The project is still in the study stage, which is being conducted by the Suez Canal Authority with international consulting companies (Suez Canal Authority).

Cairo

- The announcement by the head of the Egyptian Suez Canal Authority, Lieutenant General Osama Rabie, of studying a project under which the full duplication of the maritime navigation channel would be completed raised questions about the cost, return, and timing dimensions.

In light of the economic crisis that his country is currently experiencing, and the sharp decline in canal revenues, due to reasons including the escalation of tension in the Red Sea.

Lieutenant General Rabie said that the project is still in the study stage, which is being conducted by the Authority in cooperation with specialized international consulting companies and will be completed within 16 months in preparation for presenting the project to the Egyptian government, provided that the necessary funding to implement the project in the future will be provided from the Authority’s investment budget approved by the Ministry of Finance. Without imposing any additional burdens on the state’s general budget.

While the announcement caused a state of controversy on social media platforms between supporters, opponents, and skeptics of the feasibility of the project, the head of the authority made television interventions to “reassure” citizens, but he stressed that the Suez Canal is moving forward towards completing its ambitious strategy in developing the navigational channel. At the same time, he warned that a lot of ship traffic revenues would be lost by 2030 if the project was not implemented.

What are Egypt's motives for the full duplication of the canal project?

According to official data and statements, the project:

  • It did not come suddenly, and it is one of the previous project proposals to improve navigation in the canal.

  • It has become a necessity due to the growth of global trade and the increase in the number of ships passing through the Suez Canal.

  • It aims to raise the classification of the canal and increase its numerical and capacity for all categories and sizes of ships of the global maritime fleet.

  • Maintaining the competitive position of the Suez Canal in the face of competing and alternative routes, whether sea or land.

What is the project’s relationship to the 2015 branch (New Suez Canal)?

In August 2015, the “New Suez Canal” project was opened, which is a 35-kilometre-long branch parallel to the canal. It cost $8.2 billion and aimed to reduce the time ships spend to cross from 18 to 11 hours to enhance the carrying capacity of marine tankers.

To finance the project, the government collected about 64 billion pounds from the Egyptians in the form of investment certificates, which cost the state’s general budget 7.6 billion pounds annually for 5 years, as a return to the certificate holders. The Canal Authority also borrowed about 850 million dollars from Egyptian banks to finance the rest of the infrastructure work.

The project of complete duplication of the navigational channel is considered a continuation of the parallel branch. It aims to extend the “branch” 50 kilometers to the north and 30 kilometers to the south, and its initial cost is estimated at about 22 billion pounds, according to televised statements by the head of the Suez Canal Authority.

According to a previous statement by President Abdel Fattah El-Sisi, the partial expansion of the canal in 2015 aimed to “raise the morale of the people,” which put that project under severe criticism at the time on the grounds that it had not received sufficient studies and was implemented within one year at a huge cost, and that it contributed to the local currency crisis and the rise Debt burdens, which raised fears of a repeat of the matter in the project to fully double the shipping channel, especially since Egypt has not yet emerged from its economic crisis.

About 30% of the world's shipping containers pass through the Suez Canal (Getty)

What is the benefit of complete duplication of the Suez Canal?

According to Lieutenant General Rabie’s statements, if the studies prove that the project is not feasible and therefore it will not be implemented, then by 2030 the Suez Canal will lose revenues from the passage of the largest number of ships, while the waiting period will continue to be long, and complete safety for traffic will not be achieved and the closure of the canal will be avoided and the global trade movement will be disrupted, as well. It happened when the giant container carrier Ever Given ran aground in the Suez Canal in March 2021.

On the other hand, political economy professor Abdel Nabi Abdel Muttalib believes that the dualization of the canal is the “project of the century” for Egypt, strengthening its position in the international trade movement and confronting all attempts to establish alternative paths and corridors.

However, he added - in an interview with Al Jazeera Net - by saying that the problem of the project lies in the timing of its presentation, and therefore announcing it and thinking about it is a “big mistake” in light of the current local and regional circumstances associated with the Israeli aggression on the Gaza Strip and the lack of predictability of its paths, and the accompanying great threat to the movement. Navigation in the Red Sea, which may extend for a year or more.

