Two years of Egypt’s $8.2 billion ‘gift to the world’

A photo taken with a smartphone on March 26, 2015 shows an Egyptian navy FFG-7 frigate passing through the Suez Canal, by the Egyptian city of Ismailia, 100 kilometers northeast of Cairo, on it's way to the Red Sea. (AFP)
Updated 08 August 2017
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Two years of Egypt’s $8.2 billion ‘gift to the world’

CAIRO: Two years after Egypt launched its “gift to the world,” opinion is divided on the $8.2 billion New Suez Canal.
Enthusiasts say the project has already injected nearly $3 billion into the economy. Critics say any genuine economic boost is much farther down the line. Others say the real benefit is not financial at all, but political, emotional and psychological.
What is not in doubt is that the Suez Canal is the fastest shipping route between Europe and Asia and one of the Egyptian government’s main sources of foreign currency, and that the expansion is an astonishing feat of engineering achieved at eye-watering speed.
On Aug. 5, 2014, President Abdel Fattah El-Sisi declared that Egypt would add a second 35 km shipping lane to the 164 km canal, as well as deepening and expanding a 37 km section of the existing waterway. This would allow ships to pass in both directions at the same time, and increase the capacity from 49 to 97 ships a day. And it would be completed, the president said, in one year.
On Aug. 6, 2015, true to his word, El-Sisi inaugurated the new branch of the canal with a glittering celebration, welcoming international leaders aboard a yacht while helicopters and fighter jets flew overhead.
There are also plans to develop the surrounding area into an industrial and commercial hub with new ports and shipping services.
The expansion was financed entirely by Egyptians, who bought investment certificates to pay for it. At the time of the launch, banners calling the project “Egypt’s gift to the world” filled the streets and songs cheering for Egypt were all over the radio.
On the anniversary, canal authority spokesman Tarek Hassanein said the Egyptian people were the true owners of the project. “Egyptian hands impressed the whole world in one year,” he said.
What, however, is the bottom line? The canal authority says the waterway’s revenue from January to July was $2.94 billion. According to Reuters, in July last year revenues stood at $429 million.
Pro-government Egyptian newspapers on Sunday were filled with reports on how the canal expansion was successful, and the “era of bearing fruit” had just begun.
“The New Suez Canal project has made many positive contributions to the Egyptian economy,” said Justin Dargin, a leading Middle East energy expert.
Other analysts believe optimism is premature. “It is hard to judge how much it has added to so far net of its costs,” said Paul Sullivan, a professor of economics at Georgetown University in Washington.
“Over time, in combination with the investments developing around it ... with such infrastructure investment Egypt has a real chance to turn a corner toward a better future.
“The benefits for a while will be more political and emotional, but over time the possible economic benefits could be very large.”
Saeed Sadek, a political sociology professor at Future University in Cairo, said: “The benefits of the project are both political and psychological. El-Sisi himself has said that he wanted with this project to unify Egypt and raise public morale.
“We understand that to see the revenues from this project and its effects on the national economy is something that will take years.
“Nevertheless, the Suez Canal will remain the most vital shipping route in the region.”


Treasury Secretary: US ‘could not be happier’ with Bahrain outcome

Updated 27 June 2019
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Treasury Secretary: US ‘could not be happier’ with Bahrain outcome

  • Mnuchin confident of raising the first $4 billion soon

MANAMA: Jared Kushner’s “workshop” aimed at securing economic prosperity for Palestine closed with optimistic forecasts from President Donald Trump’s special adviser that it could be the basis for a forthcoming political deal with Israel.

Kushner told journalists at a post-event briefing: “I think that people are all leaving very energized, very pleasantly surprised at how many like-minded people they see. It is a solvable problem economically, and the reason why we thought it was important to lay out the economic vision before we lay out the political vision is because we feel we need people to see what the future can look like.

“The Palestinian people have been promised a lot of things over the years that have not come true. We want to show them that this is the plan, this is what can happen if there is a peace deal.”

The next stage, before a political deal is attempted, will be to get feedback from the event and agree to commitments for the $50 billion package for Palestine and other regional economies.

“I think you need $50 billion to really do this the right way, to get a paradigm shift,” Kushner added.

US Treasury Secretary Steven Mnuchin said: “I could not be happier how this has gone,” adding that he was “highly confident we will soon have the first $4 billion. It’s going to be like a hot initial public offering.”

Most of the attendees at the event in Manama, Bahrain, gave Kushner’s economic proposals a serious hearing and agreed it was a useful exercise. Mohammed Al-Shaikh, Saudi minister of state, said: “Can it be done? Yes it can, because it was done before. In the mid-1990s to about the year 2000 there was a global coordinated effort by the US and other countries. I was at the World Bank at the time. I saw it. If we could do it then with significantly less money we can do it again.”

Others warned, however, that there was still a long way to go on the political aspects of the Israeli-Palestinian relationship. Tony Blair, the former British prime minister and Middle East peace envoy, said a political deal was essential.

“This is an economic plan that, if it is implemented, is going to do enormous good for the Palestinian people. But it isn’t a substitute for the politics. There will be no economic peace. There will be a peace that will be a political component and an economic component. The economy can help the politics and the politics is necessary for the economy to flourish.

“The politics has got to be right in this sense as well. The obvious sense people talk about is how do you negotiate the contours of the boundaries of a Palestinian state in a two state solution,” Blair said.

Christine Lagarde, managing director of the International Monetary Fund, highlighted the work the fund has done in conflict situations. “We had an exceptional result in Rwanda, and a good economic outcome in Mozambique,” she said. But she contrasted this with disappointing results in other African conflicts.

Lagarde said that the aim of the economic plan should be to create jobs. “The focus should be on job-intensive industries, like agriculture, tourism and infrastructure.”

Willem Buiter, special economic adviser to US banking giant Citi, said there were obstacles to the Kushner plan succeeding. “Necessary conditions for any progress are peace, safety and security. And there must be high-quality governance and the rule of law in Palestine,” he said.

HIGHLIGHTS

• Jared Kushner believes the conflict is a ‘solvable problem economically.’

• The senior adviser vows to lay out political plans at the right time.

• Expert urges external funding in the form of grants or equity, rather than loans.

He also suggested external funding should be in the form of grants or equity, rather than loans. “We should not burden a country trying to escape from its past with high debts,” he added.

Some attendees warned of the risks to investor funds in the current political situation in the Middle East. 

But Khalid Al-Rumaihi, chief executive of the Bahrain Economic Development Board, said: “Risk is not new to the region. We’ve tackled it for the past 30 to 40 years, but that has not stopped investment flowing in.

“Investors trade risk for return, and the Middle East has learned to cope with risk and conflict. There are pockets where the risk is high and Palestine is one of them. But I remain positive. The return in the region is higher to compensate for the risk,” he added.

At a session of regional finance ministers, Mohammed Al-Jadaan of Saudi Arabia said: “The region is in desperate need of prosperity and hope. There is a way forward, but you need political commitment.”

UAE Finance Minister Obaid Al-Tayer added: “We are decoupling politics from economics. If it’s the only initiative on the table we should all give it a chance.”