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Thursday, August 6, 2015

EGYPT: Morsi and Sisi's Canal projects in the balance.



The Suez Canal took 10 years to build and cost thousands of workers their lives. When planners suggested three years for a second one, Egypt’s president balked.

“Not three years, just one,” Sisi ordered.

Twelve months later, Abdel-Fattah El-Sisi is hosting a party to celebrate the biggest expansion of the canal since it first opened in 1869. For the former army chief seeking to bolster his rule, the symbolism is impossible to miss.

Less clear are the economic benefits of what billboards in Cairo and New York’s Times Square dubEgypt’s gift to the world,” which will raise capacity and shorten the time it takes to sail the 193-kilometer (120-mile) link between the Red Sea and the Mediterranean. Thursday’s ceremony, to be attended by dignitaries from French President Francois Hollande to North Korea’s deputy leader Kim Yong Nam, comes amid sluggish global trade growth to which the canal’s fortunes are linked.

From a shipping industry point of view, this initiative to expand the Suez canal was a bit of a surprise,” said Ralph Leszczynski, Singapore-based head of research at Genoese shipbroker Banchero Costa & Co. “There was no pressing need or requests for this as far as I’m aware.

Suez has yet to fully recover since the global financial crisis caused shipping to plummet in 2009. Though total tonnage has increased, the number of vessels using the canal remains 20 percent below its 2008 level and just 2 percent higher than a decade ago, data compiled by Bloomberg show.



Rather than a bottleneck, analysts say those statistics reflect slower global trade growth, which the International Monetary Fund expects to average 3.4 percent in the period 2007-2016, compared with 7 percent over the previous decade.



The Baltic Dry Index, which measures rates for shipping iron ore, coal and grain and is viewed as a bellwether for the global economy, slumped to a record low 509 points in February. It remains about 90 percent below its all-time high of 11,793 reached in 2008.


Lacking Details


At the moment, speed is not a key factor for container shipping, the shipping sector which most utilizes the canal,” said Michelle Berman, the head of operational risk at BMI Research, a unit of Fitch Group. A bigger issue is a “surplus of ships” relative to demand, with ever-larger vessels built for the Asia-Europe route compounding the problem, she said.

The government hasn’t made public viability studies to show how it will gain a return on its 64 billion Egyptian pound ($8.2 billion) investment. The expansion will meet future demand, with traffic expected to double to 97 vessels a day by 2023, said Mohab Mameesh, head of the Suez Canal Authority.

“By creating a second lane of the canal we are able to reduce waiting times, which reduces fuel expenditures and costs, with no increase in our toll fees,” he said in an e-mailed response to questions.

Global trade volume would need to rise by around 9 percent a year for Suez to reach its traffic goal, Capital Economics said in a report on Monday, describing the target as “unlikely to say the least.”


Canal Distraction


That hasn’t stopped El-Sisi and his government from talking up the new canal amid political challenges to its rule.

Hundreds of Egyptians, most of them supporters of the deposed Muslim Brotherhood, have been killed and thousands imprisoned since El-Sisi, as army chief, pushed his Islamist predecessor from office in 2013 after mass protests. El-Sisi was elected president last year.

The political turmoil has polarized Egyptians. El-Sisi supporters say it saved the country from the deadly strife affecting much of the Middle East, while opponents criticize the government’s human rights record and what they regard as brutality used to restore stability.


French Connection


Thursday’s party, with an estimated price tag of $30 million, is a chance for the government to send a more positive message by harking back to the events marking the canal’s 1869 completion. French empress Eugenie attended -- her husband Napoleon III was deposed a year later -- and a performance of Giuseppe Verdi’s ’Rigoletto’ opened Cairo’s new opera house.

The canal has since transformed global trade.

About 8 percent of the world’s cargo now passes through the canal, according to the Suez Canal Authority. Traveling from Singapore to New York through Suez reduces the distance by 19 percent compared with the route via the Pacific and the Panama Canal. From the Persian Gulf to Rotterdam, Suez saves 42 percent by removing the detour around the Cape of Good Hope.

Even without any improvements, the canal would always be attractive,” said Neil Atkinson, head of analysis at Lloyd’s List Intelligence.


Wider, Deeper



The second canal -- actually a new 35-kilometer channel and 37 kilometers of widening and deepening of the original -- allows two-way traffic and reduces transit time to 11 hours from 18, according to the canal operator. The expansion won’t allow larger vessels to use the route.

New ports and logistical services are expected to follow, and the project includes six tunnels under the canal. The authority expects revenue to grow to more than $13 billion by 2023, up from $5.5 billion in 2014.

“‘Build it and they will come’ is not enough,” said Simon Kitchen, a strategist with Cairo-Based investment bank EFG-Hermes, adding that companies will require incentives to build factories and other facilities. “The government needs to give ships a reason to sail through the canal,” he said.