Egypt, according to Abdul Muttalib, also suffers from real economic problems, represented by the inability to provide hard currencies, raw materials, and production requirements. Therefore, if the state’s general budget has investments and surpluses, it would be more beneficial for them to be directed to the fields of manufacturing and agriculture, even if the Canal Authority had Suez has financial surpluses, it would be better to direct them to developing the canal axis and establishing a logistics zone or a global free trade zone.

Holding the same thread, Egyptian researcher in political economy Mustafa Youssef says, “The Egyptian economy is no longer able to bear any additional costs or burdens for useless projects.”

In an interview with Al Jazeera Net, Youssef cited the parallel branching project, saying that it led to the floating of the Egyptian pound in the year following its opening in 2016, after it caused the withdrawal of dollar liquidity from the country.

The New Suez Canal, a branch parallel to the canal, opened in 2015 at a cost of $8.2 billion (Al Jazeera)

What are the sources of financing for the project and is the Egyptian economy able to bear its costs?

As soon as the study of dualizing the Suez Canal was announced, tweeters and activists linked the matter to obtaining a first payment estimated at about 10 billion dollars from the value of the deal for the new city of Ras al-Hikma on the northern coast, which Cairo recently concluded with Abu Dhabi, with huge investments estimated at about 150 billion dollars.

However, Lieutenant General Osama Rabie denied the existence of a relationship between the two matters, explaining that the funding necessary for its future implementation would be provided from the Authority’s investment budget, without placing any additional burdens on the state’s general budget.

Commenting on Rabie’s speech, economic expert Abdul Muttalib believes that the Canal Authority’s budget, its special fund, or even the state budget itself is unable to bear the project in local currency without dollar costs.

It also reduced the chances of successfully replicating the experience of local stocks and bonds, which the Egyptian government issued in 2015 to finance the new branch project, given the significant rise in inflation rates over the past 10 years.

Are the threats to navigation in the Red Sea reflected in the course of the Suez Canal dualization project?

Lieutenant General Rabie indicates that the canal’s revenues decreased by 50.7% from the beginning of 2024 until February 26, expecting its overall revenues to decline during the current year, with the continued tension in the Red Sea, to $5 billion, compared to about $10.249 billion in 2023.

For his part, researcher Mustafa Youssef believes that the United States and Arab countries, including Egypt, are able to put pressure on Israel to stop the aggression against Gaza, and thus calm the situation in the Red Sea, calling on his country to create real investment opportunities in the agricultural and industrial sectors, instead of focusing on transportation projects. and international trade.

What alternatives are available for developing the Suez Canal?

From a technical perspective, Ibrahim Fahmy, a visiting professor in the Department of Marine Engineering at the University of Strathclyde in Scotland, believes that developing the Suez Canal’s navigational course does not require duplicating the entire course in order to reduce the passage time of ships by two hours, after the multiple stages that were implemented before 2011 and the subsequent stage in 2015. .

Fahmy explained in an interview with Al Jazeera Net that what is required is a medium project at a limited cost and with the current capabilities of the Suez Canal Authority of dredging units (machines that carry out drilling operations in the water) to deepen the middle of the navigational channel from the shape of (V) to the shape of (U) to reduce the possibility of ships running aground, such as an accident. Evergiven.

He cited the canal dualization project in 2015, saying that it could have been implemented at about half the cost, which then exceeded $8 billion, and the government’s justifications for compressing the project’s timetable and hiring contractors at twice international prices were “illogical.”

According to a previous report by the “Solutions for Alternative Policy” platform - a research project at the American University in Cairo - the canal’s revenues do not reflect its economic value, and must go beyond efforts to expand the canal and transfer ownership of its assets to private companies and funds.

The report indicated recommendations that could generate sustainable revenues that add economic value, including:

  • Establishing an industrial and logistics zone around the canal that will focus on exports, and avoid relying solely on ship passage rates and fees imposed on them.

  • Developing ship services transiting the canal by establishing repair, maintenance and service yards in the cities of Port Said and Suez.

  • Developing free trade zones in the cities surrounding the canal, as data shows that many ships crossing the canal head first to Jebel Ali in the Emirates to obtain their various services before passing through Egypt, due to the scarcity of industrial and logistical services there.

Source: Al Jazeera