nominated by the World Bank to evaluate the performance of the master plan.^{[5] [21]}

During a state visit to Russia, President Abdel Fattah el Sisi said that he had agreed with his Russian counterpart President Vladimir Putin to establish a Russian industrial zone as part of the new project.^[22]

References

Suez Canal Authorities Suez Canal Authority (SCA) Port Said Port Authority Suez Governorate Ismailia Governorate Port Said Governorate Cities and ports Port Said Port Fuad SCCT container terminal Ismaïlia Suez Suez Port Infrastructure Waterworks Suezmax Lake Manzala Lake Timsah Great Bitter Lake Fresh Water Canal New Suez Canal Constructions Lighthouse of Port Said Suez Canal Bridge El Ferdan Railway Bridge Ahmed Hamdi Tunnel Power line crossing Marine life Lessepsian migration List History Heroopolite Gulf Canal of the Pharaohs Société d'Études du Canal de Suez (1846) French/UK operation Ferdinand de Lesseps Isma'il Pasha Suez Canal Company Convention of Istanbul First Suez Offensive Anglo-Egyptian Treaty of 1936 Suez Crisis Operation Musketeer Operation Tarnegol Operation Telescope Protocol of Sèvres United Nations Security Council Resolution 118 United Nations Security Council Resolution 119