Optimism in Egypt as plans for Suez Canal Zone are unveiled
CAIRO // Egyptians and analysts have reacted positively to a $50 billion development project centred around a military-led excavation of the Suez Canal that was presented on Saturday at an investment in Sharm El Sheikh.
Consultants from Dar Al Handasah, an international project management group, together with the Suez Canal Authority, presented the master plan for the Suez Canal Zone.
It will be a special economic zone encompassing several ports that will serve as a platform for industries synergizing to make Egypt a player in the global economy.
The canal project was one of several projects and investments announced by the government over the weekend and the government hopes they complement one another.
“All of these national projects were important to look at when looking at the development plan with the Suez Canal and we feel that they integrate with these projects,” said Yehia Zaki, the head of Dar Al Handasah. “The new canal adds an important aspect to the development project. The two complete each other.”
It will encompass some 100 square kilometres of maritime and logistical facilities in Arish, Port Said, Ismailia, Suez, Ain Sokhna and Tor, and focus on providing a platform for manufacturing, transport, logistics, information and communications, and energy. 400 square kilometres have been set aside for industrial development
Whether the development project, and the investment conference it was presented at, can spur enough investment for a needed economic recovery in unclear.
Investors and the business community are confident that the government is serious about growth, given recent legal reforms for special economic zones such as the Suez Canal Zone.
Lower oil prices and the falling Egyptian pound are also making the country a more attractive destination for investment.
“It’s an idea that has been discussed for 10 years if not more, and it never really materialised. Nobody can say what the reason is,” said Ahmed Morsy, said a Middle East expert at the University of St Andrews. “One can argue that it’s the mindset of the ruling leadership and at that time it was the very cautious Hosni Mubarak.”
Today, that cautiousness has been replaced by an audacious project. When it was announced at a press conference in August that the military would dig a new lane of the Suez Canal it was scheduled to take three years to excavate, but president Abdel Fattah El Sisi said it would be done in one year, taking everyone by surprise.
After Mr El Sisi’s announcement, $8 billion was raised in domestic bonds in just over a week, some of them purchased by citizens for a little as 10 Egyptian pounds (Dh5).
“Big projects in Egypt have a problem in administration because we have inefficient government officials,” said Mohamed Zaki Elsheemi, an engineer and political commentator.
“But, we can’t tell if this project is a loss for Egypt yet, because most Egyptians like Sisi and like the government, and there is a large popular interest in this project.”
Most media has focused on the digging of the new lane of the canal and its financing, but the larger and more ambitious project is the Suez Canal Zone. Investment minister Ashraf Salman said the project is expected to make up between 30 to 35 per cent of Egypt’s economy in the future.
The economy is now in dire need of investment and development after political instability ended years of high economic growth rates.
Its economic outlook improved after fuel subsidy reform and lower oil prices reduced the deficit. The central bank had managed the depreciation of the Egyptian pound, and political risk has been reduced. A relatively educated workforce, proximity to major markets and a large domestic consumer market are also attractive to investors.
“In general in the business community I think people are optimistic,” said Ayman Ismail, a business professor and chair of entrepreneurship at the American University in Cairo. “Egypt’s economic problems for the last 4 years were not economically driven. It was about political stability and having clarity about where we are going.”
The Suez economic zone hopes to create a million jobs by 2030 and will require at least $50 in investment — $15 billion for utilities, $15 billion for enhancing ports, and $20 billion in industrial areas.
The economic zone will carry special benefits under a 2002 law inspired by similar economic zones in South Korea and Ireland, including a reduced corporate tax rate that is the a third of what companies outside the zone will pay.
“This law is designed to make the authority in charge a very autonomous one. It’s like running the economic zone in a state within the state,” said Hani Sarie-Eldin, the head of the law firm reviewing the law for the government. “In other words it defeats all the impediments to investment. It is a true implementation of what we call a one-stop shop.”
The Suez Canal Authority — an autonomous body — will be enabled to grant all authorisations needed, handle disputes through both arbitration and non-judicial review, and allocate land through long-term renewable leases.
The review of the canal law comes alongside tax and investment reforms that have sought to ease investor doubts about the regulatory framework in Egypt.
Insurgents, mainly based in the Sinai peninsula, intensified their attacks in recent months, intending to make the country less attractive to investors.
Violent attacks on infrastructure and business targets were higher than any other time since the removal of former president Mohammed Morsi.
Several major companies announced large investments at the conference, including large Chinese, Japanese, and Gulf-based funds and corporations. Those investments may signal a vote of confidence to smaller investors who were not able to pledge major investments at the conference.
“The next layer which for me is the most interesting and that’s the middle-sized [companies] and how they see the signals by the larger investors,” said Mr Ismail. “These are going to be concerned by profitability. There are many plans for huge real estate developments and logistics hubs and once you get those you get people investing around them.”
Egyptians were also upbeat. Mr Elsheemi said that on a recent trip to Suez and Ismiailiya people were excited about the project.
“The money is all coming now,” added a dry cleaner in Cairo who did not give his name.
“I think it’s a big project for Egypt and it will raise our country up compared to the other countries,” said Khaled Yousry, an IT specialist from Alexandria. “It’s a big issue for our president now, and it’s a good chance for him to make the people in Egypt stay tuned to our president, to make them feel that he made something for us.”
Updated: March 15, 2015 04:00 AM