Huge dredging barges have been widening and deepening the Suez Canal and dry digging has carved out a parallel channel in the light brown sand ever since President Abdel Fattah al-Sisi announced the ambitious expansion plans for a new economic zone centered around the waterway a year ago.
The dredgers’ enormous vacuums suck up millions of cubic metres of sand to allow another passage for cargo ships transiting to and from Europe, North Africa and Asia.
The authorities estimate that it will almost double throughput to 97 ships per day and raise billions of dollars in revenue.
The canal expansion project is predicted to raise annual revenue from $5.3bn in 2014 to $13.5bn by 2023
Source: Egyptian Government
Egypt raised the initial funding for the New Suez Canal project through a financing scheme that had traits of a popular crowdfunding campaign.
The Suez Canal Authority (SCA) sold investment certificates to Egyptian citizens and entities through four main public banks, and the government was able to raise more than the needed E£60bn ($7.8bn) in just eight days.
The five-year non-tradable certificates, guaranteed by the finance ministry and denominated in Egyptian pounds, carry an interest rate of 12%.
The fundraising effort was similar to one that the Ethiopian government launched for the construction of the Grand Ethiopian Renaissance Dam.
Besides the nationalist fanfare, the development plan itself is a significant undertaking.
The main focus so far has been on extending the canal itself by dry digging a new 35km waterway, along with expanding and deepening the existing canal over 37km.
The SCA reported that dry digging was completed in early May, and the expansion is meant to allow for two-way traffic and ease bottlenecks in order to cut transit time and allow larger ships to traverse the trade route.
The increased traffic, according to the government’s calculations, should bring an uptick in annual revenue to $13.5bn in 2023 from $5.3bn last year.
Plans to expand the Suez Canal area and develop it into an industrial, logistics and trade hub have gained momentum in the year since they were announced, all leading up to what promises to be an extravagant canal opening ceremony on 6 August.
“We expect that, upon the full development of this area, it will represent no less than 30% of the economic scale of Egypt,” says Hani Sarie-Eldin, the founder of Sarie-Eldin & Partners, a law firm that is part of an alliance to establish a master plan for the Suez Canal Area Development Project.
Officials have said that the economic zone, which spans around 450km2, will be a driving force for foreign investment, which has dried up in the years following the 2011 uprising.
Egyptian officials are approving legislation that would designate the area a special economic zone with its own regulatory framework.
A one-stop shop will have representatives from the many ministries and governmental entities that usually deal with investors.
The unified authority should facilitate the overly bureaucratic process of licensing, incorporation, gaining access to land and other aspects of doing business.
The grander economic zone is a long-term project, with the first phase due to be completed in 2030 and the second phase 20 years after that.
“We hope that by [August] the law will be issued and the new entity that will be in charge of this economic zone will be established and in operation,” adds Sarie-Eldin.
He explains that by legally establishing the area as a special economic zone, the proposed legal framework will “avoid the constraints faced with local investment laws and regulations by adopting the existing economic zone law which has not been fully enacted.
“We proposed some amendments to it as well to improve the quality of investment and the quality of the regulatory framework.”
With that, August will be one of the first tests to see if the government can get the economy back on track. ●
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