Others are more positive. Egypt’s economy grew at over four percent in the nine months to March for the first time since 2010, mainly due to infrastructure spending related to the canal upgrade, according to investment bank Pharos Holding for Financial Investments.


Saving Money


A shorter transit may save up to 4 percent of journey costs depending on the length, the Napoli-based economic research center SRM estimates.

"The project “was a necessity to maintain the attractiveness of the Suez Canal,” said Michael Storgaard, a spokesman for Maersk Line, the world’s biggest container shipping company. Even so, it’s too early to say whether Maersk will route more vessels through Suez, he said.

Still, any future economic payoff is trumped by the political implications for the government from building confidence in El-Sisi’s leadership, according to Amr Adly, a scholar with the Carnegie Middle East Center in Beirut.

El-Sisi is trying to gain legitimacy through his government’s achievements,” Adly said. His thinking is that Suez “shows the government can deliver, it can commit to something and get it done,” he said.



IN THE BALANCE 

SISI: News Suex canal
Morsi: Suez Canal Corridor Area Project


1) 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. and to double the capacity of the Suez Canal from 49 to 97 ships a day.



2) Six new tunnels for cars and trains are also planned to end the isolation of the peninsula, connecting it better to the Egyptian heartland. As of 2015, there was only a single tunnel under the Canal, the Ahmed Hamdi Tunnel that connects Suez with the Sinai.Revenues from the Suez Canal would jump from 5 billion dollars to 12.5 billion dollars annually.



3) However, according to the Egyptian trade expert Dr. Omar el-Shenety the official estimate of traffic doubling in the first year of the canal's operation is somewhat exaggerated. Higher traffic projections could be affected by a slump in global trade or by increased fees.



4) The expansion of the Suez Canal is thought to have a diverse range of effects, at local and regional scales, on both the biodiversity and the ecosystem services of the Mediterranean Sea. Concerns are raised of Egypt’s inattention to international environmental agreements, and the neglect of sustainable practices may exacerbate deleterious environmental impacts.



5) The expansion of the canal and the tunnels are expected to cost around 60 billion Egyptian pounds (US$8.4 billion). 30 billion Egyptian pounds will be for digging the new canal and the other 30 billion will be for the 6 new tunnels.











1) The plan of implementing the Suez Canal Corridor Development Project includes in general carrying out 42 projects in general, six of which have top priority. These major projects include…





 2) Developing the roads of Cairo-Suez and Ismailia–Port Said into free roads for facilitating transportation and movement between the province's areas and to link it with the capital.











3) Establishing Ismailia tunnel passing through the Suez corridor to link between the eastern and western banks of the Suez Canal.








4) Establishing a tunnel at southern Port Said under the Suez Canal to facilitate linking the eastern and western banks of the Suez Canal to each other.














5) Developing Nuweiba Port into a free zone.


 







6) Developing Sharm el-Sheikh airport.


7) Establishing a new water by-pass on Ismailia canal up to the site of the water desalination station at the east of the Canal to support the new development areas.



8) The plan will be implemented in a phased-out way; the first of which is aimed at creating new industrial and logistical units in the area that depend on the activities of the added value as well as the complementary industries at home and abroad through creating logistical distribution zones and utilizing the current units, in addition to projects for developing these units in the future along with developing the current economic entities.

9) Other projects will be set up including the establishment of a tunnel under the Suez Canal. It will be the largest of its kind in the Middle East. The tunnel will include four lanes. Also, the plan envisages setting up two airports, several tunnels; three harbors to serve ships and stations for loading, shipping, repairing and unloading commodities from giant ships as well as stations for re-export.

These projects will increase the Canal's revenues through establishing large logistical projects and setting up a Silicon Valley for the advanced technological industries, tourist resorts along the Canal, a transit area for ships and an outlet for the new ships to create new residential, agricultural and industrial communities.

10) The infrastructure of the project requires rehabilitating the industrial zones at the east of the Canal and activating several development projects including the double-tracking of the Canal's navigational waterway at a length of 34 km long in the area from Al-Ballah by-pass to the km 52 area at the Western Qantara, which is a waiting area for the ships from the north and south, with the same current width and depth of the Canal. This project will help increase the revenues and accelerate the passage in the navigational waterway, as 10% of the global trade and 22% of the container trade in the world pass through the Suez Canal. However, the Canal's revenues will not exceed the transit fees.

This water lane celebrated by an ignorant government ruled by an idiot president named El-Sis, is the greatest scam ever, and accompanied by the extravagant celebration (while people are starving) will be the reason for Egypt to fall into heavy debts as it happened in the past during the time of khedive Ismael who drowned in debts because of similar celebration. Hence later on Egypt was mandated by Britain for over a hundred years.

 



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