Egypt bets on $8bn Suez Canal facelift to refloat economy

Economists and shipping analysts question whether there is sufficient traffic and east-west trade to meet its revenue targets

NATIONALIST celebrations to inaugurate a major extension of the Suez Canal intended to power an economic turnaround began yesterday when Egyptian President Abdel Fattah al-Sisi boarded a historic yacht to welcome foreign dignitaries.

Dressed in military regalia, the former armed forces chief, who led a military takeover two years ago but ran for president as a civilian last year, sailed to Ismailia to join leaders of France, Russia and Gulf Arab states for the ceremony.

The $8bn New Suez Canal project was completed in one year instead of three on Mr Sisi’s orders, but economists and shipping analysts question whether there is sufficient traffic and east-west trade to meet its ambitious revenue targets. The canal expansion is the centrepiece of a grand agenda to lift the most populous Arab nation out of poverty and secure Mr Sisi’s grip on power after he ousted elected Muslim Brotherhood President Mohamed Mursi in 2013 following mass protests.

The inauguration was also intended to strengthen his international standing, with French President Francois Hollande and Russian Prime Minister Dmitry Medvedev among leaders attending.

Mr Sisi set sail aboard the yacht El-Mahrousa, the first vessel to pass through the Suez Canal when it opened in November 1869.

Yesterday was declared a public holiday. Cairo and other cities were decked out in bunting, with fairy lights hung from bridges over the Nile and banners proclaiming “From the mother of the world (Egypt) to the whole world”.

Newly delivered French Rafale fighters, US F-16 warplanes and helicopters flew overhead and naval vessels escorted the yacht.

The yacht was an ambivalent symbol, since King Farouk, the last monarch to rule Egypt, sailed into exile in Italy aboard it after being ousted by the military in 1952.

The country has been in turmoil since the Arab Spring uprising that deposed autocrat Hosni Mubarak in 2011, and many of Egypt’s nearly 90million people have suffered from the effects of a slower economy, a fall in tourism and high inflation.

The government believes the New Suez Canal and an industrial development zone around it will seal Egypt’s deliverance from economic purgatory, not many are sceptical.

The project involved extending a waterway parallel to part of the 19th century canal connecting the Mediterranean to the Red Sea, as well as deepening and widening the old channel — the shortest shipping route between Europe and Asia.

The project has been billed as a national accomplishment on par with president Gamal Abdel Nasser’s nationalisation of the original Suez Canal in 1956 and construction of the Aswan Dam.

State television broadcast shots of the new canal to the theme of the television series Game of Thrones.

For many Egyptians, as well as economists and experts, the immediate benefits of the expansion, funded largely by a public subscription in Egypt, are not obvious.

The Suez Canal Authority expects a windfall of additional revenue — up to $13.23bn annually by 2023 from just over $5bn last year, with the number of vessels using the canal every day rising from 49 to 97.

But sluggish world trade, competition from an expanded Panama Canal and a slower Chinese economy make it unlikely the project can achieve its revenue targets soon or bring about a significant fall in unemployment.