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PS21 Insight: What will the new Suez Canal mean for Egypt?

Last Thursday, Egyptian President Abdel Fattah al-Sisi officially dedicated what many are calling ‘the new Suez Canal,’ an expansion that will run parallel to the original canal. In addition to allowing for more traffic to pass through and reducing ships’ waiting times, Sisi claims the ‘new canal’ will grow the country’s economy exponentially.

A US aircraft carrier during its transit through the Suez Canal.
A US aircraft carrier during its transit through the Suez Canal.

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  • ‘New Suez Canal’ project likely won’t have as many economic benefits as hoped
  • Instead, it’s been called a vanity project for Sisi’s administration
  • Despite doubts, it likely doesn’t represent a threat to Egyptian national security
  • What it could do is restore confidence of foreign investors

Last Thursday, Egyptian President Abdel Fattah al-Sisi officially dedicated what many are calling ‘the new Suez Canal,’ an expansion that will run parallel to the original canal. In addition to allowing for more traffic to pass through and reducing ships’ waiting times, Sisi claims the ‘new canal’ will grow the country’s economy exponentially.

Since it was announced last year, however, the plan has faced considerable criticism. This type of large-scale national project alone, critics argue, is not enough to pull Egypt out of the economic crisis that has plagued the country since its revolution in 2011. Additionally, it could weaken national security.

Below are some early conclusions from a selection of PS21 contributors. If you’d like to contact any of them directly, please email ps21central@gmail.com.

David Hartwell: former British Ministry of Defence official, now editor of Middle East Insider.

Amr Ismail: writer and commentator specializing in Middle East affairs.

There are fears that the new canal could hurt national security, which the Egyptian government has rebuffed. These concerns could be unfounded, but with the country currently fighting ISIS on the Sinai border, it seems unwise to ignore them completely.

Hartwell: Whether the expanded canal now… represents an enhanced security threat to Egypt is… an issue. The Egyptian army is of course currently in the midst of battling Islamic State-affiliated militants in the Sinai Peninsula. Since 2011 they have been loosely linked to very sporadic low-level attacks on the canal – mainly in the form of rocket-propelled-grenades launched in the direction passing shipping. The canal zone is effectively a closed military area with heightened security measures that have deterred any potential attempt to close the canal or damage shipping and there is little reason to suggest that these will not continue to deter attacks in the future. Areas of concern in the future though might be the planned new tunnels under the canal linking the Sinai to the rest of the Nile delta. These could become targets in themselves or conduits for terrorist infiltration in the future, although this has likely been weighed by the Egyptian security forces as a threat that can either be managed or deterred.

The government has also–somewhat ambitiously–projected high economic growth as a result of the new canal, which is unlikely. Most agree that the project will affect the economy, but just what the impact will be is still unclear.

Hartwell: The newly constructed stretch of canal will officially open on 6 August yet the extent of its economic benefit to the Egyptian economy remain unclear. While the Suez Canal Authority and Egyptian Army who have overseen the project confidently predict that annual revenues will more than double from US$5 billion to US$12 billion, others experts are more circumspect, suggesting that traffic may not reach the numbers projected until perhaps a decade in the future, suggesting that, at least in the short term, the new project will struggle to profitable. These fears echo concerns by numerous shipping experts who have also questioned whether the project is economically justified based on global shipping traffic trends.

Ismail: Although the project gives indication that Egyptian government is committed to develop the economy which [has] suffered a lot since 2011, problems like corruption and poverty still need more than a “new canal” to be solved.

One thing that everyone agrees on, however, is that the new canal has sparked nationalist sentiment in Egypt.

Ismail: Domestically, the new project [has] caused waves of patriotism in Egypt. The canal has played an important role in the Egyptian history and the struggle against colonization. The new canal was completed in one year under difficult circumstances, economically and in terms of security. As the canal is a source of pride and patriotism for the Egyptians, it is not hard to understand that the celebrations aim to enhance the national feelings of the Egyptian people at time the country is fighting Da’esh (ISIS) militants [on the] Sinai-Gaza border, and facing… political instability and terrorism from neighbor countries.

Hartwell: [The] economic concerns… underestimate the extent to which the project is as much a prestige political venture designed to bolster the domestic image of President Abdel Fattah el-Sisi as it is a project grounded in economic certainties. That said, as well as reflecting political kudos on Egypt’s new rulers, the scheme has nevertheless been designed to inject confidence into the economy and convince Western investors that the Egyptian economy is bouncing back from years in the doldrums as a result of the prolonged political instability in the country. While the scheme appears to have helped Sisi consolidate his hold on power, whether it achieves the latter aim of restoring investor confidence remains to be seen.

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