World Economy

New Suez Canal Open to Questions

New Suez Canal Open to QuestionsNew Suez Canal Open to Questions

Egypt staged a show of international support on Thursday as it inaugurated a major extension of the Suez Canal which President Abdel Fattah Al-Sisi 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, Reuters reported.

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

The spectacular inauguration was also intended to bolster his international standing in the presence of French President Francois Hollande, Russian Prime Minister Dimitry Medvedev, King Abdullah of Jordan, the emir of Kuwait and the king of Bahrain. US 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.

Earlier Sisi, in full military regalia, sailed up the canal, flanked by a young boy in military fatigues waving the Egyptian flag, aboard the yacht El-Mahrousa, the first ship to pass through the Suez Canal when it was opened in November 1869.

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

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.

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

 Additional Revenue

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 in annual revenue by 2023 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%.

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