The Suez canal

The project was included in most of the main candidates’ 2012 election campaigns, though not the now-ousted President Morsi, who nevertheless embraced it once in office – only to be subsequently accused by opponents of attempting to use it to seize public land for political gain. With Morsi now replaced by interim President Adly Mahmoud Mansour following the coup d’état in 2013, many hope that revitalising the Suez Canal will help restore the country’s economy, which has struggled amid three years of political and economic turmoil in the wake of the popular revolution of 2011.

Project appeal

Throughout that period, the Suez Canal has remained a major source of hard currency, netting around $5bn a year – an important contribution to the national coffers at any time, but never more so than in recent years, when foreign investment and tourism revenues have both seen significant reductions.
Even so, the Egyptian government says that figure could be much higher, up to 20 times higher according to some, with the proposed industrial and logistics development to service the near 10% of global trade – and 20% of the world’s container traffic – which makes its way along this 120-mile corridor.

The appeal is obvious, but with political tensions still bubbling, the security situation uncertain and controversy already surrounding the project, it is clear that there are some big challenges to be faced from the outset – quite aside from the scale of the construction itself.

Huge undertaking

It is set to be a huge undertaking, whichever of the 14 local and international joint ventures, chosen from the original 33 respondents, ultimately wins the bid. The government plans to develop four seaports in three key areas along the canal – Ismailia, Port Said and Suez – with a number of associated big infrastructure projects also forming part of the overall programme, including a ‘Technology Valley’ and a new industrial zone.

The recent rescue of 52 scientists from a vessel trapped in Antarctic ice has brought icebreakers into the spotlight.

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The full cost of the project is yet to be announced, but a $3.5bn stimulus package has been promised by the end of the year to help finance the work, which is expected to take about 20 years to complete and result in around 450,000 direct jobs, with a further 1.2 million supported indirectly.

The international consultancies involved include Worley Parsons, Witteveen + Bos, AECOM Middle East, Scott Brownrigg, Port Consultants Rotterdam BV and McKinsey & Co. The Suez Canal Authority (SCA) will select its preferred bidder from among the contenders by mid-2014. The winners will then have six months to flesh out their proposals, before the final, detailed scheme is put before Egypt’s government, with the initial stages of the work provisionally scheduled to get underway early in 2015.

Security implications

How well that all goes to plan, some observers suggest, may depend heavily on the wider security situation in the country.

One of the major sources of controversy over the project within Egypt itself was the new Suez Canal Development Law proposed by President Morsi, which many feared would create a ‘state-within-a-state’, and potentially cede territory to countries, such as Qatar, with links to the (then-ruling) Muslim Brotherhood. Although last year’s military coup removed the Morsi regime and its draft law, the threats to close the canal to shipping made by activists in the affected areas, which already had a long history as flashpoints for violent unrest, has left few in any doubt of the potential for disruption to the project.

Moreover, they are not the only ones to have seen the propaganda value of interrupting the flow of vessels through this vital waterway.

“The Suez Canal has remained a major source of hard currency, netting around 5bn USD a year.”

Attacks on shipping

There has seldom been a shortage of groups hostile to the Egyptian government – past or present – to be found in the areas that surround the Suez Canal, and relatively low-level attacks on state-owned targets and personnel can be described as almost endemic. However, things assumed a different tone last year when, on 29 July and then again at the end of August, two ships navigating the canal were fired on with rocket-propelled grenades (RPGs). Neither suffered significant damage, but the implications were clear. As Christian Le-Miere, senior fellow for naval forces and maritime security at the International Institute for Strategic Studies (IISS), wrote in the IISS Voices blog, “The sinking of a vessel in the Suez Canal would effectively shut the entire canal for several days, if not weeks.”

Responsibility was claimed in September by the Furqan Brigades – a group which shares al-Qaida’s ideology, if not a direct link to them – confirming previous suspicions that they had been behind the attacks on what they called “the artery of commerce of the nations of disbelief and tyranny”.

Although few analysts believe that RPGs could sink a major vessel, and so force the closure of the canal, achieving that goal by other means is unlikely to be beyond the scope of the Furqan Brigades or other militant groups operating in the area. Even if a sinking was not achieved, the damage done by a successful attack to the reputation of the canal as a major shipping route – and the political and economic environment within Egypt – would be instant.

Uncertain future

There has already been a mild foretaste of what that might entail. According to the SCA, year-on-year traffic through the canal fell in 2013 by 6.6% overall, with a 4.4% reduction in oil tanker traffic and a 5.4% fall in container shipping over the period. How much of that decline can be put down to the industry’s reaction to last May’s increased tolls and how much laid at the door of rising security concerns is, of course, open to debate. What is clear, however, is that the spectre of maritime terrorism, coupled with the country’s current mix of political unrest and economic uncertainty, appear to be casting a long shadow over the future of the Suez Canal Regional Development Project, at least for now.

Industry insiders describe what exactly is changing and detail surrounding compliance options.

Will that all change and allow it to be the salvation of the beleaguered nation’s economy, yielding the planned – and much needed – $100bn a year in revenue and solving chronic unemployment which (unofficially) runs at over 20%? Or will the project simply be scuppered before it ever gets off the ground?

That may become much clearer once the bids start to come in, and international confidence in the scheme can be gauged. At the moment it seems likely to go ahead, but the situation, particularly in and around Sinai, is volatile at best and could change very quickly. In many ways, the future of the project is something that only the Egyptian people themselves can decide.