Expanded canal to generate more revenues for the government
- Canal expansion has allowed for other port projects to press ahead
- Canal is a vital source of hard currency
The new Suez Canal expansion, which is expected to be officially opened during a ceremony on 6 August, is set increase its annual revenue from $5.3bn in 2015 to $13.2bn in 2023.
The $8.5bn expansion project was led by the Egyptian Army in 2014 and was positioned as the flagship project symbolising the new governments economic vision for the country.
Following a national subscription to raise the necessary funds, $8.5bn was promised in just six days by ordinary Egyptians. Work began on 6 August 2014.
The project to build a new 72-kilometre waterway enables two-way traffic and double the current daily ship capacity.
Plans suggested the project would take three years, but it has taken just one year with the first cargo ship passing through on 25 July. The cargo ship passed through as helicopters and naval vessels followed, in a symbolic trial run that was carried out under major security concerns in the Sinai Peninsula.
The Suez Canal is an important source of scarce foreign currency for Egypt and as the tourism market continues to suffer resulting from regional and local instability, the waterway will prove vital in the short to medium term.
Revenues totalled $5.5bn in 2014, when 17,150 ships, loaded with 963 million tonnes of cargo, passed through the canal. The World Bank published a report at the end of 2013 that concluded Egypt was falling short with regard to returns from the canal. Its study showed Cairo obtained a maximum of $150-$200 in value added to each container shipped through the Suez Canal or handled by its ports, whereas European ports typically generated $2,000-$3,000 in value added for each container.
|Suez Canal traffic by vessel type, 2014|
|Source: Suez Canal Authority|
Nevertheless, the expansion project has received heavy support from the local population who see the scheme as an illustration of Egypts recovery. Meanwhile security along the canal will be a concern for the authorities who have been fighting Isis-affiliated militants in the Sinai Peninsula.
While the focus has been on the expansion of the canal, a number of projects surrounding the waterway have also been announced since the investment conference in March.
The Finance Ministry recently pushed through legislation for a 500-square-kilometre Suez Canal Zone (SCZone). It will cater to a broad range of sectors, including manufacturing, logistics and ship repair among others.
The investment needed is estimated at $50bn, with $15bn for infrastructure and utilities, $15bn for enhancing ports, and $20bn for industrial and other areas.
Further to this, on 29 July MEED reported that Egypts Suez Canal Authority confirmed it is planning to develop an extension to the access channel at the East Port Said terminal. Sources close to the project tell MEED the scheme will cost about $60m and will take seven months to complete.
It is understood the new access channel will be 9.5km long and 18.5 metres deep, to speed up shipping movement at the end of the canal. The expansion of the terminal will give vessels and containers 24-hour access to the port, offer easier access to the Mediterranean Sea and is expected to increase revenues.
The Suez Canal Container Terminal (SCCT), which is 55 per cent owned by the Netherlands Maersk Group, will partly finance the project as part of an agreement with Cairo signed in 2007 to develop the East Port Said terminal.
At East Port Said, activity decreased by about 10 per cent in 2012, but recovered the following year to be close to the record level of 3.2 million 20-foot equivalent units (TEUs) achieved in 2011 and has since slowly improved.
Investment in ports has been steady over the years and several schemes are under execution or pre-execution to further boost capacity. In the longer term, there are a series of upcoming connected projects with plans to extract more value from Egypts most strategic asset, the Suez Canal.
|Port projects under execution or pre-execution|
|Project owner||Project name||Value ($m)||Main award||Completion|
|Finance Ministry||Safaga Industrial port expansion||885||2016||2020|
|El-Nasr Mining Company||Red Sea: Al-Hamrawin Seaport revamp||40||2015||2017|
|Amiral||Sokhna Liquid Bulk Terminal||334||2016||2018|
|Transport Ministry||Nile River Inland Cargo Transport||100||2014||2017|
|Transport Ministry||6 October City dry port||100||2016||2018|
|Transport Ministry||River Bus Project||100||2016||2019|
|Alexandria Port Authority||Container Terminal Port 3||300||2016||2020|
|Sources: MEED, Maritime Transport Ministry|
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