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

New Suez Canal project likely wont have as many economy benefits as
hoped
Instead, its been called a vanity project for Sisis administration
Despite doubts, it likely doesnt 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 countrys 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 youd 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 Daesh (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 Egypts 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.