MS Risk Blog

Troubled Waters: Suez Canal Corridor Development Project Problematic for Egypt

Posted on in Africa, Egypt title_rule


Background: Egypt’s government is in the beginning stages of
what some have called “the development project of the century.” The Suez Canal Corridor (SCC) development project is a comprehensive project to transform the Suez corridor into a major economic zone and prospering waterfront region.

The SCC project is intended to work through joint public and private partnerships. Developments include construction of a major Mediterranean seaport in Eastern Port Said, a “Technology Valley” in Ismailia, and an industrial zone west of the Gulf of Suez. In addition, the project features residential centres, agricultural projects spanning the length of the canal, and three new tunnels which will connect the two banks of the Canal Zone, referred to as a “bridge for development” in the Sinai.

The project is expected to take 20 years to implement, with hopes of attracting nearly US $100 billion in investments. The SCC development is estimated to create nearly one million job opportunities in Port Said, the Gulf of Suez, and Ismailia, and represents a major component of President Mohamed Morsi’s ‘renaissance’ electoral programme.

While implementation is beginning in 2013, plans for the project date back to the era of Anwar Al-Sadat. Essam Sharaf, who was Egypt’s Minister of Transportation under Hosni Mubarak, and erstwhile Prime Minister for the eight month transitional period between the end of the Mubarak regime and the current government, worked on the project for years, and became its chief architect.

In late April, Egypt’s National Authority for Tunnels signed an agreement with Spanish firm Getinsa Paymacotas to conduct technical studies on building three new tunnels underneath the Suez Canal.  Two of the tunnels will be allocated for roads, and the third will be for a railway. Several countries, including the US, Britain, France, Germany, Italy, Norway, India, Holland, Russia, China and Japan have made offers to invest in the project. Egyptian government has already signed an investment agreement with Chinese TEDA Corporation to develop part of a joint industrial zone near the Suez Canal. The Egyptian government will soon be announcing four additional companies which will be awarded contracts to work on the project. Leaders are also in talks with the Deauville Partnership with Arab Countries in Transition, an international effort launched by the G8. The Egyptian government, led by President Mohamed Morsi, hopes the organization will provide international investment to help fund the project.


Egyptian government circumvents advisory board: Despite the economic stimulus that SCC development promises, it has been met with many hindrances and backlash. On 24 April, the nine-member advisory team, led by  Essam Sharaf, resigned from the project after discovering that the Morsi government had created and was implementing different plans to those suggested by the advisory board. In a statement released on 25 May, the team explains that the government had cut off all means of communication with the advisory board for four months.

“We are aware of the possible damages that are likely to affect the northwest area of the Suez project as a result of implementing the government’s vision, amid the late execution plans and inappropriate policies and legislations,” the statement said.

Problems with legislative framework: A former member of the advisory team revealed that the draft law which the Morsi government had submitted  to the upper parliament (Shura Council) was highly contentious. One component allowed for development  the Suez Canal region without consulting the team. Other sections of the draft law are equally contentious: Article 1 of the draft law states that the borders of the Suez Canal region are to be outlined by presidential decree, and Article 2 says that general authority and the governing system would be decided by the president.

These articles are in direct opposition to Article 5 of the Egyptian constitution, which declares that the Egyptian people are the source of authority. As it stands, the draft legislation does not appear to guarantee popular or legislative overview.

On 23 May, workers at the Suez Canal Authority in Port Said stormed a conference on the project, protesting the projects terms, and the ruling party, the Muslim Brotherhood. As attendees evacuated the conference, several protesters held their shoes aloft—a very strong insult.  Individuals attending protests do not oppose the project itself. Many oppose the draft bill, and have fears for the long term ramifications, including worries that excessive foreign investment could result in risking Egyptian sovereignty of Suez Canal. Others fear that the project puts investors in beneficial positions while not guaranteeing returns to Egyptian workers or the economy. Still others are concerned that international efforts in the region could increase the threats to Egyptian national security, which are already substantial in the Sinai Peninsula.

Attempts at Reassurance:

In a speech at an SCC development conference, Egyptian Prime Minister Hisham Qandil tried to reassure the public, emphasising that the draft law can be amended while being debated by the Shura Council. Qandil also stressed that the draft law takes into account all national security and armed forces criteria, and emphasises sovereignty of the region, indicating that the projects on the land will be usufruct.

Qandil announced, “We are keenly aware of and determined to safeguard the security of our homeland. This is the position of the government and the opposition, without a doubt. There are no land sales involved in this huge project, only lease contracts.” Qandil also stated that some projects in Suez Canal region will start immediately, including the  development of the tunnels that will pass under the Suez Canal.

The statements by Qandil have not assuaged fears, particularly as the Shura Council is dominated by the Muslim Brotherhood. The public remains concerned that the draft SCC project law will be endorsed without public or legislative opinions taken into consideration. Requests have been made by the public to delay the project’s implementation until the new parliament is elected. The Egyptian military has requested deferment until the varying state bodies can guarantee that the project would be free of violations to national security. There is no word on whether these requests will be addressed.

Maritime Impact: Roughly 10% of the world’s merchandise and 20% of all ships pass through the Suez Canal. As political factors are addressed, the project is aimed at turning the canal into “a global centre for industry and logistics.”

The project will evolve in three phases: Phase 1 will focus on developing Port Said and Suez ports by 2017, and will establish a system of trans-shipment to turn those ports into global warehouses. Port Said’s 17,000 acres will include the establishment of facilities to serve the navigation traffic, businesses, tourism and industrial projects. A second container terminal (CT2) will be created on the south side of the port, and will encompass 540,000 square metres. The storage facility in east Port Said will serve giant vessels that wish to decrease the weight of their cargo as they head to Asia, Europe and North America. The plan also incorporates new wave-breaker and dock walls and railways and telecommunications equipment.

Port Said Expansion, Stages 1 through 3 (expected completion 2030):

The Port will expand to increase capacity in the General Cargo Terminal, Liquid cargo Terminal, Multi Purpose Terminal,
Dry Bulk Terminal, Agri-Shipments Terminal, Roll-On Ships Terminal and Bunker Terminal.
Expansion will also see the development of a Ship Yard.

Near Suez, the region of Ain Sukhna will serve as a base for export industries and economic activities. As in Port Said, Ain Sukhna will serve giant vessels that wish to decrease the weight of their cargo as they head to Asia, Africa and Latin America.

The second phase will include establishing an industrial zone that
hosts a variety of industries such as production of machinery, tractors, consumer goods, fertilisers, carpets, textiles and building supplies. The zone will span 190 km from north to south, and build upon existing infrastructure while developing light industrial zones. Plans include the establishment of packaging factories for products transported through the canal. Phase 2 will also see the establishment of ship maintenance centres along both sides of the Canal, and the establishment of light tourism projects on both sides.

The final phase will aim at setting up a “Technology Valley” in Ismailia, making it a centre for technology, commerce, communications, and tourism once the scheme gets off the ground. We have been told that there will be a “technology valley” in Ismailia, that a new tunnel will be built under the canal, and that an industrial zone will spring up on both sides of the canal, to be synergised by the establishment of a world-class technological university.

There has been no suggestion of anticipated disruption to maritime traffic.

Tagged as: , ,