On Sept. 4, investment certificates aimed at funding the Suez Canal development project were available for purchase at Egypt’s four public banks. By the end of the day, the total amount paid had reached 6 billion Egyptian pounds ($839 million), according to Hesham Ramez, governor of the central bank.
He attributed the demand to “the patriotism of Egyptians who are keen on contributing to such an enormous national project,” as well as the relatively high interest provided by the certificates. “Almost 90% of the buyers are individuals and not corporations,” he said. The turnout led to banks extending their working hours.
However, Investment Minister Ashraf Salman said prior to the issuing of the certificates that he expected the money raised to cover the total cost of digging the new canal, which is 60 billion Egyptian pounds.
The Guardian newspaper ran an article about thousands of Egyptians being evicted without compensation to make way for the new canal. Patrick Kingsley and Manu Abdo reported that in the villages of Qantara and Abtal, 1,500 homes were destroyed and another 5,000 are threatened.
“Soldiers told evicted villagers they had no right to live on the land as it technically had always belonged to the army,” they wrote. “Some of those who argued back were arrested.”
The project is seen by some as a national achievement, and by others as an uncalculated adventure. A major implementation challenge has already emerged with the appearance of underground water during the drilling process. This is expected to greatly increase costs, especially in light of the one-year deadline set by the president, which the army has promised to stick to.
“The cost of drilling underwater will exceed 10 times the cost of drilling in dry lands,” said engineering professor Haitham Awad. The proximity of the drilling site to the original canal played a major role in creating the problem, he added. “The drilling site chosen was 400 meters from the Suez Canal, but it would have been better to choose a site between 8 and 10 kilometers from the old canal.”
Iman Fathi, an expert at the Ministry of Irrigation and Water Resources, said the appearance of underground water was due to the absence of necessary research that should precede implementation. “There were not enough studies conducted on the characteristics of the soil in the construction sites,” she said. This will not only drastically increase costs, but also make timely completion impossible, she added.
However, several state-run and independent media outlets celebrated the appearance of water as a sign of progress, while official statements presented the use of dredges as a triumph.
“The introduction of dredges to the construction site marks the start of a new stage in the project,” said Mohab Mamish, chairman of the Suez Canal Authority. “The fact that this stage started only 24 days after the beginning of the project is an achievement in itself.”
Economic concerns relating to technical challenges have been voiced by experts. Economist Omar al-Sheneti said he was skeptical about the amount of revenue that the project is expected to generate, and questioned the official argument that digging a new canal would increase the number of vessels passing through it.
“Doubling the number of vessels passing through the Suez Canal is primarily linked to the global trade movement, which increases by 2-3% in regular periods, excluding periods of recession,” he said. “This raises concerns about the achievement of the desired figures and revenues.” Funding the project through investment certificates is also problematic, especially with the high interest they offer, he added.
“The financial return on investment certificates will be funded from the profits of the Suez Canal, until the new canal achieves financial surpluses,” Sheneti said. “Consequently, there is a problem with economic feasibility that will affect the net income of the Suez Canal allocated to cover the deficit and finance part of the state’s general budget.”
Hani Tawfik, investment expert and head of the Arab Investment Union, expressed apprehension that the project would face the same fate as the Toshka, or New Valley, project in Egypt’s Western Desert, which started off ambitiously but ground to a halt.
“There is a lack of feasibility studies, and engineering figures and investment management remain a mystery, even though nobody doubts the seriousness and enthusiasm of the current regime to implement the project,” he said.
Tawfik also objected to foreigners not being allowed to purchase investment certificates. “This decision was first taken when contributors were to become shareholders, but now since contribution is through the purchase of investment certificates, there is nothing wrong with it,” he said.
Economic expert Ahmed al-Sayed al-Naggar said the project would offer a solution to Egypt’s pressing unemployment problem, through job opportunities both during the digging process and after completion.
He said he expects an economic boom. “Some 18,000 ships sail through the canal every year, a figure that could double after the new project increases the number of giant cargo vessels passing through, raises revenues and the canal’s share of world trade.”
Naggar supports the state’s decision to restrict the purchase of investment certificates to Egyptians, saying the original canal was dug by foreign funds that left Egypt with huge debt and led to the British occupation.
“Therefore, it is important from the start to ensure that funding for constructing the canal is 100% Egyptian, while Arab and foreign capital would later finance industrial and service projects,” he wrote. “The old canal and the new project must remain entirely Egyptian.”