Egypt Opens Expanded Suez Canal Amid Skepticism About Its Benefits

Mega-project seen as cornerstone for economic turnaround, but economists cast doubt on ambitious revenue targets.

AP

Egypt staged a show of international support yesterday as it inaugurated a major extension of the Suez Canal, which President Abdel-Fattah al-Sissi hopes will power an economic turnaround in the Arab world’s most populous country.

The former armed forces chief, who led a military takeover two years ago but ran for president as a civilian last year, told a ceremony attended by leaders of France, Russia, Arab and African states that Egypt would defeat terrorism.

The $8 billion New Suez Canal project was completed in just one year, instead of three, on Sissi’s orders. But economists and shipping analysts question whether there is sufficient traffic and east-west trade to meet its ambitious revenue targets.

“Work did not take place in normal circumstances, and these circumstances still exist and we are fighting them and we will defeat them,” Sissi said, after signing an order allowing ships to cross the new stretch of waterway.

“Egypt during this year stood against the most dangerous terrorist threat that would burn the world if it could.”

The canal expansion is the centerpiece of a grand agenda by Sissi to cement his tenure as the man who brought stability and prosperity to Egypt, after he ousted elected Muslim Brotherhood President Mohammed Morsi in 2013 following mass protests.

The spectacular inauguration was also intended to bolster his international standing, in the presence of French President François Hollande, Russian Prime Minister Dmitry Medvedev, King Abdullah of Jordan, the emir of Kuwait and the king of Bahrain. U.S. Secretary of State John Kerry was in Cairo on August 2 for a strategic dialogue with Egypt, but no top-level representative of the Obama administration attended the ceremony.

Egypt’s allies are keen to burnish its image in a region beset by turmoil. Cairo, too, faces an increasingly brazen two-year-old insurgency based across the Suez Canal in the Sinai Peninsula, which has killed hundreds of police and soldiers.

But Egyptian authorities say the safety of ships through the strategic canal has never been under threat.

Newly delivered French Rafale fighters and U.S. F-16 warplanes staged a flyby, while helicopters flew overhead and naval vessels escorted the yacht in the televised ceremony.

Yesterday was declared a public holiday. Cairo and other cities were decked out in bunting, with fairy lights hung from the Nile river bridges and banners proclaiming “From the mother of the world to the whole world.”

Tents for the festivities in Ismailia were erected on the east bank of the canal. A giant statue of a toiling canal worker with shovel in hand looks over the waterway. A towering statue of the ancient Egyptian Pharaonic goddess Isis, with wings splayed, looks out over the new channel; behind it fly the flags of the world. Nationalist songs by military brass blared.

Egypt had been reeling from years of turmoil since the Arab Spring uprising that deposed autocrat Hosni Mubarak in 2011, and many of the country’s nearly 90 million people have suffered from an economic slowdown, fall in tourism and high inflation.

The government believes the New Suez Canal and an industrial zone to be developed around it will seal Egypt’s deliverance from economic purgatory – to the skepticism of some.

The project involved extending a waterway parallel to part of the 19th century canal connecting the Mediterranean to the Red Sea, as well as deepening and widening the old channel – the shortest shipping route between Europe and Asia.

It has been billed as a national achievement on a par with President Gamal Abdel Nasser’s nationalization of the original Suez Canal in 1956 and the building of the Aswan Dam.

A crowd of about 300 gathered in Cairo’s Tahrir Square, honking horns with the color of the Egyptian flag. “This isn’t just for me, it’s for my children and grandchildren. This is for the whole world,” said 50-year-old Gamal Amin.

But not everyone was enthralled. “There isn’t anything new to be celebrating. There are more important things for Egyptian people that this money could have been used for,” said Mahmoud, 24, walking past Tahrir.

For many Egyptians, as well as economists and experts, the immediate benefits of the expansion, funded largely by a public subscription in Egypt, are not obvious.

The Suez Canal Authority expects a windfall of additional revenue – $13.23 billion annually by 2023, up from just over $5 billion in 2014, with the number of daily vessels rising from 49 to 97 over the same period.

But sluggish world trade, competition from an expanded Panama Canal and a slower Chinese economy make it unlikely the project can achieve its revenue targets anytime soon, or bring about a significant fall in unemployment from about 13 percent.

Some economists have branded the projections wishful thinking, especially since Suez Canal revenue growth has failed to keep pace with the growth in world trade since 2011.